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Bill would limit tax breaks for long CO2 pipelines used for sequestration; sponsors cite changing scale of projects
Summary
Representative Jay Olson told the committee House Bill 1295 would narrow tax exemptions for CO2 pipelines so the state exemptions apply only to pipelines used exclusively for enhanced oil recovery, not to pipelines whose primary purpose is permanent sequestration.
Representative Jay Olson told the House Finance and Taxation Committee that House Bill 1295 as amended would remove tax exemptions for carbon dioxide pipelines when the CO2 is destined for permanent geologic storage and would preserve exemptions for pipelines used exclusively for enhanced oil recovery (EOR). Olson said the Century Code provisions currently cited in law (for example, North Dakota Century Code 57-6-17.1 for centrally assessed property taxation and section 57-39.2-04 for sales and use tax) were enacted when the original exemptions were intended for in-state uses and not for long interstate trunk lines.
"Allowing a 10-year exemption to continue will be very costly for the state," Olson said, adding that a multi-state corridor of pipelines could multiply the state reimbursement owed to counties. Olson urged the committee to limit exemptions to activities that directly benefit North Dakota industries and suggested staff could further amend language to include coal or ethanol projects if the committee wished.
Supporters of the change included Dakota Resource Council and other local stakeholders who argued large projects that transport CO2 from out of state are being subsidized by North Dakota taxpayers while federal 45Q tax credits already provide significant incentives. Zachary Cassidy of Dakota Resource Council said federal funding through 45Q makes additional state exemptions unnecessary and that communities along a pipeline may incur costs for nuisance, traffic and emergency services.
Opponents, including the North Dakota Petroleum Council, Summit Carbon Solutions, the Lignite Energy Council, the North Dakota Ethanol Producers Association and the Greater North Dakota Chamber, urged a do-not-pass recommendation. The North Dakota Petroleum Council argued that repealing the exemptions would make large CO2 pipeline projects less economically viable and would discourage investment in enhanced oil recovery and carbon capture projects. Summit Carbon Solutions and others said the state's prior policy framework and permitting regime (including North Dakota's Class VI primacy and financial-assurance requirements) were designed to attract capital and that pulling exemptions now would undermine that effort.
Debate included procedural, technical and national-security concerns. Representative Sue Ann Olson raised whether changing rules midstream would affect projects under development; sponsors said some projects have not begun construction and that the federal incentive structure (45Q) dwarfs state exemptions in dollar terms, making the state exemptions less likely to be the deciding factor. Representative Porter and others questioned foreign investment reports attached to online testimony; sponsors and Summit representatives disputed claims that projects were owned by Chinese state interests and noted a mix of investors including U.S. and allied firms.
The committee heard extensive testimony on both sides; sponsors recommended further targeted amendments if the committee desired to exclude certain in-state industries (coal, ethanol) from the repeal. No committee vote occurred during the hearing.
