Legislation passed by the Legislature has the potential of finding uses for the state’s large natural gas supply. The legislation provides a sales tax exemption for certain natural gas processing facilities. If successful, enough ethane, propane and other products would be produced to attract a plastics manufacturing plant to North Dakota.
The Tribune Editorial Board understands the argument against the exemption, but the need to reduce flaring and make use of the natural gas supply overrides that argument. Rep. Rick Becker, R-Bismarck, was among legislators who opposed the bill. He called the measure "corporate welfare" that picks winners and losers. He argued if a venture is going to be profitable a company won’t need subsidies to do it.
We think that’s often true. However, corporate welfare is a tax structure that allows a company to pay no taxes. This is an investment that when modeled out for 20 or 30 years pays for itself many times over.
Oil production in the state has outpaced the industry’s ability to deal with natural gas and there’s still too much flaring in the oil patch. Some companies have been reducing oil production to keep down flaring. We need to reduce wasteful flaring and mineral owners need to get value for the natural gas. So far the industry and the state have struggled to accomplish that goal. In February the state produced 2.6 billion cubic feet per day of natural gas with about 20 percent burned off or flared.
Presently, the state produces between 25,000 and 50,000 barrels per day of ethane at natural gas processing plants in Tioga and near Williston, according to Justin Kringstad, director of the North Dakota Pipeline Authority. Then the ethane goes by pipeline to Alberta, Canada, for plastics manufacturing.
Instead of shipping out the ethane the goal is to use the tax exemption to lure the petrochemical industry to the state. Sen. Dwight Cook, R-Mandan, a co-sponsor of the bill, has high hopes for the tax exemption. "The jobs that this could create and the revenue it would generate is unbelievable potential," he said.
Natural gas from the Bakken is considered to be rich gas with a high concentration of natural gas liquids. The new sales tax exemption, if successful, will encourage more processing of the gas to produce ethane, propane, butane and lighter gases. The incentive can be used by straddle plants, or processing plants located on or near a natural gas transmission line. The plant removes excess natural gas liquids from the processed natural gas in the pipeline. The tax exemption also applies to a facility known as a deep cut fractionator that processes the natural gas liquids to produce ethane, propane, butane and other products. North Dakota has a sales tax exemption for a petrochemical plant, but it has never been used.
The goal of the tax exemption is to bring all these factors together resulting in plants and more jobs.
One company, Bakken Midstream, provided encouraging legislative committee testimony about one opportunity. The company's website says it wants to develop value-added natural gas infrastructure in North Dakota. Bakken Midstream’s website says the company believes conditions are right for North Dakota to develop petrochemical facilities similar to Alberta's Industrial Heartland. Shawn Kessel, deputy commerce commissioner, said a petrochemical facility could mean a multibillion-dollar investment for North Dakota, not including the associated infrastructure.
None of this will happen quickly, but the state needs to make a steady push for projects being discussed and ones similar to them. North Dakota needs to make the best use of its resources.