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House Panel Votes Out Bill Ending Higher State Taxes on Pipes

A House Judiciary subcommittee last Thursday approved by voice vote a bill that would bar states from assessing taxes on interstate natural gas pipelines at a higher rate than those levied on in-state industrial and commercial facilities.

The legislation (HR 1369) would prohibit states from discriminating in their taxation of interstate gas pipelines and potentially could in the long term send natural gas prices lower. The measure, sponsored by Rep. Chris Cannon (R-UT), also would allow for interstate gas lines to challenge a state's taxation policy in federal court.

Cannon is chairman of the Commercial and Administrative Law Subcommittee, which voted out the bill. The measure has been sent to the full Judiciary Committee, but a mark-up has not been scheduled yet.

In the 1970s, Congress enacted legislation to prevent states from levying higher taxes on railroads, interstate trucking and interstate aviation, but they excluded interstate gas pipelines from the bill, said Martin Edwards, vice president for legislative affairs at the Interstate Natural Gas Association of America (INGAA). He noted the Cannon bill would correct this omission.

"States have been charging [interstate pipelines] at higher rates for many years," Edwards told NGI. He estimated that 12 to 15 states currently assess higher taxes on interstate pipes than on in-state industrial and commercial facilities. Ohio is "kind of the 800-pound gorilla taxing interstate pipelines at four times the level of in-state industrial and commercial property."

The Cannon measure would not preclude states from ever raising taxes on interstate gas pipelines, Edwards said. However, when increasing taxes, the bill would require states to deal with interstate pipelines and in-state industrial and commercial facilities in a consistent fashion, he noted.

A similar bill has been introduced in the Senate by Sen. John Cornyn (R-TX). It currently is pending before the Senate Finance Committee. Cornyn is trying to get co-sponsors and have the bill moved to the Senate Judiciary Committee, where he is a member, a spokesman said.

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