BISMARCK, N.D. - Nearly 80 percent of House members voted Wednesday to kill a bill that would have reduced the state’s oil extraction tax by one-half of 1 percent.
Debate over the bill centered on the reduction in the oil extraction tax rate and the agreement between the state and the Three Affiliated Tribes that would split oil tax revenues. House Bill 1234 was defeated by a 21-71 vote.
HB1234 would have lowered the oil extraction tax rate from 6.5 percent to 6 percent after June 30. It also would change the definition of a stripper well to a well with 35 barrels of oil per day in production. The bill would close a loophole allowing wells drilled on stripper well properties after June 30 to receive stripper well status.
A fiscal estimate for HB1234 shows a revenue increase of $105 million to the state during the 2013-15 biennium and $220 million in 2015-17.
Offsetting much of that is the negative $100 million fiscal impact in the 2013-15 biennium and the $180.6 million reduction in 2015-17 if the oil extraction tax cut were enacted.
The overall fiscal note for HB1234 showed a $9.9 million loss in revenue in 2013-15 and $46.2 million in 2015-17.
Rep. Scot Kelsh, D-Fargo, said he was against HB1234 due to the half-percent oil extraction tax cut. He said he disagreed with the claim by bill proponents that the stripper well loophole’s closure amounted to a tax increase.
“It’s not a tax increase. It’s a matter of tax fairness,” Kelsh said. He added that the stripper well property provisions and tribal agreement should have been in separate bills and not tied to the oil extraction tax cut.
“The oil industry has presented us with all kinds of opportunities,” said
Rep. David Drovdal, R-Arnegard. Drovdal said the adjustments made in HB1234 would provide a clear picture of the state’s oil tax system for the oil and gas industry.
Rep. Mark Dosch, R-Bismarck, rose in opposition to the bill, citing concerns with the tribal agreement. HB1234 requires the Three Affiliated Tribes to report annually on investments in infrastructure as well as fees assessed on the oil and gas industry.
Dosch compared the deal in HB1234 to the original tribal agreement approved 20 years ago for tribal gambling. He said the deal was intended to create jobs and allow for revenues to be used to improve conditions on the reservations. Dosch said he hasn’t seen great improvement and he couldn’t bring himself to vote for HB1234.
“I’m not going to turn my back on North Dakota taxpayers,” Dosch said.
Rep. Kenton Onstad, D-Parshall, said Dosch was wrong and said that funds from gambling on reservations fund a number of programs that benefit tribal members.
Rep. Jon Nelson, R-Rugby, called HB1234 a template to work from in order to clean up the state’s oil tax law.
“I think this bill has a lot that’s wrong in it, but I also think this bill has a lot that’s right,” Nelson said.