Dakota I Commerce

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DEPARTMENT OF COMMERCE TESTIMONY APRIL 13, 2022, 2:35 P.M. CST

HOUSE APPROPRIATION INTERIM GOVERNMENT FINANCE COMMITTEE

PRAIRIE ROOM REPRESENTATIVE MICHAEL HOWE, CHAIR

JAMES LEIMAN, PH.D., COMMERCE COMMISSIONER

Chairman Howe and members of the Interim Government Finance Committee, I am James Leiman and I have the privilege of serving as Commissioner of the North Dakota Department of Commerce. I am here today to provide a report to the committee on Senate Bill 2291 and the implication of state divestiture from companies that have either subscribed to Environmental, Social, and Corporate Governance (ESG) philosophies or have boycotted the fossil fuels industry. Regardless of what I believe the facts are clear for North Dakota and the world as over half the world’s assets under management or somewhere between $30 and $50 trillion (estimates vary) have adopted some form of ESG investment strategy. In addition, with over $30 billion of planned capital expenditures for the state, note that this accounts for over half of the state’s combined Gross State Product, almost every project has an ESG component. No state in the nation has this kind of economic development ratio so we should all be proud. Consider the ADM site at Spiritwood or Marathon refinery in Dickinson; these are companies that are very important to the state yet clearly state on corporate documents that they follow ESG principles. The same applies to Hess, Exxon and their subsidiary XTO, Cargill, CHS, etc., they simply espouse these philosophies.

Instead of shying away from major companies and large-scale investments, the State has pursued a method of business recruitment that paints an innovative picture to attract mega projects. We are aggressive, data driven, and we hustle hard! In addition, these projects have high returns on investment and are highly dependent on either agricultural products or fossil fuels for feedstock. Realizing that we have the geological jackpot, infrastructure, and know-how to attract ESG driven projects, North Dakota is on

NORTH

Dakota I Commerce Be Legendary.N

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pace to have the highest GDP per capita in the nation! In addition, the legislature invested in the Clean Sustainable Energy Authority (CSEA) as well as other programs to encourage clean energy growth. Simultaneously, Commerce has been working with the coal industry to determine a path forward for continued production and even growth in the face of ESG investment. We work very closely with local elected officials and economic development professionals on finding a path forward; also, we are doing the same for oil and gas. We have been pressuring large companies in Europe as well as their governments to inspire and educate Washington on the need for increased production and infrastructure. We can grow all sectors!

As Commerce Commissioner and EmPower Chair, I firmly believe in an “all of the above” strategy. As a result, as the world wants to pay a premium for cleaner energy, North Dakota has determined a path forward that increases raw energy and agricultural production while providing stability to producers through value-added opportunity. If the state were to divest itself from these types of investments, it would be exposed to more market volatility and a highly uncertain future. For perspective, consider the projects below which all subscribe to some level of ESG principles:

1. Cerilon Phases 1 and 2 $5B 2. Two fertilizer facilities $2B (names withheld as they haven’t been announced) 3. Clean Hydrogen Hub $3B 4. Project Tundra $1B 5. Various CCUS projects $700MM 6. Summit Ag $4.5B 7. Coal Creek $2B 8. Crypto mining $6B (some announced, some withheld due to NDA) 9. Wellspring Hydro $200MM 10. Red River Bio Refinery Expansion $500MM 11. ADM $400MM 12. Marathon Energy $800MM 13. Casselton Soy $450MM 14. A large soy to jet fuel production plant $1.1B (names withheld as they haven’t

been announced) 15. Several corn to jet fuel production facilities $3B (names withheld as they haven’t

been announced)

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And there is a slate of projects just like these right behind as we have been aggressive, calculated, methodical, and capable!

Imagine what would happen to basis for ag producers if we lost these projects…. Also, imagine in a world where 1.1 million barrels of daily production produces 3 billion cubic feet of gas today and because of the maturity of the Bakken, will produce 5 billion cubic feet per day by 2027. If we don’t find a home for the gas, some companies, because of their shareholder and corporate philosophies, may curtail production. We could capture this gas and add value right here, right now and sell our products to the world. If not, curtailment will lead to large reductions in both economic activity and state revenue.

Source: ND Pipeline Authority

Bottom line, regardless of how politically driven and misguided ESG investments may be, North Dakota has identified a method to use other people’s “liabilities” and convert them to cash, in some cases, six times over, for our producers and processors. Removing the ability to invest in these projects would place North Dakota at a serious competitive disadvantage. Lastly, Commerce commissioned an ESG study where industry led the input. Attached to this testimony is what industry recommended the state engage in from an ESG perspective. Thank you for your time today and may we continue to enjoy many more successes, grow each energy sector, and ensure that all North Dakotans and regions have access to high paying jobs. be

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Case • Actual Production • Base (Current) • Basa (Historical)

2027 2032 2037 2042 2047

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Confidential. © 2021 IHS Markit®. All rights reserved.

ESG Roadmap for North Dakota Solution prioritization and ESG Roadmap for North DakotaNovember 2021

Final

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The project’s workplan was divided in four phases

a. Define ESG goals and objectives.

b. Document current ESG landscape for the state with regards to the energy and agricultural sectors.

c. Conduct interviews with pertinent North Dakotan stakeholders; quantitative and qualitative assessment of capital market sensitivities

a. Develop a framework to identify ESG solutions throughout the value chains of energy and agriculture.

b. Conduct workshops / brainstorming sessions with select stakeholders to create an exhaustive list of potential ESG solutions.

c. Provide a high-level characterization of potential ESG solutions.

a. Create a decision-making framework to prioritize ESG solutions based on impact to the resiliency of the energy and agriculture sectors.

b. Determine the probability of success for the prioritized ESG opportunities and identify potential chokepoints.

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a. Articulate a core ESG strategy for the state to provide resiliency for the energy and agricultural sectors.

b. Build a Roadmap based on this overarching ESG strategy.

1. Assess North Dakota’s current ESG landscape

2. Identify and characterize the ESG solutions

3. Prioritize short and long-term ESG solutions

4. Build an ESG Roadmap for North Dakota

0. Stakeholder engagement occurs over the course of this effort

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Agenda

Review of ESG diagnostic and solution prioritization

ESG Roadmap

Appendix I: North Dakota’s current ESG landscape

Appendix II: Identifying and characterizing ESG solutions for North Dakota

Appendix III: Additional materials

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Through our interviews and the diagnostic, we have identified a number ofESG issues and as well as significant opportunity sets for North Dakota

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Natural gas flaring

Methane venting and fugitive emissions

Coal power emissions1

Agricultural emissions

Land and water conservation and usage

Expansion of renewable energy (wind, geothermal, solar, etc.)

Expansion of biofuels / bioenergy production1

Hydrogen and derivatives production1

Carbon credits and offsets farming1

Issu

esO

ppor

tuni

ties

Environmental

Transparency and consistency across internal ESG reporting and supply chain oversight

Community and tribal partnerships with new energy developments1

Social Governance

1 Issue/opportunities considers CCS technology

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Understanding the barriers needed to be lifted to tackle the key ESG issues and execute on new opportunities is key to develop a robust roadmap

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Nat

ural

gas

flar

ing

Vent

ing

&

fugi

tives

Coa

l em

issi

ons

Agr

icul

tura

l em

issi

ons

Land

/wat

er

cons

erva

tion

ESG

repo

rtin

g

Issues Opportunities

Financial and commercial

Fiscal and regulatory

Institutional capacity

Technological

Ren

ewab

le e

nerg

y ge

nera

tion

Bio

fuel

s /

bioe

nerg

y

Hyd

roge

n &

de

rivat

ives

Car

bon

cred

its &

of

fset

s

Com

mun

ity &

tr

ibal

par

tner

ship

sEnvironmentalSocial

Governance

Barriers

Categories

Competing corporate incentives

Community acceptance

Labor

Difficulty to overcoming barrier:HighLow

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IHS Markit facilitated a workshop with industry to generate a list of potential ESG solution for North Dakota

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Taskforce: infrastructure + communities

Targeted solutions at trunklines

Coal byproduct utilization

opportunities

Incentives for renewable gas development

Guarantees for pipelines to eastern ND

45Q expansion

Boost in-state energy use (e.g.

data centers)

Ag industry emissions education

Guidance for ESG reporting, data collection

Research on water recycling and

reuse

RTO planning for transmission

development

State corridor(s)

development

FERC collaboration on

transmission

Promotion with investors and multinationals

State incentives to meet LCFS

Cross-sector biofuel

partnerships

Wind power / H2 generation partnerships

DOE partnerships on low carbon fuel

Incentives for renewable fuel

cluster

State funds to acquire offset

credits

Program for private access

to offsets

Fed. guidance on offset

accounting

Education on carbon farming

and offsets

Flaring & methane

Coal emissions


ESG reporting & community

Renewables generation

Biofuels & hydrogen Carbon credits

PPPs

Stat

eFe

dera

l

Methane detection

collaboration

Production tax credit / federal

LCFS

Support of new technologies to

help de-risk

Ag emissions standards and

verification

Public education for infrastructure

projects

Public benefits for infrastructure

projects

Federal “Just Transition” programs

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Key solutions were prioritized through an informal vote during the workshop

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Guarantees for pipelines to eastern ND

Public education for infrastructure

projects

State corridor(s) development

Cross-sector biofuel

partnerships

Guidance for ESG reporting, data collection

Promotion with investors and multinationals

Ag industry emissions education

45Q expansion

Education on carbon farming

and offsets

Taskforce: infrastructure + communities

RTO planning for transmission

development

Coal byproduct utilization

opportunities

Federal “Just Transition” programs

Research on water recycling

and reuse

8+ votes 7 votes 6 votes 5 votes 4 votes 3 votes 2 votes

PPPs

Stat

eFe

dera

l

Methane detection

collaboration

DOE partnerships on low carbon fuel

Boost in-state energy use (e.g.

data centers)

Support of new technologies to

help de-risk

Incentives for renewable gas development

Ag emissions standards and

verification

FERC collaboration on

transmissionEarly indications show significant support around

specific solutions

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From the workshop, interviews and case studies, IHS Markit and the State developed a list of about 30 solutions to consider and prioritize

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Stakeholderalignment

Ease of implementation

Output from interviews

High impact to economic resiliency

Focus will be given to the ESG solutions

with the highest impact to the State’s economic resiliency

considering the investment required

Time needed for implementation and ease of change will

be considered based on our

analysis of barriers

Opportunities where there is broad

alignment among North Dakotan stakeholders

List of ~30

solutions

Prioritize list of ESG solutions for Roadmap

IHS Markit database and case studies

Workshop / brainstorming session

Note: The prioritization will be predominately qualitative in nature, though some back-of-the-envelope calculations will be made when necessary

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Based on potential impact and feasibility, IHS Markit proposed to focus on a set of ESG solutions for the North Dakota roadmap

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Managed lands

Methane detection

"Just Transition"

LCFS markets

Expand 45Q

Renewable CH4

Gas gathering

Feasibility

Corridor

Pote

ntia

l im

pact

($ b

illio

ns in

vest

ed o

r ret

aine

d)

DOE tech partnership

R&D collaboration

Public educationCommunity partners

Community benefits

Long-haul pipe

Data centers

Ag education

ESG reporting

State promotion

Green loansEconomic zone

Permitting office

MN engagement

Relocation program

FERC collaboration

Fed. land bank

Hydrogen PTC

Proposed ESG solutions

Low High

The ESG Roadmap is comprised of the ESG solutions which fall within (or near) the upper right region of the chart

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Agenda


ESG Roadmap




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Taking a step back, we identified 11 solution categories forming the basis of the proposed North Dakota’s ESG strategy

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Stakeholder communication Economic incentives

Increase promotional effort

with investors

Public education, outreach and

benefit programs Economic development

zones

Methane detection

collaboration

Industry ESG support Government collaborations

Hydrogen PTC and 45Q

expansion

Assist in capturing LCFS & carbon credit

marketsState ESG reporting guidance

Support for green loan and bond development Collaborative

federal and state efforts

Gathering system development coordination

Data center development

incentives

Industry coordination

Note: Proposed solutions for the North Dakota ESG Roadmap are not presented in any order of priority. That determination will be up to the State to decide.

1110

9

8

7

65

43

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ESG solution #1: Increase promotional efforts with potential investors including multinational firms and private equity

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1. Prioritize conference attendance2. Develop conference pitchbook3. Follow up with investors of interest

1. Consult with inbound marketing firm2. Develop an inbound marketing plan3. Delegate content creation to experts

1. Choose roadshow intermediary2. Target key investor groups of interest3. Tailor pitch materials to investor groups

1. Assign social media coordinator2. Develop weekly social media KPIs3. Coordinate social media with industry

1. Contract professional web services2. Determine investor informational needs3. Develop IR content with visual data

Attend major energy and agricultural conferences1

Virtual or in-person non-deal roadshows with key investor groups

2

Professional investor relations web portal with helpful resources

3

Amplify signal of press releases on professional social media platforms

4

Creation and distribution of inbound marketing content for the State

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Increase promotional efforts

with investors

Cross-sectorNature of opportunity

Short-termTime horizon

Proposed actions Action items TimelineBy mid Q1 2022End of Q1 2022Continuous

End of Q1 2022End of Q2 2022End of Q2 2022

End of Q1 2022ContinuousEnd of Q2 2022

End of Q1 2022End of Q1 2022Continuous


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ESG solution #1: Increase promotional efforts with potential investors including multinational firms and private equity

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Attend major energy and agricultural conferences

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Proposed actions Action item #1Prioritize conference attendanceLook to attend key investor conferences throughout the year. Ex: Global Ag Investing, CERAWeek, PowerGEN, etc.

Develop conference pitchbookCreate a 30-45 min presentation which sells the North Dakota story to investors, with an emphasis on ESG growth opportunities.

Follow up with investors of interestCreate a follow up plan for major companies and investors which you’ve met with at conferences or had expressed some interest

Action item #2 Action item #3

Choose roadshow intermediaryTo compliment conference attendance, the State can leverage an intermediary to set up meetings with investor groups.

Target key investor groups of interestWith input from North Dakotan industry and conferences, build a target investor list based on impact and level of interest.

Tailor pitch materials to investor groupsWith existing materials from the conference pitchbook and IR web portal, focus content on only the pertinent info for the investor

Contract professional web servicesPreferably a company with prior IR portal experience. Web portal professionalism is one of the lowest cost value-adds.

Determine investor informational needsAs you interact with investors, ask them what type of information they are looking for, particularly any pain points that are difficult.

Develop IR content with data visualsWith business community and investor input, develop information rich content that show-cases why N. Dakota is a great opportunity.

Assign social media coordinatorDesignate someone within the State to handle social media communications as part of their job description.

Develop weekly social media KPIsLinkedIn and Twitter are the primary business social media platforms. Visibility is based on quality and frequency of posts.

Coordinate social media with industryCoordination between the State and North Dakotan companies and organizations to amplify big announcements and other news

Consult with inbound marketing firmHubSpot popularized inbound marketing but there may be competing consultancies. Pick the one most tailored for organizations.

Develop an inbound marketing planInbound marketing refers to digital content creation to enable customers to find you. This includes videos, podcasts, blogs, etc.

Delegate content creation to expertsThe key to inbound marketing is “expertise” in the topics at hand so enlist the relevant experts in North Dakota to generate content

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ESG solution #1: Increased promotional efforts with investors

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2022 2023 2024Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

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Attend major energy and agricultural conferences

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ESG solution #2: Public education, outreach and community benefit programs for new infrastructure developments

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1. Speak with infrastructure developers2. Align with state lawmakers3. Establish public outreach office

1. Interview community members2. Work with a PR agency3. Roll out public relations campaign

1. Establish centralized communications2. Develop tailored presentation(s)3. Hold meetings for key stakeholders

1. Develop public presentation(s)2. Schedule and promote meetings3. Hold in-person and remote meetings

Formalize outreach coordination between developers and the State

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Develop a public relations campaign2

Hold a series of public townhalls3

Create project specific communication strategies

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Public education, outreach and

benefit programs

CommunityNature of opportunity

Long-termTime horizon

Proposed actions Action items TimelineEnd of Q2 2022End of Q3 2022End of Q1 2023


End of Q2 2022ContinuousContinuous


1. Identify key community needs2. Create matching state fund mechanism3. Manage allocation of funds


Develop meaningful community benefit programs

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ESG solution #2: Public education, outreach and community benefit programs for new infrastructure developments

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Proposed actions Action item #1Speak with infrastructure developers and community representativesReach out to developers and community representatives to gain their perspectives on effective public outreach

Align with state lawmakersSeek alignment with state lawmakers on the content and extent of public education and community benefits programs

Establish public outreach officeWork with state lawmakers to create a more formalized and consistent community outreach program to centralize efforts


Interview community membersConduct a series of “customer discovery” interviews and surveys and identify their key informational gaps

Work with a PR agencyFocus content development and messaging on addressing the key pain points of community members

Roll out public relations campaignDevelop implementation strategy of public relations campaign including frequency and medium of outreach

Develop public presentation(s)Put together professional, short presentations focused on addressing the key concerns of the public

Schedule and promote meetingsSchedule for meetings in key communities across the state and put some thought into promotional efforts to maximize attendance

Hold in-person and remote meetingsDesignate state official(s) to present and answer questions for the public; consider having key developers in attendance as well

Establish centralized communicationsCoordinate public outreach efforts with developers proposing new projects and determine key messaging

Develop tailored presentation(s)Turn key messaging into project specific presentations which should address the key concerns of impacted stakeholders

Hold meetings for key stakeholdersCo-lead a series of community meetings with developers to provide information and answer questions from stakeholders

Identify key community needsWith feedback from interviews and survey, assess what the greatest needs are in the community

Create matching state fund mechanismAddress needs through grants, donations, scholarships, etc. and establish matching funds to solicit developer commitments

Manage allocation of fundsManage allocation of funds into community benefit programs and increase their visibility as part of broader community outreach


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ESG solution #2: Public education, outreach and benefit programs

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ESG solution #3: Natural gas gathering system development coordination

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1. Gain input from industry players2. Work with lawmakers on objectives3. Form Task Force

1. Evaluate current flaring issues2. Forecast infrastructure needs3. Conduct a scenario analysis

1. Legislate policy framework2. Establish gas system planning solution3. Gather feedback and adjust

1. Distill list of key conclusions2. Provide policy recommendations3. Draw up implementation plan

Review of current landscape and identify chokepoints

2

Provide key conclusions & policy recommendations

3

Implement a gathering system planning solution 4

Gathering system development coordination

FlaringNature of opportunity


Proposed actions Action items TimelineEnd of Q1 2022End of Q2 2022By mid Q3 2022


By mid Q1 2023By mid Q1 2023By mid Q1 2023

By mid Q2 2023End of Q2 2023Continuous

Establish Task Force to review gathering system development

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Implement a gathering system planning solution

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Proposed actions Action item #1Gain input from industry playersSpeak with key oil & gas producers, midstream developers, and industry organizations for their perspectives

Work with lawmakers on objectivesWith the legislature, establish a set of key objectives for the State that the Task Force will need to consider

Form Task ForceSecure funding and form a Task Force composed of key industry players, State industry experts and advisors


Evaluate current flaring issuesUnderstand which issues have been addressed and which issues currently remain to be resolved

Forecast infrastructure needsDevelop a detailed gas production monthly forecast for Williston development down to the sub-basin level to identify infrastructure needs

Conduct a scenario analysis Presume production levels will grow at an optimistic rate, gas-to-oil ratios will also increase. Forecast system requirements.

