Carbon Sequestration Credits May Leave North Dakota Taxpayers On The Hook For $ 250 Million

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Leading Republican lawmakers have said that credit program set out in bill passed at this sessionis dedicated to Project Tundra, an ambitious billion dollar carbon capture and storage facility at a coal-fired power plant in central North Dakota.

If successful, Project Tundra will become the largest in the world. carbon capture unit. The holy grail of clean energy innovation, this breakthrough would give new life to the North Dakota coal industry and provide a roadmap for decarbonizing coal-fired power plants around the world.

But when lawmakers approached the Bank of North Dakota, the country’s only state-owned bank, to take over the loan program, bank officials declined, saying they would never approve of a loan of this size, subsidized interest rates, or risks on their own balance sheet.

Instead, they wrote the language of a bill that gave the state up to $ 250 million in lending, with the proviso that the Legislature or the state’s highest regulatory council would provide refunds so that the bank would not take responsibility.

That refund is likely to be covered in taxpayer dollars, said Senate Majority Leader Rich Wardner, R. Dickinson, although the legislature can draw from a variety of government funds. Legislators are hoping federal carbon capture tax credits will cover costs over a longer period.

Republican leadership, including Senate Appropriations Chairman Ray Holmberg of Grand Forks; Housing Allocation Chair Jeff Delzer of Underwood; and Wardner, said they could not anticipate loan returns to bite the government, and noted that Project Tundra may never need government money at all.

However, some critics see the loan program as a gift to a beloved private industry that could leave taxpayers on a hundreds of millions of dollars hook.

“The state is willing to put taxpayers at risk,” said Republican Bismarck spokesman Rick Becker, an outspoken opponent of government spending, who was one of 15 House members who voted against the package that established the loan program. Becker added that he was not surprised to learn that the state bank did not want to take the risk.

“This is the reason why businesses turn to the government,” he said. “They make deals that would not exist in the free market. And the reason they won’t happen is because they are too risky or not viable. ”

Becker criticized loans as a form of “corporate welfare” and noted that the government approval process is likely to meet lower standards than private lenders, who require higher interest rates and a long list of guarantees to ensure that the recipient does not default.

Main Business Development Department, Bank of North Dakota Officer Todd Steinwand said that in addition to the fixed low interest rates and the size of the loan program, which exceeded the statutory per-recipient cap – Bank officials saw an additional risk in unresolved issues related to carbon capture technology, which is still at an early stage when it comes to coal power and has not been proven on the scale of the Tundra project.

The headquarters of the Bank of North Dakota, the country's only state-owned bank, is located near the Missouri River in Bismarck.  Photo courtesy of the Bank of North Dakota.

The headquarters of the Bank of North Dakota, the country’s only state-owned bank, is located near the Missouri River in Bismarck. Photo courtesy of the Bank of North Dakota.

While the Bank of North Dakota will not take any risks, the bank will help thoroughly vet the recipient and his payment plan before anything is approved, Steinwand said. He also noted that several other large lending programs do not appear on the balance sheet of the Bank of North Dakota, including funds that the bank provides for the construction of public schools and infrastructure projects.

Carbon capture projects like Project Tundra, led by utility company Minnkota Power Cooperative, are looking to retrofit coal-fired power plants to remove carbon dioxide molecules from gas emissions. This carbon dioxide will then be pumped into the ground for permanent storage, preventing the greenhouse gas from affecting the atmosphere.

The technology is expensive to develop, but the federal carbon tax credit helped stimulate several dozen projects across the country in recent years… Project Tundra hopes to cover its $ 1 billion upfront costs over a longer period after the systems are up and running, as tax breaks are only paid after carbon dioxide is stored or used as an alternative.

Minnkota spokeswoman Stacey Dahl said Project Tundra, which previously received a $ 10 million grant from the US Department of Energy and $ 15 million from North Dakota for research, is still finalizing its preliminary cost estimate.

Minkota’s leadership previously noted problems with attracting private capital to a coal-related project, although Dahl said that so far they have generated a lot of interest from investors. According to her, the project plans to move to the fundraising stage by the end of summer or early fall.

This illustration shows what a carbon capture plant at the Milton R. Young power plant could potentially look like.  Minnkota says the cooperative is still in the midst of cutting-edge engineering and does not yet have a real blueprint or layout for the capture facility.  Courtesy of Minnkota Power Cooperative

This illustration shows what a carbon capture plant at the Milton R. Young power plant could potentially look like. Minnkota says the cooperative is still in the midst of cutting-edge engineering and does not yet have a real blueprint or layout for the capture facility. Courtesy of Minnkota Power Cooperative

Leading lawmakers highlighted the rigor of the Bank of North Dakota’s appraisal and verification process, which Steinwand said has made the bank a successful independent government institution for over 100 years. But North Dakota’s leadership has shown a willingness to foster carbon sequestration in the state, and some skeptics have said the bank is not immune to these political winds.

“They will feel the pressure,” Becker said, adding that he can see the Bank of North Dakota resisting political pressure to help fund Project Tundra if they don’t believe the loans are viable.

“But it looks like a lot of things. You know, dominoes fall out depending on what the powerful want, ”he said.

“It’s approved unless there is evidence that it shouldn’t be,” said Dustin Gavrilow, managing director of the North Dakota Watchdog Network, which monitors government spending. Although Bank of North Dakota officials act independently, Gavrilow said, “they know they will hear it from certain people” if they decline a loan application from such a high-priority project.

Although the republican leadership said setting aside $ 250 million for Project Tundra has always been a top goal In a recent legislative session, Gavrilow noted that the funds were not reflected in the bill until the end of March, after much of the formal hearing process had ended.

“They were trying to hide the ball,” Gavrilow said. He argued that the loan program would not have passed if it had been introduced on its own, especially by the House of Representatives, where Democrats and libertarian conservatives form a sizable electoral bloc.

Wardner said he was not aware of any reservations about the Bank of North Dakota loans, and added that their resistance to putting the program on their balance sheet did not indicate to him that it would be too risky. Nevertheless, he said, the bank was probably satisfied with the provision guaranteeing reimbursement from other government agencies.

“If this item was not there, you bet they would be worried,” he said.

While Wardner acknowledged that the government would be at the risk of borrowing, he said he sees support for Project Tundra and the development of carbon capture as necessary steps to preserve the state’s coal industry.

“I know there is some risk,” he said. “I’m just telling you that we are doing this very important. I think it’s worth it. ”

Readers may contact Forum Reporter Adam Willis of the Report for America Corpus at awillis@forumcomm.com.

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