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Western leaders support oil tax formula bill, but say it won’t meet all needs

Ron Ness, president of the North Dakota Petroleum Council, testified in support of HB1176 in front of the Senate Appropriations Committee on Monday in the state Capitol in Bismarck. (Tom Stromme/Bismarck Tribune)1 / 2
Steve Holen, president of the North Dakota Association of Oil and Gas Producing Counties, seen in this undated file photo, testified Monday before the Senate Appropriations Committee that an amended version of the new oil tax formula bill won't meet the needs of western North Dakota communities. (Dickinson Press file photo)2 / 2

BISMARCK – Western North Dakota officials lined up Monday behind legislation that would return a greater share of oil tax revenue to their counties, cities, schools and townships, even though it won’t meet all of their needs and could put them further behind, they said.

The Senate Appropriations Committee took more than an hour of testimony on House Bill 1176 in a hearing room packed with about 75 people and more listening outside the door.

The version of the bill that passed the House last month would send about $629.4 million in oil production tax revenue to political subdivisions. Amendments considered Monday would raise the total to $632.2 million, or $134.4 million more than under current law.

Steve Holen, president of the North Dakota Association of Oil and Gas Producing Counties, testified that the bill won’t meet their needs and many necessary projects will be put on hold because of a lack of funding options.

“This has the potential to put western North Dakota political subdivisions further behind as our areas continue to grow with the prospect of higher oil prices looming in the upcoming years. This oil will be developed at some point,” said Holen, superintendent of McKenzie County Public School District in Watford City.

However, the association understands the impact of lower crude oil prices on the state budget, and its members support the bill and will explore other ways to fund projects and catch up with needed infrastructure, Holen said.

North Dakota currently taxes oil production at 5 percent and oil extraction at 6.5 percent.

For counties that receive $5 million or more in annual production tax revenue, fourth-fifths of the amount above $5 million is divided through a formula that sends 75 percent to the state and 25 percent to political subdivisions.

Western lawmakers and Gov. Jack Dalrymple proposed changing that formula to 60 percent local, 40 percent state. But House members approved a split of 70 percent state, 30 percent local, citing lower anticipated oil revenues that now are forecasted to total about $3.4 billion in 2015-17 – nearly $5 billion less than the December forecast used in the governor’s budget.

Like the House version, the proposed Senate version would cut funding for the energy impact grant program from $240 million to $140 million. But it would designate uses for all but $8.8 million of it, whereas the House version would leave $98.8 million undesignated.

Ann Hafner, a paramedic and manager of Killdeer Area Ambulance Service, asked the committee to include $7 million in emergency medical services grants as the Legislature did in 2013. The proposed Senate version designates $6 million for that purpose.

Hafner said ambulance calls continue to rise despite the slowdown in oil activity. The service received a staggering 539 ambulance requests over the last 12 months – including 142 since Jan. 1 – compared with 79 calls during the same 12-month period ending March 2007, she said.

“It’s not dropping off,” she said, attributing the increase to more industrial accidents and an increase in substance abuse, fights and domestic violence.

Ron Ness, president of the North Dakota Petroleum Council, encouraged lawmakers to look at the bill as a long-term benefit and said infrastructure upgrades are needed to continue oil development.

The state had 96 active drilling rigs Monday, down from 186 rigs on Dec. 12, and Ness said he’s “very concerned” oil tax revenues won’t be enough to support catch-up funding such as the $1.1 billion “surge” bill signed into law last month.

“We’ve played catch-up. It’s time to get ahead of the game,” he said.

The committee’s chairman, Sen. Ray Holmberg, R-Grand Forks, said the bill would be referred to a subcommittee right away.

“There are a number of other bills that are dependent on what ends up being in this bill,” he said.

Reach Nowatzki at (701) 255-5607 or by email at mnowatzki@forumcomm.com.

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