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Coal Taxes History

Coal Severance Tax

2017 Session

  • The production limit of coal severed that is required to be shared with a county within fifteen miles of the tipple of the active coal mine has been changed.  The production limit through calendar year 2017 is 3,400,000.  For calendar years after 2017, the production limit is 3,000,000.
  • For the purpose of computing coal conversion tax, “gross receipts” is amended to exclude only financial assistance, whether in the form of price guarantee payments or otherwise, provided by federal government or any agency of the federal government.  The tax rate was changed from 4.1% to 2% on gross receipts and a provision was added that if a coal conversion facility met the carbon dioxide recapture requirements prior to January 1, 2017 the facility may not claim the reduction going forward.
  • Five percent of all funds allocated to the State General Fund will continue to be allocated to the Lignite Research fund without the original sunset date of July 31, 2018.

2015 Session

  • Amended several sections of law to define commercial leonardite as a subsurface mineral and defined commercial leonardite severance taxation.

2009 Session

  • Prohibited imposition of coal severance tax on coal used to produce steam that is used in agricultural commodity processing facilities in North Dakota or adjacent states or any facility owned by the state or a political subdivision of the state, or on coal purchased for improvement through coal beneficiation and subsequently used in, or used to produce steam that is used in, agricultural commodity processing facilities located in North Dakota or adjacent states or any facility owned by the state or a political subdivision of the state.
  • Provided that after June 30, 2011, the state treasurer shall allocate funds provided by legislative appropriation to cities, the county general fund, and school districts within a coal-producing county to offset 50% of the loss to the county's share of coal severance tax revenue allocated to a non-coal-producing county in the previous calendar year.

2001 Session

  • Reduced the 75-cent tax to 37½ cents per ton.
  • Repealed the exemption for coal burned in small boilers, effective July 1, 2001.
  • Changed the distribution of the 37½-cent tax to allocate 30% to the coal development trust fund and 70% to the counties.
  • Allowed a county to grant a full or partial exemption from its 70% share for coal shipped out of state.

1997 Session

  • Effective July 1, 1999, the legislature exempted coal burned in coal-fired boilers in generation stations having a total capacity of not more than 210 megawatts, within North Dakota or adjacent states, from 50% of the 75-cent coal severance tax.
  • A city, school district, or the county commissioners of the county in which the coal is mined may grant a partial or complete exemption from their share of severance tax revenues.
  • A political subdivision that has granted an exemption from all or part of its share of severance tax revenues must be omitted from the allocation or have its allocation adjusted to reflect the reduction it has granted.

1999 Session

  • Repealed the exemption for coal burned in small boilers, effective July 1, 2003. 

1995 Session

  • Increased to 70% the portion of taxes collected and deposited in the Trust Fund during a biennium to be appropriated by the legislature for lignite research, development, and marketing.

1994 Constitutional Amendment

  • Voters in the Primary Election approved a constitutional amendment placed on the ballot by the legislature to allow appropriations from the Trust Fund for clean coal demonstration projects approved by the North Dakota Industrial Commission and the United States Department of Energy.  [The Department of Energy did not approve a clean coal demonstration project in North Dakota.]

1991 Session

  • Provided for 50% of taxes collected and deposited in the Trust Fund to be appropriated by the legislature for lignite research, development, and marketing, in accordance with the 1990 constitutional amendment.

1993 Session

  • Limited the amount of coal production on which a coal-producing county has to share its severance tax with a nearby non-producing county.
  • Added loans for school construction to uses of the Trust Fund.
  • Exempted coal shipped out of state after June 30, 1995, and before July 1, 2000, from the state’s 50% portion of the tax.
  • Provided that counties may grant a partial or complete exemption from the county’s 35% portion of the tax.

1990 Constitutional Amendment

  • Voters in the Primary Election approved a constitutional amendment placed on the ballot by the legislature to allow up to 50% of the taxes collected and deposited in the Trust Fund during a biennium to be appropriated by the legislature for lignite research, development, and marketing.

Coal Conversion Tax

2015 Session

  • Exempted beneficiated coal produced for use within a conversion facility from the coal conversion facility tax.

2009 Session

  • Clarified that the exemption for new or repowered electrical generating plants is limited to a new or repowered unit of a plant.
  • Provided that a coal conversion facility that achieves a 20% capture of carbon dioxide emissions during a taxable period receives a 20% reduction in the State General Fund share of the coal conversion tax, and an additional reduction of one percent for every additional two percentage points of its capture of carbon dioxide emissions, up to 50% reduction for 80% or more capture.  The reduction is available for ten years from the date of first capture or from the date the facility is eligible to receive the credit.

