Lower Oil Tax for North Dakota

North Dakota Oil Tax Reductions
North Dakota Oil Tax Reductions

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

Related: North Dakota Tax Trigger Getting Closer

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.

Pipeline Safety Strengthened in North Dakota

Bakken pipeline threatened
Bakken pipeline threatened

On Monday, Governor Jack Dalrymple took steps to strengthen the state's regulatory oversight on crude pipelines by signing House Bill 1358.

This legislation provides $1.5 million for a study of pipeline technology and gives the state greater authority to regulate construction.

After a series for accidents involving leaks and accidents, Gov, Dalrymple sought help from the federal Pipeline and Hazardous Materials Safety Administration in order to help fund university research in pipeline safety.

Related: PHMSA Offers Pipeline Safety Grants

Gov. Dalrymple offered a statement, saying that “This legislation builds on our ongoing work to enhance pipeline safety in North Dakota. With this bill’s passage, North Dakota will require significantly more from pipeline builders and operators. At the same time, the state has significantly expanded its pipeline reclamation fund so that we can also resolve land and water restoration needs that are more than 30 years old.

The issue of pipeline safety and environmental concerns have increased as more oil has been produced in the United States and producers must find ways to move the product. TransCanada Corporaiton has been working since 2008 to get approval to extend the Keystone, allowing another 800,000 barrels of petroleum to flow from the Bakken region to the Gulf Coast.

Related: Obama Issues Keystone Pipeline Veto

Read more at legis.nd.gov

Governor Dalrymple Commits to Infrastructure

Bakken roads
Bakken roads

Governor Dalrymple of North Dakota signed legislation that grants massive emergency funding to counties and cities statewide in order to bolster the lagging infrastructure.

On Monday, the ND Senate unanimously approved SB 2103 for roads and other critical infrastructure throughout the state with the bulk of the resources allocated to its oil producing counties. The $1.1 billion is in addition to a $2.3 billion infrastructure spending package that is already in place.

The bulk of the money is targeted to fix roadways and bridges that have not been able to keep up with the increased traffic of heavy oil field equipment that the shale boom has brought to the Bakken area. Many of the region’s oil-producing counties still use hundreds of miles of gravel roads as main transportation routes often seeing as many as 1,000 vehicles a day, compared to fewer than 50 before the boom. Lawmakers hope this legislation will improve the infrastructure for what is hopefully another 20- to 25-year production in the play.

Speaking with the Dickenson Press, Watford City Mayor Brent Sanford said, “The traffic flow will be better. It will be safer. So this is really a great investment for public safety.

Related ND News: No Income Tax for North Dakota?

Senate bill 2103 allocates the nearly $1.1 billion as follows:

  • $450 million for the Department of Transportation
  • 300 million for the state’s top 10 oil-producing counties
  • $140 million for cities within the top 10 oil producing counties
  • $8,750,000 to school districts in oil-producing counties
  • $215 million for hub cities: Williston, Dickinson, Minot and Watford City.
  • $112 million for non-oil-producing counties.
  • $16 million for townships in non-oil-producing counties.

Read the entire bill at legi.nd.gov

No Income Tax for North Dakota?

Dalrymple cuts state income tax
Dalrymple cuts state income tax

In a few short days, the North Dakota legislature heads back into session. Expected to take center stage are several key funding issues recently made more crucial by the continued decline in oil prices

First is an initiative by GOP members that would effectively wipe out the state income tax. A new bill that is expected to be introduced early in the session will reduce the income tax rate to zero. This is a counter to Gov Dalrymple’s proposal for a 10% decrease in personal and corporate income tax that was made in an effort to draw more people to the region. This issue is highly contested since there is great concern over the potential lost revenue due to plummeting oil prices.

North Dakota's state funding is tightly tied to taxes on oil and gas production and was responsible for more than half the state’s revenues for 2013. So as oil prices decline, legislators have reason to be nervous. In addition to expected lower production, there is a quirky law from 2001 that allows tax exemptions when oil hits a certain low price point. Though the formula is a bit complicated, basically if oil stays below $52.58 (2015) for five consecutive months, the percentage of tax decreases, potentially resulting in untold millions in lost revenue.

Reduced tax revenue brought on by low oil prices has already put many services at risk, so reducing state income tax is making many lawmakers nervous.

Senate Majority Leader Mac Sneider told a teh Jamestown Sun that “I think at a time when we’re seeing warning signs of not wanting our budget to be dependent on the price of a commodity, I think eliminating the income tax is shortsighted. We’ll be focusing on tax relief, but it’ll be on the tax that people are most concerned about, and that’s property tax.

Another funding issue that ND legislators will be deciding is the way the state divides tax revenues. When Gov. Dalrymple rolled out his proposed budget, it included a change in the state’s oil production tax distribution formula that would shift the way funds are split and allow more money to be funneled back to the county level. Currently local governments receive 25 percent of these funds but this would increase that 60 percent, which would be vitally important to improve local infrastructure (including roads, water plants and housing) that has not caught up with the demand.

Read more at washingtonpost.com

(photo credit: North Dakota National Guardcc

Bakken Oil Transport Still Not Safe

Lac-Mégantic rail disaster
Lac-Mégantic rail disaster

When the North Dakota Industrial Commission issued its landmark ruling last week concerning the conditioning of oil, it appeared that they were making a serious move towards improving the safety of transporting crude out of the Bakken. But according to an article in the StarTribune, the new regulations, which go into effect April 2, 2015, won’t bring the industry any closer to a solution for a serious problem that is drawing fire from legislators, concerned citizens and environmental groups.

Alan Stankevitz, an expert on the DOT 111 tanker car, explains in the StarTribune that the standards set by the commission, which includes Gov. Jack Dalrymple, are not enough to adequately address the problem. The order establishes new regulations that demand facilities to maintain an operating pressure at less than 13.7 psi. This is a much larger number than the volatility point for Bakken crude, which is between 11.5 and 11.8 psi.

Stankevitz writes, “The bottom line is that the limit has been set so high by North Dakota that the mandate is toothless. The same volatile oil that caused the massive explosions in Casselton, N.D., and Lac-Mégantic would still have been allowed to ride the rails, according to this new mandate.

Stankevitz goes on to charge the commission with using ‘smoke and mirror tactics’ to divert attention away from the real issue, which he believes to be the routine use of old and outdated tanker cars that are leased by the petroleum industry for transportation.

Read more in the Star Tribune.