State and tribal leaders moved closer Wednesday to reaching a compromise for sharing tax revenue from oil produced at Fort Berthold while also establishing a framework for future tribal tax agreements.
The Senate Finance and Taxation Committee heard testimony in support of Senate Bill 2312, which is projected to send an additional $33 million to the Mandan, Hidatsa and Arikara Nation in oil tax revenue for 2019-21.
Tribal Chairman Mark Fox said tribal leaders are close to signing a new agreement with Gov. Doug Burgum that would resolve a long-running dispute over how oil tax revenue is shared. The proposal would provide MHA with more funds to support oil development while giving certainty to the industry that companies won’t face the potential for dual taxation.
“We’ve been working for years on getting this done. What’s in front of us now is an opportunity to reap the benefits of that dialogue, that communication and that work,” said Fox, who said he’s been involved in oil tax discussions at every legislative session since 2011.
Currently, oil tax revenue is split 50-50 between the state and the tribe. Under the proposal, 80 percent of oil tax revenue from trust lands would go to the tribe, while 20 percent would go to the state. Trust lands are held by the federal government in trust for the benefit of the tribes.
For fee lands, which are private lands within the reservation, the state would receive 80 percent of the oil tax revenue and the tribe would receive 20 percent. Because more oil development is occurring on trust lands, the tribe would see a revenue increase.
Supporters of the bill say the drop in revenue for the state would be offset by an overall increase in oil industry investment.
“Long term, the state will benefit from additional revenues as well with additional development that otherwise wouldn't take place with the current uncertain tax environment,” said Sen. Jordan Kannianen, R-Stanley, the primary sponsor of the bill.
The MHA Nation objected to legislators’ decision in 2015 to reduce the overall oil tax from 11.5 percent to 10 percent. If the bill is approved, Fox said the tribe will have additional dollars to invest in roads, water infrastructure for energy development and housing.
Oil industry representatives testified in support of the bill, telling legislators they expect more investment in oil development and capturing natural gas on Fort Berthold if the bill is approved.
On Tuesday, Burgum voiced support for the proposal during a press conference with state and tribal leaders.
“This agreement is critical for creating a stable tax and regulatory environment across North Dakota that will help us compete with shale plays in other areas of the country,” Burgum said in a statement. “We’re in a competition for capital investment and talent, and our state and tribal nations become stronger competitors when we work together as a team.”
More than 300,000 barrels of oil per day are produced at Fort Berthold, or about one-fifth of North Dakota’s production.
Meanwhile, legislators also are considering two bills that would set a framework for tribes to enter into future agreements for taxes on alcohol, tobacco and sales and use tax, including tax on online sales.
Senate bills 2257 and 2258 stem from the work of an interim committee led by Burgum that studied tribal tax issues.
Fox said alcohol sold at Fort Berthold has historically been taxed with the state collecting all of the revenue. The proposal would set up a framework for the tribe to enter into an agreement with the state and share that money. Fox said MHA would like to use alcohol tax revenue to help pay for law enforcement patrols, treatment programs and other impacts.
“It’s going to make a significant impact to our nation,” Fox said. “It’s going to be historical.”
Ron His Horse Is Thunder, chairman of the tax commission for the Standing Rock Sioux Tribe, told legislators he supports the bills with amendments that give tribes more flexibility to negotiate the terms with the governor. One point of ongoing discussion is how tax agreements would affect tribally owned businesses, particularly casinos.
Sen. Dwight Cook, R-Mandan, chairman of the Senate Finance and Taxation Committee, emphasized that the bills would not impose a tax on tribal members, but enable tribes to impose their own taxes if they choose.
The proposed legislation also would allow tribes to negotiate tax agreements with the governor without having to wait for legislators to be in session every two years.
Representatives from the Spirit Lake Tribe and Turtle Mountain Band of Chippewa Indians also spoke in favor of the bills. Committee members are expected to continue discussing the proposals on Monday.