BISMARCK, N.D. (AP) — North Dakota is courting the petrochemical industry with a new tax incentive aimed at adding value to the state's abundant natural gas supply.
A bill approved in the recent legislative session adds a sales tax exemption for certain natural gas processing facilities.
The goal is to produce a supply of ethane, propane and other products that could attract a plastics manufacturing plant to North Dakota.
"The jobs that this could create and the revenue it would generate is unbelievable potential," said Sen. Dwight Cook, R-Mandan, a co-sponsor of the legislation.
North Dakota produces between 25,000 and 50,000 barrels per day of ethane at natural gas processing plants in Tioga and near Williston, said Justin Kringstad, director of the North Dakota Pipeline Authority. The ethane is shipped by pipeline to Alberta, Canada, for plastics manufacturing, he told the Bismarck Tribune.
The Department of Commerce has been working to attract a petrochemical plant to North Dakota to create a new industry and take advantage of growing natural gas volumes, said Shawn Kessel, deputy commerce commissioner.
The state produced 2.6 billion cubic feet per day of natural gas in February, with about 20 percent burned off or flared due to inadequate processing capacity and other infrastructure.
"Some companies are having to reduce the amount of oil that they're producing so they don't exceed flaring regulations," Kessel said. "If we can find a company that can then utilize this gas and create a value-added product out of it, we win on multiple levels."
Natural gas that is produced along with Bakken oil is considered to be rich gas, which means it has a high concentration of natural gas liquids.
The new sales tax exemption approved by lawmakers aims to encourage further processing of the gas to produce ethane, propane, butane and lighter gases.
The incentive applies to so-called 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. To qualify, the facility must produce at least 45,000 barrels per day of ethane.
North Dakota already had a sales tax exemption for a petrochemical plant, but it has never been used.
Sen. Jessica Unruh, R-Beulah, who advocated for the bill during the legislative session, said the state doesn't have enough infrastructure to process, transport and store products that could be used for plastics manufacturing.
"It's a big gap and a big obstacle to convincing petrochemical companies to locate here in the center of the United States," Unruh said during a Senate floor session.
The sales tax exemption also applies to certain natural gas liquids pipelines, storage facilities, rail upgrades and roads developed in conjunction with a straddle plant or fractionator. The bill also extended the sales exemption for fertilizer and chemical processing plants through 2023.
Rep. Rick Becker, R-Bismarck, was among House lawmakers who opposed the bill, calling it "corporate welfare" that picks winners and losers.
"I think it's wrong to select industries to say 'you don't need to pay,'" Becker said during a House debate. "If their endeavor is going to in the end be profitable, they will do it without subsidies."