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GOP lawmakers pitch 60/40 split of oil production tax revenue to address local needs

BISMARCK - Western North Dakota counties struggling to keep pace with oil and gas development would more than double their current take of oil tax revenue under a revised formula pitched by Republican lawmakers Wednesday.

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Senate majority leader Sen. Rich Wardner, R-Dickinson, center, outlines a proposed formula change bill to provide necessary funding support for western North Dakota communities at a press conference in the state capitol in Bismarck on Wednesday afternoon. In back are Rep. David Rust, R-Tioga, left, and Sen. Bill Bowman, R-Bowman. (Tom Stromme / Bismarck Tribune)

BISMARCK – Western North Dakota counties struggling to keep pace with oil and gas development would more than double their current take of oil tax revenue under a revised formula pitched by Republican lawmakers Wednesday.

“This will help them get ahead of the game instead of coming from behind,” Senate Majority Leader Rich Wardner of Dickinson said.

Senate Minority Leader Mac Schneider of Grand Forks was quick to point out that Democrats strongly supported a bigger share of revenue for local governments during the 2013 legislative session, “not 40 days out from an election.”

“It’s a proposal that has superficial appeal, but it begs for closer scrutiny,” he said.

North Dakota currently taxes oil production at 5 percent. Eighty percent of the revenue is divided through a formula that sends 75 percent to the state and 25 percent to political subdivisions.

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As part of their three-pronged approach, western Republicans want to change that split to 60 percent local, 40 percent state. That would funnel about $2.2 billion instead of $1 billion to counties during the 2015-2017 biennium, based on what Wardner called a conservative estimate of $8.6 billion in total oil and gas tax revenue.

Revenue from oil production and extraction taxes accounted for about $3.3 billion, or 53 percent, of the $6.1 billion the state Tax Department collected from all revenue sources in the fiscal year that ended June 30. Budget forecasters are projecting total oil and gas tax revenues of about $7.5 billion for the current biennium and $9.8 billion during the 2015-2017 biennium.

Oil tax revenue has benefited all of North Dakota through tax reductions, water projects and funding for education, Wardner said. But the state needs more workers to keep the industry humming along, and recruiting them will require more revenue for counties, cities and school districts to build the infrastructure necessary to meet demands and support affordable housing, he said.  

“I will guarantee you that if we can pass this legislation, you will see the light at the end of the tunnel, and the whole state of North Dakota is going to benefit from this,” he said.

Money from the other 20 percent of the production tax revenue stream would go to the state’s largest cities and school districts that have at least 1 percent of their private workers engaged jobs related to the oil and gas industry.

Under Wardner’s scenario, Williston and Dickinson would receive the bulk of the funding for cities, at $64 million and $39 million, respectively. Minot would get $12 million, Mandan $9 million, Bismarck and West Fargo each $3 million, and Fargo, Grand Forks and Jamestown each $2 million.

Schneider noted the list didn’t include smaller but rapidly growing communities such as Watford City, New Town and Stanley that have been strained by oil development. He and House Minority Leader Kenton Onstad of Parshall said the proposed formula also leaves out cities in counties with less than $5 million in annual oil production tax revenue, including several in Ward County.

“That’s a significant omission,” Schneider said.

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The final piece of the GOP proposal would cut funding to the Energy Impact Grant program from $240 million this biennium to $150 million for 2015-2017.

Wardner said he’s heard from local officials that they’re “sick and tired of filling out papers and applying” for the grants, which provide one-time funding for projects related to infrastructure, schools, law enforcement, airports and emergency services. Schneider said lawmakers shouldn’t get ahead of themselves and cut the program before seeing how a revised formula works.

The proposed 60-40 split is likely to encounter resistance from eastern North Dakota lawmakers. Wardner said there “are some that feel it’s way too much money and the state is going to be hurt,” but he said there will be plenty of revenue left over.

House Majority Leader Al Carlson, R-Fargo, said he has witnessed the needs in oil country, and “there’s no question we have to address that.”

“It’s just going to take an 80-day session to sort this out,” he said.

Last week, Wardner and three other western North Dakota GOP legislators proposed $800 million in “surge” funding that they hope to have signed by the governor by the end of January so that cities and counties can plan for the 2015 construction season. Onstad called it “makeup money” that should have been allocated in 2013 or during a special session that Democrats requested but were denied by Gov. Jack Dalrymple.

Wardner said that if the formula is revised as proposed, “We don’t expect to ever ask for early money again.”

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

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