Dem-NPL legislators: New cost projections of GOP oil tax cut “stunning”
(BISMARCK, N.D.) – At a press conference today, Dem-NPL legislators called recent calculations on the cost of the oil extraction tax cut proposed by the GOP legislative majority “stunning.” The projections, compiled by the North Dakota Tax Department, predict the reduction of the oil extraction tax contained in SB 2336 would cost the people of North Dakota $1.32 billion in the first five years alone.
“These new numbers, which are unquestionably conservative, really lay bare the radical and reckless nature of the GOP’s oil tax plan,” said Senate Dem-NPL Leader Mac Schneider, D-Grand Forks. “The billions in lost revenue under this bill should be used to improve infrastructure, address oil impacts, and continue property tax relief. That the majority would have these priorities shelved in favor of a sharp reduction in the extraction tax is stunning.”
On January 31st, 2013 Democratic lawmakers brought forth a Legislative Council memo that showed the 31% reduction in the oil extraction tax (from 6.5% to 4.5% for new wells drilled in 2017) proposed in SB 2336 would lead to $595 million in reduced revenues in the first five years of its existence. This initial projection was based on data from the Department of Mineral Resources, which assumed daily production for these new wells would be approximately 50 barrels of oil per day.
The $1.3 billion reduction projected under the Tax Department’s calculations rest on an assumption that new wells will produce 200 barrels per day. Though the resulting $1.3 billion five-year loss is dramatic, the 200 barrel-per-day estimate itself almost certainly understates the actual cost to North Dakota.
For instance, Senator George Sinner, D-Fargo, highlighted a chart from the Department of Mineral Resources which demonstrates that new Bakken wells initially produce 1,016 bbls per day with an average decline in production of 65% in year one, 30% in year two, 22% in year three, 19% in year four, 16% in year five and 10% per year thereafter. Under this scenario, the people of North Dakota stand to lose $3.7 billion over the coming half decade under the GOP oil extraction tax cut.
“The GOP majority has yet to be frank with the people about the actual cost of the oil extraction tax cut, but we know for a fact the reduction in revenue quickly adds up to billions upon billions dollars,” said Sinner.
Representative Kenton Onstad, D-Parshall stated that the oil extraction tax cut should be scrapped in favor of a renewed focus on addressing the needs of oil-impacted communities this session.
“Mountrail County alone has stated they need approximately $600 million to address oil and gas impacts and basic operating costs over the next decade,” Onstad said. “You have to ask: Why? Why are Republican lawmakers insisting on going forward with a sharp reduction in the extraction tax when the focus this session should be on assisting our communities?”
SB 2336 is scheduled to be heard in the House Finance and Taxation Committee Tuesday, March 19that 9:00 a.m.