(cheerful orchestral music) - This is North Dakota Legislative Review.

I'm Dave Thompson, thanks for joining us.

Our guest today, on our program, is the new state senate majority leader, David Hogue of Minot.

Senator, thank you for being here.

- Well thank you for having me, David.

- I'm curious, why did you decide to seek leadership?

- Well, I've been in the senate for 14 years, seven sessions.

I've had a chance to work with my predecessor, Leader Wardner, as the caucus leader, and so I thought it would be a natural progression for me to go from caucus leader to majority leader.

Have enjoyed the leadership role in the senate and so I thought I would enjoy that as well.

- One thing we never got into, and I'm going to get into it with you, what is the role of the majority leader?

- I would, (sighs) I would describe the majority leader as, sort of like, maybe the CEO of an organization.

You're trying to lead a lot of talented people, all trying to get to the end state in April, which is to generate a sound budget for the people of North Dakota, one that is balanced.

And you're trying to adopt sound policy.

So, you have the task of assigning people to committees, assigning leadership within those committees, deciding some of the harder questions that arise, that have to be, you know, somebody's gotta make a decision, at the end, how to balance a budge when a lot of budgets come in that are over what our projected revenues are.

So at that point, you really have to, somebody has to make that call, and that comes down to, as you know, the conference committee for the OMB budget, Office of Management and Budget.

- The final budget that is passed in the session, yes.

- Right.

- In terms of your priorities and the caucus' priorities, can you outline where you're at on those?

- I can, I can.

I don't think it's a secret that workforce development is probably our number one issue.

We have instituted a new policy committee that is just devoted to workforce development issues.

We've never had that committee before.

But the reason, you know, the reason I would say it's the number one priority issue is, well, actually twofold, one, the problem of trying to fill jobs in North Dakota is getting increasingly hard.

The problem's getting worse in terms of number of open positions and cutting across all sectors of our economy, from healthcare to education, criminal justice, all of these components of our, both our society and our economy are struggling to find people.

And so, you know, how much can government do to solve that problem?

I'm not sure, but we're gonna try.

So I would say definitely workforce development is a number one issue.

A second issue is tax relief.

We've been blessed with a lot of revenues in the past two bienniums.

We've managed the ARPA dollars that we've got from the federal government to help us with some of the obligations we would have had regardless of whether we receive those ARPA dollars.

So we wanna provide some tax relief because we have a surplus.

And so I would describe tax relief as a priority.

A third priority would be to try to help and develop large animal agriculture in the state.

You know, for a number of years, we've tried that.

We've had one referral, but it's very hard, as legislators, when we look right across the border in Minnesota and South Dakota to see that they have, you know, eight to nine times the amount of animals, dairy animals, swine, turkey, and we ask ourselves, well, why is that?

And we think we have a solution, but that's a priority, I would say, as well.

- That's probably gonna be a hard lift in some respects, given the propensity from some farm groups to say they don't like anything that even reeks of corporate agriculture.

- Right, right, I understand that.

And I would make the point that Senator Wansick, from Jamestown, has made, there's the ability to get large amounts of capital into agriculture is possible in 43 states, yet we don't see large corporate organizations farming.

And so that's just not part of what I think is a reasonable concern.

But we see with, you know, with the advent of our ethanol plants, with the new soybean plant in Spiritwood, North Dakota, there is so much opportunity to take their feed stocks that they have left, when they process ethanal, when they process soybean oil, to take that and use it as steady, low cost supply of food.

And the synergies there are just, it's hard to describe because it's not just the low cost feed stocks, it's the access to low cost fertilizers.

And all of our grain producers in North Dakota understand what's happened to the, you know, the cost of fertilizer has just gone through the ceiling.

And so there's just so many synergies or business opportunities that we, as a state, could realize if we would just harness the potential for large animal agriculture.

- So that's going to be an issue we're going to have to keep our eyes on as it evolved through the session.

- Yes, yes.

I think you're gonna see, I think you're gonna see the house is gonna pass it pretty strongly, and so we'll see what happens when it comes over to the senate, but I know there are just a lot of proponents in the senate as well who want us to do more to facilitate large animal agriculture.

