A BILL for an Act to amend and reenact subsection 3 of section 54-35-26 and sections 57-40.2-03.3 and 57-60-06 of the North Dakota Century Code, relating to the evaluation of economic development tax incentives, the carbon dioxide capture and injection use tax exemption, and the ad valorem property tax exemption for carbon dioxide capture equipment used for enhanced oil recovery and secure geologic storage; to repeal sections 57-06-17.1, 57-06-17.2, and 57-39.2-04.14 of the North Dakota Century Code, relating to the carbon dioxide pipeline exemption, payments in lieu of taxes for certain carbon dioxide pipeline property, and the carbon dioxide capture and injection sales tax exemption; and to provide an effective date.
HB 1295 would revise North Dakota’s review process for economic development tax incentives by adding carbon dioxide capture and injection-related tax exemptions to the list of incentives that must be periodically analyzed by legislative management. The bill also updates the contractor use tax statute to continue, and in some cases phase, exemptions for property used in carbon dioxide capture, transport, injection, and related industrial projects, including enhanced oil recovery, gas processing, fertilizer or chemical processing, straddle plants, fractionators, biologic manufacturing, and sustainable aviation fuel facilities.
The bill further changes the property tax treatment of carbon dioxide capture systems and equipment used for secure geologic storage or enhanced oil recovery by classifying them as personal property exempt from ad valorem taxation, except for the land itself. It repeals existing provisions governing the carbon dioxide pipeline exemption, payments in lieu of taxes for certain carbon dioxide pipeline property, and the separate sales tax exemption for carbon dioxide capture and injection materials. The bill sets different effective dates, with some provisions taking effect for taxable events after June 30, 2025, and others for taxable years beginning after December 31, 2024.
HB 1295 would amend several sections of the North Dakota Century Code affecting tax policy for carbon capture and related energy infrastructure. It would remove or replace existing carbon dioxide pipeline and sales tax exemption provisions, while preserving and reorganizing exemptions tied to carbon dioxide capture, injection, and storage equipment and materials. The bill would also expand the list of economic development tax incentives subject to legislative review, affecting how the state evaluates tax expenditures over time.
No committee transcript or vote detail is provided, but the bill ultimately failed on February 14, 2025. Based on the text, the measure appears to have been framed as a technical and policy update supporting carbon capture and industrial development incentives, rather than a broad tax overhaul. The lack of recorded debate in the provided materials makes it difficult to identify strong public sentiment, but the failure suggests it did not secure sufficient legislative support.
The main points of contention likely centered on the use of tax exemptions and property tax relief for carbon capture and related fossil-fuel-adjacent infrastructure, especially the repeal of existing carbon dioxide pipeline provisions and the continued exemption of equipment used for enhanced oil recovery and secure geologic storage. Supporters would likely view the bill as a way to encourage investment in carbon management and industrial projects, while critics may have questioned the fiscal impact, the complexity of the exemption structure, and whether the incentives primarily benefit specific industries rather than the broader tax base.