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North Dakota Legislature looks to ease taxes on coal industry

House Bill 1412 would remove the coal conversion tax on the lignite industry in North Dakota for five years.

By Dylan Sherman


BISMARCK – Energy is one of the biggest industries in North Dakota, and the Legislature is looking to support the coal industry with House Bill 1412.

Rep. Jeff Delzer, R-Underwood, introduced the bill to members of the House Finance and Tax Committee on Feb. 3, and the committee voted unanimously send the bill on to the Appropriations Committee, where Delzer is chairman. It would reduce the current coal conversion tax by 60% and impose a lignite research tax. Lignite is a type of coal that is abundant in North Dakota.

“We cannot afford to ignore the challenges the industry faces,” Delzer said, noting that the industry “has done many improvements” on environmental issues. “We in North Dakota enjoy some of the best air and water quality in the nation and likely the world,” he said.

The bill would reduce general fund revenue for the 2022-23 biennium by $35.5 million, according to an attached fiscal note. The bill would be effective from June 30, 2021, to June 30, 2023.

Delzer said the industry faces such challenges as requirements to reduce carbon emissions and competing with federally subsidized “green” energy. The state has been collecting a conversion tax from the coal industry since 1975, he said.

“This [bill] will give the industry some relief to better compete with other forms of generation,” he said. “The end goal is to keep the thousands of our friends and neighbors who have [made] and will continue to make their living” in the coal industry.

Jason Bohrer, president and CEO of the Lignite Energy Council, testified in favor of the bill. “Due to changing field markets, federal policies and regulations and distorted energy markets, the lignite industry greatly needs immediate economic relief,” he said. 

Bohrer said the North Dakota lignite industry produced more than $5 billion in regional economic impact and over 13,000 jobs. 

“The total amount of coal conversion taxes paid in 2019, which is the most complete data available, was $25.4 million,” he said.

Bohrer said HB 1412 only focuses on the coal conversion tax and is proposing temporary tax relief for five years. “This relief does not impact county tax revenue or the lignite research fund,” he said. “Counties will be held harmless under this bill.”

Although the relief is temporary, Bohrer said he believes it will be highly beneficial, providing “economic stability for the industries while we develop carbon capture and additional uses for lignite.”

Bohrer was asked by a committee member if lignite is receiving any federal subsidies.

“It really all depends on how you define a subsidy,” he said. “A lot of times what you’ll see happen is subsidies defined very broadly for the oil, gas and coal industries and very narrowly for renewal industries.”

Bohrer said a lot of provisions in the tax code are defined as subsidies when taken advantage of by the fossil fuel industry. However, there are very few direct subsidies that only apply to the coal industry. “There are a few and they are relatively small in magnitude,” he said. “For our purposes they add very little to the bottom line.”

There is no single major factor affecting the coal industry, but a combination of factors in the energy markets, he said. “Electricity markets have changed a lot in the past 10 years, with an influx of really cheap natural gas and heavily subsidized wind,” he said.

Geoff Simon, executive director of the Western Dakota Energy Association, also testified in support of the bill. “The only reason we are here is because of distorted federal energy policy, which reports intermittent generation, incentivises it actually, and fails to actively compensate baseload lignite plants,” he said.

Simon said he appreciated Rep. Delzer for proposing this bill, for recognizing the revenue generated by the coal conversion tax is important to the communities that he represents. “This bill does recognize they need that revenue to support ongoing operations,” he said.

There was no testimony or discussion in opposition to the bill during the hearing. An advocate for development of wind energy in North Dakota, who was not at the hearing, declined to comment.

Rep. Ben Koppelman, R-West Fargo, a committee member, said the bill was important to support the lignite industry in North Dakota. 

“Nationally steps are being taken to manipulate our opportunities in our market in North Dakota, both in energy and in other ways,” he said. “I think we have to do what we can to support the industry that has supported us for a long time.”

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