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North Dakota Tribes Threaten to Cut Off Oil Production Funds to State

Amid strained relations with state officials, three Native American tribes whose reservation lands provide more than 20% of North Dakota's oil production on Tuesday threatened to abandon an oil production revenue-sharing agreement with the state.

The Mandan, Hidatsa and Arikara tribes told members of the North Dakota House Finance and Taxation Committee that they are serious about pulling out.

Mark Fox, chairman of the joint tribes, testified in response to a pending legislative proposal from the Republican majority House leader to cut tax increases for producers if oil prices climb back above $90/bbl, more than twice what Bakken crude is selling for these days. Fox criticized the proposal as being in violation of the revenue-sharing agreement.

A proposed oil production tax cut from 11.5% to 10% would cut into revenues for the tribes from the production by private operators on their land. Since 2008, when the shale boom got into full swing, the tribe has collected $844 million under the revenue-sharing deal, and the state has collected $973 million, according to North Dakota Tax Department data. The state's share of revenues from the reservation is distributed among counties, cities, school districts and a number of other state funds/programs.

More than 1,500 wells have been drilled on Fort Berthold since the revenue-sharing agreement was signed. Only one well was drilled on Fort Berthold during the 20 years prior to the agreement.

The prospect of oil tax cuts because of commodity prices has had state lawmakers' attention for the past two years. The measure being considered, as proposed by House Majority Leader Al Carlson, would eliminate the final trigger for raising taxes by 1% if oil prices get back above $90, something nobody in the industry is predicting will happen any time soon.

Carlson  has told local news media that he opposes a tax policy that increases taxes as production is increased. Lower taxes, conversely, won’t spur more drilling; only higher global prices will do that, he said Tuesday.

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