Distill list of key conclusionsFrom the analysis, draw out the key conclusions which provide an assessment of the state of the Bakken gathering system

Provide policy recommendationsFrom the conclusions, provide actionable policy recommendations including the framework for industry coordination efforts

Draw up implementation planWith the policy recommendations, write up a detailed implementation plan to follow and reference

Legislate policy frameworkWork with state lawmakers to take the policy recommendations and pass a policy framework for gathering system planning

Establish gas system planning solutionFrom the policy framework, launch the new gas system planning solution and provide resources for industry to get up to speed

Gather feedback and adjustPost launch of the solution, encourage feedback from industry players and make appropriate adjustments if key issues arise

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ESG solution #4: Methane detection and mitigation collaboration

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1. Gather feedback from industry players2. Discuss possibilities with key lawmakers3. Create informal proposal working group

1. Align on centralized mitigation efforts2. Develop collaborative mitigation program3. Establish funding for program & launch

1. Finalize proposal and gather feedback2. Secure industry commitments3. Work with lawmakers on budget approval

1. Evaluate current accounting methods2. Develop consensus standard3. Provide resources for compliance

1. Identify methane sources & pain points2. Evaluate and select technologies to pilot3. Launch pilot programs & evaluate results

Formalize the new collaboration including financial commitments

2

Seek agreement on initial actions including technology pilots

3

Adopt a methane accounting standard across the value chain

4

Develop a collaborative methane detection response program

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Methanedetection

collaboration

MethaneNature of opportunity


Proposed actions Action items TimelineEnd of Q1 2022End of Q1 2022Start of Q2 2022


End of Q4 2022End of Q1 2023Start of Q2 2023


Start of Q1 2023End of Q2 2023Start of Q3 2023

Seek stakeholder alignment for methane collaboration

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Proposed actions Action item #1Gather feedback from industry playersEngage with major producers, midstream operators and industry organizations to get their input and willingness to collaborate

Discuss possibilities with key lawmakersSpeak with lawmakers to get their views on a methane public private partnership and preliminary estimates on budget availability

Create informal proposal working groupPut together a working group from key industry players and the State to develop a methane collaboration program proposal


Finalize proposal and gather feedbackFinalize methane program proposal and gather feedback from industry and state lawmakers; make revisions if necessary

Secure industry commitmentsDevelop a fair methodology for determining participant financial commitments and receive written, non-binding commitments

Work with lawmakers on budget approvalPresent budget proposal to lawmakers and work with them to secure adequate funding for a meaningful methane collaboration

Identify methane sources & pain pointsOnce the collaboration has been formalized, conduct an initial baseline assessment of methane emissions in the Bakken

Evaluate and select technologies to pilotEvaluate and select the technologies which appear to be the most promising at addressing the key areas of concern

Launch pilot programs & evaluate resultsConduct a series of methane detection pilots across the value chain and at different levels of accuracy and evaluate effectiveness

Evaluate current accounting methodsMake a comparison of methane accounting methods across industry players including scope, granularity and emissions factors

Develop consensus standardCome to an industry consensus for North Dakotan operators and gather feedback from the investment community

Provide resources for complianceAfter methane accounting standard rollout, provide training and other resources to assist smaller companies with standard

Align on centralized mitigation effortsAfter deployment of detection technologies, discuss the possibility of centralizing the efforts to mitigate methane leaks

Develop collaborative mitigation programOutline member accountability and financial responsibility for a collaborative mitigation program and identify key provider(s)

Establish funding for program & launchSecure additional funding from lawmakers (if necessary), organize centralize response team and launch program

Note: As with any public-private partnership, the State will need to make a determination on how much of the program funding will come from government vs. industry pockets

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ESG solution #5: Special economic zone for new low carbon technology development

24

1. Review state corporate incentives 2. Determine fiscal appetite of legislature 3. Design a highly competitive package

1. Seek alignment among ND stakeholders2. Build support among other key states3. Support legislative process in D.C.

1. Create a competitive relocation program2. Set income & property tax exemptions3. Provide ancillary relocation benefits

1. Review frameworks of other states2. Have working groups draft proposals3. Socialize proposals with state lawmakers

1. Connect with key hub enablers2. Form working groups of participants3. Conduct regularly schedule coordination

Define corporate tax incentives and exemptions

1

Institute worker relocation benefits and tax exemptions

2

Organize hub development industry working groups

3

Prepare regulatory frameworks for emerging technologies

4

Push for federal low carbon technology zone designation

5

Economic development

zones








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ESG solution #5: Special economic zone for new low carbon technology development

25


1


2


3


4


5

Proposed actions Action item #1Review state corporate incentives Catalog what other states have done and are doing to attract low carbon technology and estimate the economic benefits

Determine fiscal appetite of legislature Work with lawmakers to estimate the state’s fiscal appetite with regards to establishing low carbon technology hubs

Design a highly competitive package Through a combination of tax incentives and exemptions, design a program which will maximize ND’s attractiveness given budget


Create a competitive relocation programDevelop program to award incentives to qualifying workers willing to relocate from out-of-state to a special economic zone

Set income & property tax exemptionsProvide short-term guarantees of income and tax advantages for workers relocating to special economic zones

Provide ancillary relocation benefitsAdditional benefits could be provided to workers & families like training, temporary housing, house hunting assistance, etc.

Connect with key hub enablersSpeak with suppliers, developers and customers to get their initial thoughts on hub development, particularly the key barriers

Form working groups of participantsBuild working groups specific to technology (e.g. CCUS, biofuels, hydrogen, wind, etc.) with participating firms and state officials

Conduct regularly schedule coordinationWorking groups should meet at least once a quarter to discuss issues, coordinate on developments and draft legislative proposals

Review frameworks of other statesHave working groups review the relevant low carbon hub development regulatory frameworks from other states

Have working groups draft proposalsAfter deliberations and discussion with investors, have the working groups put together draft proposal(s) for consideration

Socialize proposals with state lawmakersGather feedback from state lawmakers on proposal, support revision and review process

Seek alignment among ND stakeholdersSpeak with industry, lawmakers and other in-state stakeholders to get their input on what effect federal incentives would entail

Build support among other key statesReach out and potentially cooperate with other states looking to establish low carbon technology development hubs

Support legislative process in D.C.With an industry and state coalition, help draft legislation and support it through committees and floor votes

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ESG solution #5: Economic development zone

26

2022 2023 2024Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

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ESG solution #6: Tax and other financial incentives for data center projects

27

1. Aggregate various state incentives2. Examine data center growth3. Rank effectiveness of policies

1. Research data center requirements2. Interview data center developers3. Identify best-fit developers

1. Data center resources for web portal2. Add IT/ cloud computing conferences3. Target federal government agencies

1. Develop policy recommendations2. Work with lawmakers on legislation3. Launch and promote new incentives

Catalog the tax and other incentive offerings from other states

1

Determine the key needs of data center developers

2

Establish data center incentives for North Dakota

3

Expand investor outreach efforts to include data centers

4

Data center development

incentives







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1


2


3


4

Proposed actions Action item #1Aggregate various state incentivesCollect information of data center incentives that other state’s have implemented and categorize types of incentives

Examine data center growthLook at data center growth trends among various states and categorize each state by energy reliability and population proximity

Rank effectiveness of policiesCorrect for reliability and proximity and rank the effectiveness of various state policies in attracting data center developers


Research data center requirementsGet a preliminary understanding of the factors which make a data center feasible, reliable and cost effective

Interview data center developersSchedule and conduct interviews with several data center developers, including B2C, B2B businesses and government

Identify best-fit developersBased on North Dakota’s attributes, narrow down a list of best-fit data center developers to target for further BD opportunities

Develop policy recommendationsTake learnings from other state programs and data center needs and provide a recommended incentive package framework

Work with lawmakers on legislationWork with state lawmakers on finding a tenable incentives package which can be passed into law

Launch and promote new incentivesRollout data center incentives program, publicizing it among developers, particularly best-fit developers identified previously

Data center resources for web portalCreate professional, informational resources to expand the state’s investor web portal to include data centers

Add IT / cloud computing conferencesBesides energy and ag conferences, start attending and presenting at key IT / cloud computing conferences

Target federal government agenciesThe remoteness, energy security of North Dakota provides an opportunity to bring federal agency data centers into the state

B2C = Business-to-consumer; B2B = Business-to-business, BD = business development

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ESG solution #7: State incentives and programs to help companies capture LCFS and carbon credit markets

30

1. Assess feedstock balances2. Research non-food feedstock capacity3. Incentivize feedstock growth on fallow lands

1. Assess potential for partnerships with DOD2. Consider state tax incentives3. Work with lawmakers on budget approval

1. Understand byproduct demand2. Promote biogas from manure3. Connect energy & ag infrastructure

1. Determine locations of unmet demand2. Explore additional crush options3. Conduct cross-industry outreach

Strengthen North Dakota agricultural capacity to offtake coproducts

2

Incentivize industry to invest in crush facilities3

4

Assist in capturing LCFS & carbon credit markets

BiofuelsNature of opportunity


Proposed actions Action items TimelineEnd of Q1 2022End of Q1 2022Start of Q3 2022

End of Q1 2022Start of Q3 2022Start of Q4 2022

End of Q1 2022Start of Q2 2022Start of Q2 2022


Assess North Dakota feedstock potential for biofuels

1

Incentivize processing of Sustainable Aviation Fuel (SAF)

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ESG solution #7: State incentives and programs to help companies capture LCFS and carbon credit markets

31

Assess potential North Dakota feedstock potential for biofuels

1

Strengthen ND Ag processing capacity to offtake coproducts

2

Incentivize industry to invest in oilseed crush facilities

3

Proposed actions Action item #1Assess feedstock balancesAssess state and regional balance sheets for all biofuel feedstock crops

Research non-food feedstock capacityProvide grants for state research in non-food oilseed crops grown on fallow land (e.g. Camelina)

Incentivize feedstock growth on fallow landsConsider policies to allow farming of fallow acres for special crops sold into renewable fuels


Understand byproduct demandAssess state and regional crush and biofuels coproduct demand (specifically meal)

Promote biogas from manureIncentivize animal ag to promote biogas from manure into renewable natural gas

Connect energy & ag infrastructure Form working group to explore infrastructure gaps in connecting energy and agricultural production regions of the state

Determine locations of unmet demandIdentify optimal locations for new state crush facilities to support regional demand

Explore additional crush feedstocksAssess unique facility needs to crush additional oilseed crops such as camelina

Conduct cross-industry outreachReach out to energy sector on options to invest in crush and/or biofuel infrastructure


4

Assess potential for partnerships w/ DODVia local DOD assets identify and collaborate with end users of aviation fuel to provide a locally sourced SAF solution

Consider state tax incentivesTo address the local supply side of SAF, consider targeted tax incentives that will prime the pump around local SAF production

Work with lawmakers on budget approvalPresent budget proposal to lawmakers and work with them to secure adequate funding to support a meaningful partnership

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ESG solution #7: Assist in capturing LCFS & carbon credit markets

32

Assess potential North Dakota feedstock potential for biofuels

1

Strengthen ND Ag processing capacity to offtake coproducts

2

Incentivize industry to invest in crush facilities

3


4

2022 2023 2024Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

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ESG solution #8: State guidance on ESG reporting for energy and agriculture companies

33

1. Determine industry segmentation2. Form segment working groups3. Provide guidance on objectives

1. Inventory existing methodologies2. Conduct a cross comparison3. Gather investor feedback

1. Develop online resources2. Host training workshops3. Provide auditing and feedback

1. Draft sector reporting guidelines2. Seek industry feedback3. Formalize guidelines with lawmakers

Review existing ESG reporting methodologies2

Establish consensus ESG reporting methodologies

3

Provide training and other resources for businesses

4

State ESG reportingguidance

ESGreporting

Nature of opportunity


Proposed actions Action items TimelineEnd of Q1 2021By mid Q2 2022By mid Q2 2022

By mid Q3 2022By mid Q3 2022By mid Q3 2022


End of Q1 2023Throughout FY 2023Continuous

Form ESG working groups for industry segments

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ESG solution #8: State guidance on ESG reporting for energy and agriculture companies

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1

Review existing ESG reporting methodologies

2


3


4

Proposed actions Action item #1Determine industry segmentationFigure out how many unique industry segments require specific guidelines across the energy and agriculture value chains

Form segment working groupsFor each segment, form a working group from industry and the state to investigate and work towards a reporting standard

Provide guidance on objectivesEnsure that each working group has aligned on a set of central objectives and provide scope limitations and other criteria


Inventory existing methodologiesWorking groups should first inventory existing ESG reporting methodologies from companies, organizations and governments

Conduct a cross comparisonNext, working groups should do a cross comparison of methodologies, listing advantages and disadvantages of each

Gather investor feedbackFinally, working groups should speak with pertinent investors to understand their specific pain points in ESG reporting

Draft sector reporting guidelinesHave each working group draft sector ESG reporting guidelines and conduct a series of challenge sessions for revisions

Seek industry feedbackHave working groups gather broader industry feedback on proposed ESG reporting guidelines and make revisions

Formalize guidelines with lawmakersSeek approval from state legislature to formalized ESG reporting guidelines and supporting programs

Develop online resourcesOnce ESG guidelines have been established, create a web portal with templates and instructional content

Host training workshopsHost a series of remote trainings targeted towards medium and small businesses within the state’s energy and ag sectors

Provide auditing and feedbackPut in system and resources in place to review ESG reporting from North Dakota businesses and provide feedback

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ESG solution #8: State ESG reporting guidance

35

2022 2023 2024Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

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ESG solution #9: Support development of green loans and bonds that can provide funding for new opportunities in the State

36

1. Reach out to established developers2. Get feedback from potential developers3. Speak with financial services

1. Identify a diversity list of projects2. Look to incorporate social aspects3. Compile and prioritize project list

1. Hold financial institution one-on-one’s2. Attend financial services conferences3. Follow up with interested financiers

1. Develop project specific pitch slides2. Construct a consolidated pitch3. Create a marketing strategy

Gauge interest from current and potential developers

1

Aggregate possible green projects for consideration

2

Develop marketing content and strategy3

Roll out marketing strategy and engage with financials

4

Help coordinate loan, bond structuring and issuances

Support for green loan and bond development






ContinuousContinuousContinuous

51. “Close the sale” with financiers2. Intermediate between parties3. Evangelize green bonds to public market

ContinuousContinuousContinuous

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ESG solution #9: Support development of green loans and bonds that can provide funding for new opportunities in the State

37


1


2

Develop marketing content and strategy

3


4


Proposed actions Action item #1Reach out to established developersSpeak with North Dakotan developers in wind, biofuels, CCUS, and other clean technologies on capital needs

Get feedback from potential developersIn your communications with institutional and strategic investors, understand their capital needs and potential financing opportunities

Speak with financial servicesBegin discussing the prospects of North Dakotan green loans and bonds with commercial and investment banks


Identify a diversified list of projectsSee which prospective clean projects are in need of debt financing within the state across the energy and ag sectors

Balance portfolio of projects between Environmental and Social impactsIdentify or create opportunities within each project which could be socially beneficial to North Dakotan communities

Compile and prioritize project list Keep a running list of current and potential clean technology projects which need debt financing

Develop project specific pitch slidesFor each project under consideration, develop a few pitch slides and appendix supporting materials for financial institutions

Construct a consolidated pitchDevelop an executive summary highlighting the projects under consideration, collective capital needs and risk diversification benefits

Create a marketing strategyIdentify key lender and other financial services conferences, create an outreach list for large institutional lenders and IBs

Hold financial institution one-on-one’sReach out, schedule and present to the top financial institutions for energy & agriculture on the lending and investment banking side

Attend financial services conferencesAttend and if possible present at major financial services conferences geared towards energy transition, climate and ESG

Follow up with interested financiersFollow up with those financial institutions which expressed an interest in either financing loans or issuing bonds

Note: The portfolio of clean technology and other “green” projects should be diversified and (if possible) address key social issues such as providing job opportunities for at-risk workers and marginalized communities and improving labor conditions and safety

5

“Close the sale” with financiersPrioritize closing financing agreements by keeping an active line of communication open and meeting financier requirements

Intermediate between partiesThe state is positioned as a good intermediary between varies companies seeking financing and financial institutions

Evangelize green bonds to public marketWith green bond issuance, be a vocal advocate in public debt markets – press releases, social & traditional business media

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ESG solution #9: Support for green loan and bond development

38

2022 2023 2024Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Action item #3

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Develop marketing content and strategy

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Wind energy

HydrogenCarbon capture

Biofuels

Qualified ventures

For green loans and bonds, a portfolio of qualifying ventures are bundled together and partially guaranteed by the state to reduce investor risk

39

Investorsprovide capital through bonds or loans to fund

qualifying projects

Developersconstruct projects which help meet climate and

sustainability goals

State governmentfacilitates bond and loan

repayments, guaranteeing a minimum capital return

Projects which meet investor requirements for “green” investments are bundled together to diversity and

reduce the overall financial risk

EvaluatorProvides objective oversight of project

outcomes

Sources: IHS Markit, Chesapeake Bay Foundation

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ESG solution #10: Pursue collaborative efforts with federal and state governments to facilitate technology and infrastructure development

40

1. Review current level of collaboration2. Gather input from industry & universities3. Design more impactful collaboration

1. Review existing & upcoming programs2. Determine state funding appetite3. Coordinate with developers and DOE

1. Review existing FERC regulations2. Interview developers on FERC rules3. Find alignment in the Midwest

1. Speak with key developers in MN2. Seek alignment with MN state officials3. Formalize a partnership

Improve collaboration between industry and universities

1

Partner with DOE on tech pilots with partial state funding

2

Engage with MN to coordinate infrastructure development

3

Work with FERC on addressing the needs of Midwest energy markets

4

Collaborative federal and state

efforts







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ESG solution #10: Pursue collaborative efforts with federal and state governments to facilitate technology and infrastructure development

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1


2


3


4

Proposed actions Action item #1Review current level of collaborationExamine existing R&D projects between industry and the universities, particularly industries that operate in western ND

Gather input from industry & universitiesSolicit feedback from industry & universities to get their view on collaboration pain points and what can be done to improve

Design more impactful collaborationWorking with state lawmakers, design a program which will promote greater industry university collaborations


Review existing & upcoming programsCatalog existing DOE programs & funding currently being consider in Congress; create a prioritization list

Determine state funding appetiteWork with state lawmakers to determine the type of R&D projects they will help fund and the potential capital availability

Coordinate with developers and DOE Act as an intermediary between potential developers and the DOE; assist in developing and advocating for proposals

Speak with key developers in MNGain an understanding of the various desires and concerns of infrastructure developers who (want to) operate in MN

Seek alignment with MN state officialsDiscuss key needs, largest barriers and potential opportunities for infrastructure development cooperation

Formalize a partnershipAgree to a cooperative partnership on share economic development interests to facilitate approvals and attract capital

Review existing FERC regulationsReview existing FERC rules on transmission and pipeline development and get a preliminary assessment of pain points

Interview developers on FERC rulesGain utilities, electric generators and oil & gas shippers’ perspectives on current FERC rules and things they want to see changed

Find alignment in the MidwestReach out to states throughout the Midwest to find common ground on proposed FERC rule changes to advocate together

Note: An additional avenue to look into to help facilitate development of new technologies is the formation of a collaborative venture fund from North Dakotan companies. An example of a VC fund that manages these sorts of corporate partnerships is TechNexus Ventures located in Chicago, Il.

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ESG solution #10: Collaborative federal and state efforts

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2022 2023 2024Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

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ESG solution #11: Advance support for a hydrogen production tax credit and expansion of 45Q in Congress

43

1. Speak with hydrogen developers2. Speak with CCUS developers3. Speak with energy investors

1. Gather established industry perspectives2. Get feedback from state lawmakers3. Understand views in the community

1. Draft legislation & build sponsorship2. Provide committee process support3. Get support from members of Congress

1. Start conversations with key states2. Reach a consensus on policy push3. Formalize coalition to support efforts

Determine developer and investor needs to greenlight projects

1

Seek alignment among North Dakotan industry, lawmakers & people

2

Seek alignment among states benefiting from federal tax credits

3

Support the legislative process in Congress4

Hydrogen PTCand 45Q

expansion

HydrogenNature of opportunity






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ESG solution #11: Advance support for a hydrogen production tax credit and expansion of 45Q in Congress

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1


2


3

Support the legislative process in Congress

4

Proposed actions Action item #1Speak with hydrogen developersDetermine what hydrogen production tax credit ($/kg) would be needed to enable accelerated development plans

Speak with CCUS developersDetermine what changes to 45Q would need to be made to enable the success of mothballed CCUS projects

Speak with energy investorsGet a sense of their appetite for these projects and what level of tax incentive and other support they would want to see


Gather established industry perspectivesSpeak with North Dakotan companies impacted by growth in hydrogen and CCUS to get their thoughts on clean tech incentives

Get feedback from state lawmakersWork towards a consensus with the state legislature to gain their support for these federal tax credit programs

Understand views in the community As part of town hall events, work to understand community members perspectives on newer clean technologies

Start conversations with key statesReach out to states who will benefit most from these tax credits and gauge interest in a multi-state coalition policy push

Reach a consensus on policy pushFor participating states, reach alignment on the key policy objectives and messaging for tax credit programs

Formalize coalition to support efforts Look into formalizing state coalition into an organization(s) to facilitate coordinated efforts at the federal level

Draft legislation & build sponsorshipProvide sample draft legislation to key congressional sponsors and work to add additional sponsors

Provide committee process supportProvide information and testimonial support throughout the committee process in the U.S. Congress

Get support from members of CongressIf necessary, reach out to the broader congressional membership to provide informational and testimonial support

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ESG solution #11: Hydrogen production tax credit and 45Q expansion

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2022 2023 2024Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

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Agenda


ESG Roadmap




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North Dakota has been one of the most carbon intense economies in the United States on a per GDP basis, well above the U.S. average

47

Carbon intensity of energy use by each state’s economy, 2018Metric tons of energy-related carbon dioxide per million dollars of GDP (Real $2012)

Source: EIA

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

NYOKAKWY WV KYND LA KSNMMS MT WAAR IN AL MAIA NE SCMO TX UT CT CA

Top 20 Bottom 5

There are roughly a dozen U.S. states which currently have passed a cap-and-trade system, including the bottom 5 seen in the chart (WA, CT, CA, MA, and NY). The U.S. Congress is also considering a carbon tax on U.S. imports.

