North Dakota will study whether the current insurance market is adequate for its coal industry and whether there is a need for a state-based insurance product for the sector that would insure against risk at an "appropriate cost."

Republican North Dakota Gov. Doug Burgum signed a bill on March 15 asking the state's insurance commissioner to study the availability, cost, and risks of insurance coverage for the lignite coal industry. The insurance sector is facing activist and investor pressure to distance itself from coal and other emissions-intensive industries. Coal companies have reported difficulty obtaining affordable insurance services in recent years.

"Insurance premiums are rapidly rising for the fossil fuel industry — yet another challenge for lignite coal," Burgum tweeted on March 16. He added that the study would ensure "a level playing field based on science, not ideology."

Access to capital presents a similar issue as some financial institutions have adopted coal or fossil fuel exclusion policies.

"Coal is an industry that the insurance industry should be absolutely running away from," said Ross Hammond, senior strategist for the Insure Our Future campaign, which promotes a rapid shift of the insurance industry away from supporting and financing fossil fuels. Multiple organizations are involved with the campaign, which focuses on the insurance industry and climate issues. Hammond said those wanting to help workers should focus on retraining and other job opportunities rather than slowing the transition away from fossil fuels.

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North Dakota Insurance Commissioner Jon Godfread said during a March 3 legislative committee hearing that rate increases have been "upwards of 100% plus in the last three to four years" for coal mines and coal-fired power plants.

"There is a significant amount of pressure to essentially get out of this industry if you're on the insurance side," Godfread said.

During the same hearing, Jason Bohrer, president and CEO of the Lignite Energy Council, said that one member saw a rate increase as high as 300% over the past few years. Bohrer warned lawmakers they should expect rising pressure for companies to act on environmental, social and governance issues to impact the rest of the fossil fuel sector soon as well.

"The premium hikes have resulted in increased costs that didn't exist three years ago, while our economic challenges continue to increase," Bohrer said. "These added high costs are making these facilities less competitive in the electricity marketplace."

Only five mines reported coal production volume greater than zero tons in North Dakota in 2020, according to U.S. Mine Safety and Health Administration data. NACCO Industries Inc. owns three of the four largest coal mines by tons produced in the state.

One of the sponsors of the bill to study coal's access to insurance is North Dakota state Senator Jessica Bell. Bell is also an environmental manager for North American Coal Corp., a subsidiary of NACCO, according to the senator's biography on the state's legislative website.

NACCO wrote in a March 3 securities filing that insurance coverage is increasingly expensive, contains more stringent terms and could be challenging to obtain in the future.

"Because the company is involved in the coal mining industry, costs of insurance may increase substantially or insurance carriers may decide not to insure the company in the future," the company wrote.

Basin Electric Power Cooperative Senior Vice President and CFO Steve Johnson said in a video shared for the North Dakota-based cooperative's virtual annual 2020 meeting that Insure Our Future's campaign has been "relatively successful" and is expected to become more aggressive. Basin Electric operates across multiple states with a portfolio that includes coal, gas, oil and renewable energy resources.

"Without going into detail, I can state that Basin Electric has been impacted by these efforts," Johnson said in the remarks. A representative of Basin Electric filed testimony supporting the North Dakota bill and reiterating testimony provided by the Lignite Energy Council.

Asked about the North Dakota law, National Mining Association spokesman Conor Bernstein said that when talking about insurance or financial products for industry, "we tend to forget those industries are made up of workers and communities that depend on those jobs."

"We want to ensure fairness and we're working with partners at the state and federal level to encourage more transparency and to ensure the industry and the tens-of-thousands of jobs it supports are getting a fair shake," Bernstein wrote in an email.

The bill directs the insurance commissioner to report findings to legislative management and implement recommendations by June 1, 2022.