DEM-NPL Leaders on Al Carlson’s Republican Supermajority’s 11th Hour Scheme to Permanently Cut Oil Extraction Tax by 30%

DEM-NPL Leaders on Al Carlson’s Republican Supermajority’s 11th Hour Scheme to Permanently Cut Oil Extraction Tax by 30%

Schnedier and Onstad: Republican last minute attempt “a misuse of the legislative process” and a “breach of trust with future generations”

(BISMARCK, N.D.) – In response to the announcement by Representative Al Carlson that the GOP majority in the Legislature intends to go forward with a delayed bill that would permanently reduce the oil extraction tax by 30 percent, House Minority Leader Kenton Onstad and Senate Minority Leader Mac Schneider released the following statement:

If enacted, the Republican majority’s resurrected plan to dramatically and permanently reduce the oil extraction tax would represent a misuse the legislative process and result in a breach of trust with future generations of North Dakotans.

Representative Carlson’s proposal — advanced on day 70 of an 80 day legislative session with no public input or collaboration with the minority — is literally a back room deal. If the proposal actually stood to benefit North Dakotans, it would have been introduced as a bill months ago and subjected to the public scrutiny that accompanies a bill’s path through the Legislature.

Instead, Representative Carlson and his followers are seeking to ramrod a significant, permanent reduction to the oil extraction tax through the Legislature without a meaningful opportunity for thoughtful consideration. It is an arrogant power tactic that has no place in North Dakota policy making.

Worse than this procedural abuse is the potential end result for North Dakota. By reducing the oil extraction tax by over 30 percent during the remainder of the life of the world-class Bakken oil play, the majority is setting the state up for a loss of tens of billions of dollars that should be used to support infrastructure projects, fund education, and invest as part of our Legacy Fund.

If the proposed 30 percent oil extraction tax reduction was in place during the previous biennium, for example, revenue would have been reduced by approximately $642,754,538 in just those two years alone. Extrapolating a similar loss across the decades, this permanent reduction in revenue would dwarf anticipated short-term revenue losses from the “triggering” of existing incentives. Specifically, Moody’s Analytics recently predicted that if the “big” trigger activates in June of 2015 as anticipated, this incentive would expire in May of 2016 due to the expected rise in the price of oil.

Under those circumstances, permanently cutting the extraction tax by 30 percent in a contrived and artificial exchange for elimination of the trigger is like cutting off a leg to avoid a sprained ankle.

We are proud of the Legislature’s role in promoting valued investments by the oil industry in our state’s economy and happy that the industry has thrived under our existing tax structure. We remain entirely open to working with the majority on ways to incentivize continued investment in North Dakota by the oil industry during downturns in the market without unduly harming our state budget. However, this proposal — which compared to current law seeks to provide a massive tax cut when oil is at $100 a barrel and a relative increase in taxes on the industry during prolonged periods of sustained low prices — utterly fails to strike the right balance.

Our Republican colleagues need to remember that the 6.5 percent extraction tax was put in place by a vote of the people. The triggers, on the other hand, are a product of legislative action. We are happy to work to reform the triggers if our friends in the majority decide to scrap this proposal and engage in good faith. But we will zealously guard the people’s share of this one-time harvest.


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