How it’s Used Biomass Energy System
Biomass facilities burn carbon-based organisms to generate steam in order to power turbines for electricity production. All types of biomass release emissions when burned.
Current taxation process
There are 13 energy production facilities in Minnesota primarily powered by biomass. These facilities have a combined capacity of approximately 260 megawatts. They include:
- Four investor-owned utilities
- One owned by a cooperative
- Seven privately owned
- One owned by a municipal government
Biomass facilities are valued and taxed like coal, nuclear, and natural gas energy producing facilities. Biomass facilities owned by investor-owned utilities and cooperatives are valued on a unitary basis as described beginning on page 11.
- Some of these plants qualify for exemptions that reduce their taxable value.
- Privately-owned biomass facilities attached to industrial facilities are taxed based on the value of the facility itself.
- Municipally-owned biomass facilities are exempt from property taxation.
Exclusions and exemptions
Pollution control exemption
This exemption applies to property used primarily to reduce or control air, water, or land pollution. The exemption reduces the taxable value of companies in certain industries.
- A company must file an application with Revenue to receive this exemption.
- The application is reviewed by the Minnesota Pollution Control Agency and is approved or denied by Revenue.
- If an application is approved, the property would qualify for the exemption in the following assessment year.
- After the application is approved, the pollution control exemption must be claimed each year by February 15. The exemption typically applies to equipment. Currently, four biomass facilities receive this exemption. Three of these facilities are owned by investor-owned utilities and one facility is owned by a cooperative.
Statutory exemptions
Statutes grant special tax exemptions to three small biomass facilities. However, none of these facilities are assessed by the state so they are not included in this report. Municipally-owned biomass facilities are exempt from property taxes.
Impact
The pollution control exemptions reduce the taxable value of the biomass facilities, and the taxes they pay by about 18 percent.
Variation in taxes
The tax per kilowatt hour produced can vary by facility. Variations happen because:
- Some facilities are more efficient
- Some run more continuously than others
- Some qualify for different levels of exemptions
- Some are municipal utilities that are not subject to property taxes
- Local tax rates vary
Costs and benefits
The costs and benefits of hosting a biomass facility are similar to those for other traditional and renewable energy sources. Benefits include job creation and a skilled workforce, a stronger tax base, and lower taxes.
Like other renewable energy sources, the costs of hosting a biomass facility are much less than fossil fuels. One cost to host communities is pollution, as biomass facilities emit some greenhouse gases and particulate matter.
Since we cannot quantify the costs that biomass facilities place on host communities, it is not conclusive whether the property tax system adequately compensates for the potential costs of hosting biomass facilities.
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