BISMARCK — A bill that would provide a tax exemption for oil sold to North Dakota’s lone refinery was slammed by a representative of the Greater North Dakota Chamber of Commerce, who called it a windfall.
Bill Shalhoob, a lobbyist for the chamber, testified Monday against House Bill 1032 before the House Finance and Taxation Committee.
The bill would provide an exemption from the state’s 6.5 percent oil extraction tax for oil recovered and refined in North Dakota. The state’s lone refinery, owned by Tesoro Corp., is outside of Mandan. The Tesoro facility has 68,000 barrels of oil per day of refining capacity.
“It appears to provide a windfall to those … lucky to sell oil to Tesoro,” Shalhoob said.
Shalhoob pointed to a fiscal note attached to the bill that said it would mean an approximately $258 million reduction in oil extraction tax revenue. The estimate is based on the current refining capacity in the state.
“I’m not sure we want to go there,” Shalhoob said.
The $258 million in reduced revenue would impact several funds that receive oil extraction tax dollars.
Thirty percent of the tax revenues go into the Legacy Fund and another 30 percent go into the Strategic Infrastructure and Improvements Fund.
Twenty percent goes into the Resources Trust Fund and the remaining 20 percent is split between the Common Schools Trust Fund and Foundation Aid Stabilization Fund.
Shalhoob said the $258 million in revenue would be better spent on other things, such as tax reduction for North Dakotans.
Rep. Glen Froseth, R-Kenmare, asked Shalhoob where the money should be invested, specifically. Shalhoob replied that he didn’t know but that there needs to be discussion on alternatives to a handout to the oil and gas industry.
Shalhoob said the bigger question is why the industry is not able to expand. He said regulations from the Environmental Protection Agency make investment in expanded capacity and construction of new refineries more difficult.
No new refineries have been built in the U.S. since the 1970s although at least three are being considered in North Dakota.
“If we could solve the environmentals, we’d have three refineries going up today,” Shalhoob said.
No one testified in favor of HB1032. An earlier hearing took longer than expected and Shalhoob was the only person to testify. The committee took no action on the bill on Monday.