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Western ND opposes 'takings' of oil tax revenue

Halliburton oil trucks drive near the company's yard in Williston, N.D., April 30, 2016. REUTERS/Andrew Cullen

BISMARCK — Western North Dakota communities are fighting what they consider a money grab for a portion of oil tax revenue.

Townships in the top nine oil-producing counties were set to share about $25 million in gross production tax revenue for 2017-19 through Senate Bill 2013.

An amendment approved by the House diverts $16 million of that funding and sends it to townships across the state.

"It is a takings," said Senate Majority Leader Rich Wardner, R-Dickinson.

The gross production tax, which is collected in lieu of property taxes on oil and gas development, is the source of revenue communities use to offset impacts of oil development.

Geoff Simon, executive director of the Western Dakota Energy Association, said townships and counties rely on that funding to maintain roads heavily traveled by the oil industry.

In McKenzie County, the state's top oil-producing county, the road budget is projected to be $64.5 million in 2017, compared to about $8 million in 2010.

"These aren't your average farm and ranch roads. They're industrial roads," Simon said. "They need every penny they can get to keep up."

But townships in other areas of the state have infrastructure needs, too, said Rep. Mike Brandenburg, R-Edgeley, a member of the House Appropriations Committee.

Under the original bill, townships in the oil counties were projected to receive an average of about $56,000 for 2017-19.

With the amendment, townships in oil counties are projected to receive an average of $20,000, while townships in non oil-producing counties would receive an average of $10,000. Where there aren't organized townships, the funding would go to the county.

"We're trying to find a fair way to do this," Brandenburg said.

How the state distributes oil tax revenue is a common topic of debate at the state Legislature, with western communities making the case in recent sessions that they need more funding to keep up.

The North Dakota Petroleum Council is "adamantly opposed" to the amendment and is advocating for a greater portion of the revenue to go back to communities with the greatest impact, said President Ron Ness.

A conference committee of House and Senate members is working to resolve their differences on the bill.

Other amendments to the bill also reduce funding for the Bakken "hub cities" of Dickinson, Williston and Minot, which have heavy debt loads after funding major projects such as wastewater treatment plants to keep up with growth spurred by oil development. School districts in those hub cities also would see a funding reduction under the amendment.

The bill includes $35 million for a new Williston airport and $5 million for the Dickinson airport.

Dickinson perspective

Shawn Kessel, Dickinson's city administrator, met with 10 legislators on Monday regarding the amendment, three of whom met in conference committee on Tuesday.

"Overall, we made a lot of contact, and I guess we will find out how successful that was in a few days," Kessel said.

The House version proposes giving about two-thirds of the money from the gross production tax that usually goes to western townships to eastern townships, he said. If this passes, a township receiving $45,000 a year for road impacts would lose $30,000 to the eastern part of the state, he said.

In the cities, the House version would not recognize the first two percentage points of mining employment in the hub oil cities. Hub oil cities receive $375,000 per percentage point of the population working in mining, so this loss would cost them $750,000 a year—$1.5 million a year among Dickinson, Williston and Minot.

There are other suggestions being debated, including excluding only the first percentage point or redefining what a hub oil city is, Kessel said. By the current definition, Mandan is also considered a hub oil city with 2 percent of its population in the mining industry, so this provision would exclude Mandan from these funds.

The current bill also contains a legislative intent, which would prevent hub cities from pledging these revenue streams from the gross production tax to any bond or loan, Kessel said. Dickinson has never pledged these funds, but other cities have. Kessel and Wardner have both previously said that this intent would make it easier for the state to eliminate the funding streams altogether in the future.

But this tug-of-war over state funds between the east and the west is nothing new, Kessel said.

"The reason that it may happen with oil revenue is because it's very specific geographically in its production and because the gross production tax is levied in lieu of property tax," he said. "So the state took our ability to levy property taxes on the industry and said, 'We're going to do it instead as a state, and then we'll return dollars to you.' There's a feeling of ownership in western North Dakota over those oil revenues because of the in-lieu-of nature of those collections."

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