Rising Crude Derails Bakken Tax Trigger

June 2, 2015 Kenny DuBose

The recent increase in crude prices is good news for North Dakota’s coffers, but bad news for Bakken oil and gas producers.

North Dakota's oil tax trigger was introduced by lawmakers to provide tax incentives to strained producers to ease the sting of prolonged lower crude prices. The trigger went into effect in February as WTI crude dipped below the $52.58 price point. The formula requires that crude stay below that price for five consecutive months, for the state to waive its 6.5% oil extraction tax.

The oil trigger was expected to take place June 1st, but rising crude prices mean it wont be implemented and producers will miss out on an estimated $480 million over the next six months. Since the nosedive last fall, crude prices inched up after the first of the year and make a sharp rebound in May, increasing almost 25% since April 1.

“State Tax Commissioner Ryan Rauschenberger confirmed this by saying “Given that oil has been trading mostly in the upper 50s, well above $55.09, we will not be triggering.”

To read more, visit nd.gov.

Lower Oil Tax for North Dakota

April 28, 2015 Elizabeth Alford

North Dakota is one step closer to cutting the price-triggered exemption that will lower the extraction tax on oil.

On Friday, North Dakota lawmakers cleared the way to change a 30 year old tax structure that gave some tax breaks for the oil industry have been linked to a price "trigger." Debate in North Dakota’s House was fierce and ended in a 66-26 vote in favor of cutting the state’s oil tax rate from 11.5 percent to 10 percent.

Republicans believe that this will provide a more stable table policy that will boost the state’s economy, but Democrats have said that it will cost the state billions over the next 10 years. The legislature’s research group estimates that the new tax structure will add $120 million to the state’s coffers between 2015-2017.

Now that the bill has cleared both house and the senate, the bill is now on its way to the governor’s desk for final approval.

“Governor Dalrymple’s spokesman Jeff Zent said the governor had not studied the bill. “Generally speaking, a flat tax offers the advantage of greater economic certainty,” Zent said. “But the details of any plan are very important, and we haven’t seen a final proposal.”

To read the full bill, visit nd.gov.

North Dakota Tax Trigger Getting Closer

February 11, 2015 Elizabeth Alford

The countdown has begun on North Dakota's small oil tax trigger.

This measure, which kicked in at the beginning of the month, was introduced by lawmakers to provide tax incentives to strained producers in order to ease the sting of prolonged lower crude prices.

The formula for the tax trigger states that when West Texas Intermediate (WTI) stays below $52.58 (2015) for five consecutive months, then the state waives its 6.5% oil extraction tax. Since January crude prices averaged $47.98 per barrel, the trigger took affect February 1st. As long as the price stays below $52.59 for the next four months, the incentive will take effect. Once the prices inches up, the calculations start over.

North Dakota state legislators jumped this week to take measures to extend the trigger through June 30, 2019. House Bill 1437 extends a smaller trigger that would take place the month after an average price point of $57.50 is reached. Both triggers would not be able to occur at once and there is provision to allow time for the state to recover from the huge losses that are inevitable.

“The bill’s sponsor, Rep. Glen Froseth said that, “It’s probably the best time to be doing it. We want the industry to keep working.”

To read the full bill, visit nd.gov.

Image: CCo Public Domain