MINOT, N.D. — A bill introduced in Bismarck seeks to slash the interest rates the Land Board can charge oil and gas companies for overdue royalty payments.
The rates — as much as 18% interest with as much as 12% in penalties on top — are downright usurious. They would make a credit card executive blush.
The legislation would cut those down to 3.25% interest and 4% for penalties.
That would be sound reform on its own merits, but there's more to the story.
Last year, under the direction of Commissioner Jodi Smith, the board sent letters to oil companies who worked on state lands informing them their royalty payments weren't calculated correctly. The Land Board administered this leasing and provided the oil companies with guidance on calculating royalties.
The guidance was wrong.
This error, in some instances, goes back as far as four decades.
The letters demanded payment of hundreds of millions on decades' worth of royalties in a mere 90 days lest they face the absurd interest and penalty rates mentioned above.
"Big oil or not," no company deserves to be treated this way by its government.
How would you feel if the government said they'd miscalculated your property taxes and you now had 90 days to pony up tens of thousands of dollars before an 18% interest rate kicked in?
Smith is trying to spin this situation to the news media. "Land Commissioner Jodi Smith said few companies are ever actually charged the maximum penalties, and it's common for her office to grant temporary exemptions on penalties to firms that have trouble paying the department punctually," Jeremy Turley reported.
But Smith undermined that argument by simultaneously trying to claim that delays in paying royalties would hurt North Dakota's schools: "The department is still reviewing the potential effects of the bill, but Smith said there would be significant 'financial implications' for the schools, colleges and government funds that rely on the timely collection of royalty payments," Turley wrote.
If few are paying these rates, how would lowering them hurt schools?
Smith made these same claims last year, and they were as bogus then as they are now. The revenues administered by the Land Board flow into the Common Schools Trust Fund, which, in turn, contributes to the state's per-pupil education funding. While its revenues may be suffering — mostly due to the pandemic-driven downturn in oil activity but also, in a minimal way, by this dispute over royalties — it's also sitting on multiple billions in principal balance.
According to Treasurer Thomas Beadle's office, as of August of last year, the fund had $4.8 billion, an increase of $700 million since March.
There's plenty of money for the schools.
Smith's claims are false.
The Land Board's interest and penalty rates are absurd.
It's time for some changes.
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Rob Port, founder of SayAnythingBlog.com, is a Forum Communications commentator. Reach him on Twitter at @robport or via email at email@example.com.