The state has again favored the oil industry over its residents. This time it comes in another deadline extension for companies to pay the state for deductions taken from natural gas royalties.
Companies must now pay by April 30, 2021, or face penalties. If they meet the deadline they will face just minimal interest. Officials estimate the state is owed tens of millions of dollars from companies that applied deductions for royalties resulting from mineral development on state-owned land.
North Dakota uses the royalty payments to benefit education and public institutions.
This is the second delay granted by the Land Board. Payments originally were due this spring but were delayed until Sept. 30. In both cases, the extensions were prompted by the oil downturn caused in large part by the coronavirus pandemic.
These are difficult times, and many businesses and industries are hurting. However, the payment deadline didn’t sneak up on any company. About 40 companies owed the state for deductions taken to compensate for “post-production costs,” which are the expenses for gathering and removing impurities from gas to prepare it for sale later in the processing chain. Eight companies have since come into compliance.
The state began its efforts to collect the money after a favorable North Dakota Supreme Court ruling last year. The companies were given plenty of time to pay, and it’s disappointing only eight have complied so far.
Too often, the state’s oil industry-related decisions are driven by fear that the companies will leave the state. State officials worry oil companies will shift their focus away from the Bakken to shale plays such as the Permian Basin in Texas and New Mexico. The Permian is closer to major pipelines, refiners and export terminals. That makes the oil worth a few more dollars per barrel than Bakken crude.
Add uncertainty surrounding the future of the Dakota Access Pipeline and the potential changes to the quality of natural gas accepted onto the Northern Border Pipeline, a major exporter for Bakken gas.
Throughout its history, the oil industry has seen a lot of ups and downs. So what’s happening now isn’t an unusual situation. Another thing that’s not unusual is the state going the extra mile for the oil industry. Company officials explain how dire a situation is, and the state bends backward to find ways to help them out.
The state is using pandemic-related federal aid it received to restore abandoned oil well sites. The work provides jobs for oil workers who lost their jobs because of the downturn. That’s good, but some of the abandoned wells should have been dealt with years ago. The state is letting the companies that abandoned the wells off the hook.
The money owed the state from the royalties would be useful during the pandemic. When the Legislature convenes in January, it no doubt will be considering some tight budgets. Additional funds for education and public institutions would be appreciated.
North Dakota should be on good terms with the oil industry, but not at the state’s expense. We need to quit operating out of fear and conduct a businesslike relationship.
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