Legislators focus on oil, coal, ethanol, wind

The oil industry will drill in the legislative arena to make the business of oil flow smoothly through regulatory and pipeline channels in North Dakota.

Legislators also will be asked to tweak laws to enhance other energy resources in the state, like wind, coal and ethanol. 

Oil exploration and production are at levels not seen for nearly two decades in North Dakota, so it's no surprise that legislative attention will be focused on the oil patch.

Ron Ness, who heads up the North Dakota Petroleum Council, said the industry wants a pipeline authority to help relieve the transportation bottleneck that happened this summer. Some producers were without a market for their oil product.

Ness said the authority would be similar to the transmission authority formed in the previous session to bring energy producers together for cooperative power line projects, with the state taking a position as coordinator and lender of last resort.

Ness said the industry also wants the Legislature to continue a 24-month tax holiday for new shallow gas wells. The holiday would otherwise expire in June.

He said the tax holiday has spurred development of natural gas wells in the oil field, adding about $600,000 in tax revenue for those gas wells on which the holiday has expired.

The oil industry also will ask the Legislature to compute the 5 percent gross production tax and 6.5 percent oil extraction tax against the actual reported price of North Dakota oil, instead of against the Dec. 31 set price reported on the NYMEX index.

He said the actual price is often substantially lower than NYMEX and would give some relief to oil producers if the North Dakota market price continues to fall. Ness said North Dakota oil producers are already paying the third highest tax rate in the country.

Ness said the Petroleum Council also would support any bills aimed at workforce development. The demand for oil field workers is growing and "there are still more than 200 job openings," he said.

Oil is hot out west, but coal projects also have been making big news.

Several new power plants are on the drawing boards and other projects are in the works that would tap into new uses of lignite.

John Dwyer, who directs the Lignite Energy Council, said a bill would be introduced to increase state funding of the lignite research fund.

He said the bill would ask for $1 million of the state's share of coal conversion tax revenues in order to put more money toward the Lignite Vision 21 program.

Lignite Vision was developed five years ago to enhance power plant construction in North Dakota by making matching funds available to coal developers.

Dwyer said the additional $1 million would be allocated toward the issuance of revenue bonds to help finance the possible construction of one or more coal plant projects in development now.

Those coal development projects include the possible construction of a third unit at the Milton R. Young Station at Center, a new base load power plant at South Heart being proposed by Great Northern Power Development, a coal-to-liquid fuels plant at Great River Energy's Underwood station and a third unit at Basin Electric Power Cooperative's Leland Olds Station at Center.

Dwyer said the optimism for new coal development in North Dakota exceeds anything he's seen in his 25 years with the council.

He said he's hopeful the Legislature will support the request for additional development money in view of the potential for jobs in the lignite fields.

He said another piece of legislation aimed at the energy industry would enhance development of transmission capabilities.

He said the bill would allow the Public Service Commission to levy a tariff on behalf of investor-owned utilities to allow them to recover costs for transmission upgrades from consumers.

Dwyer said the tariff would alleviate the utility's investment risk in new transmission lines and expedite what is normally a lengthy rate case process.

With two ethanol plants to go online soon and another in development, the corn-based fuel additive will get some legislative attention, along with other renewable fuels.

The North Dakota Renewable Energy Partnership has endorsed in concept a list of legislative actions to improve the climate for renewable energy.

The first is a Renewable Energy Development Fund of $20 million that would flow through a renewable energy council for research and development.

Patrice Lahlum, who directs policy and communication for the state agriculture department, said commissioner Roger Johnson is interested in setting a standard for ethanol that would mimic other states' ethanol blend standards for gasoline.

The concept under consideration would require a 10 percent ethanol blend in gasoline by 2009, gradually trending upward to a 25 percent blend by 2019.

Other legislative concepts are increased incentives for ethanol production and incentives for feedlots using ethanol corn mash.

Other renewable energy legislation is in the wind, now that North Dakota's wind energy development is firmly established with commercial wind farms in Burleigh and Oliver counties in this region and others elsewhere in the state.

The North Dakota Renewable Energy Partnership has outlined a concept to restore wind farm siting authority to the Public Service Commission for wind projects of more than 20 megawatts. The oversight would include the issues of landowner compensation and perimeter setbacks.

The PCS's authority was stripped of anything under 100 megawatts in the last session.

(Reach reporter Lauren Donovan at 888-303-5511, or lauren@;westriv.com.)