Dorso Column: North Dakota Should Build The Keystone Pipeline

A review of North Dakota history would show that our legislature is at its best when it gives birth to some radical ideas. I am reminded of the establishment of the Bank of North Dakota, The State Mill and Elevator and state run workers compensation now known as WSI.

Let’s try this one: If the Keystone Pipeline is an economically feasible commercial enterprise why doesn’t the state build it? If I understand the issue properly it is because the pipeline crosses the border between Canada and the U. S. that we need Presidential approval before construction can begin.

Is the narcissist in the White House holding it up because of his environmental concerns or is there another motive? I believe he has two motives. One is environmental and the other, the Democrat affinity for Warren Buffet’s check book, both political. As Rob has said here on SAB the BNSF railroad is making hundreds of millions hauling Bakken crude to refiners. Does anyone think that the Democrat campaign contributions by Mr. Buffett and his minions aren’t part of why a permit isn’t forthcoming?

With all of the oil money accruing to the state’s coffers let’s get creative. If we can’t give it back to the citizens as a sales tax or income tax break let’s build a pipeline. I don’t think I have to list all the benefits a pipeline would bring with it.

I am normally against government getting into business but in this case I think it is time to take matters into our own hands. The legislature should pass legislation enabling Governor Dalrymple to enter into negotiations with the Keystone people. The beginning of the pipeline would be in North Dakota thus avoiding the need for the federal permit. The state would negotiate a compact with the states to our south giving them an opportunity to own a portion of the line. Their motivation would not only be the creation of the jobs as it was built and the taxes it would generate but also the profits from being a partner in the venture.

Let’s give everyone in other states a chance to make some money off the flow of crude. South Dakota bought a railroad under Governor Janklow so they are no strangers to economic investments. Get Nebraska, Kansas and Oklahoma on board and we have an interstate compact. If some of those states can’t or won’t join we continue without them.

The idea is that the compact would form a corporation owned by the states. I have faith that a group of attorneys could devise a way for the states to each have its protections and a say in the management of the new corporation. An added benefit would be that the states could finance the deal with tax exempt bonds. Each state would contribute construction money on a prorate basis. They would share in the profits based on their participation.

The states could negotiate a construction agreement with the Keystone people. I would envision a deal where the right of way may belong to Keystone or they would sell it to the state’s corporation. Whether it was a lease back arrangement or a sale would be part of the negotiation. I also would expect a management agreement could be struck with the Keystone people.

I don’t believe the states should be long time owners of the facility. In my world the compact would make part of the negotiation with Keystone a future purchase of the facility after the bonds for construction are retired.

One incentive for Keystone would be to size the line in such a way as to make it feasible to connect the Canadian section. Added to that would be the management contract and possibly the lease back of the right away.

The feasibility of the proposal rests on the ability of the states to raise the money for construction by issuing tax exempt bonds. The difference in cost between normal commercial financing and the ability of the states to take advantage of the tax code is enormous. Hopefully the difference would be enough to make a partial build out a reality.

Another eventuality might also occur. Given that all of the above is feasible the present occupier of the White House may opt to give the permit. Rather than allowing a bunch of western governors, US Senators and congressman from Republican states to score a victory he throws Buffet under the bus. I don’t think this President would like to see the pipeline get built in spite of him.

Back in the 90’s we took some bold moves to get North Dakota out of its economic doldrums. Today the state has an opportunity to insure its future as an energy producer. It wouldn’t hurt to pass a law allowing the Governor to get the ball rolling. The Governor is a shrewd businessman and I would trust his instincts on this. If the legislature needs oversight they certainly could establish a committee of the Legislative Council.