2007 Session

  • Provided that from July 1, 2007, through June 30, 2009, 3.5% of funds allocated to the State General Fund from the coal conversion tax must be allocated to the Lignite Research Fund.  After June 30, 2009, 5% of all funds allocated to the State General Fund from the coal conversion tax must be allocated to the Lignite Research Fund, through July 31, 2018.
  • Expressed legislative intent that $500,000 is to be used to pay for fees associated with lignite litigation that may be brought by the state to protect and promote the continued development of lignite resources.  If activities associated with the litigation are not initiated by January 1, 2009, the $500,000 must be returned to the State General Fund.
  • Changed statutory references from “lignite” to “coal” in legislation enacted in 2005, relating to repowered plants, which was found unconstitutional by the South Central Judicial District Court.

2005 Session

  • Enacted the Coal Conversion Facility Tax Reduction Act that provides a five-year exemption for electrical generating plants that complete repowering.
  • Defined “repowering” as an investment of more than $200 million or $1 million per megawatt of installed nameplate capacity, whichever is less, in an existing power plant that modifies or replaces the process used for converting lignite coal from its natural form into electric power.
  • In February 2006, the South Central Judicial District Court found the Coal Conversion Facility Tax Reduction Act unconstitutional.

2001 Session

  • Amended the definition of a coal conversion facility to include an electrical generating plant that has at least one single unit with a capacity of 10,000 kwh or more.
  • Increased the tax rate on installed capacity to .65 mill times 60% of installed capacity times the number of hours in the taxable period.
  • Changed the distribution of the tax on installed capacity to 85% to the State General Fund and 15% to the county in which the plant is located.
  • Increased the tax rate on synthetic natural gas to $.135 per mcf.
  • Changed the tax rate on gross receipts to 4.1%.
  • For calculation of gross receipts, established ceiling prices per mcf of synthetic natural gas, of $4.25 for 2001 and 2002; $4.35 for 2003; $4.45 for 2004; $4.55 for 2005; $4.65 for 2006; $4.75 for 2007; $4.86 for 2008; and $4.97 for 2009.
  • Excluded from the definition of gross receipts any revenue received by the operator of a coal gasification plant in excess of the amount per mcf of synthetic natural gas established as the ceiling price for each calendar year from 2001 through 2009.
  • Required the first $41,666.67 received each month from a coal conversion facility other than an electrical generating plant to be deposited in the State General Fund through December 31, 2009.
  • Allocated the remaining 85% to the State General Fund and 15% to the county in which the plant is located.
  • Provided that allocation of the coal conversion tax to each county may not be less in each calendar year than it was in the immediately preceding calendar year.
  • Provided that any county that has a coal conversion facility that was not a coal conversion facility before January 1, 2002, had to receive for 2002 at least as much as that facility paid in property taxes for taxable year 2001.
  • Provided that for subsequent years the county must receive no less than it received in the preceding year.
  • Required that all amounts received from that facility must be allocated in the same manner property taxes were allocated for taxable year 2001.

1997 Session

  • Increased the exemption for income from byproducts of a coal gasification plant from 20% to 35% from January 1, 1997, through December 31, 2000.
  • Provided the exemption reverts to 20% after December 31, 2000.
  • Exempted revenue derived from the sale and transportation of carbon dioxide for use in enhanced recovery of oil or natural gas, retroactive to January 1, 1997.

1991 Session

  • Created a five-year exemption from part of the tax for new coal-burning electrical generation plants.

1989 Session

  • Defined a coal beneficiation plant as a coal conversion plant.
  • Enacted a tax of 20 cents per ton of beneficiated coal or 1.25 % of gross receipts, whichever is greater, on coal beneficiation plants.
  • Exempted beneficiated coal produced in excess of 80% of plant design capacity.

1987 Session

  • Changed the rate on electrical generating plants to 1¼ mill levy on 60% of installed capacity times the number of hours in the taxable period and 1¼  mill levy on production.
  • Reduced the tax rate on coal gasification plants to 7 cents per mcf of gas produced for sale or 2.5% of gross receipts, whichever is greater.
  • Exempted synthetic natural gas produced in excess of 110 million mcf per day.
  • Exempted byproducts of a coal gasification plant to a maximum of 20% of gross receipts.
  • Made the five-year exemption for coal conversion facilities other than electrical generating plants effective from the date of first taxable production.
  • Eliminated the reference to date of construction.

1985 Session

  • Changed the tax rate on coal gasification plants constructed before July 1, 1985, from 10 cents to 15 cents per mcf of gas produced for sale, or 2.5% of gross receipts, whichever is greater.
  • Changed the definition of gross receipts to exclude any financial assistance from the federal government.
  • Provided a five-year exemption from part or all of the tax for coal conversion facilities, other than electrical generating plants, that were constructed after July 1, 1985.

