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MHA Nation seeks change to oil tax 'inequity' surrounding border wells

MHA Nation seeks change to oil tax 'inequity' surrounding border wells

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Three Affiliated Tribes Chairman Mark Fox speaks in favor of Senate Bill 2319 before the Senate Finance and Taxation Committee on Wednesday at the state Capitol. Seated in back is North Dakota Tax Commissioner Ryan Rauschenberger.

The leader of the Three Affiliated Tribes is asking North Dakota lawmakers to correct what he describes as a tax "inequity" surrounding wells on the border of the Fort Berthold Indian Reservation.

The tribe and state share in extraction and production taxes from wells that begin on the reservation and extend horizontally underground across the border. But in the reverse situation -- when wells begin off the reservation and cross onto it -- the tribe does not collect tax revenue.

“These wells should be included precisely because they extract oil and gas from underneath our reservation,” Chairman Mark Fox told members of the Senate Finance and Taxation Committee on Wednesday. “This is just about fairness.”

He spoke in support of Senate Bill 2319, introduced by Rep. Jordan Kannianen, R-Stanley, which aims to allow the tribe to collect taxes from wells that begin outside its reservation boundary and cross over. There are 132 wells in such a position.

Fox said oil companies drilling wells along the boundary benefit from improvements to infrastructure such as roads paid for through oil tax revenue.

State tax officials estimate the bill would result in $15.5 million less tax revenue for the state, counties, cities and school districts over the next two-year budget cycle, with that money going to the tribe instead.

The request from the tribe follows a new oil tax sharing agreement reached in 2019 that spells out what percentage of tax goes to the state and tribe from oil production on Fort Berthold. The proportion depends on whether trust or fee land is crossed. Trust land is held by the federal government in trust for the benefit of the tribe, and fee land refers to private land within a reservation. The agreement, in effect, sent a greater share of the revenue to the tribe.

Several oil companies that drill on Fort Berthold testified in favor of Senate Bill 2319 on Wednesday. No one spoke in opposition to the bill.

The committee endorsed the measure unanimously Wednesday after agreeing to an amendment from Kannianen that would cause the provisions in the bill to expire after two years unless certain conditions are met. One of the conditions involves the drilling of at least one well that begins on Fort Berthold and extends outside its border across federal land.

Kannianen said he's hopeful the state and tribe can work together on developing federal minerals just outside the reservation boundary in light of President Joe Biden's recent "pause" on federal oil leasing. The tribe has pushed for the Biden administration to defer to American Indian tribes when it comes to energy development on their lands.

Development on federal lands near Fort Berthold would help offset any revenue the state loses if the tribe shares in revenue from wells that begin off the reservation and cross over, he said.

The bill still needs approval from the full House and Senate. If that happens, there would still be one more step -- the tribe and state would need to amend the oil tax agreement to account for the changes in the legislation.

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

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