ND Legislature changes state's oil tax distribution formula

JAMES MacPHERSON, Associated Press

Oil and gas: ND Legislature changes state's oil tax distribution formula

BISMARCK, N.D. (AP) — The North Dakota Legislature on Wednesday endorsed a change to a formula that's used to distribute tax revenue from oil and gas production to help communities deal with the impacts of energy development.

The House voted 91-1 and the Senate 46-1 on the formula that would give more funding to counties, cities, schools and townships in and around western North Dakota's oil patch.

The legislation is less than what has been proposed by Gov. Jack Dalrymple and sought by leaders in the region. The bill, one of the most debated of the session, has been the subject of weeks of negotiations between House and Senate representatives. It now heads to the governor.

At present, 80 percent of the annual production tax revenue above $5 million is divided between the state and local governments, in a 75-25 split favoring the state. The Legislature amended the formula to give 70 percent to the state and 30 percent to local governments.

Community leaders in western North Dakota's oil-producing counties and Dalrymple had pushed a 60-40 split in favor of local governments. But slumping oil prices have forced lawmakers to contemplate a more than $5 billion estimated shortfall in oil and gas tax revenue compared with a December forecast used by Dalrymple to craft his executive budget.

The reworked formula is expected to generate $631 million for the local governments over the next two-year budget cycle, an increase of $133 million over the current cycle, according to state budget analysts.

House Minority Leader Kenton Onstad, a Parshall Democrat whose district is in the heart of the oil patch, voted for the measure but said the region deserved more funding.

Onstad was critical of the $112 million in funding earmarked for roads and other projects in communities that are outside of the oil patch but are still impacted by rapid growth.

"They were impacted economically," Onstad said. "They were not structurally impacted."

The revamped distribution formula is in addition to legislation that Dalrymple signed in February that is fast-tracking $1.1 billion for highways and communities affected by North Dakota's exploding growth.

The record one-time spending bill was rushed through the House and Senate so infrastructure projects begin by this spring, when the state's construction season typically starts.

The bulk of the money will be spent in the western oil patch, which has been overwhelmed with spending needs on roads, utilities, housing and schools amid a flourishing state economy.

Senate Republican Majority Leader Rich Wardner of Dickinson, whose district is also in the oil patch, said the revamped distribution formula was realistic considering slumping crude prices.

"Western North Dakota came out OK," he said. "And when you put that in with the surge funding, we feel some good things are going to happen out there."

Williston GOP Sen. Brad Bekkedahl said the formula rewrite will be an "improvement" for communities in the oil patch and those outside of it.

"This beneficial to our cities, our counties and our state," he said.

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