ND House kills oil tax restructuring measure

BISMARCK, N.D. (AP) -- North Dakota's House on Thursday killed a bill that that would have lowered tax rates for oil companies in exchange for closing loopholes.

Lawmakers overwhelmingly defeated the measure 87-6, with little debate.

Democrats had blasted the measure, saying it would have cost North Dakotans more than $1.3 billion in the first five years. The party issued a statement immediately following Thursday's House vote.

"We welcome the defeat of the radical and reckless cut to the oil extraction tax," the statement said. "The people of North Dakota stood to lose billions from our one-time harvest of oil resources under the GOP majority's proposal, and we hope the House's action is the last gasp of any effort to reduce the extraction tax this session."

Sen. Dwight Cook, R-Mandan, who chairs the Senate Finance and Taxation Committee, crafted the tax restructuring bill that passed the Senate earlier. The measure would charge oil companies an effective tax rate of 9.5 percent on wells drilled after 2017 instead of the 11.5 percent tax rate they're charged now, in exchange for closing loopholes used by companies.

Cook said the measure attempted bring tax certainty to the oil industry and the state.

"I'm disappointed," Cook told The Associated Press.

The reworked tax structure would have eliminated price triggers that would lessen state taxes for companies if the price of oil falls below a certain level. The concept, adopted in the 1980s during a time of depressed oil prices, adjusts the state's oil extraction tax based on a five-month average price if a barrel falls below a certain price. The so-called trigger price currently is set at $52 a barrel. The state could see tax revenue decrease by at least $2 billion if oil falls below the current price trigger, backers of the measure said.

Cook's proposal also would have cut the exemption for so-called stripper wells that the state Tax Department says is costing North Dakota about $50 million in revenue each year. The 1980s-era law cuts taxes for low-producing oil wells to keep them pumping, but it also has been applied in recent years to some gushers in North Dakota because they are near the weaker wells.

Stripper wells are exempt from the state's 6.5 percent extraction tax, but not a 5 percent production tax. Attempts to close the loophole have failed in the past three legislative sessions.

Both parties have been critical of the so-called stripper well exemption but no proposal has been introduced this session aimed at that issue alone. Cook said his proposal aimed to close the loophole while offering drilling incentives so companies didn't move rigs to other states.

"Pretty soon people have to stop complaining and start offering solutions," Cook said.

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