U.S. average

No carbon price policiesCap-and-trade

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North Dakota’s power sector, followed by oil & gas operations and agriculture, represent the lion’s share of the state’s reported emissions

481 Agriculture emissions were estimated to be 15.35 MMtCO2e for 2020 based on a GHG inventory estimate by the EPASources: EIA, EPA

30.7

88.8

21.4

15.4

9.6

9.31.2

Electricity Oil & gas

1.2

Agriculture1 Industrial Transportation Commercial Residential Total

Estimated North Dakota GHG emissions inventory by sector, 2018 Million metric tons CO2 equivalent (MtCO2e)

97%

Coal

3%Natural gas

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The top 3 North Dakotan power generators, who represent 60% of the state’s 2019 net generation, predominately still rely on coal

49

Top power net generators by generation source, 2019Terrawatt-hours (TWh)

Source: EIA

3.2

Basin Electric Power Coop

Northern States Power Co - Minnesota 1.3

Great River Energy

Minnkota Power Coop, Inc

ALLETE, Inc.

Otter Tail Power Co

USACE-Omaha

Brady Wind, LLC

Montana-Dakota Utilities Co

Acciona Wind Energy USA LLC

8.4

11.5

4.7

2.5

1.6

1.3

1.1

0.6Coal Other

HydroNatural gasWind

61%

27%

8%0%

4%

41.1 TWhtotal 2019 generation

Coal power is still predominant in North Dakota. Roughly 30 U.S. states have Renewable Portfolio Standards (RPS) that result in reduced carbon intensities for their respective electric grids

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However, cross the Mid-Continent electric utilities are setting carbon neutral decarbonization targets, particularly in high-demand regions

50Source: IHS Markit

76%

24%

<1%

U.S. Mid-Continent power sector GHG emissions% of power sector emission by source

Coal Natural gas Oil

Mid-continent electric company decarbonization targets

69%

Companieswithouttargets

31%

Companieswithtargets

Utilities across the Upper Midwest have set ambitious decarbonization targets, and if these are followed through, demand for renewable generation will continue to growth significantly

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North Dakota wind generation will continue to be highly competitive vs. natural gas and wind power from other regions

51

Onshore wind LCOE (including PTC) by region, 2018 – 2050$/MWh, Real $ 2020

Source: IHS Markit

53

45

40

35

23

22

New England North DakotaNew York

CaliforniaChicago Texas

202046

40

36

32

22

22

55

48

46

41

32

32

2025 2030

Production Tax Credit (PTC) and Investment Tax Credit (ITC) at the federal level has been instrumental in the adoption of renewable power throughout the U.S.; additional economic incentives have been implemented by various states

Prod. tax credit

expires

Nat. gas $45.74

Nat. gas $51.83

Nat. gas $57.87

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Ensuring adequate transmission from North Dakota to Minnesota’s central hub will be key in facilitating sustained growth in wind generation

52Sources: IHS Markit, S&P Global, ESRI, MISO

Central North Dakota-Minnesota LMP differential

0

5

10

15

20

Apr ’20

Jan ’20

Jul ’20

Oct ’20

Jan ’21

3rd Quartile2nd Quartile (Median)1st Quartile

$/MWh

MISO transmission corridor to Minnesota hub

Bismarck

Minot

Transmission 230-345 kVTransmission 345-500 kVWind generationCoal generation

MISO price heat map

Central North Dakota generation and transmission1/4 of the time the

differential is substantial

The competitiveness of North Dakota onshore wind could also provide opportunities in green hydrogen production, to utilize excess wind generation that could not be transmitted to other demand centers

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A potential idea to promote the development of transmission would be for power authorities in demand-heavy states pair their development requests

53Source: New York State Energy Research and Development Authority (NYSERDA)

Champlain Hudson Power Express

The New York State Energy Research and Development Authority (NYSERDA) put out an RFP for a combined proposal of clean energy generation and transmission

Case study: State of New York proactively request clean energy sourcing and transmission from bidders

One submission has Hydro-Québec and Transmission Developers (Blackstone portfolio company) delivering 1,250 MW of Canadian hydro power to New York City

States in MISO demand centers in the Upper Midwest could potentially replicate NYSERDA’s RFP strategy, pairing wind generation and transmission developers

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Looking at the oil and gas value chain for the Williston Basin, the majority of reported GHG emissions are within E&P operations

54Note: CH4 emissions considered to have global warming potential of 25 (IPCC 4)Sources: IHS Markit, EPA

Onshore Gathering and Boosting

90%

77%

10%Upstream (E&P)

23%23% 77%

Natural Gas Processing1

0%0.4

100%

Natural Gas Transmission

88%

0.0

12%Total

25.42.4 28.2

Williston Basin reported upstream and midstream GHG emissions, 2019Million metric tons CO2 equivalent (MMtCO2e)

CO2CH4 (CO2e)

37.4 2.73.5 0.3 43.9Emission intensity*

(kgCO2e/boe)

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While emissions intensity in the Permian has improved significantly since 2015, the Williston Basin has struggled to show similar improvement

55

Upstream emissions intensity of Permian and Williston operators by source, 2015 – 2019Kilograms of CO2 equivalent per barrel of oil produced (kgCO2e/bbl)

Sources: IHS Markit, EPA

0

50

100

150

200

250

300

P PWP

71%

22%

W

107

WP P

11%

5%

74

120

W

64%

148

5%

69%

261

161

25%4%

111 99

144161

7%

5% 19% 4%

16%

9%

73%

W

74% 24%55%

26%

19%40%

16%

32%

30%55%

63%

33%85%

41%

-72%FlaringCombustion Venting

2015 2016 2017 2018 2019

P = Permian Basin operatorsW = Williston Basin operators

To help facilitate midstream development in the Permian, the state of Texas streamlined its permitting processes for new pipeline development, easing the burden of midstream providers in obtaining right-of-way for their systems

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Segmenting by operator size, we see that flaring has been an issue for all, however, smaller firms have had difficulty with their methane emissions

56

Upstream emissions intensity of Williston Basin operators by source, 2015 – 2019Kilograms of CO2 equivalent per barrel of oil produced (kgCO2e/bbl)

Sources: IHS Markit, EPA

0

10

20

30

40

50

60

70

80

M LS S SL M3%

S

29

29

L M

6468

24

2247

64

93%

89%

3310%

1%

10%

46%35

77

39

87%

76

5% 8%

33

6%

82%

8%

0% 17%

1%

1%

7% 8%

6% 6%

7%

90%

1%

7%3%

1%L

44%

53%

M

57%

42%

80%

85%

1%

54% 85% 45%

54%

96% 34%

65%

57

MS4%

5%

L7%

88%

VentingCombustion Flaring

2015 2016 2017 2018 2019

L = Large-sized operatorsM = Medium-sized operatorsS = Small-sized operators

To reduce oilfield emissions, governments have taken different approaches: Colorado now has stringent regulations effectively mandating takeaway capacity; Alberta has opted to cover the expense of pneumatic device replacements

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However, the Williston Basin’s geology does make it attractive for carbon capture and storage, particularly for Enhanced Oil Recovery (EOR)

57Sources: IHS Markit, USGS, Baik, E., et. al. (2018). “Geospatial analysis of near-term potential for carbon-negative bioenergy in the United States”

To promote CCUS, Texas offers grants and loans to companies to develop projects; Kansas grants companies the right to deduct amortized costs of machinery and equipment for CO2 CCUS for 10 years as well as a 5 year property tax exemption

CO2 injection per well and storage capacity in the U.S.

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Agriculture will be a major component of the any future pathway to carbon neutral

58

Multitech mitigation scenario: U.S. biofuels demand, 2000 – 2050Thousand barrel per day (Mbbl/d)

Source: IHS Markit

108

839 744981 896

603

184

358351

344

0

200

400

600

800

1,000

1,200

1,400

20102000

0

108

857

2020

71

2030

1

0

2040 2050

929

1,3691,301

1,018

0

18

3054BiodieselEthanol Biojet

% of total U.S. liquids

demand0.5% 4.5% 5.2% 8.0% 12.3% 16.1%

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U.S. feedstock demand for biodiesel and renewable diesel. Biojetfeedstock demand to come mostly after 2030

59

U.S. FAME + RD + Jet production vs. feedstock availability TMT – Feedstock equivalent

Source: IHS Markit

Feedstock demand from biodiesel (FAME) is assumed to remain relatively flat; however, biodiesel production that (a) does not get the LCFS credit, and/or (b) shares the federal credits with blenders/obligated parties will likely become uncompetitive in the short term as RD production increase and places higher pressure on feedstocks supplies. Hence, lower production and feedstocks demand from biodiesel in the next 5 years is likely.

The “feedstock gap” measures the difference between feedstock demand and the sum of (a) waste fats and grease that IHSM judges can be redirected to biofuels to 2040, and (b) historical maximum vegetable oil used for biodiesel and RD.

The gap starts in 2022 when the new 400 mgy Diamond Green facility starts and needs ~1,390 TMT per year (3 billon lbs). For perspective, this plant is equivalent to 12% of US soybean oil production.

The scale of the gap has it peaks mid/late 2020s is indicative of the pressure/opportunity for vegetables oils and feedstocks.

Marathon’s Dickenson renewable diesel plant is part of the 2021 increase

Feedstock gap to be filled by redirecting more waste fats & oils, vegetables oils, and feedstock imports, new veg oil production and crops.

Feedstock gap = demand – max waste fats and oils – historical max vegetable oils

Feedstock gap

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Alternative feedstock supplies to meet U.S. renewable diesel production and close the feedstock gap

60

Sources of commercially available feedstocks to meet demandTMT – Feedstock equivalent

Source: IHS Markit

Although renewable diesel production outlook estimates will change if part of the processing capacity does not come on online, it is clear that the anticipated demand is significant compared domestically sourced feedstocks options. US to move to be feedstock short from being long

The feedstock gap can be “filled” from the following sources:

1. Increased use of vegetables oils – there are not sufficient waste greases and oils (or LCF); this includes:

2. redirecting US SBO exports3. Redirecting NA canola oil exports back to the US to

substitute SBO in food applications or to go into biofuels.

4. Potentially even greater penetration of the waste grease and oils feedstocks (baseline already assumes that by 2025 84% of total supplies are used by biofuels)

5. Increased production of vegetable oils (i.e., increased crush)

6. Imports of low carbon feedstocks and vegetable oils.

Also, large incentives to drive feedstock production expansion and innovation including lower CI feedstocks and biofuels, such as ethanol-to-jet fuel

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North America existing renewable diesel facilities


Pacific Ocean

Feedstocks DCO

SBO

5! UCO

I! Animal fats

5! Animal fats, DCO, UCO

5! Animal fats, DCO, SBO

I! Canola oi l

Cielo Waste Solutions <1 Onstream

Wyoming Renewable Diesel 100 Onstream

Kern Oil 15 Onstream

t-

Altair Fuels 40 Onstream

l I I \

UNITED STATES

/ /

/

CANADA

East Kansas Agri Energy 5 Onstream

Ridgeline Energy Services 15 Onstream

.---~----, '----..:::::::==--'-1 REG Synthetic Fuels 90 l--1rllr.i.'I

Lifecycle Renewables 5 Onstream

Atlantic Ocean

World Energy 40 Onstream

Onstream Sunshine Biofuels 7

0 480 k

5! Canola oil, DCO, SBO

I! Multifeedstock

I! Sawdust, waste bio-crude

5! SBO, DCO, beef tallow

I! Tallow

I! Waste woody biomass

I! Waste-to-fuel

MEXICO Gulf of Mexico

I! Inedible waste streams of agricultural oils and animal fats

Waste agricultural oils and animal fats

I! Waste fats, camelina oil , DCO, SBO, UCO

Company name

Capacity (million gallons per year)

Facility operational start date

0 Operating facility

0 Facility planned/ Under construction

- International boundary

Onstream

Facility capacity (Million gallons per year)

737-1 , 132 . 401-736 185-400 53-184

16-52 10-15 0-9

0 180 mi

Note: UCO = used cooking oil; DCO = distillers corn oil ; SBO = soybean oil.

Source: IHS Markit: 2003036

~ IHS Markit'

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Crop patterns have changed with small grains losing out to corn and soybean acres leaving ND well-positioned to capture biofuels demand

62

North Dakota, area planted to major row cropsThousands of acres

Sources: IHS Markit, USDA, NASS

Drivers of the shift in crop acres include:

Better varieties of corn and soybeans suited for ND, particularly the Red River Valley

A general decline in competitiveness of US wheat that shifted the economics toward corn and soybeans

Strong demand from the biofuels sector, particularly from 2005 to 2014

The shift puts ND is a good position to meet expected increases in demand, particularly from the biofuels sector but there are challenges:

Corn is a relatively high CO2 emissions crop

Soybean oil is less favored in carbon offset programs than “2nd generation” feedstocks such as used cooking oil, tallow, etc.

ND is a more distant supply region

In past 25 years ND soybean acres have increased from 1% to 8% of US total

In past 25 years ND wheat acres as a percentage of US total have stayed stable at around 17%

In past 25 years ND corn acreshave increased from 1% to 3% of total

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While production of corn and soybeans in North Dakota has increased, processing capacity is still centered to the South and East

63Sources: IHS Markit, industry sources, USDA

U.S. corn production and processing facilitiesU.S. soybean production and processing facilities

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Agriculture response to feedstock demand: soybean processing capacity expansion

64

Expansion of soybean processing capacityMMT per year

Source: IHS Markit

Oilseed crushers - various expansions and new projects:

1. CHS Minnesota 0.5 MMT/Y expansion

2. Cargill Iowa and Ohio combined 1.3 MMT/Y expansion

3. ADM North Dakota 1.4 MMT/Y new soybean crush project

4. Shell Rock Iowa 1.1 MMT/Y new project (Phillips 66 minority stake)

66

69

72

75

2020 2021 2022 2023 2024 2025Operational Under expansion-CHSUnder expansion-Cargill Under expansion-Others

6% capacity expansion under construction or announced: ~0.8 MMT of SBO and ~3.3 MMT of SBM addition by 2024

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Agriculture response to feedstock demand: canola processing capacity expansion in North Dakota’s backyard

65

Canada canola crush capacity expansionMMT per year

Source: IHS Markit

Canada

1. Viterra in Regina, SK 2.5 MMT/Y new project

2. Cargill in Regina, SK 1.0 MMT/Y new project

3. Ceres Global in Northgate, SK 1.1 MMT/Y new project

4. Richardson Yorkton SK 1.2 MMT/Y expansion

0

6

12

18

2020 2021 2022 2023 2024 2025Operational Expansion-Richardson Announced-Cargill

52% capacity expansion under construction or announced: ~2.5 MMT of canola oil and ~3.2 MMT of canola flour addition by 2025

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North Dakota sees strong in-state and regional demand for ammonia


Ammonia supply and demand is unevenly distributed in the US with a limited number of states having net surplus.

The Midwest region, despite the increase in capacity from new production in the region, is estimated to have a net shortage of 1.7 MMT as a result of its demand for direct application ammonia for its large agricultural base. About 1.3 MMT of this deficit is supplied by the US Gulf region. The region also receives surplus production from Ohio and imports from Canada

Canada also supplies ammonia imports to meet the demand needs of the states in the Northwest, while the Southwest deficit is covered with imports from Trinidad

Regional ammonia supply/demand and trade flows, 2019

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North Dakota has limited ammonia production capacity, but ample feedstocks


Natural gas is by far the most common feedstock used in the production of ammonia, accounting for around 60% of world ammonia capacity. The most competitive capacity and, therefore, export production, is represented by plants using natural gas feedstock

US ammonia production is found in 17 states but is mostly located in the Eastern half of the country and concentrated in a few key states. Current US capacity is approximately 16.6 MMT and is expected to increase to 18.7 MMT by 2030 with the expected opening of a 1.3 MMT plant in Texas in 2024 and other unspecified capacity expected to materialize towards the end of the decade

The only production site in ND is the Dakota Gasification Company’s facility in Beulah, ND, which produces 299kMT per year on a steady basis

North Dakota can grow its industrial output in this area by taking advantage of low-cost natural gas feedstocks, and traditional/green electricity inputs to provide traditional (grey), blue, and/or green ammonia for direct application farm use as well as energy storage in the biofuels and hydrogen energy economy

U.S. ammonia capacity, 2020

‘Capacity, ‘000 MT 2010 2015 2020 2025 2030

US Total 10,886 11,920 16,599 18,151 18,746

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Water Air

Electrolysis Air separation

H2 N2

Electricity

Haber-Bosch

Ammonia

Existing uses Opportunistic uses

Fertilizer Explosives

Cooling agent Cleaning products

Phamaceutical Others

Marine fuel Biofuel

Energy storage Hydrogen provision

“Blue” or “Green” ammonia shows promise for reducing carbon intensity of fertilizers as well as supporting the hydrogen economy


Green ammonia refers to ammonia produced through a process that emits zero or a minimal amount of carbon dioxide (and other greenhouse substances) in the environment. But this is a living description since currently ammonia produced through a process that emits reduced amount of carbon dioxide may also be referred to as green ammonia in some cases

There are basically two ways to reduce or eliminate CO2 emission from an ammonia production process:

> First option: use carbon-free feedstock (water and air) and renewable electricity which would produce zero or minimal amount of CO2 in the production process (see right chart)

> Second option: use carbon-bearing fuel/raw materials and capture/remove the CO2 emitted from the process. Ammonia produced in this way is commonly referred to as “blue ammonia”

In the chart on the right side, electricity used in the process can be partially or completely “green”

This section highlights 4 opportunistic uses of green ammonia, which are energy storage, hydrogen provision, marine fuel and biofuel, with the latter two and renewable fuel of hydrogen provision likely having shorter development time

Example of green ammonia production process

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Comparison of ammonia and hydrogen as energy storage


Hydrogen and ammonia shipment costsEnergy density and specific energy of various sources

Marine DieselRenewable

DieselFT Diesel

Hydrogen Gas

Hydrogen Gas (700 bar)

Liquid Ammonia

Liquid Hydrogen

Lithium Ion Battery

LNG/LBG

Methanol

Natural Gas

Natural Gas(250 bar)

Marine Fuel Oil

LPG

0

5

10

15

20

25

30

35

40

0 50 100 1500.00 0.50 1.00 1.50 2.00 2.50

Truck

Rail

Vessel

Ammonia Liquid hydrogen Gaseous hydrogen

Energy density (MJ/L) $USD/MT-km

Specific energy (MJ/kg)

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The challenge for ND is to capture the downstream carbon credits and not just credits relate to agriculture production

70Sources: IHS Markit, World Bank, Ecosystems Consortium Market Services

Over the years, there has been an oversupply of carbon credits resulting in lower average carbon credit prices and prices vary by type of project. Agricultural carbon credits are considered expensive due to high implementation costs i.e., US$10-$20/tCO2e and therefore very few projects are registered under the compliance markets.

Agricultural projects are still at only 1%-2% of the market (~1 million issued credits).

> Only 10 carbon crediting mechanisms out of 26 global and prominent carbon mechanisms cover agriculture amongst other sectors.

> 75% of the agricultural carbon credits are registered just under Alberta ETS priced at $14-$19/tCO2e and come from conservation cropping, fed cattle and biogas.

> Other global jurisdictions have started to add agriculture as an additional sector e.g., New Zealand will price GHG from agriculture by 2025 in line to be net zero by 2050. GHG emissions from fertilizers will be covered under New Zealand ETS at processor level. For livestock, a separate alternative pricing mechanism will be developed at farm level.

Opportunity: USDA’s carbon bank initiative or similar public or private initiatives can bring a mechanism to monetize and stabilize a carbon market for agriculture.

Issuance cost and avg. carbon credit by sectorKtCO2e

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Man

ufac

turin

g

Oth

er la

nd u

se

Agric

ultu

re

Ener

gy e

ffici

ency

Fugi

tive

emis

sion

s

Indu

stria

l gas

es

Fuel

sw

itch

Was

te

Ren

ewab

le e

nerg

y

Fore

stry

International IndependentRegional, national, subnational Avg. Price

Carbon price ($USD)

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Carbon pledges by major agri-food companies


40 companies have carbon pledges with defined full scope, 15 companies do not have carbon pledges but are either reducing carbon activities or are planning to announce pledge in future and 4 companies do not have any pledges

JBSSyngenta Mosaic

YaraCoca Cola

MarsUnilever CargillKellogg

ABP Food GroupGeneral Mills

Danone Nestle’

WalmartDairy Farmers of America

Fonterra Co-operative GroupDanish Crown AmbA

Perdue AgribusinessJohn Hancock (Manulife)

HeinekenJohn Deere

SLC AgricolaLand O Lakes

Olam Nutreco

Abbott NutritionCarrefour

Aldi Nippon Meats (NH Foods)

BayerViterra

DIAGEO Friesland Campina

Louis Dreyfus Company (LDC)

Tyson FoodsPepsiCo

Arla FoodsMcCain Foods

BungeADM

Companies with full scopes No pledge but carbon activities

Farmland PartnersCHS

American Foods GroupDe Heus Animal Nutrition

No pledge or activities

AGP CooperativeNutrien

Minerva S.A. FoodsVION Food GroupLe Groupe Lactalis

DMK Deutsches MilchkontorTönnies Lebensmittel

BRF S.A.EuroChemAdeco Agro

Cofco GroupWhole Foods

Constellation BrandsYilli

Paterson Grains

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Our initial thoughts on opportunities and challenges

72

Developing a CCUS network incorporating the most resilient coal power plants, ammonia manufacturing, and other industrial sources

Blue hydrogen production

Working with neighboring states for transmission development

Alternative outlet: green hydrogen and ammonia generation from wind resources

LCFS in California, Oregon and (possibly) Washington State could provide demand outlets for hydrogen and biofuels

Working with small technology developers to help curb methane emissions of small producers (i.e. network of methane monitoring)

Working with midstream developers to align infrastructure development with D&C activity (e.g. speed process to secure right-of-way)

Link corn production to “green” nitrogen

Explore digestor potential around animal agriculture as a pathway to biogas and renewable natural gas

Shift oilseed production to higher oil content oils (e.g., canola). If there is a demand shift to alternative proteins, you lessen the demand for protein meal and reinforce a shift toward higher oil content oilseeds.

