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TJ Jerke, Forum News Service, Published March 18 2013

Dems: Oil tax cut could cost ND $3.6 billion over five years

BISMARCK – Democratic lawmakers say the state would lose about $3.6 billion over five years under a proposal to decrease the oil extraction tax rate for new wells beginning in 2017.

Senate Bill 2336 proposes to decrease the current 6.5 percent extraction rate companies pay per barrel of oil extracted. The tax would drop to 4.5 percent, effectively decreasing the amount the state would collect between 2017 and 2021 from $11.9 billion to $8.2 billion.

The state Legacy Fund and Water Resources Trust Fund, which take in a percentage of the oil extraction tax, would see a decrease in funding as a result.

The Water Resources fund would lose out on $516 million; the Legacy Fund would lose about $1.1 billion over the five year period.

“(The funds) are being robbed from that money,” said Sen. George Sinner, D-Fargo.

Sinner revisited the $594 million loss Democrats originally thought the state was going to lose as a result of the tax cut. He found that number was based on 50 barrels of oil produced a day.

Sinner and other democratic lawmakers held a news conference late Monday morning to present two numbers that highlighted the potential loss in revenue that would come from the Senate proposal.

The state tax department said the state could lose $1.3 billion based on 200 barrels produced a day. The $3.6 billion loss was based on 400 barrels per day, a conservative number based off a projected production of 1,015 average barrels per day given by Lynn Helms, director of the Department of Mineral Resources – a number Democrats say is more realistic.

The bill’s sponsor, Sen. Dwight Cook, R-Mandan said the entire bill will benefit the state and oil companies, and concerns shouldn’t just focus on the tax cut.

“It’s a complicated issue, it’s not the type of issue that’s easy to explain,” he said. “We have to start with everyone talking about the whole bill.”

He said if there is a concern, it should be about the 10 tax incentives the state currently has. Eliminating these loopholes, which the bill proposes, would be a tradeoff for lowering the extraction tax rate, which he says the state is leaning too heavily upon.

“We are so dependent on this industry right now, which has had a history of boom and bust,” Cook said.

Rep. Scot Kelsh, D-Fargo, who will hear the bill in the House Finance and Taxation Committee on Tuesday morning, said if the bill becomes law, it will be sent to a statewide vote by an initiated measure.

“It does not enjoy popular support,” he said. “There won’t be 20 percent support for it on the ballot.”

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