North Dakota wants the petrochemical industry.
That means it is offering new tax incentives aimed at adding value to the state’s abundant natural gas supply.
A bill approved in the state 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 said.
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 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.