REGIONAL — Local officials say some area towns stand to lose thousands of dollars in tax revenue should the South Portland-Montreal Pipeline become obsolete.
The pipeline that has been sending crude oil from Portland Harbor to Montreal for nearly 75 years may stop sending crude oil through its pipes in 2016, according to published reports in the Portland Press Herald and other media outlets.
The Portland Press Herald reported on Nov. 30 that that a major pipeline reversal project in Canada could be completed as early as December, potentially making the South Portland-Montreal pipeline outmoded by the new year.
The pipeline transports conventional crude oil from tanker ships in South Portland 236 miles to Montreal. It runs along and crosses some of Maine’s most critical lake and river watersheds, including the Androscoggin River, Sebago Lake and the Crooked River in local towns including Otisfield, Harrison and Waterford.
But dwindling use and completion of a project to reverse the direction of an Ontario-Montreal pipeline to go from west to east has led to speculation in the media and among town officials that the owner of Portland Pipe Line Corp. and its South Portland facility will shut down the 236-mile line to Montreal.
And if that happens, local area officials say they are bracing for what could be an influx of requests for tax abatements.
A request for information from Portland Pipeline Corporation this week was not returned.
“It’s taxed like any other piece of commercial property,” said longtime Otisfield Selectman Len Adler, who lives down the street from about one acre of Portland Pipeline-owned property near Spurr’s Corner on Route 121.
The pipeline in Otisfield is composed of three pipes, set at or above the frost line, ranging from a 12-inch-deep pipe built in 1945 to a 48-inch-deep pipe built in 1965, Lee Dassler, of the Western Foothills Land Trust, said several years ago when she and others brought to light a potential plan to send tar sands through the pipes. One pipe is exposed on the Crooked River near Bolsters Mills in Otisfield.
Otisfield officials say they stand to lose thousands of dollars in tax revenue -Adler estimates about $123,000 – if the pipeline shuts down. The pipe runs along the same route as natural gas pipelines that would not be affected by a shutdown of the Portland Pipeline.
Officials like Harrison’s Town Manager George “Bud” Finch say they are not surprised. They have been hearing for months that the amount of crude oil flowing through the pipes has been reduced.
Harrison has 47.6 acres valued at $142,800 and a building valued at $2,031,900 for a total valuation of $2,171,400 associated with the pipeline.
“Harrison has very limited taxable commercial property other than the pipeline, powerlines and a few small businesses so we are always concerned about any possible loss of revenue from taxation that would have to be passed on to home owners,” said Finch.
There are two sets of pipe lines running through the right of way in Harrison. One is operated by Portland Pipeline the other by Portland Natural Gas. Taxes on the Portland Pipeline are about $25,000 and are taxable as long as the pipeline is in the ground.
The expectation by local officials, including Waterford Selectmen Chairman Randy Lessard, is that should the Portland Pipeline shut down, the company would request tax abatements in each town where they have pipeline.
“It’s not a lot of money for us. We have four miles of pipe,” said Lessard. “When we calculated this several years ago when there was a lot of talk about tar sands coming through, we found it would be about a quarter of a mill rate.
“Not insignificant, but it won’t cause insurmountable problems for the town,” said Lessard.
Waterford, which has 7.8 miles of pipe running through the town crossing the Crooked River watershed five times, taxed the Portland Pipeline $38,141 in 2015.
Waterford, unlike Otisfield, taxes the Pipeline Company strictly on its infrastructure, which means if the pipe remains, the value remains regardless of the usage, said Lessard.
“In Waterford the taxes are set on value, not use,” Lessard said. “So the land and the pipeline still has value. We charge for the infrastructure.
“When we tax real estate, it’s done on the replacement cost. We adjust for depreciation and economic and physical depreciation. Replacement doesn’t change with change in use,” he continued.
For example, he explained, if Waterford Homes closes for the winter, the excess capacity caused by lack of people and equipment, doesn’t mean less taxes. The intrinsic value (of the structure) is in the walls and roofs and so forth, he said.
Otisfield, on the other hand, said it would tax the pipeline based on “functional obsolescence.”
“About 20 years ago the poultry industry collapsed so barns that had been assessed at full value lost their value. It’s called functional obsolescence,” Adler said in explaining how “functional obsolescence” works. “If they [the pipeline] closed down, there would be some value but no where near what it is.”
Mike Rogers, supervisor for municipal services for the Maine Revenue Service property tax division, said he tends to agree that the functional obsolescence will come into play for local assessors should the pipeline become obsolete.
“The infrastructure would still be there but it wouldn’t be making money. I believe it would [be taxed on functional obsolescence,]” he said.
The entire pipeline in Maine stretching from Albany through Bethel, Waterford, Harrison, Otisfield, Casco, Raymond, Windham and beyond has an approximate valuation of $26.5 million.
The 236-mile-long pipeline was constructed in 1941 to move and refine petroleum needed to fuel the Allies’ World War II efforts against Nazi Germany. The Portland Pipeline Company has continued moving crude oil to Montreal since that time.
In recent years it has been the target of environmental advocates and others who were concerned about reports that Exxon Mobile and others were backing a plan to allow a Canadian oil pipeline company to pump tar sands oil through the Portland Pipeline for export to global markets.
Resolutions were passed in several towns, like Otisfield and Waterford along the Crooked River, to oppose the tar sands plan. Portland Pipeline officials told voters there was no plan currently to reverse the flow and ship tar sands oil.
The South Portland City Council approved an ordinance in 2014 that would prevent the company from reversing the flow of the pipeline.
Any requests for tax abatements must be requested no more than 185 days after commitment, which is the first of September in Waterford, Lessard said. Therefore abatements – should any be requested for 2015 – would have to be filed by the first of March.
For now, local officials will have to take a wait and see position, but all agree that should the pipeline be shut down, there will be a financial hit.