Scenario indicates North Dakota could lose nearly $370 million in 2015 biennium, over $6 billion through 2023 biennium under current oil price projections

(BISMARCK, N.D.) – Armed with oil price and production projections obtained from the Department of Mineral Resources, the Energy Information Administration, and the Chicago Mercantile Exchange Group, Dem-NPL legislators today said that the GOP proposal to permanently cut the oil extraction tax by 30 percent in exchange for elimination of the “trigger” incentive results in an unacceptable risk of stunning revenue loss both in the upcoming biennium and in future biennia.

“If the oil price predictions made by the EIA and CME Group prove true, North Dakota will lose hundreds of millions of dollars in the next two years and billions upon billions in between now and 2025,” said Ron Guggisberg, a member of the House Appropriations Committee who gathered the data from the Department of Mineral Resources and worked with Legislative Council to develop the attached memorandum detailing these scenarios.

According to the data from the EIA and CME Group regarding the price of oil, the “trigger” would be in effect from June of 2015 through October of that year. However, the EIA and CME Group data predicts the price of oil will reach average above the trigger price for all five of these months, meaning the trigger incentive would no longer be effective starting in November of 2015.

In other words, this data indicates that the trigger incentive would be in effect only for the statutory minimum of five months.

“Such circumstances can reasonably be called the doomsday scenario for North Dakota,” Guggisberg added. “A permanent 30 percent cut to the extraction tax taking place after what would otherwise represent a relatively minimal five month loss of extraction tax revenue would be disastrous both in the near term and the long term for our state.”

Indeed, under such a scenario (identified as Proposed Scenario 2 in the attached memo), the state would lose an estimated $369,330,000 in the 2015-2017 biennium alone. Because of the permanent nature of the 30 percent cut to the extraction tax, the continued loss of oil extraction tax revenue would be profound: An estimated additional $5,830,350,000 reduction in revenue from the start of the 2017 budget period through the 2023 biennium.

“We understand that predictions change when it comes to a volatile commodity, but rather than being outlandish this nightmare scenario is based on best evidence,” added Senate Minority Leader Mac Schneider. “HB 1476 has been sold as adding predictability regarding oil revenues. This data shows that the bill is a multi-billion dollar crap shoot. It is an unacceptable risk for North Dakota that is being ramrodded through.”

HB 1476 was introduced last Friday by House Majority Leader Al Carlson. On Monday, it was heard by the House Finance and Tax Committee at 9:00 a.m. and was passed by the full House of Representatives that afternoon. The House did not take any testimony from the Tax Department or the Department of Natural Resources regarding the long-term cost of the 30 percent oil extraction tax cut.

(END)

Click Here: Comparison of Estimated Oil & Gas Tax Collections – Proposed Scenario Calculations

The post DEM-NPL Legislators: Republican Oil Tax Scheme Could Cost N.D. Over $6 Billion in Revenues by 2023 appeared first on North Dakota Democratic-NPL Party.

From:: Dem-NPL News