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North Dakota: Legendary. Follow the trail of legends

Ryan Rauschenberger
Tax Commissioner
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Coal Taxes History

Coal Severance Tax

2017 Session

  • The production limit of coal severed that is required to be shared with a county within fifteen miles of the tipple of the active coal mine has been changed.  The production limit through calendar year 2017 is 3,400,000.  For calendar years after 2017, the production limit is 3,000,000.
  • For the purpose of computing coal conversion tax, “gross receipts” is amended to exclude only financial assistance, whether in the form of price guarantee payments or otherwise, provided by federal government or any agency of the federal government.  The tax rate was changed from 4.1% to 2% on gross receipts and a provision was added that if a coal conversion facility met the carbon dioxide recapture requirements prior to January 1, 2017 the facility may not claim the reduction going forward.
  • Five percent of all funds allocated to the State General Fund will continue to be allocated to the Lignite Research fund without the original sunset date of July 31, 2018.

2015 Session

  • Amended several sections of law to define commercial leonardite as a subsurface mineral and defined commercial leonardite severance taxation.

2009 Session

  • Prohibited imposition of coal severance tax on coal used to produce steam that is used in agricultural commodity processing facilities in North Dakota or adjacent states or any facility owned by the state or a political subdivision of the state, or on coal purchased for improvement through coal beneficiation and subsequently used in, or used to produce steam that is used in, agricultural commodity processing facilities located in North Dakota or adjacent states or any facility owned by the state or a political subdivision of the state.
  • Provided that after June 30, 2011, the state treasurer shall allocate funds provided by legislative appropriation to cities, the county general fund, and school districts within a coal-producing county to offset 50% of the loss to the county's share of coal severance tax revenue allocated to a non-coal-producing county in the previous calendar year.

2001 Session

  • Reduced the 75-cent tax to 37½ cents per ton.
  • Repealed the exemption for coal burned in small boilers, effective July 1, 2001.
  • Changed the distribution of the 37½-cent tax to allocate 30% to the coal development trust fund and 70% to the counties.
  • Allowed a county to grant a full or partial exemption from its 70% share for coal shipped out of state.

1997 Session

  • Effective July 1, 1999, the legislature exempted coal burned in coal-fired boilers in generation stations having a total capacity of not more than 210 megawatts, within North Dakota or adjacent states, from 50% of the 75-cent coal severance tax.
  • A city, school district, or the county commissioners of the county in which the coal is mined may grant a partial or complete exemption from their share of severance tax revenues.
  • A political subdivision that has granted an exemption from all or part of its share of severance tax revenues must be omitted from the allocation or have its allocation adjusted to reflect the reduction it has granted.

1999 Session

  • Repealed the exemption for coal burned in small boilers, effective July 1, 2003. 

1995 Session

  • Increased to 70% the portion of taxes collected and deposited in the Trust Fund during a biennium to be appropriated by the legislature for lignite research, development, and marketing.

1994 Constitutional Amendment

  • Voters in the Primary Election approved a constitutional amendment placed on the ballot by the legislature to allow appropriations from the Trust Fund for clean coal demonstration projects approved by the North Dakota Industrial Commission and the United States Department of Energy.  [The Department of Energy did not approve a clean coal demonstration project in North Dakota.]

1991 Session

  • Provided for 50% of taxes collected and deposited in the Trust Fund to be appropriated by the legislature for lignite research, development, and marketing, in accordance with the 1990 constitutional amendment.

1993 Session

  • Limited the amount of coal production on which a coal-producing county has to share its severance tax with a nearby non-producing county.
  • Added loans for school construction to uses of the Trust Fund.
  • Exempted coal shipped out of state after June 30, 1995, and before July 1, 2000, from the state’s 50% portion of the tax.
  • Provided that counties may grant a partial or complete exemption from the county’s 35% portion of the tax.

1990 Constitutional Amendment

  • Voters in the Primary Election approved a constitutional amendment placed on the ballot by the legislature to allow up to 50% of the taxes collected and deposited in the Trust Fund during a biennium to be appropriated by the legislature for lignite research, development, and marketing.

Coal Conversion Tax

2015 Session

  • Exempted beneficiated coal produced for use within a conversion facility from the coal conversion facility tax.

2009 Session

  • Clarified that the exemption for new or repowered electrical generating plants is limited to a new or repowered unit of a plant.
  • Provided that a coal conversion facility that achieves a 20% capture of carbon dioxide emissions during a taxable period receives a 20% reduction in the State General Fund share of the coal conversion tax, and an additional reduction of one percent for every additional two percentage points of its capture of carbon dioxide emissions, up to 50% reduction for 80% or more capture.  The reduction is available for ten years from the date of first capture or from the date the facility is eligible to receive the credit.

