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Enbridge tax dispute could hit Minnesota counties with big bill

A tanker truck passes by an Enbridge storage tank near Berthold, N.D. Michael Vosburg/Forum News Service

A tax dispute between Enbridge and the Minnesota Department of Revenue could end up costing counties in the state millions of dollars.

The company filed an appeal with the state tax court, which claims the Department of Revenue inaccurately assessed its property, resulting in unfair increases for the tax years 2012 to 2016.

Enbridge continued to make its tax payments while disputing the valuations throughout those years.

If the courts find in favor of the company, the counties that received those tax dollars could be on the hook for whatever the court determines the company overpaid.

The state department valuates pipelines, utilities and railroads, and the collections for those assessments are then given back to the counties where the property is located.

Enbridge is one of the largest — and in some cases the largest — taxpayer in many counties, meaning the refunds could be a serious drain on local budgets.

The counties are asking the state Legislature to step in and hold the counties harmless for what county officials say is the state's mistake.

Big Chunk

Eric Christensen, administrator for Kittson County, said the county's bill could be as high as $2.8 million.

This figure is 34 percent of the county's total 2017 budget.

"It's a big chunk of money to come up with," Christensen said, and it's not as bad as what other counties are facing.

Two companion bills were introduced this legislative session that would make the state responsible for overpayments stemming from assessments it conducts.

"We're hoping it does get passed," Christensen said.

However, the House bill's sponsor, Debra Kiel, R-East Grand Forks, is not optimistic about that prospect.

"This bill is probably not going anywhere," Kiel said.

She said she introduced the bill knowing the refunds would be a significant hardship on the counties, but it's late in the session for the bill, which is in conference, to move to passage.

More importantly, there's a lot of question over how much the state would have to pay back, which won't be known until the courts decide on the matter.

That decision isn't expected until October.

John Louis, media coordinator with the Department of Revenue, said in an email the department proposed legislation that would improve the assessment processes and make it more transparent.

Shannon Gustafson, communications supervisor with Enbridge's U.S. Liquids Pipelines & Projects division, said the company is appealing $18 million in tax payments.

In 2012, she said, Enbridge proposed a 16 percent increase in property taxes, but the Department of Revenue assessed an increase of 24 percent, which Gustafson said the company found unreasonable.

"For decades, we have paid our fair share in property taxes, but in 2012 the state of Minnesota departed from the established way it values our system, significantly increasing the value," Gustafson said in an email.

She said the company made repeated attempts since 2012 to resolve the issue with the Revenue Department, but those efforts didn't get the desired response.

Louis denied the department changed its methods.

"The Minnesota Department of Revenue has consistently applied the same methodology that is prescribed by rule since it was amended in 2007," he said.

Gustafson said with future investments planned in the state, the company decided to appeal the valuations through the only means the state provides for such action.

Christensen notes other companies are also filing suit against the department, including at least one other pipeline company. If the courts decide the assessments were flawed and legislation holds the state responsible, it could hit the state's budgets hard in coming years.

"The Legislature might open Pandora's Box for the state," he said.


Scott Peters, auditor-treasurer with Marshall County, said the county will have to pay back more than $1.4 million if the courts side with the company and the repayment obligations fall to the counties.

He said he's watched this situation developing for a while.

"They've been arguing for five years," he said.

Enbridge is Marshall County's largest taxpayer, and their tax payment alone is a quarter of the county's total levy.

He's hoping the state will find some way to resolve the dispute and maintain the positive relationship it has with the company.

The company said it also wants to find a resolution to the dispute.

"Enbridge has operated pipelines in Minnesota for more than 65 years, and we have long-standing relationships with the counties where our infrastructure is located," Gustafson said.

Gustafson said the company has invested more than $1.5 billion in pipeline infrastructure in the state since 2008, where it has operated for more than 65 years.

In 2011, the company paid $34 million in state property taxes.

Peters said an upcoming project to replace the company's Line 3 is especially important to the county in terms of tax revenue, investment, and jobs it will create.

Gustafson said the project will create $2.1 billion in investments throughout the state, and after completion, it will provide an estimated additional $19.5 million dollars in property taxes to the state.

Kevin Killough

Kevin Killough is the business reporter for the Grand Forks Herald. You can reach him with story tips, comments and ideas at 701-780-1244.