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Judge: State overvalued Enbridge pipelines by $3.2 billion in 3-year span

The Minnesota Department of Revenue overvalued Enbridge Energy's oil pipeline system by billions of dollars, a tax court judge ruled Tuesday. Now the burden of paying refunds could fall on the 13 counties that the pipelines pass through.

From 2012 to 2014, the pipelines were overvalued by $3.2 billion, according to Judge Joanne Turner of the Minnesota Tax Court.

This poses a huge problem for counties making refunds.

"For some of these counties, it's more than their entire levy," Matt Hilgart, a general government policy analyst for the Association of Minnesota Counties told the News Tribune. "That to me is earth-shattering because how can a community have a mechanism to pay that back without just closing their doors or raising the tax rate so high on residents and businesses that they just push people out of their county?"

The pipelines were overvalued by $156 million in 2012, $888 million in 2013 and $2.2 billion in 2014. Enbridge has complained that it was overtaxed by $15 million to $20 million in that same period.

In an emailed statement, the Minnesota Department of Revenue wrote: "We disagree with the Minnesota Tax Court's decision. We understand the concerns of the affected counties. This is not the end of the litigation process and we are exploring our options for appeal."

Enbridge, based in Calgary, operates several pipelines that cut across northern Minnesota, connecting Alberta and the company's terminal in Superior. The company is awaiting the final approval in June for another oil pipeline — the controversial Line 3 replacement project, which Minnesota regulators have been reviewing since 2015.

In an emailed statement, Enbridge spokeswoman Jennifer Smith said the company will work with affected counties.

"Throughout this entire process, Enbridge has been focused on trying to find an equitable solution to the tax dispute with the State of Minnesota Department of Revenue. Enbridge does not plan to take any immediate action on this ruling as all parties now have 30 days to file an appeal," Smith said.

Enbridge pipelines pass through 13 minnesota counties — Aitkin, Beltrami, Carlton, Cass, Clearwater, Hubbard, Itasca, Kittson, Marshall, Pennington, Polk, Red Lake and St. Louis — where they hold substantial tax bases.

In St. Louis County, the effects of Tuesday's ruling are unclear.

"We are still evaluating the impacts of the decision," County Administrator Kevin Gray said Tuesday.

Looking forward, Hilgart said the Association of Minnesota Counties hopes to find solutions to prevent additional overvaluing.

"This has real effects on communities, schools, cities, townships and counties. We need to figure out a more stable, consistent way to deal with this in the future so that when local governments are budgeting a levy, based on these assessments, which are done by the department of revenue, they can know that they mean something — that they're real," Hilgart said.

Dates set for PUC decision

The fate of Line 3 will be decided by June 27.

On Tuesday, the Minnesota Public Utilities Commission announced its commission meeting schedule for Enbridge's Line 3 replacement.

Oral arguments will be held on Monday, June 18 and Tuesday, June 19 while commission deliberations will be held Tuesday, June 26 and Wednesday, June 27. The meetings begin at 9:30 a.m. in the PUC's large hearing room in St. Paul, 121 7th Place E., Suite 350.

Jimmy Lovrien

Jimmy Lovrien is a reporter for the Duluth News Tribune. He spent the summer of 2015 as an intern for the Duluth News Tribune and was hired full time in October 2017 as a reporter for the Weekly Observer. He also reported for the Lake County News-Chronicle in 2017-18. Lovrien grew up in Alexandria, Minn., but moved to Duluth in 2013 to attend The College of St. Scholastica. Lovrien graduated from St. Scholastica in 2017 with a bachelor's degree in English and history. He also spent a summer studying journalism at the University of California, Berkeley.

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