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State, tribal oil tax agreement clears final hurdle

North Dakota House members put their stamp of approval on a new tribal oil tax agreement, the final hurdle for resolving a dispute with the Mandan, Hidatsa and Arikara Nation over how oil revenue is shared.

The House voted 84-8 on Wednesday in support of a bill that is estimated to send an additional $33.6 million in oil tax revenue to the tribe in the next two-year budget cycle.

Rep. Craig Headland, R-Montpelier, chairman of the House Finance and Taxation Committee, urged legislators to approve House Bill 2312, which was the result of extensive work by a tribal taxation committee.

Headland said the bill removes the “looming potential” for dual taxation on oil produced at Fort Berthold, a situation he said would be devastating to industry and state revenues.

“This bill is meant to improve the business climate by providing economic certainty to the state, the tribe and the industry on the reservation,” Headland said.

The state and the MHA Nation currently share equally in tax revenue from oil produced at Fort Berthold. But tribal leaders objected in 2015 when state lawmakers reduced the overall tax on oil production from 11.5 percent to 10 percent.

The new agreement resolves that dispute by sending 80 percent of oil tax revenue from trust lands to the tribe, while 20 percent would go to the state. For fee lands, which are private lands within the reservation, the state would receive 80 percent of the oil tax revenue and the tribe would receive 20 percent.

Because more oil development is occurring on trust lands, or lands held in trust by the government for the benefit of the tribes, the state is projected to lose tax revenue while MHA will receive a greater share. The agreement applies to newly drilled wells, not existing wells.

However, oil industry leaders have said they expect to increase investment at Fort Berthold as a result of the agreement. If the industry adds two drilling rigs to Fort Berthold over a two-year budget cycle, that would offset the financial impact to the state, according to estimates from the state Tax Department.

Gov. Doug Burgum and MHA Nation Chairman Mark Fox signed a new oil tax compact on Feb. 28 that mirrors the language in the bill. Some members of the House objected to being asked to vote on the bill after the governor signed the agreement.

“It really feels like our hands were forced to vote for this legislation before it even had a public hearing,” said Rep. Sebastian Ertelt, R-Lisbon.

Fox has said the tribe plans to invest the additional revenue in roads, housing and other infrastructure, as well as stimulate investment to reduce natural gas flaring. Fort Berthold produces just under 300,000 barrels of oil per day, about one-fifth of North Dakota’s overall production.

The bill also continues the work of the tribal taxation issues committee, led by Burgum, during the next interim. The bill still requires Burgum’s signature, considered a formality since he’s already signed the compact and voiced his support for the legislation.

Blackout Energy is an industrial equipment provider located in Williston, North Dakota that offers heaters, light towers, coolers, frack stands, and fuel rigs for other businesses. The views and opinions expressed in this article are strictly those of its authors and were not written by Blackout Energy. This article was originally published by Bismarck Tribune.