The state of Kansas stands to gain the least financially from the Keystone XL. Its situation is unique because the first Keystone pipeline already runs through Kansas, and part of that pipeline would act as a bridge between two sections of the new pipeline. However, the Keystone XL would increase the amount of dilbit flowing through Kansas, so TransCanada would need to build additional pump stations in the state to handle the new capacity (up to 830,000 barrels of oil per day).
When TransCanada began planning the Keystone pipeline in 2005, Marion County commissioner Dan Holub was one of the few Kansas officials who opposed it. "I'm scared to death of what they're running through there," he said, referring to the unknown dangers of dilbit.
Holub tried to persuade state officials to help address landowners concerns. But instead, the Kansas legislature passed a series of bills to incentivize energy processing, including one that granted large pipelines a property tax exemption for up to 10 years. The new pump stations for Keystone XL would likely receive the same tax exemption.
Holub says TransCanada didn't need the tax cut, which cost his county some much-needed funds. According to the Kansas Department of Revenue, the Keystone pipeline would have brought $2.9 million in property taxes to Marion County in 2011.
But State Sen. Jay Emler, who voted for the tax cut, said the bill guaranteed a steady source of crude oil for the state's refineries and was meant to encourage TransCanada to build the pipeline through Kansas. "One of their lobbyists came to my office in 2005 and said, 'If we don't get this tax exemption, we won't bring the pipeline through Kansas.'"
Emler said a recent letter from a TransCanada lobbyist says the tax exemption was just one of several factors in deciding where to build the pipeline, so the company might have brought Keystone through Kansas anyway. "Hindsight is always 20/20," Emler said. If the legislature had known in 2005 that TransCanada didn't need the exemption, "why would we have given it to them?"
The Kansas Department of Revenue has challenged the tax exemption and the matter is now before the Kansas Court of Tax Appeals. If TransCanada loses its exemption, a court spokesperson said, the company would have to pay all its back taxes.
TransCanada also got a tax break in South Dakota when the first Keystone pipeline was routed through the state. South Dakota legislators passed a bill in the 1990s to grant large energy projects, including ethanol plants and wind blade factories, a refund on a 4 percent contractor excise tax. The law wasn't intended for oil pipelines, said Scott Heidepriem, a former state senator who now runs a law firm in Sioux Falls, but it was so loosely worded that TransCanada qualified.
Heidepriem said the first Keystone pipeline is eligible for more than $30 million dollars from the tax refund, though records from the South Dakota Department of Revenue show that the company had claimed just $2.7 million as of September 2011. Heidepriem argues that TransCanada didn't need the tax break because the pipeline would have come through the state anyway. It doesn't make sense to give them all this money while the legislature cuts the state's education budget, he said.
In 2008, Heidepriem represented a group of landowners along the first Keystone pipeline who fought TransCanada's use of eminent domain. The landowners eventually settled, but details of the settlement remain confidential.
The South Dakota legislature tightened the language on the tax refund law after the first Keystone pipeline was built. The Keystone XL would be eligible for no more than $10 million dollars, and the program will expire at the end of 2012.
But South Dakota's lawmakers haven't taken action on something landowners along the route have been lobbying for: A bond to make sure their property would be cleaned up in the event of a spill. Between 2008 and 2010, the legislature failed on three separate occasions to approve a spill bond that would have imposed a several-cents-per-barrel tax on Keystone XL oil. If the money wasn't used, it would have been returned to TransCanada.
Vig helped lobby for the bond as a member of a grassroots group called Dakota Rural Action. She described the experience like "walking into a brick wall." TransCanada fought it tooth and nail, she said, "and our legislators listened to them and voted against it."
Lisa Song is a reporter for InsideClimate News, a non-profit journalism group focusing on climate news..