Explore energy specific crops for a “new wave” of crops especially in areas where corn/soybean production is less favorable

Integrated low carbon biofuels supply chain from canola (or other high oil content oilseed crops) that captures the majority portion of potential carbon offsets

ND will also need to ensure that general crop production at least keeps pace with carbon reduction activities across the US and Canada – Farming for carbon credits will happen and can be a competitive advantage for the state.

Potential opportunities and challenges in energy and agriculture

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Agenda


ESG Roadmap




73

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Lack of profitability for investors, and to some extent climate concerns, is drawing capital out of the oil & gas weighted energy sector

74

0%

5%

10%

15%

20%

25%

30%

Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-21

Information TechnologyHealth CareIndustrialsConsumer DiscretionaryFinancialsCommunication ServicesConsumer StaplesEnergyUtilitiesReal EstateMaterials

Evolution of S&P sector weightings since 2005Sector weighting %

Sources: IHS Markit, S&P Global

The energy sector – in its majority oil and gas – has fallen from 15% to less than 3% of value of the 500 largest public companies listed in the United States

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Meanwhile, capital flows to ESG investment funds increased almost 7x from Dec 2018 to Dec 2020

75

Total assets under management (AUM) and number of ESG ETFsBillions $USD

Source: IHS Markit

Total number of funds

7 8 9 9 11 14 18 21 2231

47

67

141

44 52 57 6680 89

107119

135

181202

232

284

0

50

100

150

200

250

300

0

20

40

60

80

100

120

140

160

Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20

Number of ESG ETFs(right axis) Total AUM

(left axis)

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Through our interviews and the diagnostic, we have identified a number of ESG issues and as well as significant opportunity sets for North Dakota

76

Natural gas flaring

Methane venting and fugitive emissions

Coal power emissions1


Land and water conservation and usage

Expansion of renewable energy (wind, geothermal, solar, etc.)

Expansion of biofuels / bioenergy production1

Hydrogen and derivatives production1

Carbon credits and offsets farming1

Issu

esO

ppor

tuni

ties

Environmental

Transparency and consistency across internal ESG reporting and supply chain oversight

Community and tribal partnerships with new energy developments1

Social Governance

1 Issue/opportunities considers CCS technology

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Understanding the barriers needed to be lifted to tackle the key ESG issues and execute on new opportunities is key to develop a robust roadmap

77

Nat

ural

gas

flar

ing

Vent

ing

&

fugi

tives

Coa

l em

issi

ons

Agr

icul

tura

l em

issi

ons

Land

/wat

er

cons

erva

tion

ESG

repo

rtin

g





Technological

Ren

ewab

le e

nerg

y ge

nera

tion

Bio

fuel

s /

bioe

nerg

y

Hyd

roge

n &

de

rivat

ives

Car

bon

cred

its &

of

fset

s

Com

mun

ity &

tr

ibal

par

tner

ship


Governance

Barriers

Categories



Labor


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Key themes emerge throughout the barriers identified

78

This distance to markets can disincentivize developers of gas, wind and other resources to invest, particularly when gaining right-of-way over long distances is too uncertain for investor comfort

Flaring, a dominant ESG issue in North Dakota, is also a result of right-of-way issues and lack of monetization options to enable timely gas gathering infrastructure development

Development of new monetization options (e.g., data center, ammonia, biofuel) could potentially resolve some of the emission barriers and enable new opportunities

Lack of local monetization opportunities, right-of-way difficulties impede further commercial development

In a more capital scarce environment for the traditional energy and agriculture sectors, North Dakota suffers from a lack of visibility among some investors vs. more populated states

Raising North Dakota’s visibility among investors through a variety of publicity and outreach efforts would potentially unlock capital for transformative ESG investments

The State lending support in shoring up ESG reporting for North Dakotan industries would likely further facilitate increased investor interest

Low visibility among investors is limiting capital availability for new ESG opportunities

Local communities do not feel that they are capturing sufficient benefits from new energy developments, particularly for products destined for out-of-state customers

This is compounded by the perception that new energy projects are causing high paying, low skilled coal industry jobs to disappear, which have supported local communities for decades

The State could do several things including engage in community outreach, establish visible community benefit programs and implement Just Transition programs for displaced coal workers

Difficulty in obtaining North Dakotan stakeholder alignment for new developments to proceed

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Other jurisdictions have been successful in lifting these barriers

79

15. UK’s largest biomass power plant utilizing wheat straw

16. Agriculture multinationals spearheading carbon credit trading

17. Carbon credit system implementation in Michigan

18. Summit connecting Midwest ethanol production facilities to CCS

19. Threemile Canyon Farms sustainable operations in Oregon

7. World-scale blue ammonia production in the UAE

8. Green ammonia facility in Nebraska

9. Iowa data center hub development

10. “Build Strong” program to seek community alignment

11. Colorado “Just Transition” initiative for displaced industry workers

12. State worker relocation programs

13. Pennsylvania’s pipeline infrastructure coordination office

14. Right-of-way simplification for Texas’s competitive renewable energy zones

1. Alberta emissions management and reduction programs

2. Project ASTRA collaboration for methane leak detection

3. Coyote carbon neutral natural gas power project on tribal lands

4. Coal plant conversion to natural gas and green hydrogen power

5. E-fuels plant harnessing wind energy to create hydrogen

6. New York State transmission development proposal

Energy AgricultureCross-sector

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Though there are many learnings to take from these case studies, three key takeaways provide some direction on what would better enable investment

80

De-risking project approval and execution of large ESG projects has often been achieved through tribal communities partnership and establishment of a permitting coordination office to help companies cut through the red tape

States have made significant in-roads through the establishment of taskforce and pilot plant to incentivize collaboration, bring the community onboard and resolve key ESG issues

University has often played a central role in partnering with companies to develop pilots and trigger technology development

As incentive emerge across different jurisdictions and geographies, successful projects have often leveraged a combinations of ESG programs to get the project going (e.g. LCFS and 45Q, European carbon tax abatement)

The resources of a single company or even a few might not be enough, particularly for large-scale transformative projects or emerging technologies with substantial risk; long terms commitment is often essential

Low carbon ammonia meets a net regional demand for agriculture while potential leveraging low cost wind or natural gas supply in the State; similarly, with large wheat acreage and other potential biomass sources, North Dakota is a potential renewable energy hub

Storing the carbon produced by ethanol would leverage both North Dakota significant corn production and abundant EOR

Carbon credit trading is likely one of the leading sources of carbon offsets available to ND and will link farm and energy sectors; timing is uncertain but the future demand is clear and pricing and contracts will catch up soon

Unique partnerships and taskforce have been key to streamline and de-risk ESG projects

The current policy and regulatory frameworks are often insufficient to incent early ESG deployment

North Dakota is uniquely positioned to capture the growing set of opportunities that lie at the cross of ag and energy

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External carbon pressures will continue to mount… Financiers, investors and many large corporates have made a plethora of low-carbon pledges

81

Multi-national corporations Financial institutions

If we took these pledges at face value, what would be the impact on global and NA carbon emissions?

Source: UN Global Impact – Business Ambition for 1.5 C, news and announcements from Dec. 2019

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Tesla’s equity value, at least to some degree, reflects investor sentiments with regards to energy transition expectations

82

Market capitalization of Tesla vs. major automakers by region, July 26th 2021Billions $USD

Source: IHS Markit

0

100

200

300

400

500

600

700

Tesla EEUU Europa Asia

Toyota

Honda

HyundaiNissan

136.9

402.6368.7

633.5

U.S.U.S. Europe

Estimated units produced in 2020 (thousands)Tesla GM Ford VW Daimler BMW Stellantis Renault Toyota Honda Hyundai Nissan

508 6,828 3,972 8,487 2,840 2,467 2,439 2,683 9,200 4,400 6,230 4,246

Ford

GMVW

Daimler

BMW

StellantisRenault

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Out of any fossil fuel, coal has seen the largest ESG repercussions in U.S. financial markets

83Sources: IHS Markit, Citi, Liberty Mutual

Larger financial institutions are turning away from coal, leaving coal-heavy portfolios to smaller banks with higher return requirements

Large insurers are also cutting their coal exposure, a number are opting out all together if a utility has more than 30% coal generation

There’s a reluctance for capital investments in new coal projects; the predominate focused is on maintenance for existing operations

“Citi commits to not take on any new clients after 2021 that have plans to expand coal-fired power generation”

“Liberty Mutual will not insure new risks for companies with >25% coal exposure and will phase out existing coverage to such companies by 2023”

“CAPEX for thermal is mostly for maintenance. While there will be some new thermal mines, these will mostly be self-financed and primarily replacement. Still, new thermal coal mines will be rare.”

As larger financial institutions leave, the investors that remain will typically be smaller and want higher returns for their investments. This elevated cost of capital puts coal at an economic disadvantage vs. other forms of power.

Coal investment trends in the U.S. Recent examples and expert commentary

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Capital flows, public pressure and climate policies are driving oil and gas companies to diversify, reduce emissions, and pursue net-zero targets


Dec19

Jan20

Feb20

Mar20

Apr20

May20

Jun20

Jul20

Aug20

Sep20

Oct20

Nov20

Dec20

Jan21

Feb21

Mar21

RepsolNet zeroby 2050.

BPNet zero by 2050; 50% cut in carbon intensity.

TOTALNet zero by 2050; net zero in Europe. 60% reduction in carbon intensity globally.

BPAnnounced series of emissions reduction targets for 2030; 40% reduction in oil and gas output by 2030.

ConocoPhillipsReduce operational GHG emissions intensity 35–45% by 2030. Net zero for operations between 2045-2055.

EquinorNet zero by 2050.

ExxonMobilReduce intensity of upstream emissions 15–20% by 2025.

ShellNet zero in all scopes by 2050; Reduce carbon intensity 100% by 2050.

EniFull net zero in all scopes by 2050 on an absolute basis.

PetroChina“Near” net zero by 2050; new annual spending targets set.

EquinorReduce carbon intensity 50% by 2050.Carbon neutral by 2030.

Eni80% reduction in net emissions by 2050; net zero by 2030 from upstream; net zero for Eni group by 2040.

Occidental PetroleumOperational net zero by 2040; ambition to net zero in all scopes by 2050.

ChevronEarly achievement of 2023 target; sets new aim of 35% reduction in carbon intensity by 2028.

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Debt issuances for major Bakken producers have contracted 54% since 2018, a trend which started before the global recession

85

Debt financing for select Williston Basin operating companies1 by yearBillions of $USD

1 Includes ConocoPhillips, Devon, Marathon, Hess, Whiting, EOG, Denbury, Oasis, QEP, Continental, Rimrock, Northern, Kraken, Crescent PointSource: Rainforest Action Network

13% 8% 12% 13% 15%1%

16%8%

1%4%

5%5%

5%

7% 9%

17%2%

7% 8%12%

1%

6%

11% 7%8%

6%

10%7%

10% 7%

8% 17% 8%

28%13% 16% 14% 19%

16% 17% 18% 17% 12%

0%

20%

40%

60%

80%

100%

0%

3%

0%

2%

2018

1%

3%

4%

0%5%

20.04

2019

11.84

1%

5%

2016

21.46

0%

2017 2020

25.90 16.19

2%

4%

1%4%

4%3%

4%3%

4%

2%

Goldman SachsMizuho

ScotiabankJPMorgan Chase

Wells Fargo

MUFG

Bank of America

Morgan Stanley

Citi

TDDeutsche BankBarclaysOther

+4.44+1.42 -9.71 -4.35

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Barriers to the ESG issues and opportunities

86

Nat

ural

gas

flar

ing

Vent

ing

&

fugi

tives

Coa

l em

issi

ons

Agr

icul

tura

l em

issi

ons

Land

/wat

er

cons

erva

tion

ESG

repo

rtin

g





Technological

Ren

ewab

le e

nerg

y ge

nera

tion

Bio

fuel

s /

bioe

nerg

y

Hyd

roge

n &

de

rivat

ives

Car

bon

cred

its &

of

fset

s

Com

mun

ity &

tr

ibal

par

tner

ship


Governance

Barriers

Categories



Labor


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Key barriers to natural gas flaring

87

Barriers to natural gas flaring Difficulty to overcoming barrier:




Technological

1. Low economic returns for natural gas infrastructure development and is thus not a priority for capital allocation2. Minimum commitment requirements make smaller-scale gas monetization less attractive and there is often no

penalty for delay in arrival of infrastructure

1. Lack of flaring rules and penalties make flaring the highest NPV option available to producers in many situations2. Regulatory approval processes for pipeline development not as streamlined as it could be, though some

approvals are handled by federal agencies making this difficult3. Eminent domain is a non-starter in North Dakota

1. Timing delays in obtaining right-of-way for natural gas infrastructure development partially compounded by lack of oil and gas industry resources within the state government

2. Lack of specifics from the state to energy industry on pathway to carbon neutrality by 2030

1. N/A

HighLow

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Key barriers to natural gas flaring (cont.)

88

Barriers to natural gas flaring



Labor

1. Lack of cross company monetization initiatives2. Aversion to sharing future drilling development plans, seen as loss of competitive edge3. Midstream companies prioritize producers with larger footprint or producers with which they have existing

relationships

1. Community reluctance for gas pipeline infrastructure development in their backyard, particularly if the compensation doesn’t meet expectations; landowner fatigue in North Dakota

1. N/A


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Key barriers to venting and fugitives

89

Barriers to venting and fugitives




Technological

1. Payback periods for replacing some pneumatic devices are too long for some operators2. Potentially significant costs associated using various sensor and capture technologies without perceived

economic benefit

1. Lack of policies to encourage replacement or ban high-bleed devices; lack of stringent regulation around monitoring and leak repair methods and frequency

2. Regulatory and royalty complexity on mixing crude from different operators, making storage centralization difficult3. Lack of standardization in emissions detection, monitoring and accounting practices between parties

1. Delays in addressing oil and gas industry methane emissions partially compounded by lack of oil and gas industry resources within the state government

1. Detection technologies (both bottom-up and top-down) and interpretation of data is still evolving


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Key barriers to venting and fugitives (cont.)

90

Barriers to venting and fugitives



Labor

1. Concerns over data sharing between multiple operators2. Differing levels of stakeholder pressures for upstream/midstream players around eliminating methane emissions3. Detection technology trials require significant collaboration between companies and other organizations

1. N/A

1. Lack of technical competencies among oilfield personnel to implement methane detection, monitoring and reduction solutions


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Key barriers to coal emissions

91

Barriers to coal emissions




Technological

1. Hesitancy to upgrade existing coal-fired plants to make them “cleaner” due to unfavorable economics and unforeseen future cost burdens

2. Replacing current baseload with less carbon-intense alternatives (e.g. natural gas) will be capital intensive3. Lignite has a lower energy density vs. other types of coal and is only economic for local applications

1. 45Q tax credits aren’t attractive to power cooperatives given their tax structures

1. Lack of specifics from the state to energy industry on pathway to carbon neutrality by 2030

1. Carbon capture technologies are still being developed and haven’t achieved commercial maturity yet2. Current capture systems results in a 30% derate of coal plant’s generation capacity


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Key barriers to coal emissions (cont.)

92

Barriers to coal emissions



Labor

1. Utilities have differing incentives to reduce the carbon footprint of their generation portfolios depending on which end markets they serve

1. Perception that technologies and policies which attempt to cut emissions would likely increase the cost of electricity

1. Coal power plant closures result in the potential permanent lost of high paying, lower skilled jobs


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Key barriers to agricultural emissions

93

Barriers to agricultural emissions




Technological

1. Less developed primary processing (e.g. soybean crush) to accommodate growth in production of corn and soybeans

2. Capital investments in emission reduction technologies could be less financially attractive vs. status quo

1. Lack of a unified carbon measurement / verification within the supply chain2. Policy changes are making it difficult to attract capital for emissions reduction solutions on farm where future

revenue streams are at risk

1. Lack of specifics from the state to agriculture industry on pathway to carbon neutrality by 2030

1. Lack of developed and unified technology solutions from farm through refinery that will lower the lifecycle carbon intensity of products


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Key barriers to agricultural emissions (cont.)

94

Barriers to agricultural emissions



Labor

1. N/A

1. N/A

1. Lack of skilled workers to operate advanced agriculture equipment that will be needed to lower carbon emissions


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Key barriers to land and water conservation

95

Barriers to land and water conservation




Technological

1. The economic value of using land and water often strongly outweighs the economic value of conserving either2. The economic value of land or water conservation can occur across many years, but those in a position to make

conservation decisions (e.g., farmers) often need to make short-term decisions to remain in operation

1. Government initiatives such as the Conservation Reserve Program must be competitive with value in the open market

2. A return to previous Waters of the United States (WOTUS) rules or new rules that would severely restrict farm activities with respect to land use

1. N/A

1. It can be difficult to properly measure the value of the land and water resources in order to provide appropriate incentives to encourage conservation


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Key barriers to land and water conservation (cont.)

96

Barriers to land and water conservation



Labor

1. N/A

1. Stakeholder alignment of land and water conservation activities can be difficult to obtain due to competing interests and high visibility of resources within the community

1. N/A


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Key barriers to ESG reporting

97

Barriers to ESG reporting




Technological

1. Time and financial costs associated with ESG reporting requirements2. Even with pressure from financial institutions around supply chain ESG, some business customers do not have

the financial incentives to fully track and audit their suppliers’ ESG attributes

1. Multiple reporting standards and requirements adds a significant burden for companies for compliance2. For overseas supply chains, there is no price on carbon levied on U.S. imports, limiting the financial incentive for

the supply chain to improve its ESG metrics

1. The state government’s relative unfamiliarity of the prominent ESG rating systems and standards used by investors and financial institutions could constrain large investment deal flow into North Dakota

2. Lack of alignment between financials and federal regulatory not meeting stakeholder demand

1. Technologies for emissions quantification are still evolving


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Key barriers to ESG reporting (cont.)

98

Barriers to ESG reporting



Labor

1. Hesitancy for companies to voluntarily report ESG metrics, particularly if they are not as good as their peers

1. N/A

1. Smaller and medium sized companies may not have the worker competencies for effective ESG reporting


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Key barriers to renewable energy generation

99

Barriers to wind generation




Technological

1. New projects are economically unattractive to wind generation developers if existing transmission is not in-place or the developers foot the bill for new long-range transmission; resistance from utility customers for having to pay for this transmission

2. Issues around access to existing transmission for wind projects, competing against other forms of generation

1. Relative financial contribution to the state economy may be less than existing power generation2. Building transmission is high-risk for investors because there are so many regulatory hurdles and they must clear

every single one; resistance from other states for additional transmission development

1. Process for transmission development partially compounded by lack of resources within the state government

1. HVDC transmission is incompatible with interconnection along the line, thus limiting possible wind generation development to only one localized area


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Key barriers to renewable energy generation (cont.)

100

Barriers to wind generation



Labor

1. N/A

1. Local communities not being properly compensated for energy generation and infrastructure development for out-of-state end-users; landowner fatigue in North Dakota

2. Local government moratoriums prevent or significantly delay development of wind generation, pushing investment into other neighboring states

1. Lack of qualified trained workers to support expansion of wind generation sector


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Key barriers to biofuels and bioenergy

101

Barriers to biofuels and bioenergy




Technological

1. N/A

1. Policies that supports an expansion of biofuels production is lacking at both the federal and state level2. Regulatory and policy uncertainty is negatively impacting capital deployment and availability for biofuels and

bioenergy facilities development

1. N/A

1. Biofuels plants have mostly been unidimensional in that most of the focus is on motor fuels. New technology solutions are needed to bring a “refinery concept” to the biofuels industry.

2. For bioenergy, technology and systems that incorporate energy specific crops, next generation digestors and other advancements are needed.


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Key barriers to biofuels and bioenergy (cont.)

102

Barriers to biofuels and bioenergy



Labor

1. The traditional animosity between the conventional refinery industry and the biofuels industry is an impediment to further development of biofuels and other bio-based products beyond motor fuels such as aviation fuel, bioplastics, marine fuels, etc.

