general fund, but once that hits $71 million, it spills into the permanent oil tax trust fund – a supply of money for special projects and priorities. The 6.5 percent tax is split between the general fund (unless it has hit the $71 million cap), the water resources trust fund and education purposes. The governor’s budget includes a large chunk of oil revenue slated for infrastructure improvements in western North Dakota. He’s proposing the full one percent of the GPT that is currently sent to the general fund be put into an oil impact fund for infrastructure needs. He also wants to pay for it with the permanent oil tax trust fund – forecasted at $886 million by the end of 2011. “Most people think we need to take care of the infrastructure and the roads. The discussion is, how do you do it? Do you do it through the governor’s method or another method?” explains tax commissioner Cory Fong. Fong believes it is important to keep oil impact projects out of the general fund because given the ups and downs of the oil industry, it is difficult to manage those fluctuations within the budget. “There is also a greater identity of those one-time funding projects when it is off from the general fund,” he said. While a majority of the state’s oil production is subject to the combined 11.5 percent, the current rate averaged for all production is 10.25 percent, due to incentives built into the OET which lower the rate. Most of those incentives are triggered by price. If the price of oil drops below $47.67 per barrel, the tax rate drops in an attempt to keep drilling economical. But some legislators believe the incentives are too complicated. Rep. Shirley Meyer (DND) introduced legislation to simplify the extraction tax and give it a flat, predictable tax rate of 9.5 percent.
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