- To go back to your first point about workforce development, what are the biggest barriers to recruiting workforce to North Dakota?

- Well there's, (clears throat) there's several.

Part of it is we have such a robust economy that we're generating all these jobs in the ag.

sector and the energy sector that our population cannot supply the jobs that we have.

So that's the biggest impediment is just our demographics.

You could say we haven't been having enough babies for probably 20 or 30 years.

You know, so that's a basic part of it, a robust economy without enough people.

A second part of it is, let's face it, the geography.

We're hard to get to.

We're not, particularly in my part of the state, Minot, Williston, we're not on the interstate highway.

So we don't have access to some of the resources that other parts of the state do.

So it's a combination of things and some people will say it's, you know, the weather.

But, you know, you and I have grown up here, we're used to it, and it's not, I love our weather, of course, but some people, there's that initial reservation about thinking about relocating to North Dakota.

So that's part of it too.

- But childcare also factors into that as well.

- Yeah, yeah, and I think I may have mentioned this before, I'm somebody who has come around on the issue of whether government should be involved in trying to facilitate more childcare to help our workforce, but I'm there now.

I see it as a meaningful thing that government can do to get people who live here into the workforce.

And there's just an awful lot of people, even our major cities where there's access to larger daycare facilities, where they do the math on what it costs them for daycare and they quickly realize that they lose money by going to work.

And I don't know that we can fully address that, but we can help.

- In terms of workforce development and attracting people, Senator Mathern came up with an interesting idea to have immigration offices at the Bank of North Dakota and commerce and I believe you signed on to do at least one of those bills, correct?

- Yeah, well, the commerce one.

Well his idea is because he's a student of history and he understands that we used to have that office and it was during what he described as during the homesteaders days where, again, we were giving away raw land to people to try to attract them to come to the state of North Dakota.

And, you know, we're doing a lot of things now to do that, to attract people, but the thing about the office that he's proposing is, so we recognize, we have to bring in people from outside of the state and he and I both agree, outside the country, the continental U.S. And so large employers in the state are doing that, they are hiring firms to do all of the process, all the work visas, process all the immigration, help them get settled, and they're bringing in hundreds of workers from outside the United States.

Well the large employers have the means to do that, but some of our smaller employers don't.

So one of the things I really like about his bill is it will give the small employers access to a resource to help them recruit people from other parts of the world.

- And there's certain red tape that goes along with that.

- Absolutely, yeah, yeah.

Unless you're on the southern border, then you can come right in.

- Well you mentioned tax relief and I wanted to get into this because the argument, the way it is setting up, is it going to be income tax or property tax?

And that gets to be a tricky situation because the state, with the exception, I think, of the one mil for the University of North Dakota, the medical school-- - Right.

- Does not levy property taxes.

- Right, right.

Yeah, and so I, my best estimate today, and I haven't changed since we started, I think we'll see a combination of income tax relief and property tax relief.

Now I think we're at the stage now where we're trying to figure out, okay, how much discretionary dollars do we have to provide for both income and property tax relief and of the amount we pick, is that sustainable going into the next biennium, and the biennium after that?

And so that's the first, I think, the first decision point.

And the second one is how much of both income tax and property tax relief.

And I think where we're sort of coming out, and this is a broad range, but necessarily so, is between probably 300 and 600 million dollars, as combination, and so the things that we're looking at is, you know, if we just, for example, gave a straight, across the board, 30% tax reduction, well, that's great, but a lot of people say, well, North Dakota, you have a lot of out-of-state, non-resident tax payers.

So if you don't use more of a scalpel for a reduction in income taxes, you'll be giving a lot of tax relief to people who aren't even residents.

The same is true with property tax relief.

If you don't appropriately tailor it, you'll provide tax relief to non-residents and I think most legislators are of the view that we should be trying to target it to resident tax payers.

- That's no easy task either.

- No, no it's not.

Because we don't have readily available data on out-of-state property tax payers.

I mean, I suppose we could go down to each county auditor and ask 'em for that, but it's a painstaking process.

So with income tax payers, we do.

