Referendum In The Works For North Dakota Oil Tax Reform?

It’s obvious that North Dakota Democrats plan to make oil tax reform passed by the Legislature earlier this year a campaign issue in 2016, but could they try and refer that issue to the ballot before them?

HB1476 ended the so-called “big trigger” exemption tied to oil prices which might have eliminated the state’s extraction tax on June 1st, blowing a multi-billion dollar hole in state revenues. Though it appears as though a slight recovery in oil prices will have the state narrowly missing that exemption, the budget forecast used by lawmakers predicted that it would be in effect for eleven months in the coming biennium.

But now, starting on January 1 of 2016, the “big trigger” and other tax exemptions go away to be replaced by a relatively flat tax. If the price of oil is above $90 per barrel for three months the top tax rate for the combined oil production and extraction rates is 11 percent down from 11.5 percent under the previous code. If the price of oil is below $90 per barrel for three months the tax is 10 percent.

That seems like reasonable reform to me, but Democrats hate it and were ruthless in enforcing party discipline on the issue. Now there’s buzz in political circles about a possible referral.

There’s already one law passed during the 2015 legislative session working its way to referral – the North Dakota Farmer’s Union is going to war over an exemption to the state’s anti-corporate farming laws for swine and dairy farmers – so a referral of the oil tax would be the second.

[mks_pullquote align=”right” width=”300″ size=”24″ bg_color=”#000000″ txt_color=”#ffffff”]Dalrymple signed HB1476 on April 29, so by my calculation that would give would-be petitioners until July 28 to get this done. The law then would be suspended until voters cast their ballots either in the next statewide election (June 2016) or in a special election if Dalrymple called one.[/mks_pullquote]

Here’s the nuts and bolts of what is required.

The law gives petitioners 90 days from the day legislation is filed with the Secretary of State to get a petition approved, signed by the requisite number of eligible voters, and turned back in.

Dalrymple signed HB1476 on April 29, so by my calculation that would give would-be petitioners until July 28 to get this done. The law then would be suspended until voters cast their ballots either in the next statewide election (June 2016) or in a special election if Dalrymple called one.

The number of signatures required would be 13,452. That’s not a hard number to hit if you’ve got a well-funded organization of paid petitioners out collecting signatures – I suspect the Farmer’s Union folks will have no problems – but much more difficult if you’re relying on volunteers.

It’s not clear which group, if any, would get behind a referral of the oil tax bill. It’s not clear how much appetite there is in the public to refer the law.

On one hand, it would be easy for opponents to trot out the “handouts for big oil” canard which plays well with some factions of voters, but on the other hand the status quo in the oil tax code is hugely complicated and, given that it was tied to something as volatile as oil prices, it created a tremendous amount of uncertainty not just for the industry but for state leaders as well. I think voters could be very understanding of that argument as well, and if Dalrymple calls a special election for the referral that might be even more the case as turnout would likely be more of an issue for challengers to the law than for supporters.

And it’s not like Democrats haven’t tried to make a stink out of this issue before. During the 2014 cycle Democrats attacked state Senator Lonnie Laffen, a Republican from Grand Forks, for supporting similar reform during the 2013 session. It didn’t exactly move the needle for them.

The Republicans I’ve spoken to about a potential referral don’t sound all that worried about it. They’d like to avoid a costly battle over the issue, of course, but generally they seem to think they’d have no problem beating back any challenge to the reform.