Wall Street's climate concerns create cloud of financial uncertainty for North Dakota coal country

BISMARCK — A growing movement on Wall Street to shun investments in fossil fuels because of climate concerns is driving up insurance costs and sparking alarm in North Dakota coal country.

Leaders of the North Dakota Lignite Energy Council, which represents coal-fired power plants and lignite coal mines in the state, said they view the so-called “environmental, social and governance” movement within finance and insurance to be the industry’s most pressing threat.

“It’s now gotten to be the No. 1 issue that our members face,” Jonathan Fortner, the council’s vice president for government relations and external affairs, said Thursday, Jan. 14.

Premiums that coal plants and mines pay for property and casualty insurance have risen anywhere from 20% to 100%, he said, and the number of major insurance companies willing to cover the industry has dwindled to five or 10.

“This is millions of dollars in additional costs for the plants and mines in North Dakota,” Fortner said.

North Dakota has seven coal-fired power plants, a coal gasification plant and mines that supply them in Oliver, Mercer and McLean counties west of Bismarck-Mandan, generating $130 million in annual tax revenue for the state, according to the industry.

Coal, oil and gas combined provide more than half of the revenue for the state’s general fund budget, Fortner said. The corporate ESG movement in finance and insurance also could result in higher prices that North Dakota consumers pay for electricity generated by coal-fired plants, according to the industry.

Lignite industry representatives are working on proposed legislation to try to bar what they regard as discrimination against coal plants and mines that is not based on real insurance risks.

“Is there a response that the state can help with?” said Jason Bohrer, the Lignite Energy Council’s president and CEO, acknowledging that it’s not yet clear, although states primarily regulate insurance.

“We’re hoping there are some things we can do,” he said. “This is a significant threat. We know the problem is real. This ESG movement is going to cause problems for the industry.”

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Premiums are going up, although claims are not, he said, and coal plants and mines are having difficulty maintaining insurance coverage. Premium costs should be determined by actual risks, not “extraneous factors,” Bohrer said.
“That’s the squeeze that’s taking place that really has us concerned,” Bohrer said.

Concerns about access to capital and insurance are on top of other problems plaguing the coal industry, which is dealing with increased competition from natural gas, wind energy and other generation.

Those problems threaten Coal Creek Station, the state’s largest coal plant, which will shut down in 2022 if a new owner isn’t found by summer. Officials have expressed cautious optimism and have said multiple parties are interested in taking over the plant near Underwood.

In the waning days of the Trump administration, several federal agencies are issuing rules restricting the scope for weighing investment and business decisions based on environmental, social and corporate governance issues, including climate change.

On Thursday, the U.S. Office of the Comptroller of the Currency announced that it has completed new rules for the banking industry holding that lenders should conduct risk assessment of individual customers, rather than make broad decisions affecting whole categories or classes of customers, when providing access to services, capital and credit.

But those restrictions could be reversed or changed by the incoming Biden administration, lawyers have said.

The lignite industry also has several other legislative priorities, including proposals for a low-interest loan program to help pay for emerging technologies, such as carbon capture and storage, that have been proven in the laboratory but need help to scale up.

One possible loan recipient would be an initiative called Project Tundra, a pilot project for commercial-scale carbon capture and storage for MinnKota Power Cooperative’s Milton Young Station.

“These are developing, near commercial technologies,” Bohrer said.

If North Dakota could commercialize carbon capture and storage, it would result in the state’s sixth-largest industry and would generate both significant new revenues and jobs, he said.

The lignite industry also will seek five-year relief from the state coal conversion tax, paid by power plants and the gasification plant, that generates a total of $21 million per year, Fortner said. The county coal conversion tax would remain untouched under the proposed legislation, still being drafted.