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Business Week - ND Dem Gov Candidate Disputes Oil Money Allotments

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Location: Unknown

By Dale Wetzel

Local governments in North Dakota's western oil-producing region should keep a much larger share of the state's oil tax collections, Democratic candidate for governor Ryan Taylor said Monday.

Western counties, cities and schools are only assured about 8 percent of oil revenues, and their share should be closer to 40 percent, Taylor said at a news conference in Bismarck.

North Dakota recently passed Alaska to become the nation's No. 2 oil-producing state, trailing only Texas. In February, the state accounted for 9.1 percent of the nation's oil output, an increase from 2.3 percent five years before, according to the U.S. Energy Department.

The boom has brought prosperity, but it also has created problems with housing shortages, crumbling roads and managing school enrollments that are rising dramatically after years of decline.

"The bigger question for us is, not that we're No. 2 in production ... but are we No. 1 in how we handle the impacts of that development?" Taylor said. "We want to make sure that our quality of life is not sacrificed."

Incumbent GOP Gov. Jack Dalrymple said the increase Taylor advocates would probably require changing the North Dakota Constitution or diverting money that is now set aside for schools, water projects and local property tax reductions.

Thirty percent of the state's oil taxes are stashed in a trust fund, which North Dakota voters approved two years ago. The Legislature is barred from dipping into the fund until 2017, and there are subsequent restrictions on how it may be spent.

North Dakota collected almost $1.2 billion in taxes on oil and natural gas from July 1, when the state's current budget period began, through April 30.

Of that sum, the state's general treasury has gotten 17 percent, while local governments and the Three Affiliated Tribes, which benefits from production on the Fort Berthold reservation in western North Dakota, have gotten 20 percent, the state Office of Management and Budget says.

North Dakota has two primary taxes on oil -- a 5 percent production tax and a 6.5 percent extraction tax, both of which are figured on the oil's value when it is pumped. Many wells do not pay the top rate; North Dakota's oil tax system is honeycombed with breaks and exemptions.

State law requires that a portion of the production tax go to oil-producing counties, which in turn must share it with cities and school districts within the county.

North Dakota lawmakers also have approved pumping added oil revenues into housing, road construction and $100 million worth of "impact grants" to cities, counties and townships.

Dalrymple said he is open to reconsidering how the state's oil revenues are allocated. The production tax distribution method "can work better, and in some ways it does not help the oil counties in the way that it should," Dalrymple said. "It is not rewarding them for growing oil production."

However, the local governments' share of oil taxes is greater than 8 percent, and a large chunk is stashed in trust funds that restrict lawmakers' power to spend the money, Dalrymple said.

"When you look at it from the point of view of what's truly available ... it is actually much more even," he said.

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