Posted 4/11/17 (Tue)
By Neal A. Shipman
The North Dakota Legislature is making a very bad mistake as legislators are now looking at taking Gross Production Tax (GPT) revenues from oil-producing townships and reallocating those dollars to other non-oil townships.
Under an amendment which was tacked onto the ND Department of Trust Lands budget bill (SB 2013), some members of the Legislature are proposing to take two-thirds of the GPT revenue now allocated to townships in the top nine oil-producing counties, and redistribute it (as new money) to all the non-oil townships in North Dakota.
If the amendment is approved it will amount to a $16 million “takings,” including $2 million from McKenzie County, from those areas of the state seeing the heaviest industry impacts to their county and township roads.
One has to wonder what the legislators who are supporting this amendment are thinking? Did they forget that the GPT revenues that these oil-producing counties receive are in actuality an in lieu of tax payment for them not being able to assess property taxes on these wells? And did they forget the current GPT formula that is now in place was the result of long negotiations last legislative session that sought to bring equity in the GPT distribution to the oil-producing counties?
While obviously the Legislature can take away that which they have given, taking these funds from where they are needed the most is a wrong move.
Unlike other counties and townships that derive the bulk of their revenues from property taxes, oil-producing counties rely on their GPT receipts to build and maintain the roads and bridges that are required to service the oil industry at a time when the industry is beginning to rebound.
The “taking of this $16 million” is going to force townships and counties in the state’s oil patch to take some serious actions. They may be forced to close or restrict roads to prevent damage from heavy trucks, resulting in a detrimental impact on oil and gas production. They may choose to keep roads open, but heavy truck traffic will cause conditions to deteriorate. And without the GPT revenues, the only choice that they will have to maintain roads may be to pass on higher property taxes to local landowners.
Obviously, this amendment is drawing the criticism, and rightfully so, from the impacted counties and the ND Petroleum Council.
In addition to reducing the GPT revenue for the townships in Billings, Bowman, Burke, Divide, Dunn, McKenzie, Mountrail, Stark and Williams counties from $25 million this biennium to less than $9 million in the 2017-19 biennium if the amendment becomes law, the Legislature also wants to make changes to the Hub City designations, reduce funding for the new Williston Airport and turn the existing grant into a partial loan, and study the GPT funding.
Meeting the state’s budget woes is not going to be an easy job. The Legislature has already had to make difficult choices to meet the state’s $650 million revenue shortfall. But taking much needed GPT revenues from oil-producing counties and townships and re-allocating those dollars to other townships across the state is a move that will come back to haunt the Legislature.
We can all too vividly remember what happened to the oil patch’s roads when oil traffic mushroomed. While the traffic may have reduced slightly, it has not gone away. And as oil prices rebound and activity starts to ramp up again, why would the Legislature want to destroy the road systems that exist today.
The current GPT is working. Which is why the NDPC is urging legislators to allow the formula to work where the activity is the greatest and to be able to keep up with impacts.
Hopefully, the legislators will recognize the folly of “taking from Peter to pay Paul” when it comes to the need for the current GPT formula to remain in place untouched.