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Compromise proposed for sharing state, tribal oil tax revenue

An oil well pump in a sunflower field on July 26, 2015, west of Dickinson just off Interstate 94 as a storm brews off to the east. 2015 Forum News Service photo

BISMARCK — A proposal in the North Dakota Senate could resolve a long-running dispute over how oil tax revenue is split with the Mandan, Hidatsa and Arikara Nation.

Senate Bill 2312 changes how revenue is shared from new wells on the Fort Berthold Reservation, a compromise that has the support of legislative and tribal leaders and the governor.

The bill is estimated to shift an additional $33 million in oil tax revenue to the tribe for 2019-21, but supporters say the state will benefit from increased industry investment.

“There’s going to be more money in the long run for the state and the tribes,” said Sen. Jordan Kannianen, R-Stanley, the primary sponsor of the bill.

Oil tax revenue is currently split equally between the state and the tribe for production on the Fort Berthold Reservation, in the heart of the Bakken. But tribal leaders objected in 2015 when state lawmakers reduced the overall tax on oil production from 11.5 percent to 10 percent.

Mark Fox, chairman of the MHA Nation, has long advocated for a greater share of oil tax revenue to offset the impacts of oil development, such as fixing roads and dealing with increased crime.

Instead of sharing oil tax revenue 50-50, the bill proposes to send 80 percent of tax revenue from trust lands to the tribe and 20 percent to the state. On fee lands, the split would be the opposite, with 20 percent going to the tribe and 80 percent to the state. The change would only apply to new wells, not existing wells.

Because more development is occurring on trust lands, the net effect would be increased revenue for the tribe, said Tax Commissioner Ryan Rauschenberger.

Fox called the proposal a more equitable way to share production taxes that come from Fort Berthold. He also said it would provide certainty to the oil industry, which has been concerned about the potential of dual taxation if the state and tribe could not reach an agreement.

“Our joint effort will stabilize that and ease any apprehension about instability and allow us to move forward with more investment,” Fox said.

Senate Majority Leader Rich Wardner, R-Dickinson, and House Majority Leader Chet Pollert, R-Carrington, are co-sponsors of the bill. If the bill is approved, it would lay the groundwork for a new state-tribal tax agreement, Wardner said, which would need to be signed by the governor and Fox.

Gov. Doug Burgum participated in the negotiations and supports the proposal, according to spokesman Mike Nowatzki.

“He believes the agreement will help create a stable tax and regulatory environment that will help North Dakota attract and retain capital and talent to keep the Bakken competitive with other shale plays,” Nowatzki said.

Sen. Dwight Cook, R-Mandan, chairman of the Senate Finance and Taxation Committee, said he’s “not fully committed” to the bill but optimistic about the discussions to come. Cook said his committee is tentatively scheduled to hold a hearing on the bill on Feb. 6.

Fort Berthold produced more than 300,000 barrels of oil per day in November, or 22 percent of North Dakota’s overall oil production. About two-thirds came from trust lands.

The reservation now has more than 2,000 active wells. Department of Mineral Resources Director Lynn Helms projects that Fort Berthold has the potential for 4,535 future oil and gas wells.

Ron Ness, president of the North Dakota Petroleum Council, said providing certainty about oil taxes on the reservation should spur substantial new investment.

“It’s really big news,” Ness said.