1. N/A

1. Lack of skilled workers in the agricultural industry to support biofuels expansion efforts


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Key barriers to hydrogen and derivatives

103

Barriers to hydrogen and derivatives




Technological

1. Existing regional demand for hydrogen is low and growth of future demand is uncertain; there needs to be some guarantees around offtake; distance to attractive hydrogen markets is far

2. Lack of infrastructure puts North Dakota at a competitive disadvantage vs. Gulf Coast3. Retrofitting existing natural gas pipelines or developing hydrogen specific pipelines is capital intensive

1. Currently, there is no production tax credit which supports hydrogen (derivatives) production, only incentives on the demand side

2. Investors worry that governments can change their minds on economic incentive policies which are the basis for emerging technology business models

1. Difficulty in attracting new hydrogen and derivatives investments compounded by lack of resources within the state government

1. Long range hydrogen transport to demand centers is less efficient than larger gases (e.g. CH4, CO2, NH3)2. Large scale hydrogen storage requires identification and development of salt caverns3. Conversion of hydrogen into ammonia and methanol lowers the energy efficiency4. Electrolyzers for “green” hydrogen production are still not economically competitive


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Key barriers to hydrogen and derivatives (cont.)

104

Barriers to hydrogen and derivatives



Labor

1. Resistance in North Dakota from competing fuels

1. Perception among some that hydrogen, particularly blue hydrogen, doesn’t eliminate or drastically reduce CO2emissions, impacting some investor decisions

1. Lack of qualified people for new technology projects like blue/green hydrogen and ammonia


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Key barriers to carbon credits and offsets

105

Barriers to carbon credits and offsets




Technological

1. High upfront costs of introducing emission reduction systems and practices especially at the farm level2. Lack of consistency around reporting metrics as well as differing ways companies report and measure their own

carbon reduction goals is impeding the development of a more robust carbon credit market

1. Absence of a central regulatory system that provides a framework for the trading of credits; not a clear path that connects carbon credit generation on farm to the carbon offset market where there is demand for credits

2. Lack of a national carbon market that can absorb fungible certificates and facilitate the transfer of credits from those who are generating them through mitigation to those who are buying them as offsets

1. Lack of institutional knowledge around carbon credit accounting and verification in the state government

1. Agriculture is very fragmented relative to other sectors and as such, different types of technology need to be developed to measure and verify carbon emissions


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Key barriers to carbon credits and offsets (cont.)

106

Barriers to carbon credits and offsets



Labor

1. Competing interests splitting focus between traditional farming activities and carbon offsets

1. N/A

1. Lack of visibility and competencies in the North Dakotan farming community around carbon offsets farming


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Key barriers to community and tribal partnerships

107

Barriers to community and tribal partnerships




Technological

1. Financial resources within communities may be limited to support larger scale projects; equity and/or royalty negotiations can be more difficult, particularly with many potential shareholders

2. New technologies may have a risk profile which is ill-suited for community financed projects

1. Archeological surveys on tribal lands for greenfield projects can be time consuming

1. N/A

1. N/A


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Key barriers to community and tribal partnerships (cont.)

108

Barriers to community and tribal partnerships



Labor

1. N/A

1. Projects with large footprints and/or environmental impacts could be met with significant resistance from local community members

2. Some infrastructure investors are cautious with projects located near or on tribal lands due to potential development roadblocks and/or reputational risks

1. Lack of qualified people for newer technology projects requiring the operation of complex equipment


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15. UK’s largest biomass power plant utilizing wheat straw

16. Agriculture multinationals spearheading carbon credit trading

17. Carbon credit system implementation in Michigan

18. Summit connecting Midwest ethanol production facilities to CCS

19. Threemile Canyon Farms sustainable operations in Oregon

7. World-scale blue ammonia production in the UAE

8. Green ammonia facility in Nebraska

9. Iowa data center hub development

10. “Build Strong” program to seek community alignment

11. Colorado “Just Transition” initiative for displaced industry workers

12. State worker relocation programs

13. Pennsylvania’s pipeline infrastructure coordination office

14. Right-of-way simplification for Texas’s competitive renewable energy zones

1. Alberta emissions management and reduction programs

2. Project ASTRA collaboration for methane leak detection

3. Coyote carbon neutral natural gas power project on tribal lands

4. Coal plant conversion to natural gas and green hydrogen power

5. E-fuels plant harnessing wind energy to create hydrogen

6. New York State transmission development proposal

Summary of case studies we have looked at which have provided solutions to some of the ESG barriers North Dakota is facing

109

Energy AgricultureCross-sector

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The government of Alberta has several initiatives and grant programs aimed at curbing emissions and incentivizing adoption of emerging clean tech

110Source: Alberta government

01Methane emissions program

Program offers financial support to small and medium conventional oil and gas operators to

assess and reduce on-site methane emissions02

Carbon capture and storage fundingTwo commercial-scale projects reducing GHG emissions by 2.76 million tonnes each year with $1 billion in funding from the Alberta gov’t

03Bioenergy producer program

The Bioenergy Producer Program (BPP) provides grants to dedicated bioenergy facilities 04

Emission reduction regulationRequires regulated facilities to reduce greenhouse gas emissions and implements an emissions trading system

05Coal community transition fund

An initiative to support municipalities and First Nations impacted by the phase-out of coal in

Alberta06

Energy efficiency grant programThe grant program offers support funding for energy efficiency projects in Alberta’s emissions-intensive & trade-exposed facilities

Snapshot of Alberta’s emissions management and reduction programs

1

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Texas universities have strong relationships with the energy industry which has helped facilitate state-of-the-art emissions reduction efforts. N. Dakota could look for ways to strengthen their own academic/industry partnerships

Project ASTRA is an oil and gas industry collaborations seeking to build a shared network of methane detection across the Permian Basin

111NSF = National Science Foundation; NICE = National Institute of Clean and Low Carbon EnergySource: Project ASTRA, University of Texas

Collaborative effort at the forefront of methane detection Applicable policies, incentives and enablers

• Project is led by the University of Texas with financial and technical support from the project’s industry sponsors

• The project also has grant funding from the NSF, U.S. DOE, Texas Commission on Environmental Quality, ExxonMobil Upstream Research Company, and NICE

Once operational, this smart digital network would allow producers and regulators to pinpoint methane releases for mitigation and can increase the frequency of measuring

Technical project phases: (1) Sensor inter-comparison(2) Digital twin and network design(3) Pilot project

Project ASTRA is developing an innovative sensor network that will harness advances in methane-sensing technologies, data sharing and data analytics to provide near-continuous emissions monitoring across oil and gas facilities in the Permian Basin.

2

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Coyote Clean Power project in Colorado looks to utilize natural gas and carbon capture to produce carbon neutral power on tribal lands

112Source: Coyote Power

The Allam-Fetvedt Cycle technology, developed by 8Rivers and NET Power, drives the power turbine with produced CO2 in a closed system

The Southern Ute Indian Tribe of Colorado is partnered on the project, providing both the land and supply of natural gas

Placement of the project on the tribe’s reservation bypasses PUC and other state approvals and provides upwards of 1,000 jobs

Zero emissions 280 MW power project which will utilize natural gas and capture and store upwards of 865,000 metric tons CO2 per year

Coyote Clean Power project in Colorado Applicable policies, incentives and enablers

• Federal 45Q tax credit for carbon capture

• DOE and state renewable clean energy grants reduce upfront capital costs for investors

• Regulatory approval process de-risked by locating project on tribal lands

• Existing brownfield facility further expedites project siting processes such as archaeological surveys

• Project has full support of governor and aligns with the state’s GHG Pollution Reduction Roadmap

Energy infrastructure projects often involve high regulatory hurdles. One way to de-risk these projects for investors is to partner with tribal communities to significantly speed up the approval process

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World’s “largest green energy storage project” currently under development in Utah which will convert coal generation over to nat. gas/green hydrogen

113Source: Intermountain Power Agency

Green hydrogen will be produced utilizing excess renewable energy and stored in an existing salt dome – starting at 20% utilization

Los Angeles Department of Water and Power intends to use the new generation to help meet California’s 2045 decarbonization target

Nearly 400 people currently work in the coal power facility but by 2025 wouldn’t be able to renew its PPA without this change

1,800 MW coal power plant, Utah’s largest, will convert over to natural gas and hydrogen power capable of 840–2,400 MW generation

Intermountain Power Project in Utah Applicable policies, incentives and enablers

• Significant decarbonization pressure from major customer (i.e. Los Angeles Dept. of Water/Power) with current PPA expiring in 2025

• Dispatchable natural gas generation needed to continue operating HVDC transmission line to bring wind and solar power to Los Angeles

• Alternative Energy Development Incentive is a tax credit for 75% of new state revenues generated over the life of an eligible project (or 20 years)

• Alternative Energy Sales Tax Exemption for equipment purchase or lease to generate electricity from renewable sources

Out-of-state electric utility customers are increasingly turning away from continued coal use. Providing fiscal incentives for energy conversion / carbon reduction projects can save jobs while keeping customers happy

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World’s first integrated e-fuels plant harnesses abundant wind energy to generate green hydrogen and transforms it into methanol/gasoline for export

114Sources: Siemens Energy, H2 View

Harnessing the strong winds of Chile’s southernmost region, the facility will generate green hydrogen, and using CO2 captured from the atmosphere, will convert it into methanol

The facility will produce 130,000 liters of e-fuels per year in its pilot phase, starting in 2022. This will significantly scale up to produce 55 million liters by 2024 and 550 million liters by 2026.

Some of the methanol will be converted to e-gasoline. Both products will be exported to countries around the world and will supply enough fuel to run over 1 million vehicles.

A partnership of major international companies is developing and implementing the world’s first integrated and commercial large-scale plant for the production of climate neutral e-fuel

Haru Oni green hydrogen e-fuels plant in Chile Applicable policies, incentives and enablers

• Germany has signed a bilateral energy partnership with Chile. The partnership is to engage in closer cooperation on renewables, energy efficiency, hydrogen and digitalization.

• Overseas companies in Chile can apply for support in co-financing when implementing technological investment projects. This incentive can cover up to 30% of project expenditures.

• In support for Germany’s National Hydrogen Strategy, the government provided $9.7 million to the developers of the project, a part of the $2.4 billion allocated for international projects

(1) Plentiful natural resources, (2) supportive financial incentives and (3) strong intergovernmental partnerships increase the visibility of possible renewable energy projects among leading investors and developers

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A potential idea to promote the development of transmission would be for power authorities in demand-heavy states pair their development requests

115Source: New York State Energy Research and Development Authority (NYSERDA)

Champlain Hudson Power Express

The New York State Energy Research and Development Authority (NYSERDA) put out an RFP for a combined proposal of clean energy generation and transmission

Case study: State of New York proactively request clean energy sourcing and transmission from bidders

One submission has Hydro-Québec and Transmission Developers (Blackstone portfolio company) delivering 1,250 MW of Canadian hydro power to New York City

States in MISO demand centers in the Upper Midwest could potentially replicate NYSERDA’s RFP strategy, pairing wind generation and transmission developers

Long distance transmission development can be paired with wind generation development through large, state direct RFPs, though in this case North Dakota would have to support the efforts of more populous states

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“World-scale” blue ammonia production facility, currently in the design phase, will take advantage of existing CCS to produce low-carbon chemicals

116Source: ADNOC

Ammonia can be used as a low-carbon fuel across a wide range of applications, including transportation, power generation and industries including steel, cement and fertilizer production

ADNOC operates Al Reyadah, the world’s first fully commercial CO2 facility for the iron and steel industry, and the first commercial-scale CCUS facility in the Middle East

ADNOC has signed agreements to explore hydrogen supply opportunities with customers in key demand centers including the Ministry of Economy of Japan and Korea’s GS Energy

ADNOC is currently in the design phase of a large-scale blue ammonia production facility to be developed at the new TA’ZIZ industrial ecosystem and chemicals hub in Ruwais, UAE

1,000 kilotons per annum blue ammonia facility in UAE Applicable policies, incentives and enablers

• Mandate from the Supreme Petroleum Council to explore opportunities in hydrogen and hydrogen carrier fuels with the ambition to position the UAE as a hydrogen leader

• Proven demand for CO2 for EOR in ADNOC’s nearby oil fields

• Low tax, business and investor-friendly country

• TA’ZIZ industrial ecosystem JV has strategic importance for the UAE

Facilitating the development of a blue ammonia hub in North Dakota would leverage the state’s (1) excess natural gas, (2) carbon sequestration potential and (3) existing agricultural demand for ammonia to make it feasible

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Green ammonia supports energy infrastructure, reduces carbon intensity, and meets a net regional demand for agriculture

The Midwest region, despite the increase in capacity from new production in the region, is estimated to have a net shortage of 1.7 MMT as a result of its demand for direct application ammonia for its large agricultural base. About 1.3 MMT of this deficit is supplied by the US Gulf, plus surplus production from Ohio and Canada.

Source: Monolith Materials - https://monolithmaterials.com/solutions/ammonia

Case study: Monolith Ammonia – Nebraska CO2 Facility

Traditional ammonia production accounts for >1% of the world’s greenhouse gas emissions (equal to those of the United Kingdom)

Monolith Materials is in the process of building a new facility in Nebraska to cleanly manufacture carbon black, with green ammonia as a byproduct. Using a proprietary methane pyrolysis process combined with 100% renewable electricity, this CO2 facility will utilize natural gas and clean electricity to create 275,000 tons/year of carbon-free anhydrous ammonia when its CO2 facility is complete. This facility will stop nearly 1 million tons of CO2 per year from entering the atmosphere.

Because Monolith sits in the heart of America’s Cornbelt, this clean ammonia will offer carbon free ammonia for both traditional agricultural markets and upcoming green ammonia markets.

Regional net ammonia supply/demand and trade, 2019

Local production of green ammonia reduces carbon intensity, meets a regional agricultural demand, and decouples local pricing from gulf import drivers; will likely become more attractive with policy incentives

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Iowa has become the home of data centers for some of the biggest tech companies through a combination of low operational costs and incentives

118Sources: Iowa Economic Development Authority, Des Moines Register

Data center projects typically cost between $1-2 billion, occupy about 1.2 million-1.8 million square feet and employ 50-75 workers. The average employee makes $75,000 a year.

Companies choose the locations of data centers based on whether the area has enough skilled workers, access to fiber optic networks, reliable power and inexpensive utilities

Tech giants like Google, Facebook and Microsoft have invested billions in data centers in Iowa. The state has affordable and ample wind energy, a stable grid, a high density of telecommunications infrastructure and low costs for construction projects.

Iowa becomes a regional data center hub Applicable policies, incentives and enablers

• Iowa offers sales tax breaks to data centers investing as little as $1 million, with larger incentives for projects topping $200 million. Iowa may offer 50% or 100% refunds on sales and use tax for data center projects.

• Businesses which make substantial capital investments and have a physical presence in the state also receive income tax credits. Iowa also has no property tax on equipment.

• Iowa has also provided financing loans to smaller data centers

North Dakota’s stable and attractive energy resources and cold average temperatures make data centers an attractive possibility, particularly if right-of-way issues make pipeline and transmission development difficult

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TC Energy engages local communities across North America through its “Build Strong” program, providing funding to organizations and students

119Source: TC Energy

The program donates to non-profits, registered charities, associations, municipalities, social enterprises, Indigenous groups and foundations that:• equip first responders with important tools and

resources• improve access to education• protect and enhance the environment• and alleviate poverty

In 2020, TC Energy donated more than $20 million to over 2,500 different organizations and students from 1,040 communities across North America

TC Energy’s “Build Strong” program provides direct funding for local communities which are affected by pipeline projects

“Build Strong” program to benefit local communities Applicable policies, incentives and enablers

• Grants. A tax-deductible donation made to an organization that does not require the donor to receive significant goods or services in return

• Sponsorships. A donation made to an organization that results in the donor receiving some form of commercial benefit

• In-kind donations. A donation of equipment or resources owned by TC Energy made to an organization.

• Scholarships. Financial support to students enrolled in post-secondary institutions, offering over 800 scholarships across North America

One of barriers North Dakota faces is resistance from some community members in new energy infrastructure development. Active stakeholder engagement plan have been effective at lifting these barriers

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Colorado’s Office of Just Transition supports coal workers, employers, and communities as they plan for future coal plant closings

120

Colorado Governor Jared Polis enacted a series of clean energy laws last year with the backing of the state’s labor movement. Unions and environmental activists coalesced around the creation of an Office of Just Transition in the Colorado Department of Labor and Employment. The office has a dedicated staff and a diverse advisory committee charged with creating an equitable plan for coal-dependent communities and workers as the state transitions to 100% renewable energy by 2040.

For many labor advocates, the term “just transition” refers to policies to ensure workers displaced by a shift away from coal and fossil fuels have a fair shot in a low-carbon economy.

In Colorado, unions successfully pushed for language in the bill requiring the Office of Just Transition to include supplemental income to cover “all or part of the difference” between coal workers’ old jobs and their new ones. The language aims to mitigate the fear that clean energy and other jobs pay less than the fossil fuel industry.

Colorado and other states are lobbying for an active partnership with the federal government to:> Lead a national strategy for impacted fossil-fuel workers> Address local budget shortfalls due to loss of property taxes and other revenues> Help finance state and local economic development, resiliency, and diversification efforts

Source: Colorado Department of Labor and Employment

States have made in-roads with labor groups within fossil fuel industries through creating Just Transition programs to provide financial, training and other support for displaced workers, something North Dakota could look in to

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States are incentivizing relocation of full-time remote technical workers through a number of programs

121Sources: various state programs

Case study: Review of state remote worker relocation programs

Located in Alabama, Remote Shoals awards participants $10,000 cash. 25% of the money is provided up front (to help cover moving expenses). After six months participants receive another 25%, and the final 50% after they have lived in the Shoals for one year.

In November, the Northwest Arkansas Council launched the Life Works Here initiative, which offers $10,000 and a new mountain bike or museum membership to successful applicants who relocate there.

In Oklahoma, the Tulsa Remote program opened to applicants in November 2018. Initially capped at 100 slots it has since been raised to 1,000. In this remote worker grant program, workers can receive a $10,000 cash grant over the year. You can either get all or some of the money upfront to help pay for moving expenses—if any is left over, you’ll then receive a small monthly stipend for the year. Tulsa Remote also pays for desk space at 36 Degrees North, a coworking location. This program includes a housing stipend on top of the monthly stipend, along with a supportive community with social programming to help you meet new transplants and connect with the town.

West Virginia is targeting remote workers who are outdoor enthusiasts with its Ascend West Virginia program. Accepted applicants receive $12,000 for making the move—$10,000 in monthly payments over the first year and $2,000 during the second year of residence. A free year of outdoor recreation (including free outdoor gear rentals), access to free coworking spaces, and professional and social development opportunities are included in the program. Ascend WV is currently accepting applications to live in Morgantown, with other cities opening up in 2022.

In Kansas, the Choose Topeka program is offering up to $15,000 for professionals to relocate there. The initiative is split, with $10,000 going toward the purchase of a home in Topeka or Shawnee County, or $5000 toward a one-year lease in the region.

Remote workers are likely not the panacea for ND ESG industries, but this highlights ways to attract workers to move to remote areas

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Pennsylvania’s Regional Permit Coordination Office provides synchronized and consistent reviews and approvals for complex projects

122Source: Pennsylvania Department of Environmental Protection

The office established in 2019 on recommendation of Pennsylvania’s Pipeline Infrastructure Task Force to address challenges in the state in building new gas infrastructure to support the Marcellus shale production

RPCO expedites permitting for erosion and sediment control (Section 102) and wetlands or stream crossings (section 105) as well as providing statewide technical support and coordination.

RPCO focuses its work on complex projects, such as natural gas transmission pipeline projects that require a FERC Certificate. It also handles pipeline projects that cross three or more counties and two or more regions in the state.

RPCO streamlines project development and permit processing, reduces redundant operations, and provides effective service and project delivery. It also coordinates with the various departmental programs that have authority to process these permits/authorizations and coordinates project reviews of mutual jurisdiction in accordance with established delegation agreements.

RPCO expedites state permitting for erosion and sediment control and wetlands or stream crossings as well as providing statewide technical support and coordination.

After encountering difficulties with gas pipeline infrastructure development, Pennsylvania made several reforms, including the establishment of a permitting coordination office to help companies cut through the red tape

RPCO coordinates with other federal, state and county resource agencies, such as the U.S. Army Corps of Engineers, Pipeline Hazardous Materials Safety Administration (PHMSA), PA Fish and Boat Commission, pertinent County Conservation Districts, FERC and the Pennsylvania Public Utilities Commission (PUC).

In addition to the biologists and engineers that are similarly staffed at the Department of Environmental Protection (DEP) offices, RPCO includes additional specialists to assist

> Licensed Professional Geologist

> Water Program specialist

Since the focus of the RPCO is the permitting process, there are no field staff with responsibilities for inspections, compliance, and enforcement.

Applicants for permits for large and complex projects are encouraged to contact RPCO early in the project planning office and communicate regularly.

