Coal, ethanol industries seek sales tax exemption for carbon storage projects

Source: By AMY R. SISK, Bismark Tribune • Posted: Thursday, January 21, 2021

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Midwest Ag Energy CEO Jeff Zueger talks in October 2020 about the test well for Blue Flint Ethanol’s carbon capture project in McLean County. Researchers will study rock samples removed in the drilling process to gauge the feasibility of storing the plant’s carbon emissions underground. Mike McCleary

Several North Dakota coal and ethanol plants are inching closer to capturing the carbon dioxide they generate and storing it underground, and they’re asking lawmakers to exempt the practice from sales tax.

A similar exemption is already in place if the carbon dioxide is injected into old oil fields to boost oil production, a process known as “enhanced oil recovery.” But the projects in the works in North Dakota seek to store the gas permanently underground far from the oil patch. The greenhouse gas would form plumes in rock formations deep below the earth’s surface and stay buried there, rather than be released into the air where it would contribute to global warming.

Bill sponsor Sen. Jessica Bell, R-Beulah, said lawmakers did not envision the developing business structure for carbon storage when they passed the enhanced oil recovery exemption in a past legislative session.

“We would like to see all of these things come to fruition,” she said Wednesday during a hearing before the Senate Finance and Taxation Committee.

The committee heard from leaders in the coal and ethanol industries on Senate Bill 2152. The measure would exempt the sale of carbon dioxide for geologic storage from both sales and use tax, which are levied at rates of 3-7% in North Dakota depending on the item.

Midwest AgEnergy CEO Jeff Zueger was among those who supported the measure. He told lawmakers about the company’s carbon capture and storage project at Blue Flint Ethanol in McLean County, where crews recently finished drilling a test well that might be used to inject the gas underground in the future.

“It’s contemplated we will have a CO2 transaction from the producer, Midwest AgEnergy, to the partner we’re working with on the project who will eventually sequester and store the CO2,” Zueger said. “We believe it’s not really a taxable event in that the CO2 would have gone into the environment.”

The president of Red Trail Energy in Stark County, Gerald Bachmeier, said his company will seek a permit from state regulators within the next few weeks to operate an injection well, a key step before carbon storage can begin. State regulators assumed oversight of such facilities from the U.S. Environmental Protection Agency in 2018.

“I believe we are going to be the first ones in the state to accomplish this,” Bachmeier said.

The other major carbon capture project in the works is Project Tundra at Minnkota Power Cooperative’s Milton R. Young Station. The project at the Oliver County coal-fired power plant is greater in scope than at the ethanol plants and will cost significantly more to build.

Basin Electric operates a carbon capture system at its Great Plains Synfuels Plant near Beulah. Much of the carbon dioxide is piped to Saskatchewan, where it’s used for enhanced oil recovery. The gas also is used by the beverage and food processing industry, as well as at water treatment plants.

Carbon capture is a hot topic in North Dakota as the ethanol industry eyes markets in places such as California that value cleaner fuels. The coal industry sees it as a way to address its carbon emissions in a nation where the public, politicians and policymakers are increasingly demanding action on climate change.

No one opposed the bill, and the Senate Finance and Taxation Committee voted 7-0 Wednesday to endorse it. The measure next goes to the full Senate for a vote.

Separately, Republican legislative leaders announced legislation Wednesday to establish the Clean Sustainable Energy Authority. House Bill 1452 would create another arm of the state Industrial Commission similar to the state Pipeline Authority and Transmission Authority.

The Clean Sustainable Energy Authority would be tasked with recommending grants and loans for energy projects to the full Industrial Commission, a three-member panel chaired by Gov. Doug Burgum. The office also would propose an environmental, social and governance policy to the Legislature. Such standards guide socially conscious business decisions, and they are becoming increasingly common in the investment world.

The authority would be directed by a 15-member board, which would include representatives from the coal, oil and renewable industries, among others.