AS I SEE IT
By Neal A. Shipman
As the North Dakota Legislature begins looking at where it is to be sending state funds during the next two years, McKenzie County and Watford City are carefully watching HB1066, which supporters are calling the “Prairie Dog” bill.
The bill is a massive rewrite of the state’s distribution of funds that it receives from the natural gas gross production tax and the oil extraction tax from oil wells producing in western North Dakota. As proposed, proponents of the bill want to see the creation of a new funding bucket for non-oil patch communities, another directed to every township in the state, a $50 million bucket for airport infrastructure improvements, as well as continued funding for the state’s hub cities.
HB1066 is a great concept so long as the state’s oil industry is pouring billions of dollars into the state’s coffers. Everyone is a winner.
But North Dakota legislators must not forget where the bulk of the state’s oil revenue is coming from.
McKenzie County is the backbone of North Dakota’s oil and gas production as it produces close to 40 percent of the state’s oil and 50 percent of the state’s natural gas. The oil and gas industry has already invested over $645 million in 64 industrial facilities in the county and plans to invest over $1.3 billion in the next few years in expanding or building new gas plants.
In the past two years alone, over $1 billion in oil taxes have poured into the state’s coffers just from the wells in McKenzie County. That is not chump change.
What North Dakota is seeing is a huge industry being built in McKenzie County. It is an industry that is not dependent on oil prices. These plants are only barely meeting the current production. And as more wells are drilled, even more plants are going to be built.
The bottom line that North Dakota legislators need to keep in mind is that McKenzie County and Watford City are at the heart of the Bakken. The oil and gas industry rely on the county to have quality roads and other infrastructure in order to continue building that industry. Likewise, the city must be able to continue to add new infrastructure to serve the area’s growing population.
The county and city are facing massive costs to meet their five-year development plans to keep pace with the unprecedented growth as the county needs to spend over $300 million just in roads while the city is looking over $241 to make improvements to its water, sewer and road systems.
As the state’s leading oil and gas producing area, McKenzie County and Watford City aren’t asking the state legislature for anything but their fair share when it comes to returning gross production taxes to the area that generated them for the state in the first place.
HB1066 has the ability to help everyone across the state.
But if, and when, legislators start tinkering with the distribution formula and who gets what funds, it would be wise of them to ask McKenzie County and Watford City leaders how that tinkering could impact the state’s future revenues. As we are seeing when good or bad things happen in the state’s oil industry in McKenzie County, the rest of the state feels either the positive or negative effects.