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To simplify right-of-way issues, Texas Competitive Renewable Energy Zones expedited development of transmission lines from wind power in West Texas

123Source: Center for Energy Studies, Baker Institute for Public Policy

Completed only 9 years from the enactment of the CREZ legislation, 3600 circuit miles were added to the Texas power grid

When enacting CREZ, the Texas Legislature effectively addressed all three of the requirements for initiating a major transmission project:

Necessity for new service and the adequacy of existing service were clearly defined, thus allowing the regulatory commission to focus on planning

Repayment methods for costs had been established under earlier state law. By making costs shared by all ratepayers, a clear method was known for repayment to transmission investors without burdening renewable generators

With all CREZ lines in Texas, only one agency, the Public Utility Commission of Texas (PUCT) had regulatory oversight for permission and siting.

New renewable power developments are often located far from power demand in major cities. During the hydroelectric boom in the early 20th century, most transmission projects were funded by the federal government and the permitting and construction was easier.

Every power consumer in the ERCOT system shares the costs of the CREZ transmission lines, they supported cost effective routes

Texas was able to streamline the development of wind generation and associated transmission projects with a simplified right-of-way process

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Two of the UK’s largest agricultural biomass to power plants, which convert wheat straw to renewable energy

124Source: BWSC

O&M contract with BWSC who pioneered operation of straw fired plants in Denmark since 1990s and installed >3GW of conventional and renewable power capacity across 175 countries

Long-term contracts with established straw suppliers connected to the local agro-economy; strategy of forward contracting renewal. Ash offtake by Augean; recycled as high-potash fertiliser for local growers.

Located in the heart of the UK wheat belt and accessing surplus straw fuel supply; good road transport infrastructure and highly efficient haulage sector operating in the region.

85 MW (combined) biomass to power plants using wheat straw; flexible fuel mix allows for co-firing of <30% non-straw fuel (miscanthus and recycled waste wood chips).

Snetterton and Brigg (UK) biomass power plants Applicable policies, incentives and enablers

• The Renewables Obligation (RO) is the main support system for renewable electricity projects across the UK. RO Certificates (ROCs) are issued to electricity generators and bought by suppliers to show that they have fulfilled the RO.

• The plants benefit from long-term contracted revenues (75%) underpinned by the ROC payment regime until 2037.

• Existing Power Purchase Agreements (PPAs) for the next 15-years with established Norwegian and French energy utility companies.

• Fixed price O&M contract with BWSC with initial term of 15 years plus 5-year extension option; covers all key operation and maintenance risks including major and routine maintenance.

With large wheat acreage and other potential biomass sources, North Dakota is a potential renewable energy hub that could potentially feed into other green projects such as green ammonia and renewable diesel

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Carbon credit trading is just beginning with several volunteer programs that represent a critical bridge between energy and agriculture

125Sources: Siemens Energy, H2 View

Cargill, Indigo Ag and Corteva (among others) have launched carbon credit programs focused on the production agriculture level. Partnerships are often critical to link the different components of the system.

Several carbon reduction programs already in place Applicable policies, incentives and enablers• Financial marketplace demand for carbon offsets far outpaces

supply; currently seeking ~25 Gigatons of carbon reduction by 2025; Ag sector is the leading candidate for new carbon offsets.

• Some programs promote additional income. For example, in the carbon program advertised by Locus Ag, a participating farmer achieves a revenue of $70-$106/acre through carbon credits + increase in yields due to soil probiotics.

• Eligible practices to participate in carbon programs (e.g. no-tillage, regenerative farming) have proven to boost soil fertility, impact yields and reduce input costs. All carbon programs strongly promote environmental co-benefits as part of their business model to encourage farmer participation.

• Currently there are not unified transparent policies that enable rigorous carbon measurement, verification and transfer mechanisms from the farm level.

• The USDA has proposed developing a carbon bank from Commodity Credit Corporation resources; no progress yet.

There are at least 7 credit generating mechanisms that impact agriculture. Carbon credits in agriculture are generally more expensive to generate and can involve numerous indicators to generate the credits .

Carbon credit trading is likely one of the leading sources of carbon offsets available to ND and will link farm and energy sectors; timing is uncertain but the future demand is clear and pricing and contracts will catch up soon

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Michigan creates a connection between a major regional utility and the State’s Department of Natural Resources to develop a carbon offset system

126Sources: Iowa Economic Development Authority, Des Moines Register

DTE will allow customers to increase their monthly gas bill to buy purchasing renewable natural gas made from landfill waste or paying a premium for natural gas that will go to carbon offsets.

The carbon offsets are generated via a partnership between DTE and Michigan’s Department of Natural Resources. The Department of Natural Resources creates the credits by reducing timber sales from state owned forests.

Detroit based DTE Energy (DTE) has pledged to provide net zero emissions natural gas and electricity by 2050. In addition to lowering emissions from operations and promoting efficient customer usage, DTE Energy is asking consumers to buy into an offset program.

Carbon credit system implementation in Michigan Applicable policies, incentives and enablers

• The Department of Natural Resources had to agree to reduce potential revenue from timber sales and replace the lost revenue with carbon credits from DTE.

• DTE had to put in plan a mechanism where consumers could make a choice to pay more for natural gas as a way to pay for the carbon offsets passed on to the Department of Natural Resources.

• Consumers in Michigan of course will need to show that they are in fact willing to pay more for natural gas that has carbon offsets attached to it and trust that the system works.

Connecting consumers directly to carbon offset programs is something a partnership between an energy company and state managed resources can bring about

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Carbon dioxide released from corn ethanol production can be captured and transported to permanent carbon capture facilities via pipelines

127Source: Coyote Power

The objective of the project is to lower CO2emissions at the ethanol facilities by 50% which will put these facilities in a position to produce net zero or even negative carbon intenity ethanol.

To achieve these ambitious goals the corn coming into the facilities will also need to have a lower carbon emission and in this regard, John Deere has partnered with Summit in this venture.

Work has begun with Summit contraction for field studies, environmental studies and field permits. Operations of the pipeline are expected to begin in 2024.

Summit plans to connect 32 ethanol facilities in Midwest states via a pipeline that will transmit emitted CO2 to permentant storage locations including North Dakota.

Summit Carbon Solutions Applicable policies, incentives and enablers

• Low Carbon Fuel Standards in California and other states are expected to be a driver for demand of low carbon ethanol and the Renewable Fuels standard provides overall support for ethanol demand.

• A tax credit of $50 for every metric ton of CO2 removed provides the additional financial incentive needed for pipeline development. Because CO2 capture from ethanol production is relatively efficient, pipeline capture becomes feasible.

• The pipeline infrastructure fits neatly into an existing network of ethanol facilities and potential sites for carbon storage.

• The “low hanging fruit” nature of CO2 emissions from ethanol plants has facilitated investment and partnering activities.

These innovative solutions give North Dakota an opportunity to utilize carbon storage capabilities but also such a pipeline can be a catalyst for the further development of low carbon fuels in North Dakota

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Threemile Canyon Farm’s operation recycles all its inputs in an environmentally friendly way, resulting in virtually zero waste

128Source: www.threemilecanyonfarms.com

Uses zero discharge dairy waste management system, meaning nothing from the dairy enters streams or groundwater sources. Dairy compost is used extensively on the fields to enhance soil quality including the ability to retain water.Captures biogas with a methane digester. The methane creates clean, renewable natural gas (RNG) used to fuel transportation in the U.S. This digester improves air quality while creating enough energy to generate ~1/3 of the farm’s annual power needs. The digester sequesters around 136,000 metric tons per year of CO2, equivalent to the annual greenhouse gas emissions from 28,875 passenger vehicles, or CO2 emissions from 16,285 homes’ energy consumption, or carbon sequestration by 160,061 acres of forest land.

Optimizes energy used to apply water, saving approximately 666,000 kilowatt hours annually, as verified by Energy Trust of Oregon, an independent engineering group.

Threemile Canyon Farms, Oregon(Subsidiary of R.D. Offutt Company, Inc., of Fargo ND)

Applicable policies, incentives and enablers

• Threemile Canyon Farms implements sustainable operations because they are efficient but does not utilize or rely upon most incentives as they are too difficult to comply with and document

• RNG is used locally or sold on the California market

Leading sustainable practices in farming can simultaneously reduce electrical and water usage, eliminate waste, provide renewable power, and sequester carbon

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Agenda


ESG Roadmap




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Top power generator nameplate capacity by generation source

130

Top power generator nameplate capacity by generation sourceMegawatts (MW)

Source: EIA

734

2,328Basin Electric Power Coop

Great River Energy

Otter Tail Power Co

200

786

1,322


USACE-Omaha

ALLETE, Inc.


Northern States Power Co - Minnesota

Emmons-Logan Wind, LLC

Burke Wind LLC

583

497

387

350

199

HydroWindNatural gasCoal Other

9,629 MWtotal state capacity

63% coal utilization

40% wind utilization

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Utilization of coal and wind power by top generators

131

Utilization of coal and wind power by top generators, 2019Megawatt-hours (MWh)

Source: EIA

0 5,000,000 10,000,000 15,000,000

Otter Tail Power Co

Basin Electric Power Coop

78%Great River Energy


69%


73%

52%

43%UtilizationExcess Capacity

0 5,000,000 10,000,000 15,000,000

Acciona Wind Energy USA LLC

Northern States Power Co - Minnesota

ALLETE, Inc.

Brady Wind, LLC

FPL Energy Langdon Wind LLC

36%

43%

49%

37%

45%UtilizationExcess Capacity

Coal

Wind

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North Dakota coal production is all lignite and concentrated in a few operations, directly supplying nearby coal power plants

132

Coal production by mine in North DakotaMillion short tons per year

Source: EIA, North American Coal

0

2

4

6

8

10

12

14

Coyote CreekFreedom Falkirk Center Beulah

2020 2025

• All coal mines in North Dakota are surface mines and produce lignite

• Freedom Mine is the largest lignite mine in North America. It supplies the Antelope Valley, Leland Olds coal power plants and the Great Plains Synfuels Plant.

• North American Coal company operates three of the five mines and is by far the largest employer in the coal industry in North Dakota

• Great River Energy (GRE), which owns the large Coal Creek plant and a 436-mile HVDC line to bring the electricity to Minnesota, announced the plant closure in 2022. This would have resulted in the closure of the Falkirk mine.

• In June 2021, ND-based Rainbow Energy announced they would purchase the Coal Creek plant and HVDC line from GRE and look at installing carbon capture and looking at expanding the line for renewable transmission. NACCO announced they expect to keep the Falkirk mine operating as a result

Main facilities served

North American Coal (NACCO) NACCOOperator BNI Energy Westmoreland

Coyote Creek

Antelope ValleyLeland OldsGreat Plains Synfuels

Color code:Coal-fired power plantsChemical facilities

Coal Creek plant

Milton R. Young Station Heskett Station

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Forecasted wind capacity additions and installed capacity in North Dakota

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Gross wind capacity additions and installed capacity in North Dakota, 2020 – 2050Gross capacity additions, Megawatts (MW)

Source: IHS Markit

0

2,000

4,000

6,000

8,000

10,000

12,000

0

100

200

300

400

500

600

700

2020 2025 20452030 20502035 2040

Gross wind capacity additions Installed battery storage capacityInstalled wind capacity

Installed capacity, Megawatts (MW)

In our base case, IHS Markit projects North Dakotan wind generation to more than double over the next 3 decades, though the predominant bottleneck to meeting or exceeding this development schedule is ensuring adequate transmission

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Mid-Continent electric company decarbonization targets


Mid-Continent electric company decarbonization targetsPercent generation capacity decarbonized, %

0102030405060708090

100

Alle

te (2

005)

Allia

nt (2

005)

Amer

en (2

005)

Con

sum

ers

Ener

gy(2

005)

DTE

Ene

rgy

(200

5)

Duk

e (2

005)

Ente

rgy

(200

0)

MG

&E (2

005)

Mid

Amer

ican

Ene

rgy

(200

5)

OPP

D

Vist

ra E

nerg

y (2

010)

WEC

Ene

rgy

Gro

up(2

005)

Xcel

(200

5)

AEP

(200

0)

Ever

gy (2

005)

NIP

SCO

(200

5)

IP&L

(201

6)

OG

&E (2

005)

Vect

ren

(200

5)

MD

U (2

003)

Otte

r Tai

l (20

05)

Sask

pow

er (2

005)

100% target 80%+ target 50%+ target 30%+ target

2021–25

2026–30

2031–40

2041–50

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Operated crude oil production of top North Dakota producers

135

Operated crude oil production of top North Dakota producers, Pre-Covid levels and IHS Markit forecastThousand barrels per day (Mbbls/d)

1 Bakken assets acquired by Diamondback Energy during QEP Resources acquisition were subsequently sold to Oasis Petroleum2 Devon Energy recently acquired WPX Energy, taking over operatorship of their Bakken assets3 Grayson Mill Energy, a PE-backed operator, recently acquired Equinor’s Bakken portfolioSource: IHS Markit

0

50

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Continental Marathon Grayson Mill Energy3

Oasis1 Hess ExxonMobilWhiting Conoco Philips

Devon2 EOG Other

Production (2019)Production (2025)

% of Bakken prod.

17% 11% 11% 11% 10% 9% 8% 7% 5% 4% 8%

3229

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36

66

28

45

23

31

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Emission intensity

Emission intensity (KgCO2e/bbl))

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JP Morgan Chase is the leading financial providers for upstream/ midstream companies

136

Top banks for upstream companies with presence in North DakotaUSD billions

Note: Financing data includes lending and underwriting led by the given bank for the selected companiesSource: Rainforest Action Network

10

0

35

5

15

40

202530

4550

20192017 2018 20202016

MizuhoWells Fargo Bank of AmericaJPMorgan Chase Citi

Others

Top banks for midstream companies with presence in North DakotaUSD billions

35

05

25

101520

30

404550

2016 2017 2018 2019 2020

Bank of MontrealJPMorgan Chase

TD ScotiabankRBC Others

Bank of Montreal is a key financier for Canadian

midstream companies (TC Energy and Enbridge)

Wells Fargo has been a major financier for Oasis and Marathon, as well as Midstream players

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In the Williston Basin, gas flaring has historically been driven by processing constraints combined with rapid production growth

137Source: IHS Markit Plays and Basins

The midstream constraints have been exacerbated by the remoteness of the Williston Basin relative to major demand centers. Growth in Bakken oil production is directly tied to finding monetization opportunities for the associated gas.

0%

5%

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40%

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4.5

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Gas processing capacity Gas production Flaring rate

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45%

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Gas production Flaring rate NDIC flaring target

© 2021 IHS Markit

Bakken gas production, flaring and state flaring limitProduction (Bcf/d)

Bakken gas production, processing capacity and flaringProcessing capacity and production (Bcf/d) Flaring rate (%)Flaring rate (%)

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U.S. flaring rate by oil play

138

U.S. flaring rate by oil play, 2012 – 2020Thousand cubic feet of natural gas flared (Mcf) / thousand barrels of oil produced (Mbbl)

Sources: IHS Markit, SkyTruth

0

100

200

300

400

500

600

2017 20182012 201620152013 2014 2019 2020

Williston Powder River BasinPermian Eagle Ford DJ Basin

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For emerging energy sources, the Federal government’s provides various financial incentives; DOE and USDA loan guarantees are particularly notable

Category

Higher Blends Infrastructure Incentive Program (USDA); State Energy Program (DOE); OneRDGuarantee Loan Initiative and Ethanol Infrastructure Grants (USDA, OneRD’s Rural Energy for America Program with $612 MM1 for full program)

Alternative Fuel Vehicle Refueling Property Credit (IRS)

Title 17 loan guarantees (DOE, advanced fossil energy $8.5 B2); Support for six commercial-scale demonstrations by 2025 at coal electric generating facilities, natural gas electric generating facilities; and industrial facilities (DOE, $1.03 B1); Funding for demonstration projects for carbon sequestration technologies (DOE, $200 MM1) and novel uses for utilization (DOE, <$55 MM1)

45Q carbon capture tax credit (Treasury / IRS); competitive prizes for direct air capture (DOE)

Grants / loans / loan guarantees Fiscal incentives

Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program (USDA, up to $250 MM loan guarantee per project); Demonstration projects for Bioenergy Technologies Office Scale-Up and Conversion (DOE); Biomass Research and Development Initiative (USDA / DOE); Value-Added Producer Grants (USDA)

Second Generation Biofuel Producer Tax Credit (IRS); 40A tax credit for biodiesel and renewable diesel (IRS); Accelerated Depreciation for Second Generation Biofuel Plant Property (IRS); Alternative Fuel Excise Tax Credit (IRS)

Grant program for at least three commercial demonstrations of energy storage (DOE $71 MM1); program for long-duration storage (DOE / DOD); Tribal Energy Loan Guarantee Program (DOE, $2 B2 for all energy sources); Microgrant program for rural electric cooperatives (DOE); Energy Storage Grand Challenge grid-scale storage demo program (DOE)

Eligible for Investment Tax Credit if paired with renewable resources (IRS)

Relevant federal financial public policies for North Dakota energy transition – emerging energy sources

H2@Scale funding to spur demonstrations of hydrogen utilization – and possible funding from recently-announced Hydrogen Shot initiative (DOE); ARPA-E grants to demonstrate production of ammonia from renewables (DOE’s ARPA-E)

Alternative Fuel Excise Tax Credit (IRS); Alternative Fuel Vehicle Refueling Property Credit (IRS)

Notes: Items in bold represent policies of high importance; 1. FY 2021, often authorization of appropriations; 2. Lifetime authoritySource: IHS Markit

Advanced biofuels / alternative fuel production and sale

Alternative fuel infrastructure

Carbon capture

Energy storage

Hydrogen / ammonia

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More established energy and resource markets often rely on a few key Federal loan and loan guarantee programs

Category

Title 17 loan guarantees (DOE, renewable energy and energy efficiency $4.5 B2); Weatherization Assistance Program (DOE); OneRD Guarantee Loan Initiative: Rural Energy for America (USDA, $612 MM1 for full program); Rural Utilities Service Electric Programs: Loan & Loan Guarantee Program, Energy Efficiency & Conservation Loan Program, Energy Resource Conservation Program, and Rural Energy Savings Program (USDA)

Tax credits for residential energy efficiency, builders of energy efficient homes, tax deductions for energy efficient commercial buildings (DOE / EPA)

Support for deployment of materials production (metals, cement and chemicals), general manufacturing, and the heavy-duty transportation sector (DOE / OSTP)

Research and Development Tax Credit (IRS), Jobs Tax Credit (IRS), Retraining Tax Credit (IRS)

Grants / loans / loan guarantees Fiscal incentives

Tribal Energy Loan Guarantee Program (DOE, $2 B2 for all energy sources); Rural Utilities Service Electric Program Loan & Loan Guarantee Program (USDA, $750 MM1)

50-basis-point improvement in return on equity as incentive for utilities that join a transmission organization (FERC)

Title 17 loan guarantees for advanced resource development (DOE, advanced fossil energy $8.5 B2); Tribal Energy Loan Guarantee Program (DOE, $2 B2 for all energy sources)

Expensing of exploration, development, and intangible drilling costs (IRS); percentage depletion instead of cost depletion for drilling and development costs (IRS)

Relevant federal financial public policies for North Dakota energy transition – established energy and resources

Title 17 loan guarantees (DOE, renewable energy and energy efficiency $4.5 B2); Support for commercial demonstrations for nuclear, especially for transformational technologies (DOE, <$4051 MM); OneRD Guarantee Loan Initiative: Rural Energy for America (USDA, $612 MM1 for full program); Tribal Energy Loan Guarantee Program (DOE, $2 B2 for all energy sources); Rural Utilities Service Electric Program Loan & Loan Guarantee Program (USDA); Rural Utilities Service Electric Program Distributed Generation Energy Project Financing (USDA)

Production Tax Credit (IRS); Investment Tax Credit (IRS)


Electricity transmission

Energy efficiency

Industrial manufacturing

Oil & gas production & transportation

Power generation

OneRD Guarantee Loan Initiative: Water & Waste Disposal Loan Guarantees (USDA); Rural Decentralized Water Systems Grant Program (USDA); Water & Waste Disposal Grants to Alleviate Health Risks on Tribal Lands and Colonias (USDA); Water & Waste Disposal Loan & Grant Program (USDA)

Prizes from Water Security Grand Challenge (DOE)Water management

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For emerging energy sources, states primarily offer various grants and fiscal incentives, with occasional loan programs

Category

Clean Transportation Program financial incentives for electric vehicle, hydrogen, and natural gas refueling infrastructure (CA, up to $20 MM1 ); Department of Local Affairs funding for alternative fuel infrastructure for public fleets (CO); Agricultural Growth, Research, and Innovation Program offers grants, loans, or other financial incentives to alternative fuel retailers for the installation of ethanol blender pumps (MN)

Income tax credit is available for 50% of the cost of alternative fueling infrastructure (NY)

Grants and loans to CCUS projects (TX)

Low-Carbon Fuel Standard has a Carbon Capture and Sequestration Protocol (California); ability to deduct amortized costs of machinery and equipment for CO2 CCUS for 10 years and a five-year property tax exemption (KS); tax incentives for coal gasification when CO2 sequestered (MT)

Grants / loans / loan guarantees Fiscal incentives (direct or indirect)

