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North Dakota Lawmakers Look to Revamp Oil/Gas Tax Distribution

The North Dakota legislature is considering revising the long-standing formula used to distribute oil/natural gas tax revenues between state and local government. The issue is expected to get considerable debate before the current legislative session ends April 30.

A proposal in the lower House passed 70-18 on Thursday and was sent to the Senate as the state lawmakers begin a mid-session break in the first days of March. It would provide less for local revenue needs than Gov. Jack Dalrymple and local leaders had sought, according to local news media reports.

The changes are aimed at the state's current two principal oil taxes: 5% tax on production and 6.5% on extraction. Both are assessed against oil's value when it is pumped, and at present 80% of the annual production tax revenue above $5 million is divided between the state and local governments in a 75-25 split with the state getting the larger percentage.

The House bill would amend the formula to give 70% to the state and 30% to local governments. Dalrymple and others have pushed for a 60-40 split with local governments getting the 60% share.

“We support a change in the formula and believe it is needed to provide western counties adequate long-term resources to improve infrastructure and housing,” said a spokesperson with the North Dakota Petroleum Council. “We will continue working with legislators, county and city leaders and other stakeholders to find a level that all can be comfortable with.”

The chair of the state House Appropriations Committee, Rep. Jeff Delzer, told news media he thought the formula change was "generous and fair." Democrats, who have been pushing for a bigger share to local governments, are unhappy with the bill. The Democrat minority leader in the House voted against the measure.

For a number of years, North Dakota has struggled to keep up with the socio-economic, quality-of-life impacts from its oil boom, which have strained local communities' and the state's ability to provide public services. That is why the state lawmakers earlier in the month passed and Dalrymple has signed a fast-track $1.1 billion appropriation for upgrading highways and other local services tied to the state's exploding growth.

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