House lawmakers vote to eliminate price-based oil tax breaks
House lawmakers voted 57-32 on Monday to eliminate price-based oil tax breaks and also to set a lower tax on oil extraction. It is expected that contentious debate will continue.
House Bill 1476 would eliminate the so-called large trigger exemption on the oil extraction tax. It is expected that the large trigger will come into effect from June 1. It has been estimated that eliminating the large trigger would add an estimated $120 million in state revenue in 2015-17.
The bill’s long-term impact to state revenue is still not clear. Legislators talked about the bill for many hours in committee and then on the House floor. Rep. Mary Schneider, D-Fargo, was among numerous House members raising concerns about late introduction of the bill on Day 70 of the 80-day session. Schneider has asked for further study before moving the bill forward.
“We don’t want this bill to turn out to be our great North Dakota giveaway of our one-time natural resource”, said Schneider.
According to Rep. Craig Headland, R-Montpelier, chairman of the House Finance and Taxation Committee, Legislature has been talking about eliminating the triggers in the oil extraction tax in support of a stable tax for numerous sessions.
This would permanently decrease the oil extraction tax from 6.5% to 4.5% but will happen only when the large trigger takes effect. North Dakota’s 5 percent gross production tax would not be changed and it will result in an overall tax decline from 11.5% to 9.5%.
Under the present law, if oil prices remain as low as they are for the last three months, the large trigger will lower the extraction tax from 6.5% to 4% for existing wells. It would exempt new wells completely for 24 months.