Clean Transportation Program financial incentives for biofuels (CA); Agricultural Growth, Research, and Innovation Program offer grants, loans, or other financial incentives to producers of transportation fuels from cellulosic material or bio-based products (MN)

Low-Carbon Fuel Standard (California); Department of Agriculture provides biofuel producers up to $2.1053 per million British Thermal Unit for advanced biofuel produced from cellulosic biomass (MN); lower taxes on E85 (MN)

Self-Generation Incentive Program (CA, $62 MM1); Bridge incentives for retail and bulk level storage (NY, nearly $350 MM2); Grant for development and demonstration of long-duration, non-lithium ion energy storage technologies (CA)

Value of Distributed Resources provides financial incentives for distribution-connected energy storage (NY); energy storage mandates (OR, VA); rebates for customer-sited energy storage per kWh (CA)

Relevant state-level financial public policies for North Dakota energy transition – emerging energy sources

Clean Transportation Program financial incentives for hydrogen vehicles and refueling infrastructure (CA, up to $20 MM1 for infrastructure)

Low-Carbon Fuel Standard (California); Income tax credit is available for 50% of the cost of alternative fueling infrastructure including hydrogen (NY); Sales and use tax exclusion used for demonstration hydrogen fuel production (CA)


Advanced biofuels / alternative fuel production and sale

Alternative fuel infrastructure

Carbon capture

Energy storage

Hydrogen / ammonia

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States offer a many incentives for energy efficiency and low-carbon power, but financial policies for other established energy markets are more limited

Category

Zero-interest or low-interest loans from the California Energy Commission to cities, counties, various public institutions (CA); efficiency programs for Investor-owned Utilities (CA, $1 B1); New York Green Bank (NY, $1 B2); Community Energy Efficiency and Renewable Energy Loan Program “Rev It Up” (MN, $100 MM2 in bonds); Green Business Loan Program (MN); Residential Energy Upgrade (RENU) Loan Program (CO)

Energy Efficiency Resource Standards (20+ states)

Edison Innovation Clean Energy Manufacturing Fund (NJ) Sales and use tax exclusion used for electric vehicle, solar PV, battery manufacturing (CA); Investment tax credit (NY)

Grants / loans / loan guarantees Fiscal incentives (direct or indirect)

Grants for researching and developing smart grid technologies (grid modernization seen in states including CA and MN) n/a

Bonds and loans for pipeline infrastructure including CO2 transportation pipelines (WY)

Various policies from the decade of the 2000s: Tax rate reduction for oil producers using man-made carbon dioxide for carbon dioxide enhanced oil recovery (LA, TX) or storage (MS) or transmission pipelines (KY)

Relevant state-level financial public policies for North Dakota energy transition – established energy and resources

New Solar Homes Partnership incentives (CA), Renewable Energy for Agriculture Program grants (CA), Building Initiative for Low-Emissions Development Program incentives (CA), efficiency programs for Investor-owned Utilities now allows for fuel substitution (CA, $1 B annually for full program); New York Green Bank (NY, $1 B2); Community Energy Efficiency and Renewable Energy Loan Program “Rev It Up” (MN, $100 MM2 in bonds); Colorado Residential Energy Upgrade (RENU) Loan Program (CO)

Carbon pricing (WA, CA, and RGGI states); Renewable Energy Standards (in 30+ states); 100% clean electricity targets (AZ, CA, NM, NY, WA); Value of Distributed Resources (NY); partial exemption from sales and use tax of PV systems used to provide electricity to farm equipment (CA)


Electricity transmission

Energy efficiency

Industrial manufacturing

Oil & gas production & transportation

Power generation

State Water Efficiency & Enhancement Program (CA); State Water Resources Control Board's (State Water Board) financial assistance programs

Tax credits for construction of impoundments, conversion from groundwater to surface water, or leveling that conserves irrigation water (AR)

Water management

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Feedstocks are mainly sourced from the agriculture and food industry…next generation feedstocks may come from other sources


1st

Generation Feedstocks

• Lower carbon intensity • Non-food but instead animal feed• Generally inelastic to biofuel demand• Favored by low carbon biofuel policies and RD • RD demand to exceed LCF availability in the future• Regionally and locally concentrated

2nd

Generation Feedstocks

Next Generation Feedstocks

• Lowest carbon intensity and scalable • Commercial options are currently limited due to cost and economics of production and logistics• Development these alternative feedstocks has been underway with mix success in the past • Aspirational but with high economic incentives • Looking for the diamond in the rough

Palm oilSoy oil Other vegetable oils

Used Cooking Oil (UCO)Tallow DCO Other low carbon feedstocks (LCF)

AlgaeDedicated crops Switchgrass

• Ready “bolt-on” infrastructure• Somewhat elastic to biofuel demand• High carbon intensity - disfavored by LCFS policies• Crop productivity rising faster than food-use demand• Globally concentrated

Poultry fat2%

Pig Fat / CWG2%

Tallow4%

DCO1%

UCO - YG4%

Soybean oil25%

Canola and Rapeseed

Oil12%

Palm Oil31%

Palmkernel Oil4%

Other Vegetable

Oil13%

PFAD1%

PAO1%

Note: Taking the example of algae, this feedstock is often described as a next generation biofuel commodity and numerous researches and projects have been conducted in that direction over the last 10 years. Today algae could be used a biofuel feedstock, but it has one of the lowest potentials in terms of industry applications. Indeed, industries such as: carbon dioxide capture, pharmaceutical products, wastewater clean-up, food additives, animal feeds or lubricants have a better potential and competitiveness to develop algae technology at a commercial scale.

Share of global feedstock production by type

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Carbon neutrality in the agricultural sector will require the sequestration of 13.6 billion tCO2e per year


In order to be net zero in the agricultural sector, food & agricultural companies will have to sequester 13.6 billion tCO2e per year.

Our research suggests that:

> Approx. 1.6 billion (~12%) tonnes of carbon will be reduced by the 40 carbon pledges.

> Out of the total demand, approximately 798 million (~6%) tonnes of carbon will come from sourcing sustainable agricultural commodities.

Carbon pledge timelines

0% 30% 30% 100%42%12% 40%25%50%30%30%30%58% 8%38%30%1% 30%10% 20% 0%15% 25% 100%67%15% 25%50%30%50%30%27%27%75%100% 100%25%67%65%50%100%65%50%30% 30%30%40%33%75%40%10% 50%60%40% 70%70%0% 50%30%

2010 2015 2020 2025 2030 2035 2040 2045 2050 2055Land O…

GlencoreViterra

Dairy…Nutreco (2)

Heineken (2)Cargill (1)

John DeereOlam (2)McCain…

Tyson FoodsAldi (2)

Coca ColaDanone

Kellogg (2)Arla Foods…

PepsiCo (1)Unilever (2)

Carrefour (1)DIAGEO (1)

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Links between traditional energy and the agriculture feedstock raw materials industry that can serve as models for activity in North Dakota


Neste Oil – petroleum refinery Acquires Mendota: UCO collector

Valero - petroleum refinery JVDarling: UCO and Animal fats

Company

Cargill – Agri Feedstock JVLove’s – Fuel retailer

Phillips 66: petroleum refineryAcquires stake in Soybean Process Plant

Company

Four examples showing the change in other parts of the US

energy wants to link up with agriculture - agriculture wants to link up with energy

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U.S. ammonia direct application demand


Direct application of ammonia is an important source of Nitrogen. It is concentrated in the Corn Belt region and almost half of the application volume is based in 3 states: Iowa, Illinois, and North Dakota.

Anhydrous ammonia is a popular product for farmers in the region for several reasons

With a nitrogen content of 82% it is the most efficient and typically most cost-effective form of nitrogen fertilizer. With other nitrogen products a farmer needs to handle more product to apply the same amount of nitrogen.

Correctly applied anhydrous ammonia will quickly bind with soil particles and can be less subject to loss due to volatilization, leaching, or denitrification in the way other products may. Because anhydrous ammonia binds with soil particles it can be applied in the fall after harvest which can have the advantage of reducing soil compaction compared to spring fertilizer applications. This fall application practice allows producers to spread out their workloads over a longer period.

Direct application of ammonia in the USA, by states, 2019

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Ammonia distribution in the Midwest


Ammonia is moved from the surplus areas to Midwest region through a network of distribution and storage terminals by pipeline from the US Gulf, by barge through the Mississippi River system, through the extensive US rail system, and by truck.

The NuStar pipeline originates in the New Orleans region in Louisiana where it receives ammonia from production facilities and imports and then runs north into Arkansas, where ammonia can be injected at an ammonia plant in El Dorado. It then continues to Missouri where it splits into two branches: a western branch that continues north through Missouri into eastern and central Iowa before it turns west at Garner and heads south into Nebraska; and an eastern branch that crosses into Illinois and continues east through the center of the state into Indiana where it terminates at Huntington in the eastern part of the state. The pipeline serves distribution terminals and industrial facilities. A second ammonia pipeline that ran from the Southern Plains up through Kansas, Nebraska, Iowa, and Minnesota closed in 2020.

Barge shipments move ammonia up the Mississippi river from production facilities and marine terminals in the Gulf region to river terminals along the system as far north as Minneapolis, as well as into the Ohio and Illinois rivers. Barge shipments can also come out of Oklahoma along the Arkansas river into the Mississippi River.

The US rail system serves many points in the Midwest region from the US Gulf and Southern Plains production facilities, as well as from facilities located in the Midwest region. The Midwest region is also supplied by ammonia shipped by rail from Canada. Ammonia shipped by rail may go to terminals for distribution or directly into facilities for production of downstream products.

Trucking is mostly used for distributing ammonia from distribution terminals to end users in the region although ammonia from production facilities in, or close to, the Midwest can be shipped by truck to serve the local markets.

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Global ammonia capacity by feedstock


Natural gas is by far the most common feedstock used in the production of ammonia, accounting for around 60% of world ammonia capacity. The most competitive capacity and, therefore, export production, is represented by plants using natural gas feedstock.

Considerable quantities of coal are used for ammonia production in Asia, principally China. In the period 2000-2005, when gas prices were high in the United States, there was some consideration given to building coal-based ammonia plants in the US but the fall in US gas prices has caused most of these projects to be abandoned. Coal/coke-based plants account for around 27% of global ammonia capacity. Refined petroleum feedstocks such as naphtha and heavy fuel oil account for a much smaller share of world’s ammonia capacity and are limited to Asia. Smaller quantities of LPG, hydrogen and coke oven gas are also used.

Less common feedstocks such as naphtha and fuel oil are considerably more expensive than natural gas. The main location for naphtha-based plants is India. Some of these facilities have been converted to natural gas feedstock. Some ammonia plants in India are dual-feedstock facilities. Plants based on fuel oil or coal have higher operating costs than those based on natural gas and require considerably more capital investment.

In remote locations - i.e., locations remote from a large industrial/commercial and residential market for natural gas - and where natural gas is in abundant supply, ammonia production has been one of the main means of upgrading indigenous energy resources into a commercially exportable product. More recently, the growth in LNG trade has provided an alternative means of monetizing remote gas.

Natural Gas60%

Coal/coke27%

Naphta3%

Fuel Oil3%

Others7%

Global ammonia capacity by feedstock

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U.S. ammonia capacity – Companies and locations


Company, ‘000 MT 2010 2015 2020 2025 2030AdvansixHopewell, VA 513 513 513 513 513

AtochemPortland, OR 7 7 7 7 7

CF Industries IncDonaldsonville, LA 2,562 2,652 3,742 3,742 3,742 Port Neal, IA 336 336 1,062 1,062 1,062 Verdigris, OK 952 952 952 952 952 Woodward, OK 399 399 399 399 399 Yazoo City, MS 472 472 472 472 472

Dakota Gasification CompanyBeulah, ND 299 299 299 299 299

Dyno Nobel IncCheyenne, WY 191 191 191 191 191 St Helens, OR 109 109 109 109 109 Waggaman (Fortier), LA - - 726 726 726

FortigenGeneva, NE - 30 30 30

Green Valley ChemicalCreston, IA 31 31 31 31 31

Gulf Coast AmmoniaTexas City, TX - - 1,300 1,300

Koch Nitrogen Co.Beatrice, NE 272 272 272 272 272 Dodge City, KS 272 272 272 272 272 Enid, OK 916 916 916 916 916 Fort Dodge, IA 331 331 331 331 331

Company, ‘000 MT 2010 2015 2020 2025 2030LSB IndustriesCherokee, AL 159 159 159 159 159 El Dorado, AR - - 340 340 340 Pryor, OK 85 85 85 85 85

MosaicFaustina (Donaldsonville), LA 508 508 508 610 610

NutrienAugusta, GA 713 800 800 800 800 Borger, TX 490 490 490 490 490 Geismar, LA - 491 491 491 491 Lima, OH 599 626 701 701 701

OCI / Iowa Fertilizer CoWever, IA - - 726 726 726

OCI North AmericaBeaumont, TX - 305 305 305 305

RentechCoffeyville, KS 366 366 366 366 366 East Dubuque, IL 272 306 306 306 306

Shoreline ChemicalGordon, GA 32 32 32 32 32

SimplotRock Springs, WY - - 180 180 180

US Nitrogen LLCGreene County, TN - - 60 60 60

Yara/BASFFreeport, TX - - 726 726 726

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Green ammonia potential use in energy storage (relative to hydrogen)


Background

Electricity generated from sustainable energy sources is key to future low carbon economy. Once generated, electricity needs to be either used immediately or properly stored. This is particularly important for electricity generated from intermittent sources.

Multiple ways to store and recover low carbon electricity, such as batteries, physical storage (e.g., pumped hydroelectricity and compressed gases) and chemical storage (e.g., hydrogen and ammonia).

Value proposition

Increasing need for storage of energy from low carbon and intermittent sources as the globe progresses towards low carbon economy

Ammonia is easy to store and transport (so is green ammonia) as compared with hydrogen. Shipping cost is lower too.

Ammonia has higher volumetric energy density than hydrogen.

Ammonia supply chain and logistical infrastructure is mature and well developed. A wide network of ports and storage facilities worldwide is in place to handle ammonia in large volumes and shipping routes are well-established.

Potential market

Green ammonia is a promising solution for global sustainable energy storage and distribution. Countries from multiple geographies, EU, North America and APAC, have targeted this area and these are also the geographies mostly likely to have early adoptions.

Pumped hydroelectricity is a mature technology and accounted for 98% worldwide energy storage deployed in 2018. Battery cost has also declined dramatically in the past few years which has enabled the integration of batteries into solar/wind power systems. So from pure energy storage standpoint, green ammonia may not be competitive, now or in the near future. Future use of green ammonia will more likely focus on a basket of benefits that green ammonia can offer (e.g., store “green” electricity and use as hydrogen carrier) instead of merely energy storage attribute. Market development time will be affected by how fast production cost can be lowered and how much demand is materialized. While pilot uses will be increasingly seen in the short term, commercialization will likely take 10 years and more.

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Green ammonia potential use in biofuel industry


Value proposition

Green ammonia-based fertilizer can lower the CIs of crop production and therefore biofuels when such lower CI crops are used as feedstock. This is especially true for crops that require relatively high N nutrient (e.g., corn and therefor corn based ethanol). Lowering CI can help generate carbon credits under the LCFS and create value for the entire value chain.

Green ammonia can also help facilitate compliance of biofuel pathways that are below current benchmark but will be exceeding future benchmarks as the LCFS CI benchmarks reduce over time. Without improving CIs of their pathways, such biofuel producers will lose the access to California transportation fuel market and therefore have both needs and incentives to embrace solutions like green ammonia.

Based on estimates using typical CI of corn-based ethanol pathway of 73.8 and assumption of completely green electricity to produce green ammonia, CI can be reduced to 70.6 or 4.3%. Using most recent California LCFS carbon credit price of $200/MT, green ammonia can create a price premium (value) of 7.65 cents/gallon of fuel (~$5,700/MT of nitrogen) to be shared by the value chain, or $1.07 billion based on gasoline consumption of over 14 billion gallon per year in California.

Potential market

Among various carbon programs in the world, California LCFS is by far the program that offers the highest carbon credit prices, and this market is expected to continuously operate at high carbon credit prices in the future. So this market could be particularly attractive to green ammonia. Based on 14-billion-gallon E10 consumed annually in California, roughly 178KMT of nitrogen is needed if corn is the sole feedstock of ethanol (in reality, ethanol is produced from a variety of sources).

Given that corn-based ethanol into California transportation fuel pool is a mature value chain, commercial adoption can be feasible once green ammonia becomes readily available, to the extent that prices are not prohibitive. There could be time needed in market development activities such as making green ammonia available in the inputs distribution network and certifying new biofuel pathways that use green ammonia-based fertilizers. But overall, 5~10 years from now is deemed reasonable with <5 years possible with aggressive plans.

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We have classified ESG into seven categories

Financial and commercial: Financial and commercial barriers for businesses to address issues or pursue opportunities

Economic

Fiscal and regulatory: Government fiscal and regulatory policy barriers which impede the issue resolution or opportunity implementation

Technological: Technological barriers to resolving the issue or pursuing the opportunity

Non-economic

Framework for ESG barriers

Institutional capacity: The ability of government to develop and implement policy and regulation and coordinate stakeholders

Competing corporate incentives: Non-economic strategic misalignment both within companies or between companies

Community acceptance: Barriers from community resistance and dissatisfaction due to real or perceived negative externalities

Labor: Limitations on labor availability, including gaps between required skills and available workforce

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N. Dakota already has one of the highest labor force participation rates in the country; additional jobs growth will require population growth and retention

153

Per the US Census, North Dakota’s labor force participation rate from 2015-2019 was 69.2%, the 4th highest among all US states and territories

> North Dakota labor force participation rate as of July 21 was 68.8%, higher than all states and territories excepting DC (69.6%) and just above South Dakota (68.7%)

> This is compared to a US total rate of 61.7% for July 21> Long term, the North Dakota labor force participation rate is on a decline

from the energy sector-driven peak in the 00’s

Source: U.S. Census

North Dakota labor force participation rate, seasonally adjusted

672,591779,094106,503

Growth2010 2020

+16%

North Dakota population growth# of residents

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June 2021 civilian labor force by county shows the relative lack of rural workforce compared to neighboring regions

154Source: St. Louis Federal Reserve

Civilian labor force by county, June 2021# of persons

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Year-over-year changes in civilian labor force point to promising trends for North Dakota, though there was a worker exodus from the Williston Basin

155Source: St. Louis Federal Reserve

Annual change in civilian labor force by county, June 2021# of persons

How to retain & retrain Williston Basin workers? Where are MN &

MI workers going?

Can ND leverage the Canadian workforce?

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U.S. crush working near capacity limit; higher crush margins are expected to incentivize expansion in North America to meet growing demand


North American crush capacity U.S. soybean and Canada canola crush capacity expansion MMT

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North American renewable diesel locations – onstream


Pacific Ocean

Feedstocks DCO

S8O

SJ UCO

I! Animal fats

5! Animal fats, DCO, UCO

5! Animal fats, DCO, S8O

I! Canola oil

Cielo Waste Solutions <1 Onstream

\ l

\

f\-~ _ ~ } -'\"'~ -"i On~stream

Wyoming Renewable Diesel '---100 Onstream ~ East Kansas Agri Energy

~----1 5

Kern Oil 15 Onstream

..

Altair Fuels 40 Onstream

UNlljED STATES

e

Onstream

Ridgeline Energy Services 15 Onstream

~--~--~ ~---..:::::::::::::::r:::r-''"1 REG Synthetic Fuels Diamond 90 r tr---11~-+~ Green

Lifecycle Renewables 5 Onstream

Atlantic Ocean

World Energy 40 Onstream

On stream Energy 290 Onstream (

Sunshine Biofuels 7

0 480 km

5! Canola oil, DCO, S8O

I! Multifeedstock

I! Sawdust, waste bio-crude

5! S8O, DCO, beef tallow

I! Tallow

I! Waste w oody biomass

I! Waste-to-fuel

MEXICO Gulf of Mexico

I! Inedible waste streams of agricultural oils and animal fats

Waste agricultural oils and animal fats

I! Waste fats, camelina oil , DCO, S8O, UCO

Company name

Capacity (million gallons per year)

Facility operational start date

0 Operating facility

0 Facility planned/ Under construction

- International boundary

Onstream

Facility capacity (Million gallons per year)

737-1 ,132 . 401-736 185-400 53-184

16-52 10-15 0-9

0 180 mi

Note: UCO = used cooking oil ; DCO = distillers corn oil ; SBO = soybean oil.

