Taxing Carbon Pipelines – South Dakota Leads the Way

South Dakota counties can now tax carbon dioxide pipelines that pass through their jurisdictions. Governor Kristi Noem recently signed into law SB 201, allowing South Dakota counties to impose an up to $1-per-linear-foot surcharge on carbon dioxide pipeline installed in their county during a year when the pipeline company claims the IRC Section 45Q carbon capture and sequestration tax credit.

As part of the new law, pipeline companies are required to report to each county the linear footage of installed carbon dioxide pipeline. They must remit the surcharge to each county in the same manner as they would property tax payments, and the county must then use at least 50 percent of the surcharge revenue as property “tax relief.”

The bill is part of a three-bill legislative package that addresses carbon pipeline permitting, easements, and financial compensation for landowners. The bills are in response to a proposed carbon pipeline that would transport carbon dioxide from ethanol plants in several states through South Dakota to a carbon storage site in North Dakota.

For more information about this tax, contact us. Visit our Inflation Reduction Act page for general information about our services.

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