So that one's a little easier.

- I have to ask you about what's happening with the oil industry and the idea that in a few years, the pipelines to take gas out of the Balkan will be filled, unless the new one is built and they might have to ratchet back production because they worry about flaring.

I know that the legislature put in 150 million dollars of seed money for a pipeline to bring Balkan gas into central and eastern North Dakota, so far no takers, but apparently, there are things that are being done to sweeten the pot.

For example, this ad valorem tax break for the people who build the pipeline.

- Yes.

You know, when we came into the special session, was that last year, I'm trying to think, this is 23, (laughs) but when we came into the special session, that was a big item is, all right, how can we incent the construction of a natural gas pipeline which would take the natural gas out of the Balkan and help increase production of oil, and at the same time, serve a need on the eastern part of the state, and we thought, well this is a very commonsense expenditure of dollars, right, 'cause we'd get the 150 million dollars back, over time, just from increased production out of the Balkan.

But you're right, it didn't happen.

We're still interested in doing that.

I would say that's the sense of the, at least, the senate.

What we had planned to use were ARPA dollars for that.

That money has to be identified by December of 2024, has to be appropriated and spent by 2026.

So you think, well, 2026 is a long ways out, but pipelines, they take a long time.

So that's a concern of mine that we make sure that we identify a potential owner and, you know, somebody to build the pipeline before the next biennium.

- From what I hear, one of the barriers to that is that they need customers.

- Right, absolutely.

- And that, they haven't gotten that worked out yet.

- Yeah, yeah, that's my understanding as well.

They need, not just a customer, a customer that is willing to sign a contract that says, you know what, I will buy your gas for the next 10 years, or you know, some longterm timeframe that will assure them that they have a steady place to sell their gas.

- And I've also heard some rumblings is that maybe some of the industry are saying you might have to sweeten the 150 million into something else.

Are there discussions going on about that?

- Well, I'm not aware of any current discussions like that, but I can tell you, again, going back to the special session, there was always an understanding that 150 million will not be the end of the ask to the state of North Dakota.

But, again, just looking at it from a business standpoint of what you see the drop off in production because you can't produce anymore because you have no place for the gas, it was not something that scared off, I think, legislative leaders last year and I don't think it is now.

But direct answer to your question, current discussions I'm not aware of that going on.

- But there is at least concern that this is a project you want to have built and go forward.

- Right, right.

I don't think the support, the enthusiastic support for it has not waned.

- Okay.

One thing, as a kind of a subset of all this, federal dollars were supposed to go for these career academies-- - Correct.

- One was in Minot-- - Correct.

- And there's one for West Fargo and some others around the state-- - Right.

- That federal money has not materialized, but apparently, there's some movement to getting some state money to get it paid now and then, maybe, being paid back when the ARPA money comes through.

- Correct.

Yes, what we're talking about doing is authorizing the Bank of North Dakota to extend a line of credit, that is to agree to borrow money to these projects with the idea that they can start construction in this spring or this construction season, I should say, and then when the federal dollars come in, those dollars would be used to repay the line of credit from the Bank of North Dakota.

And I know you've followed the legislature.

We've done this several times before.

Up in my area, we have the water treatment plant for the NOS water delivery system.

And again, the federal government, that's a situation where the federal government says that water treatment plant that's now under construction in Max, we will pay for that, but you know, it'll take us a while to get you the money.

So with that assurance, you know, we authorized, again, a line of credit so that that project can go forward and later be reimbursed.

- Well I hate to say it this way, but thank God for the Bank of North Dakota, it's there and you can use these things.

- Right, right.

Well, the Bank of North Dakota is probably one of the greatest tools that the state of North Dakota has in terms of facilitating financing for, you know, large projects, in terms of helping out political subdivisions with their, you know, their borrowing needs.

Of course, we know that the they got out of the student loan business, but they do do student, they consolidate student loans, so they help students.

It's just a great asset to have, especially for the legislature.

- Here's one that really affects Minot and the region, the Souris River, Mouse River, flood control project.