Source: IHS Markit: 2003036

~ IHS Markit'

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While 45Q has advanced CCS, the investment rationale and drivers of returns are typically also dependent on the LCFS program

158

1 for year 2019; 60 MMtCO2/year 2 2020 operations’ start; for bio-ethanol production facility with CO2 emissions of 0.5 MMtCO2/year; with CO2 captured and transported for EOR via a dedicated 200 km CO2 pipeline; 14.4 WACC for CO2 capture and EOR; 6.9% WACC for CO2 transport; 24% federal tax rate 3 CO2 flood assumptions: 0.8 bbl/tCO2 incremental recovery; $2.5/bbl CAPEX; $3.9/bbl/year OPEX; IHS Markit WTI oil price; 20 year project life 4 assumes full use of 45Q credit for EOR 5 assuming $195/tCO2 LCFS credit; ethanol carbon intensity of 64 gCO2/MJ; including transport to California via rail Sources: IHS Markit; EPA GHGRP

Ethanol CCUS project breakeven (EOR; Permian basin)2

USD/MtCO2

U.S. produced and captured CO2 supply and demand1

Supply Demand

23.5

19.4 16.6

LCFS5Capture

7.3

Transport 45Q4EOR3

26.6

7.6

Total

63%

37%86%7%

Produced (natural)Captured (industrial)

EOR

OtherFood and beverage

Majority of the CO2 consumed in the U.S. comes from natural sources and is injected underground for EOR

CaptureTransport

CreditsEOR

Total

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Key energy-related provisions in the Infrastructure Investment and Jobs Act (as of August 11)

159

Funds $7.5 billion for alternative fuel corridors and to build out a national network of electric vehicle charging infrastructure

Codifies the Trump administration’s “One Federal Decision” aimed at streamlining the process for preparing documents, environmental assessments and environmental impact statements under the National Environmental Policy Act

Requires state regulators to consider establishing rate mechanisms to allow utilities to recover the costs of promoting demand-response practices

Directs the U.S. Department of Energy to study capacity constraints and congestion when designating National Interest Electric Transmission Corridors. Clarifies that the Federal Energy Regulatory Commission may issue permits for construction or modification of certain interstate transmission facilities if a state commission withholds or denies an application seeking approval for the siting of such facilities.

Creates a $2.5 billion revolving loan fund to allow the DOE to serve as an anchor tenant for a new transmission line or modification of an existing line. Would allow the DOE to buy up to 50% of the planned capacity, which the department may sell after the project has ensured financial viability. Permits the DOE to issue loans to or participate in public-private partnerships with eligible transmission project, with the program to receive $10 billion annually for fiscal years 2022 – 2026.

Creates program to provide low-interest loans for carbon dioxide transport infrastructure projects and grants for initial excess capacity on new infrastructure to facilitate future growth

Forms clean hydrogen programs within the DOE that include at least four regional clean hydrogen hubs to demonstrate the production, processing, delivery, storage and end-use of clean hydrogen

Authorizes $250 million to help states establish funds that would underwrite loans and grants for commercial and residential energy audits, energy upgrades and retrofits. Provides $225 million for competitive state grants to develop and implement updated building energy codes.

Sources: U.S. Senate Committee on Environment and Public Works, S&P Global

& \HS Markit"

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POWER Dislocated Worker Grants - Resources for Coal Miners

160

Ohio POWER Dislocated Worker Grant (DWG) – Southeastern Ohio

The Ohio POWER DWG aims to deliver training, work-based learning and supportive services to dislocated coal miners and other dislocated workers impacted by mass layoffs in the coal industry, to retrain in the growing oil and gas industry in Ohio. Industries of focus for training include CDL, Diesel Mechanic, Heavy Equipment Operators, Welding, Crane Operators, Waste & Wastewater Operators, and related safety training.

Kentucky POWER Dislocated Worker Grant (DWG) – Eastern Kentucky

The Kentucky POWER DWG is geared toward delivering training, work-based learning and supportive services to dislocated coal miners and other dislocated workers impacted by mass layoffs in the coal industry, to retrain for high-demand, high-wage positions and two occupations: Broadband technicians and Fiber installation in support of Kentucky's comprehensive broadband expansion effort, and a variety of IT positions to support regional business growth and expansion in sectors targeted for support an expansion. These IT positions include healthcare, agriculture, tourism and IT businesses to help them implement e-commerce and digitize the work in these sectors.

West Virginia Coal National Emergency Grant (NEG) – Statewide

This program provides retraining and reemployment services to dislocated coal miners and displaced homemakers impacted by mass layoffs and coal mine closures. The grant will help participants find new career paths outside the coal mining industry and long-term reemployment opportunities.

Source: U.S. Department of Labor https://www.dol.gov/agencies/owcp/dcmwc/powergrants

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Pennsylvania Pipeline Infrastructure Task Force sought to engage stakeholders in a collaborative process to speed gas pipeline development

161Source: Pennsylvania Department of Environmental Protection

One of the main concerns raised by landowners in Pennsylvania were the cost-benefit disparities due to increased pipeline construction. > Costs included property rights, environment, public health and

safety> There was support for the benefits to the local economies, lower

heating costs, and the reduction of carbon footprint (vs coal)> They also questioned the long-term benefits of the buildout of

gas infrastructure to the state

Key concerns of landowners were: > Loss of property value or enjoyment of portions of property> Disruption of commercial businesses > Potential loss of property or enjoyment of portions of their

property> Safety of underground pipelines, mostly regarding potential

accidents from lack of long-term maintenance> Concerns that pipeline construction can ever be fully protective

of the water, air, wildlife, and habitats throughout Pennsylvania. > Perceived public health and climate change risks.

The task force developed 180 recommendations “to make sure that the positive economic benefits of Pennsylvania’s rich natural resources can more quickly be realized in a responsible way.”

PITF Highest Priority RecommendationsBest Practice Topics

•Establish Early Coordination with Local Landowners and Lessors

•Educate Landowners on Pipeline Development Issues

Amplifying and engaging in meaningful public participation

•Train Emergency Responders•Enhance Emergency Response Training for Responder Agencies

Developing long-term operations and maintenance plans to ensure pipeline safety and

integrity

•Minimize Impacts of Stream Crossings•Use Antidegredation Best Available Combination of Technologies to Protect Exceptional Value and High Quality Waters

Employing construction methods that reduce environmental

impact

•Ensure Adequate Agency Staffing for Reviewing Pipeline Infrastructure Projects

•Implement Electronic Permit Submissions

Maximizing opportunities for predictable and efficient

permitting

•Expand PA1Call for All Classes of Pipelines•Identify Barriers to Sharing Rights-of-Ways

Planning, siting and routing pipelines to avoid/reduce

environmental and community impacts

•Attract Military Veterans to the Energy Workforce •Enhance Science, Technology, Engineering, and Math (STEM) Education

Workforce/Economic Development

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Minnesota’s “Buy the Farm” Program provides landowners an option to sell in the face of eminent domain actions related to siting of HV power lines

162Source: 2020 Minnesota Statutes § 216E.12

Minnesota’s “Buy the Farm” law was passed in after farmers protested the building of high voltage power lines through their property that served the urban areas of the state.

The law allows property owners to require utility companies to buy an entire piece of property, not just the easements necessary for the high-voltage (>200kV) transmission lines.

> Relocation expenses and compensation for legal fees may also be included

Properties must be contiguous and part of eminent domain procedures.

The law requires utility companies to divest the properties at a fair market value, diminished by the impact of the utilities easement

Eligible properties can be residential, agricultural, or recreational property, but not purely commercial non-residential property.

Only law of its kind in the nation

The law is used infrequently and has been criticized by landowners due to long delays

In rural areas, the siting of power poles in the middle of farmland or high frequency currents may hinder agricultural production

Landowner approached by utility

company to construct power lines and

refuses all offers

Utility refuses buyout offer

Landowner requests buy out of farm

Utility files eminent domain claim

Utility accepts buyout offer

Court hearing on utility’s objection

Offer extended for fair market

value of property

Utility divests properties, less the lost value from easement as

soon as feasible

Offer extended for fair market

value of property (if hearing in

landowner favor)

120

days

120 days

Buy the Farm Process

120 days

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Noting the international frameworks, many governments and states have introduced national measures that protect IPs rights and foster inclusion

US recognizes and maintains relations with ~566 American Indian and Alaska Native tribes

The Department of Treasury's Community Development Finance Institutions (CDFI) Native Initiatives program creates jobs, builds businesses, and fosters economic self-determination in Native Communities nationwide

The Economic Development Administration (EDA) works with Native American to improve their planning frameworks. Funding / technical support are provided to tribal organizations

USA

163

IPs referred to as Aboriginals, and the Constitution Act of 1982 recognizes 3 groups: First Nations, Inuit and Métis

IPs are represented by organizations regionally, provincially and nationally, e.g., Assembly of First Nations, Congress of Aboriginal Peoples, Native Women’s Association etc.

Canadian law (Bill C-15) requires projects comply with UNDRIP principles, i.e., any lands owned / claimed by IPs require their “free, prior, and informed consent” (FPIC). On a provincial level – incentives are offered to business to employ IPs

Australia focuses on inclusiveness of Aboriginals (Torres Strait Islander peoples) locally and internationally

> Internationally: Department of Foreign Affairs and Trade has developed guidance to ensure inclusiveness of IPs

> Locally: Office of Indigenous Policy and Indigenous Coordinating Centers work with communities to facilitate a coordinated approach

In addition, legislation such as the Native Title Act places important rights to the traditional owners of land on which resource development takes place

Canada Australia

Source: The Indigenous World 2021 - 35th Edition

Policy Focus: Increasing participation of IPs in major projects as equity partners,

entrepreneurs and workers

Policy Focus: Reconciliation, protecting land rights and empowering thru business

opportunities and access to finance

Policy Focus: Economic development is a matter for individual tribes

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Land rights of Alaska Natives are ruled by the Alaska Native Claims Settlement which divided the state into 12 regional corporations

Alaska has remote Indigenous communities with abundant natural resources. In 1971, the Alaskan Government established Indigenous-led Regional Corporations and Village Corporations to oversee the governance of these land rights through the Alaska Native Claims Settlement Act

Regional Corporations have sub-surface rights, which provides a basis for negotiating benefit-sharing agreements

The Red Dog mine, is one of the world’s largest zinc mines and began operations in 1989

> Specific targets exist for the hiring of local/Indigenous people, contracting goods/services and works for the mine with Nana Corporation businesses, and creation of a Village Improvement Fund through royalties

> Plus, coordinated leadership in the region across the four major organizations (NANA Regional Corporation, Maniilaq Association, Northwest Arctic Borough, and Northwest Arctic School District) has helped advance the shared goal of creating a well-trained and employable workforce in the region

164


Source: Red Dog Mine - https://www.nlm.nih.gov/nativevoices/timeline/573.html

Case study: Red Dog Mine – NANA & Tech Alaska - USA

NANA’s profits from the mine are used to improve the quality of life for Iñupiat people by maximizing economic growth, protecting and enhancing Iñupiat lands, and promoting healthy communities

Nearly 55 % of the mine’s employees are NANA shareholders, and opportunities for training and education are offered to Iñupiat youth.

Red Dog Operations is a JV between NANA Regional Corporation, Inc. (NANA), an entity owned by the Iñupiatof northwest Alaska, and Teck Alaska Incorporated (a business that runs the mining operations)

NANA contributes Iñupiat business values and owns the land, which contains the world's largest reserves of zinc and lead. The mine is managed to protect the region’s natural resources for future generations and not infringe upon Iñupiat culture and lifeways.

https://www.nlm.nih.gov/nativevoices/timeline/573.html

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Regulators and project proponents stand to benefit from more focused proactive engagement with tribes

165Source: Ruby Pipeline – Kinder Morgan

These re-routes cost the company approximately $11 million but were later estimated to have save $250 million in avoided litigation and other delay costs

• Hosted workshops on Tribal Energy Development• Recruited a Native American (NA) Tribal Liaison• Sponsored Tribal cultural resource internships• Held workshops in 6 states encouraging NA employment

• 500+ NAs attended the Ruby Tribal Employment workshops that focused on union / non-union positions

680-mile, 42-inch diameter pipeline system that extends from Wyoming to Oregon providing natural gas supplies from the major Rocky Mountain basins to consumers in California, Nevada and the Pacific Northwest

~43 Indian Tribes identified for federal consultation and in response to specific tribal cultural resources concerns the pipeline route was modified ~900 times


• An engagement in off-site dialogue with interested tribes including funding of 2 tribally directed cultural resources center projects led to an effective outreach

• A Ruby Pipeline Tribal Monitoring Program with 80+ monitors (contracted with the Klamath Tribes for monitoring on traditional off-reservation lands) helped with the project development

• Additional ethnographic studies for interested tribes (with selected experts to help identify cultural resources) furthered community engagement

Case study: Ruby Pipeline – Kinder Morgan - USA

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FNs play a pivotal role in Canada’s extractives industry as governments and companies have a legal duty to consult / accommodate them… before proceeding with resource projects affecting their territories

166Source: Coastal GasLink Pipeline – TC Energy

TC has signed ~20 Impact Benefit Agreements with elected FN governments along the pipeline route and invested in training programs to support Indigenous/local trainees and students

Projected ~$825 million in contracts awarded to Indigenous / local businesses for the project’s right-of-way clearing, and ~$1 billion in employment opportunities generated

~670-kilometer Coastal GasLink pipeline project (to be in-service 2023). Expected to deliver natural gas across northern B.C. to the LNG Canada facility in Kitimat B.C

Coastal GasLink team had ~15,000 interactions with Indigenous communities – as a result an alternate route was used for the project


• Canadian law (Bill C-15) provides projects to be in line with UNDRIP principles, such that any lands owned or claimed by IPs require their “free, prior, and informed consent” (FPIC)

• Thus, an early engagement with the indigenous community can mitigate risks such as project delays

• In addition, Impact Benefit Agreements establish formal relationships between Aboriginal communities and industry proponents and are distinct from resource revenue-sharing arrangements between governments and Aboriginal groups

Case study: Coastal GasLink Pipeline of TC Energy in British Colombia - Canada

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FNs are boosting investments to gain stakes in oil and gas projects as they seek greater returns on energy produced/transported across their territory

167Source: Coastal Clarke Lake Geothermal Project

Funding Partners:• Natural Resources Canada = USD $ 32.3 million• Wester Economic Diversification Canada = $2 million• Indigenous Services Canada = $250,000• Government of B.C. = $1 million

Approximately 10,000 workdays are expected to be created during the well field development phase; approximately 40% of which will be for positions requiring little or no direct experience

Wholly owned and Indigenous-led 7 MW geothermal electricity generation plant is set to produce clean, renewable baseload electricity which will displace gas fired generation and reduce GHG emissions

As a First Nations led economic development initiative CLGP advances indigenous reconciliation and produces a positive, sustainable and long-term revenue stream for the Nations and the region

Case study: Coastal Clarke Lake Geothermal Project –Fort Nelson First Nation - British Colombia - Canada Applicable policies, incentives and enablers

• To incentivize Indigenous led projects, the federal / provincial governments have provided extensive funding / grants

• A bigger financial role for First Nations in the sector has enabled the unlocking of oil and gas reserves in Canada, that might otherwise stay in the ground because of objections from environmental or aboriginal rights groups

• Investors find aboriginals’ involvement in energy projects appealing given that their support is often critical for regulatory approvals

• Banks in Canada are observing pipeline/storage companies seeking financial partnerships with aboriginals, e.g., RBC Capital Markets completed a $545MM bond issue for FN allowing them to buy 49% stake in a storage facility

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Heritage conservation is also a priority when dealing developmental projects on Aboriginal lands

As development projects have the potential to impact Indigenous heritage through earthwork activities, or accidental disturbance by vehicle / personnel movements – a written agreement between the Ngarluma Aboriginal Corporation and Apache helped with reaching an agreement on environmental management and protection matters

A Public Environmental Review (PER) also required certain measures for the management of Indigenous sites including;

> Signage and fencing around significant areas

> An aboriginal Heritage Management Plan to be submitted to the Department of Indigenous Affairs for review and comment, and implemented following an approval

168Source: Devil Creek Gas Plant – Apache

Gas to supply the Devil Greek facility is extracted from the Apache-operated Reindeer field and brought to the mainland via a 105 km offshore and onshore raw gas supply pipeline

The Devil Creek Gas Plant located in Western Australia’s northwest is the state’s third domestic natural gas processing hub

Impacted Indigenous communities (Wong-Goo-Tt-Ooo and Yaburara Coastal Mardudhunera) were clearly identified by the company earlier on and after a detailed the Aboriginal heritage site survey and consultation with Aboriginal groups, heritage monitors commenced the collection and relocation of artefacts in accordance with an agreed management plan

Case study: Devil Creek Gas Plant – Apache and Santos - Australia Applicable policies, incentives and enablers

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As social issues in community arise quite frequently for coal seam gas projects, there is an increased interaction with Aboriginal people

169Source: Arrow Energy - https://www.arrowenergy.com.au/__data/assets/pdf_file/0016/33064/Arrow-Energy-Reconciliation-Action-Plan-INNOVATE-2021-2023.pdf

Case study: Surat Gas Project - Arrow Energy Pty Ltd-Queensland - Australia

Indigenous Participation in the Coal and Coal Seam Gas (CSG) Sectors is coordinated through Memorandum of Understanding of Coal and CSG Indigenous Participation working groups> Key deliverables under MoU Action Plan 2019-20

included convening workshops and forums with resource sector practitioners about leading practices in:– Indigenous employment and training;– procurement from Indigenous businesses;– building organizational cultural capability

The industry's interaction with Aboriginal people has entailed 35+ Indigenous Land Use Agreements

By creating opportunities for Aboriginal and Torres Strait Islander people and organizations - diversity is built into the workforce and procurement processes. The benefits gained from greater diversity are significant; a stronger supply chain, greater innovation and improved employee engagement


Arrow’s Cultural Heritage Management Strategy entailed direct engagement with Aboriginal Parties and led to partnering with Beyond the Broncos to expand the Indigenous Girls Academy into Surat-based schools and provide extra education support 300+ students annually

To support the demand for cleaner fuels throughgas supply, Arrow’s Coal seam gas development project in the Surat Basin is operated by Arrow Energy, and joint venture between Shell and PetroChina

Arrow’s Aboriginal Cultural Heritage Impact Assessment for the Surat Gas Project highlighted• The known and potential Aboriginal cultural heritage

landscape of the project area• The need to execute Native Title agreements that did

not exclude cultural heritage and • Development of Cultural Heritage Management Plan

https://www.arrowenergy.com.au/__data/assets/pdf_file/0016/33064/Arrow-Energy-Reconciliation-Action-Plan-INNOVATE-2021-2023.pdf

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Public participation frameworks can be useful in helping the state and developers choose the right level of public engagement in decision-making

170

To provide the product with balanced and objective information to assist them in understanding the problem, alternatives, opportunities and/or solutions

We will keep you informed

Publ

ic p

artic

ipat

ion

goal

Prom

ise

to th

e pu

blic

Inform

Source: IAP2’s Public Participation Spectrum

To obtain public feedback on analysis. Alternatives and/or decisions

We will keep you informed, listen to and acknowledge concerns and aspirations, and provide feedback on how public input influenced the decision

Consult

To work directly with the public throughout the process to ensure that public concerns and aspirations are consistently understood and considered

We will work with you to ensure that your concerns and aspirations are directly reflected in the alternatives developed and provide feedback on how public input influenced the decision

Involve

To partner with the public in each aspect of the decision including the development of alternatives and the identification of the preferred solution

We will look to you for advice and innovation in formulating solutions and incorporate your advice and recommendations into the decisions to the maximum extent possible

Collaborate

To place final decision making in the hands of the public

We will implement what you decide

Empower

Increasing impact on the decision

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Disclaimer

The IHS Markit reports, presentations, individual slides, charts and information included in this presentation and/or referenced herein (the "IHS Markit Materials") are the copyrighted property of IHS Markit Ltd. and its subsidiaries (“IHS Markit”) and represent data, research, opinions or viewpoints published by IHS Markit, and are not representations of fact. IHS Markit conducted this analysis and prepared the IHS Markit Materials utilizing reasonable skill and care in applying methods of analysis consistent with normal industry practice. Forecasts are inherently uncertain because of events or combinations of events that cannot reasonably be foreseen including the actions of government, individuals, third parties and competitors. The IHS Markit Materials speak as of the original publication date hereof (and not as of the date of this document). The information and opinions expressed in the IHS Markit Materials are subject to change without notice and IHS Markit has no duty or responsibility to update the IHS Markit Materials. Moreover, while the IHS Markit Materials reproduced herein are from sources considered reliable, the accuracy and completeness thereof are not warranted, nor are the opinions and analyses which are based upon it. To the extent permitted by law, IHS Markit shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on the IHS Markit Materials or any statement contained therein, or resulting from any omission. NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE SHALL APPLY. The IHS Markit Materials are not to be construed as legal or financial advice, aresupplied without obligation and on the understanding that any person who acts upon the IHS Markit Materials or otherwise changes his/her position in reliance thereon does so entirely at his/her own risk. The IHS Materials were prepared for the sole benefit of IHS Markit’s client for IHS Markit’s client’s internal business use. No portion of the IHS Markit Materials may be reproduced, reused, or otherwise distributed in any form without the prior written consent of IHS. IHS Markit Materials reproduced or redistributed with IHS Markit’s permission must display IHS Markit’s legal notices and attributions of authorship. IHS Markit and the IHS Markit logo are trademarks of IHS Markit. Other trademarks appearing in the IHS Markit Materials are the property of IHS Markit or their respective owners.

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