State legislation to roll back Montana’s natural gas and oil tax holiday failed to move out of the House Taxation Committee Friday after 10 committee members voted for the bill and 10 voted against it.
HB 675, introduced by State. Rep. Brady Wiseman (D-Bozeman) last Monday, would establish an energy education trust fund, which would be funded by abolishing production tax holidays and a portion of the state’s coal severance tax. Wiseman has a few more days to see if he can garner enough votes; the deadline to transmit revenue bills to the full House is Tuesday (March 31).
Since 1999 the state’s natural gas and oil producers have had an 18-month tax holiday to encourage oil and gas drilling. The law was enacted when oil was trading at around $20/bbl and gas was less than $3/Mcf.
The current tax policy, said Wiseman, doesn’t provide drilling incentives but rather offers the energy industry a giveaway that has cost the state more than $500 million in revenue.
“We don’t have an incentive to drill,” he told reporters. “We don’t have an incentive to explore. What we have is a subsidy to pump. I would encourage the industry to come to this legislature with a properly formatted incentive to explore. They are right, drilling is expensive and it is risky.” He said the legislature should encourage drilling. “We ought not to be subsidizing the actual production afterwards because that costs us a lot of money.”
The Montana Petroleum Association’s Dave Galt said the tax holiday allows the state to compete with other producing states in the West. He said it “boils down to economics. It boils down to whether you’re going to be able to drill that well and complete that well…and drilling a well has certainly gotten expensive.”
Two previous legislative attempts to revamp the tax rules earlier failed in committee. One measure pushed by Gov. Brian Schweitzer, a Democrat, would have imposed a surtax of $1/bbl on oil and 8 cents/Mcf on natural gas. It also was prevented from moving to the full House, also on a tie vote, in the House Education Committee. Another bill, to reduce the tax holiday if commodity prices reached a certain threshold, was tabled by the Senate Taxation Committee.
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