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Tribe threatens to leave oil tax agreement with ND

Three Affiliation Tribes Chairman Mark Fox testifies in opposition to HB1166 during a hearing on the bill in front of the House Finance and Taxation Committee on Tuesday, Jan. 10, 2017, at the State Capitol in Bismarck. Fox wants the tribe to be exempt from the oil extraction tax bill. On the right is state tax commissioner Ryan Rauschenberger. MIKE MCCLEARY / BISMARCK TRIBUNE1 / 2
MHA Nation Chairman Mark Fox testifies Tuesday, Jan. 10, 2017, to a legislative committee regarding the state's oil tax agreement with the tribe. Amy Dalrymple/Forum News Service2 / 2

BISMARCK — The leader of the oil-rich Mandan, Hidatsa and Arikara Nation threatened to leave the oil tax agreement with North Dakota on Tuesday, Jan. 10, during a legislative hearing that brought up unresolved conflicts over how the state shares oil tax revenue with the tribe.

“We are not bluffing. Oil industry, please, take that back,” Chairman Mark Fox said during a meeting of the House Finance and Taxation Committee. “We’ll roll the dice on what that means for production on Fort Berthold.”

Fox accused North Dakota of breaking its agreement with the tribe last session when legislators reduced oil taxes from 11.5 percent to 10 percent despite strong opposition from the tribe, which accounts for more than one-sixth of the state’s oil production.

The tribe never signed a new agreement with the state with the 10 percent tax rate and council members are strongly considering pulling out of the agreement, which would lead to both the state and the tribe taxing oil produced at Fort Berthold, Fox said.

Tribal council members also are considering other remedies, including seeking reimbursement for the 1.5 percent that wasn’t collected since the law changed, Fox said.

The tribe’s testimony came in opposition to a new bill from House Majority Leader Al Carlson, R-Fargo, who proposes to make some amendments to the oil tax.

When legislators reduced the tax rate to 10 percent, they included a stipulation that the tax would increase to 11 percent if oil prices reached $90 a barrel and stayed high for at least three consecutive months.

Carlson’s bill would keep a flat rate of 10 percent regardless of the price of oil, removing what’s been referred to as a high-price trigger.

“I think this is the right thing to do at the right time,” Carlson testified. “It is not reducing taxes. It is taking away a trigger that may or may not ever happen.”

North Dakota Petroleum Council President Ron Ness testified in favor of Carlson’s bill, saying the industry supports a flat, predictable tax structure.

Although legislators reduced the overall oil tax rate in 2015, they also removed tax breaks that would have kicked in when oil prices were low. Ness estimates the industry has paid about $40 million more each month in oil taxes due to the changes made by legislators last session.

Committee chairman Craig Headland, R-Montpelier, pointed out during the hearing that prior to the tax agreement with the state and the tribe, there was no oil drilling at Fort Berthold. Headland said the committee needed to get some additional questions answered before taking action on the bill.

More than 180,000 barrels of oil came from the Fort Berthold Reservation in October, about 17 percent of North Dakota’s overall oil production of 1.04 million barrels per day, according to the Department of Mineral Resources.

Fort Berthold has eight active drilling rigs out of about 40 rigs statewide, with most activity occurring on trust lands.

Fox advocated for exempting oil produced on trust lands from the state oil extraction tax, allowing the tribe to collect its own tax and use the revenue to offset the impacts of oil development.

“We don’t have enough revenue to date to deal with all the issues that are impacting our nation,” said Fox, citing impacts to roads and an influx in human trafficking, drug trafficking and other crimes.