2007 Session

  • Provided that from July 1, 2007, through June 30, 2009, 3.5% of funds allocated to the State General Fund from the coal conversion tax must be allocated to the Lignite Research Fund.  After June 30, 2009, 5% of all funds allocated to the State General Fund from the coal conversion tax must be allocated to the Lignite Research Fund, through July 31, 2018.
  • Expressed legislative intent that $500,000 is to be used to pay for fees associated with lignite litigation that may be brought by the state to protect and promote the continued development of lignite resources.  If activities associated with the litigation are not initiated by January 1, 2009, the $500,000 must be returned to the State General Fund.
  • Changed statutory references from “lignite” to “coal” in legislation enacted in 2005, relating to repowered plants, which was found unconstitutional by the South Central Judicial District Court.

2005 Session

  • Enacted the Coal Conversion Facility Tax Reduction Act that provides a five-year exemption for electrical generating plants that complete repowering.
  • Defined “repowering” as an investment of more than $200 million or $1 million per megawatt of installed nameplate capacity, whichever is less, in an existing power plant that modifies or replaces the process used for converting lignite coal from its natural form into electric power.
  • In February 2006, the South Central Judicial District Court found the Coal Conversion Facility Tax Reduction Act unconstitutional.

2001 Session

  • Amended the definition of a coal conversion facility to include an electrical generating plant that has at least one single unit with a capacity of 10,000 kwh or more.
  • Increased the tax rate on installed capacity to .65 mill times 60% of installed capacity times the number of hours in the taxable period.
  • Changed the distribution of the tax on installed capacity to 85% to the State General Fund and 15% to the county in which the plant is located.
  • Increased the tax rate on synthetic natural gas to $.135 per mcf.
  • Changed the tax rate on gross receipts to 4.1%.
  • For calculation of gross receipts, established ceiling prices per mcf of synthetic natural gas, of $4.25 for 2001 and 2002; $4.35 for 2003; $4.45 for 2004; $4.55 for 2005; $4.65 for 2006; $4.75 for 2007; $4.86 for 2008; and $4.97 for 2009.
  • Excluded from the definition of gross receipts any revenue received by the operator of a coal gasification plant in excess of the amount per mcf of synthetic natural gas established as the ceiling price for each calendar year from 2001 through 2009.
  • Required the first $41,666.67 received each month from a coal conversion facility other than an electrical generating plant to be deposited in the State General Fund through December 31, 2009.
  • Allocated the remaining 85% to the State General Fund and 15% to the county in which the plant is located.
  • Provided that allocation of the coal conversion tax to each county may not be less in each calendar year than it was in the immediately preceding calendar year.
  • Provided that any county that has a coal conversion facility that was not a coal conversion facility before January 1, 2002, had to receive for 2002 at least as much as that facility paid in property taxes for taxable year 2001.
  • Provided that for subsequent years the county must receive no less than it received in the preceding year.
  • Required that all amounts received from that facility must be allocated in the same manner property taxes were allocated for taxable year 2001.

1997 Session

  • Increased the exemption for income from byproducts of a coal gasification plant from 20% to 35% from January 1, 1997, through December 31, 2000.
  • Provided the exemption reverts to 20% after December 31, 2000.
  • Exempted revenue derived from the sale and transportation of carbon dioxide for use in enhanced recovery of oil or natural gas, retroactive to January 1, 1997.

1991 Session

  • Created a five-year exemption from part of the tax for new coal-burning electrical generation plants.

1989 Session

  • Defined a coal beneficiation plant as a coal conversion plant.
  • Enacted a tax of 20 cents per ton of beneficiated coal or 1.25 % of gross receipts, whichever is greater, on coal beneficiation plants.
  • Exempted beneficiated coal produced in excess of 80% of plant design capacity.

1987 Session

  • Changed the rate on electrical generating plants to 1¼ mill levy on 60% of installed capacity times the number of hours in the taxable period and 1¼  mill levy on production.
  • Reduced the tax rate on coal gasification plants to 7 cents per mcf of gas produced for sale or 2.5% of gross receipts, whichever is greater.
  • Exempted synthetic natural gas produced in excess of 110 million mcf per day.
  • Exempted byproducts of a coal gasification plant to a maximum of 20% of gross receipts.
  • Made the five-year exemption for coal conversion facilities other than electrical generating plants effective from the date of first taxable production.
  • Eliminated the reference to date of construction.

1985 Session

  • Changed the tax rate on coal gasification plants constructed before July 1, 1985, from 10 cents to 15 cents per mcf of gas produced for sale, or 2.5% of gross receipts, whichever is greater.
  • Changed the definition of gross receipts to exclude any financial assistance from the federal government.
  • Provided a five-year exemption from part or all of the tax for coal conversion facilities, other than electrical generating plants, that were constructed after July 1, 1985.

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