Should Western North Dakota Communities Get More Oil Tax Dollars?

Lawmakers are in Bismarck this week for their organizational session, and a part of their organizing is finalizing bill drafts for consideration in the regular session next year. Tomorrow Governor Jack Dalrymple will give his budget address, laying out the executive branch’s model for funding the state government. After that, you can expect lawmakers to start announcing bills representing their view of how our tax dollars ought to be spent.

One area that’s sure to create some heat is funding for western North Dakota. A “surge” funding bill proposed by western lawmakers, which aims to appropriate some $800 million to oil patch communities within the first couple of weeks of the session, has already created a frayed relationship between Senate Majority Leader Rich Wardner of Dickinson and his counterpart House Majority Leader Al Carlson of Fargo (Carlson apparently claims he was blindsided by the bill).

There’s also an east/west divide over the funding. Western communities are going to be pitted against more populous (and thus more represented) eastern communities in funding fights. “Two important players are the Association of Oil Producing Counties, whose interests are obvious, and the Valley Prosperity Partnership,” writes former Grand Forks Herald publisher Mike Jacobs in a column today. “This last is a coalition of Red River Valley cities intent on ensuring that North Dakota’s current wealth is shared around. The VPP is the brainchild of William Marcil Sr., whose Forum Communications Co. owns this newspaper and others in the state.”

In addition to the “surge” bill there will be more legislation to address the share oil patch communities get of oil tax revenues. Western communities say that they’re dealing with the majority of the oil impacts, while getting a too-small share of oil tax revenues.

Taking a look at the trend in revenue disbursements for the gross oil and gas production tax, they sort of have a point (numbers from Legislative Council). In recent years oil tax revenues have skyrocketed, but the share going to the political subdivisions where the oil is produced hasn’t grown nearly as much. Though, to be fair, a lot of those dollars going to the state have also come back to the oil patch in the form of spending on highways, law enforcement, etc.

Still, it’s not hard to see why many in oil patch communities feel something is out of whack.

As you can see, in terms of percentage, the political subdivisions have been receiving of oil tax revenues had been declining until 2013:

There have been several changes in how these tax revenues are allocated over the years.

From 1957 to 1981, each county got 75 percent of the first $200,000 in oil tax revenues produced there, 50 percent of the next $200,000 in revenues and 25 percent of all revenues after that. The state got the rest. There were also distribution limits set for the counties, though the Legislature axed those in 2009.

This formula was amended in 1981, 2007, 2009 and 2013. Currently the counties are getting to keep more, but there are all sorts of dictates on how it’s allocated. County general funds get a percentage. School districts get a percentage. The Oil and Gas Impact Grant Fund got $240 million in the current biennium. The Outdoor Heritage Fund (the conservation fund the Legislature passed in 2013 to try and head off Measure 5) gets up to $30 million per biennium currently. There are also allocations to so-called “hub cities” based on percentages of employment in the mining category (which is where oil and gas workers fall).

It’s all very, very confusing.

At issue for this Legislature is a) will they make it less confusing and b) how much more will western counties get?

Looming in the background are a lot of ugly headlines about falling oil prices which have a lot of people skittish.