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NORTH DAKOTA PETROLEUM COUNCIL

BILL TRACKER: Alexis Brinkman-Baxley monitors and works with the North Dakota legislature for the North Dakota Petroleum Council. PHOTO: THE BAKKEN MAGAZINE

ND Oil, Gas Legislative Review By Alexis Brinkman-Baxley

64th Legislative Assembly of the State of North Dakota wrapped up April 29. While this session did not take as many days as the 2013 session, most would argue it was as jam-packed with significant and controversial issues. As usual, this session covered a multitude of issues relating to every aspect of the oil and gas industry, but none more impactful than those of a financial nature. Impact funding and declining oil prices were the hot topics of hallway chatter from day one, and played a role in nearly every decision that was made. Revised revenue forecasts in February and March were an attempt to give legislators a base to work from, but it took all the way to day 71 8

and a major reform of North Dakota’s oil tax structure for there to be any certainty. Likewise, work for the North Dakota Petroleum Council continued to the very end. Following is a breakdown of the results of some of the top oil and gas industry issues addressed this session:

Western Infrastructure and Impact Issues

Just like last session, increased funding for oil-impacted cities, counties and townships was one of most pressing issues. Two proposals from the governor and Senate Majority Leader Rich Wardner (R-Dickinson) were among the first bills heard when the session kicked off, and committees in

The BAKKEN MAGAZINE MAY 2015

THE MESSAGE

both bodies worked quickly to put together and approve a package in time for the 2015 construction season. SB 2103, Sen. Wardner’s Surge Bill, was signed by Gov. Dalrymple on Feb. 24, and included $240 million for the big 10 oil producing counties, $100 million for cities in the big 10 that collect $5 million or more per year in gross production tax, $172 million for hub cities and Watford City, $10 million for boundary cities, $112 million for cities, counties and townships outside of the big 10 counties, $450 million for state highways and county road construction requirements. Securing additional funding for the communities in western North Dakota was again a top priority for the NDPC. We believe this historic legislation should provide impacted communities with the resources they need. HB 1176, the funding formula bill, took considerably longer to work out. Proposed by the North Dakota Association of Oil and Gas Producing Counties and supported by the Gov. the bill changed the production tax distribution formula and increased the local share to 30 percent. Amendments to an additional bill, HB 1377, increased the local share by another four percent depending on the counties’ use of additional road-use fees. NDPC also worked to support additional staffing for many of the state agencies affected by oil and gas development, including the North Dakota Industrial Commission, North Dakota Department of Health, and the Highway Patrol.

Taxes

Major reform to the oil and gas tax structure will likely turn out to be the most talked-about issue of the session. HB 1476 was proposed April 17. The initial bill implemented a flat tax of 9.5 percent and eliminated the current tax structure if the current system’s “big trigger” went on. Legislators worked quickly to move the bill in an effort to provide some stability and predictability for the next biennium. Following negotiations with the MHA Nation and Democrats, significant changes were made to the bill and the final version was passed one week after the bill’s introduction. The final version does the following: • Regardless of whether or not the big trigger takes effect, the extraction tax will go to 5% on January 1, 2016 (total effective tax rate of 10%). The triggers will be eliminated from the tax policy. This gives industry a potential of 5 months to complete wells that would qualify for the triggered rate. Any well eligible for any exemption will only be able to take advantage of the incentivized rate until Dec. 1. • If the average price of a barrel of oil is above $90 (indexed for inflation) for 90 consecutive days, the extraction tax will increase to 6 percent, for a total effective tax rate of 11 percent. The rate will trigger back down to 5 percent following 90 consecutive days below $90. Essentially, the language creates a reverse trigger. • Section 6 of the amended bill would allow the Gov. to negotiate a tax agreement with the MHA

The Bakken Magazine - May 2015  

Hydraulic Fracturing, Williston Basin Petroleum Conference Review

The Bakken Magazine - May 2015  

Hydraulic Fracturing, Williston Basin Petroleum Conference Review