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Patrick Springer, Published March 03 2012

Budget full of infrastructure requests as oil revenue diverted

FARGO – North Dakota officials are grappling with the gusher of infrastructure needs associated with booming oil development and water management.

Although the latest revenue forecast for the current biennium is running 28.5 percent above an earlier prediction, the state confronts big obligations for roads, housing and water projects, Gov. Jack Dalrymple said.

“In spite of all the positive news about revenues, we have some incredible needs,” Dalrymple recently told The Forum’s editorial board.

As of January, the state had collected $344 million more than the forecast for the 2011-13 budget biennium.

But large portions of funding are obligated to special funds, including the Legacy Fund, which sets aside up to 30 percent of oil tax collections, Dalrymple said.

Budget analysts have begun preliminary work to identify revenues and expenses for the 2013-15 budget.

Todd Sando, the state engineer and staff director of the State Water Commission, has warned that requests are coming in for the state to help fund “monumental” water projects with “staggering” price tags.

One case in point: an estimate that a levee system on the Souris River to protect the Burlington-to-Velva reach could cost $820 million. The total cost of flood protection on the Souris, which flooded Minot, could easily top $1 billion, Sando said.

That’s in addition to a proposed $1.78 billion diversion channel to protect Fargo-Moorhead, and flood projects planned for Valley City, Jamestown and elsewhere, he said.

“Now there are cities that are saying, ‘What about us?’” Sando said. “It’s from every corner of the state.”

He added: “It’s not just flood control, it’s also water supply,” including water needs for oil development and residential use in western North Dakota and the Red River Valley.

The State Water Commission’s deadline for funding requests falls at the end of April. The North Dakota Water Coalition will help the commission rank the projects.

Sheila Peterson, fiscal director of the North Dakota Office of Management and Budget, said a key task in projecting revenues and expenses for the 2013-15 budget will be to distinguish between one-time and ongoing revenues.

“We don’t want to create a structural deficit for ourselves,” she said. “Sustainability is important. I think that will be more challenging than it’s been in the past.”

She added: “We need to be looking at numbers and needs and long-range plans earlier in the budget cycle than we have in the past.”

Traditionally, state officials present their budget plans to legislators in July before the next session.

Because of the oil boom, there is a sense that North Dakota is swimming in revenue, the governor said. That is perhaps best demonstrated, he said, by Measure 2 on the June ballot, which would abolish local property taxes. It’s a move state and local officials have said would hamstring budgeting.

Another proposal, which could be on the November ballot, would set aside 5 percent of oil revenues for conservation, clean air, water and land.

Legislative analysts recently estimated the conservation fund could take in about $87.5 million a year, or $175 million per biennium, at present oil production rates and prices.

But the state faces significant infrastructure needs in the years ahead, Dalrymple said.

The state has appropriated $1.2 billion to address infrastructure, housing and safety needs in North Dakota’s Oil Patch in the 2011-13 budget. So far, $391 million has been awarded, with about $806 million remaining.

Readers can reach Forum reporter Patrick Springer at (701) 241-5522