A high-stakes dispute over Minnesota pipeline taxes

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A high-stakes dispute over Minnesota pipeline taxes

August 27, 2017

When the votes were tallied, a question on the property tax dispute between Enbridge Energy, a Canada-based energy company, and 13 counties in Minnesota rose to the top.

We soon learned why. Enbridge, which pumps 2.8 million barrels of crude oil a day through its Minnesota pipelines, is embroiled in a yearslong dispute with the state over the way it values that property. And what emerges from the dispute could ripple far beyond the pipeline counties.

First, a little background. Unlike other properties they assess, counties must use state valuation guidelines for pipelines, utilities and railroads. But if the assessment is successfully challenged, counties are mostly on the hook for repayment, along with their school districts, cities and townships that benefited from the tax revenue. “State agencies create the valuation method, but they’re not responsible for the amount,” said Warren Strandell, a commissioner in Polk County, one of those affected.

This has created a potentially devastating conundrum for the 13 counties carrying transmission lines. Enbridge contends that its property taxes spiked 24 percent in 2012 — far above what it had anticipated based on previous assessments. Mediation talks broke down in March, and the matter now heads to Minnesota Tax Court on Oct. 3. The grand total for all the assessments in dispute, including those not yet included in the tax court case, is $50 million, according to Enbridge spokeswoman Jennifer Smith.

House Taxes Chairman Greg Davids and Rep. Pat Garofalo, who chairs a House energy committee, both are concerned that a judgment that favors Enbridge could prove devastating to counties. Clearwater County alone might have to refund as much as $7.2 million in back property taxes — more than its $6.8 million of total yearly property tax collections.

A proposed bill at the Legislature would have the state pick up the tab. Whether a majority of legislators will support that is unknown, and there is reason for caution, given that it could set a costly precedent for future disputes. Smith said Enbridge is prepared to work with counties on extended repayment plans, should it come to that. One possible avenue might be greater revenue from planned upgrades to Enbridge’s Line 3, now operating at about half its capacity. But those efforts are controversial and have drawn protests from environmentalists.

There is an even more important reason to pay attention to this seemingly dry tax dispute between an energy giant and the counties that carry the oil and gas on which Minnesotans depend. Other companies may be watching, preparing challenges of their own. “We know these large infrastructure property holders are watching this case,” said Julie Ring, of the Association of Minnesota Counties. Enbridge’s own dispute comes on the heels of a similar case involving Minnesota Energy Resources Corp., which resulted in a state Supreme Court decision that Enbridge believes bolstered its case.

SOURCE:  Star Tribune

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