Minnesota Wants To Put A Tax On Oil Shipments Through Their State

With oil train derailments, and overwhelmed rail infrastructure in general, much in the news these days two lawmakers in Minnesota want to put a tax – dare I say a tariff? – on oil shipments through their state. With roughly 50% of all oil by rail shipments in America originating in the Bakken these days, and with a lot of those shipments going east, that’s a big deal for North Dakota.

ST. PAUL – Improved crude oil safety measures should be funded by charging 1 cent per 100 gallons on all crude transported in Minnesota, the state Legislature’s transportation finance chairmen said Wednesday.

“This particular oil is especially volatile and as we have seen through recent catastrophic accidents in North Dakota and Quebec, our communities and neighborhoods are at increased risk,” Rep. Frank Hornstein, D-Minneapolis, said in announcing the initiative on the edge of a St. Paul railyard along with Sen. Scott Dibble, D-Minneapolis.

“Danger is all around us,” added lawyer Paul Blackburn, who is helping draft a bill.

Groups supporting the proposal say 2,000 crude oil trains a year pass through Minnesota transporting oil from western North Dakota. Most of the rail traffic is from Fargo through the Twin Cities.

North Dakota and Minnesota have been down this road before. In 2011 Attorney General Wayne Stenehjem sued Minnesota over the Next Generation Energy Act, which put restrictions on coal-fired electricity imported into the state while creating exemptions for coal-fired electricity produced in the state. Stenehjem argued that the law violates the interstate commerce clause of the Constitution.

“Over the last four years, we in North Dakota have made every effort to convince Minnesota officials to rescind this Act,” said Stenehjem in November of 2011. “Earlier this year, the Minnesota Legislature, in a bipartisan move, voted to repeal the law, but the Governor of Minnesota vetoed the legislation. But for the veto of the law by their Governor, we would not have had to take this step.”

That issue was a big deal for North Dakota because Minnesota is a big customer for coal-fired electricity, and North Dakota has a lot of coal.

One has to believe that a similar law putting a tax on oil shipments from North Dakota would be similarly problematic. Especially since the original intent of the fantastically abused interstate commerce clause was to prevent states from exactly these sorts of limitations on interstate trade.

Update: A reader points out an AP article which indicates that the Minnesota lawmakers aren’t necessarily just targeting oil by rail shipments.  The post has been changed to reflect this new information.

Against the backdrop of a large rail yard in St. Paul, Rep. Frank Hornstein and Sen. Scott Dibble outlined a bill they plan to introduce at the start of the upcoming legislative session that would impose a fee of about one-one hundredth of 1 cent per gallon of crude oil transported across Minnesota by rail or pipeline.