Now that, apparently, the money's in hand now for the Red River Valley flood control project, in Fargo, there's been a lot of talk about can we step up money and get the Minot flood control project built earlier?

What do you think is the status of that?

- Well, we're gonna be looking at that pretty hard.

I differentiate between flood control projects and water supply projects.

I think, to me, the flood control projects are a priority over the water supply projects, but even the flood control projects are different because in Minot, the Mouse River, it's a staged project.

So as we advance the ball, we get each part of the community gets a little bit of flood protection.

And so we're making progress.

Whereas, the Fargo diversion, you know, until it's complete, it's like virtually nobody gets any flood protection, and that's just the nature of the two different projects.

But whether it's the flood control or water delivery, we're always looking to see, okay, if we put the extra dollars to the project and accelerate the construction, how much money do we save.

And of course, that is a critical issue now when you have inflation at, you know, 7 1/2, 8% now.

And that's holding firm in the construction industry, for sure.

- And construction inflation, we just talked about the career academies, there's gonna be some extra money because of construction inflation for them.

- Right, yeah, we're talking about 40 million dollars because of the delay in constructing those projects.

And it's like, eh, what do you do?

I mean, (chuckles) you just gotta, you've gotta figure out a way to get the project done 'cause, like a lot of things, once you decide to do the project, it's never gonna be any cheaper by delaying.

So you try to accelerate construction, especially where it makes sense, from a business standpoint.

- I know it's very early in the session, but what do you think could be something that might hang up the session that you might have to go toward the 80 day limit?

- Well, that's a great question.

I've been thinking about that and, you know, I just feel like we have such a good relationship between the house and the senate that I hope that doesn't happen.

Leader Mike Lefor, from the house, we've talked about that, we've talked about what, historically, has led to delays where we're kind of sitting around, twiddling our thumbs because, you know, something's being held up and I'd like to think that we're gonna be able to work through that.

I think we've decided that it would be best for the people in North Dakota and for the legislature that we finish up either between, you know, 72 to 73 days, in that area.

- And that also leaves some days for you if you have to come back and take care of problems.

- Right.

Yeah, and the biggest potential problem is that we get the revenue forecast wrong, you know?

55% of our revenue is based on the oil and gas economy and that's based on what we project, what we think the price of a barrel of oil is gonna be and how much production there's gonna be and what kind of discounts they're gonna be, and all of that can be quite volatile, you know.

Just because of the price, a war in Ukraine, a judge shuts down a pipeline, all of those things can have a dramatic impact on our revenue.

So yeah, we wanna save time in case we get that wrong.

- I have to ask one question on a similar subject, but will carbon capture play a big role in the session?

- It is, it will.

We have, I think, in the senate alone, we have five bills that relate to carbon sequestration and the proposed pipeline that is gonna be constructed, you know, it's gonna start in Iowa, come through and collect CO2 from some ethanol plants in Minnesota, South Dakota, and Iowa, and one plant in the southeast part of North Dakota, and so that pipeline has generated a lot of public interest and concern, and I know there's a lot of bills on it.

So, in fact, next week, those bills are gonna be heard.

- Next week?

- Mmhmm, yes.

- That could be very interesting.

- Yeah.

- Yeah.

- Yes.

Yeah, and people, there's, you know, it's one of those issues where I think a lot of people are of the view that this is part of our future.

Regardless of where you're at on climate change, this is the world that we, in North Dakota, find ourselves in.

We're in a unique position to benefit from that.

So why shouldn't we try to take advantage of it by sequestering some of that.

- And use it for things like enhanced oil recovery-- - Right.

- Is what we hear a lot.

- Right, right.

Well, and we hope, you know, (sighs) you hope that technology comes for the Balkan because, you know, we've had great success in using it in the southwest part of the state.

Canada is taking some of our carbon dioxide and piping it to the Wayburn Field.

So, there's possibilities, but oh, it's really sort of exciting.

- Well Senator, time is fleeting.

Thank you for your time.

- Thank you, thanks for having me, David.

- Our guest on Legislative Review, the new senate majority leader, Senator David Hogue of Minot.

And for Prairie Public and Legislative Review, I'm Dave Thompson.

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