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 How to share lucrative tax revenue from booming oil production
promises to be the most contentious part of the 80-day session, with
politicians from the state's western oil producing counties
clamoring for more money to build roads, schools and other
infrastructure projects.
North Dakota is the second-largest U.S. oil producer and the
fastest-growing economy in the nation, although many communities
have struggled to provide public services for their growing
populations.
A more than 50 percent drop in crude oil prices since June will also
be a topic during the session. While only 3 percent of the state's
operating budget comes from oil taxes, many one-time infrastructure
projects, as well as a rainy day fund currently worth about $3
billion, are tied to the levies.
In a speech at the capitol last month, Governor Jack Dalrymple
proposed a $1 billion increase in the portion of the oil production
tax that western oil counties receive. If legislators approve the
request, it would bump the amount to $1.7 billion.
 "We all clapped when it was announced," said Vicky Steiner, a state
representative and head of the North Dakota Association of Oil and
Gas Producing Counties. "I think Dalrymple did a thorough job for
the west."
However, Fargo, Grand Forks and other eastern cities holding most of
the state's population have pushed to keep current funding models,
which gives state officials in Bismarck allocation authority over
most oil tax revenue.
The skirmish could be moot if oil prices drop too low. The state's
6.5 percent oil extraction tax gets waived if prices fall below a
trigger of $52.59 per barrel at the Cushing, Oklahoma, hub for five
consecutive months.
Dalrymple's proposed budget, which must be approved by a majority of
the 141 legislators, is based on oil prices of $74 to $78 per barrel
for the first year of the session and $79 to $82 per barrel for the
second. That is far above the current price for U.S. crude of around
$51 per barrel.
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In an interview with Reuters last month, Dalrymple said he based his
price projections on data from Moody's Corp, and he expects an
updated forecast in February, in the middle of the legislative
session.
Should the projection be cut, it could dramatically alter final
deliberations on the 279 bills under consideration.
The bill aimed at curbing sales taxes for natural gas pipelines
comes as the state enforces tough standards to curb flaring, the
wasteful burning of gas. The bill's sponsors hope the proposed law
would further encourage companies to build pipe networks, the best
way to prevent flaring.
A waiver on sales taxes for materials used to build fertilizer
plants would be a boon for CHS Inc, which announced plans last
September to build a $3 billion nitrogen plant in the state.
Legislators also will consider bills that would reduce, but not
eliminate, the state's income tax rate to zero.
Legislators receive $1,500 per month for housing in the state
capital of Bismarck during the session of the legislature held every
other year.
(Reporting by Ernest Scheyder; Editing by Terry Wade and Andre
Grenon)
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