NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
May 18, 2000
The lignite coal energy industry has become a significant force in North Dakota's economy since the energy crisis of the 1970s and now adds more than $400 million per year in personal income, with total tax revenues of more than $60 million per year, according to economists at North Dakota State University.
Professor F. Larry Leistritz and research specialist Randal C. Coon, both of the NDSU agricultural economics department, have analyzed the lignite energy industry's contribution to the North Dakota economy annually since 1982. Estimates of key economic indicators such as retail trade activity, personal income, total business activity, employment and tax revenues are based on an annual survey of firms involved in lignite-related activities, both mining and conversion, in North Dakota.
"Lignite energy industries have contributed to the state's economy in many ways," Leistritz says. "They have provided jobs and generated increased levels of business activity, which produced higher personal income and retail sales. Tax revenues generated as a result of the coal industry have provided a significant contribution to the state's revenues."
The industry has gone through some changes since the early 1980s. Lower world energy prices have had a profound effect on North Dakota's energy industries, Leistritz says. What once looked like an unlimited demand for lignite and its products has stabilized, with production remaining relatively constant during the past 10 years.
Lignite coal production in the state doubled from 1982 to 1998, going from more than 14 million to nearly 30 million tons. Production peaked at slightly more than 32 million tons in 1993 and has declined slightly since.
Industry expenditures have followed a very similar pattern (excluding the early 1980s, when considerable plant expansion was occurring). Direct expenditures by lignite-related companies went from $401.4 million (in current dollars) annually in 1986 to a peak of $543.8 million in 1995. The industry added more than $460 million in direct expenditures to the state's economy in 1998.
Personal income generated by the coal industry also peaked in 1995 at $531 million and was estimated at $405.5 million in 1998. Total business activity generated from lignite expenditures has topped a billion dollars every year since 1982, except in 1987. Total business activity peaked at nearly $1.6 billion in 1995 and was more than $1.4 billion in 1998, the year most recently analyzed.
Estimated total tax collections, including personal income tax, sales and use tax and corporate income tax, as well as coal severance, energy conversion and other tax payments by the industry, have grown from $38.2 million in 1982 to $63.4 million in 1998. Total tax revenues resulting from the lignite industry have remained more than $60 million since 1998.
Direct employment in the lignite industry peaked at 7,996 workers in 1983, a time of plant development. Employment generally remained around 3,500 jobs until 1997. Mine closings have reduced direct employment since then. Secondary employment resulting from the coal industry was estimated at 17,175 in 1998.
Leistritz says North Dakota is highly dependent on natural resource-based activities, including lignite coal mining and conversion, petroleum extraction and refining, and agricultural production. Of these, the lignite industry has been the most stable and consistent, he says, because it has not been subject to the price swings that have impacted oil and agriculture.
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Source: F. Larry Leistritz (701) 231-7455
Editor: Gary Moran (701) 231-7865