AP NEWS

Burgum administration renews push for petrochemical plant

October 14, 2019

BISMARCK, N.D. (AP) — Gov. Doug Burgum and his administration are wooing the petrochemical industry to build a multibillion-dollar plant to convert natural gas liquids into plastic or other products, bringing value to the commodity that otherwise is being piped elsewhere or burned off as a byproduct of the state’s soaring oil production.

Such a factory is far from a new idea and other proposals that were initially met with much fanfare fizzled. And any proposal continues to face long odds as the state continues to wrestle with flaring, which wastes gas and revenue and emits unnecessary carbon dioxide emissions blamed for global warming.

Here’s a look at the issue:

MOTHS TO THE FLAME?

North Dakota’s Commerce Department, at Burgum’s direction, has been trying to lure petrochemical companies to build a plant in the state.

Shawn Kessel, the agency’s deputy director, said officials have been in contact with “two dozen” petrochemical companies, and narrowed that to a shorter list.

“There is interest but I can’t say who we’re working with,” he said.

Burgum said it was “premature” to discuss any proposed projects. He did estimate such a plant would cost about $10 billion to build but would not say whether he favors offering incentives beyond a host of tax breaks already available, including an additional sales tax break for such a project approved earlier this year by the Legislature.

Burgum said no company yet has asked the state for any special incentives to set up shop in North Dakota.

DEJA VU ALL OVER AGAIN

Burgum, who was elected in 2016, is the latest in a long line of North Dakota politicians who have said fulfilling the state’s economic destiny relies on adding value to oil and finding markets for its byproducts.

Five years ago, then-Gov. Jack Dalrymple told energy policymakers, researchers, entrepreneurs and industry leaders that flaring is a “problem” and that “value-added is the future of our state economy.”

Dalrymple at the time touted a proposal Badlands NGL LLC, which promised 500 jobs at its proposed $4 billion plant that would convert polyethylene into tiny white beads that would be used in products such as pipes and other plastic products.

The company’s president at the time boasted the plant would be completed in 2017 and would easily obtain financing, without government grants or loans for its construction. Dalrymple said the project would be the largest private investment ever in the state and “one that will surely go down in history.”

Badlands NGL filed for bankruptcy earlier this year without a single shovel of dirt turned.

GAS JUST KEEPS FLARING

North Dakota oil drillers are falling far short of the state’s goals to limit the burning of excess natural gas at well heads, five years after the state adopted the rules to curb the practice. In July, and according to the latest data available, companies flared 23 percent of all gas produced in, or nearly double the 12 percent target.

The industry has spent $21 billion in a little more than a decade on natural gas infrastructure to try and keep pace with record oil production. Another $4 billion in gas processing plants and pipelines is planned over the next two years but regulators are projecting that the state’s increasing gas production will still outstrip that new capacity.

Justin Kringstad, director of the North Dakota Pipeline Authority, said projections show that oil production and its associated gas in two years will outpace even that added capacity.

ON THE OTHER HAND

What North Dakota lacks in infrastructure, it makes up in the quality and the projected quantity of its natural gas —and that might help attract investment in petrochemical plants.

Kringstad said the state’s natural gas may hold three to four times the amount of valuable gas liquids compared with other shale plays in the United States.

“It’s a unique and extremely rich gas,” Kringstad said.

More than 500,000 barrels of liquid gas is captured daily, including 300,000 barrels of ethane, the key component in plastic manufacturing, Kringstad said.

About 50,000 barrels of ethane travels by pipeline daily to a petrochemical plant in Canada, while the rest is sent to other markets nationwide.

North Dakota’s liquid natural gas production is expected to more than double within the next 20 years, he said.

HELPING WITH A HANDOUT?

The state’s tax-break incentives clearly have proven they are not enough to bring a value-added natural gas factory to North Dakota, the nation’s No. 2 oil producer behind Texas.

Kessel, of the Commerce Department, said the state’s incentives are being reviewed “and there are certain areas we could improve.” He would not elaborate.

Republicans and Democrats in the Legislature don’t have an appetite for a direct cash subsidy to a petrochemical company. House Minority Leader Josh Boschee of Fargo said that money would be better used toward education and health care. Bismarck GOP Rep. Rick Becker, who leads a group of ultraconservative House members that call themselves the Bastiat Caucus, called incentives of any kind “corporate welfare.”

“We need to get rid of burdensome regulations and lower the tax burden for everyone,” Becker said.

Sen. Majority Leader Rich Wardner and GOP Rep. Jeff Delzer both said such a handout would be akin to “picking winners and losers” and would not be endorsed by the Legislature.

“People would be very, very upset if we did that,” Wardner said.

THE SHELL SWEEPSTAKES

Burgum said he has studied the package of tax breaks that spurred the construction of a multibillion-dollar petrochemical plant being built by Shell in Pennsylvania. But he would not say whether he would endorse a similar plan for North Dakota.

Pennsylvania beat out other states for the plant by offering tax credits valued at more than $1.6 billion over 25 years. Under the deal, the company is able to sell the tax credits it earns to other companies.

Senate Majority Leader Wardner and Delzer, who heads the powerful House appropriations committee, said they could not endorse or oppose a similar plan until they reviewed a proposal.