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Bill sending more oil tax revenue to MHA Nation clears Legislature

Bill sending more oil tax revenue to MHA Nation clears Legislature

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Chairman Mark Fox of the Mandan, Hidatsa and Arikara Nation asked a House committee this spring to change the oil tax sharing agreement between the state and tribe to incorporate certain wells that straddle the Fort Berthold Indian Reservation boundary.

The Mandan, Hidatsa and Arikara Nation appears poised to start collecting tax revenue from 132 additional oil wells that straddle the border of the Fort Berthold Indian Reservation.

The tribe would receive an estimated $7.15 million from those wells over the next two years under a new tax-sharing formula with the state laid out in Senate Bill 2319, which has cleared both chambers of the Legislature and is headed to Gov. Doug Burgum for his signature.

“I am satisfied that we have addressed a problem that has existed for 12 years,” MHA Chairman Mark Fox said after he watched the final vote take place on the House floor Thursday.

Under the bill, the tribe would receive a portion of oil production and extraction taxes from wells that begin off the reservation and extend across the border. The state currently does not share taxes on those wells but does for wells that are entirely within Fort Berthold or start on the reservation and cross the boundary.

Fox has pushed to collect revenue from all the so-called “straddle wells” for several legislative sessions. He has long described the issue as an “inequity,” estimating that it has caused the tribe to lose out on over $200 million in revenue since the state and tribe started sharing oil tax revenue in 2008 after the Bakken oil boom began.

The House passed the bill 79-13 Thursday, a day after the Senate approved it 43-3.

“What this bill does is it provides tax certainty to the oil industry,” Sen. Dale Patten, R-Watford City, told lawmakers on the Senate floor Wednesday. “It increases certainty and stability and provides encouragement and support for continued drilling that will provide revenue for all entities.”

A provision in the bill seeks to prevent a scenario in which MHA Nation levies its own oil tax, in effect causing producers to be taxed twice. Fox had raised that possibility this session. If that were to happen, the legislation would prohibit the state from sharing more funds with the tribe.

The legislation took a number of twists and turns over the past few months, with various stipulations added to try to bring hesitant lawmakers on board, but those were nixed in the final version in favor of the one seeking to avoid dual taxation.

During a hearing on the bill last month, Fox told lawmakers he was considering sending a letter to the U.S. Army Corps of Engineers asking that the agency consult with the tribe on the Dakota Access Pipeline during a lengthy environmental review underway. More than 60% of oil from Fort Berthold trust land goes through the pipeline, and the tribe is concerned a shutdown would disrupt the oil industry there and lead to significant revenue loss.

Fox sent the letter, and he provided a statement to pipeline operator Energy Transfer that it filed in court earlier this week in an effort to persuade a judge to allow the pipeline to continue operating while its permit remains revoked during the environmental study.

Patten referenced MHA’s involvement in the Dakota Access case as he encouraged fellow senators to vote for the bill, saying Fox provided a “strong” statement to the court.

Fox told the Tribune the tribe “simply had to” raise its voice in the pipeline dispute because the information before the court focused mainly on how a shutdown would affect the state and pipeline company.

“What was not being fleshed out was you have a different tribe that was going to be severely impacted,” he said.

Other tribes led by the Standing Rock Sioux have been fighting the pipeline in court for five years and want to see it shut down.

Fox said he believed lawmakers were swayed to approve the new tax-sharing formula in part because they recognized that oil development tends to increase on the reservation whenever the state resolves lingering tax issues with the tribe.

“Here the tribe is stepping forward and in essence defending its own rights to energy development, and that plays into the state benefiting as well,” he said.

The bill would not require a change to the oil tax sharing compact between the state and tribe.

Rather, it would create a monthly appropriation from the state to MHA Nation based on the share of well space that lies within the reservation boundary and whether wells cross trust or non-trust land. Trust land refers to tribal land held in trust by the federal government; whereas non-trust land tends to be privately owned land within a reservation. The formula also takes into consideration when wells were drilled, as that affects the percentage of tax revenue that would go to the state or the tribe.

State Tax Commissioner Ryan Rauschenberger said his office has been involved in talks about the straddle well issue for a long time.

"I think we ended up with a good resolution," he said.

The bill’s sponsor, Sen. Jordan Kannianen, R-Stanley, called the bill a “solution all parties seem to be happy with.”

Reach Amy R. Sisk at 701-250-8252 or amy.sisk@bismarcktribune.com.

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