Posted 5/29/13 (Wed)
By Kate Ruggles
Farmer Staff Writer
When House Bill 1358 was first introduced this last legislative session, the hope of District 39 Representatives was that it would rework the oil and gas production tax formula in favor of oil-impacted counties and communities, thus sending much needed funds their way.
However, in the end, that was not necessarily the case. While more funds were allocated to western North Dakota counties than in the previous biennium, the state’s financial commitments simply fell short of McKenzie County’s actual need.
“There are 17 oil and gas producing counties in North Dakota,” states Linda Svihovec, McKenzie County auditor. “But people across the state don’t realize that 84 percent of the oil and gas that is produced comes from just four of those counties, Mountrail, Williams, Dunn and McKenzie.”
According to Svihovec, Mountrail County produces roughly 28 percent of North Dakota’s oil and gas, while McKenzie County brings in 24 percent. Williams County follows with 20 percent and Dunn County with 12 percent. That means that the 13 other oil and gas producing counties together bring in the remaining 16 percent.
And though McKenzie County brings in four percent less than Mountrail County, no one would know it from looking at the rig counts.
According to Svihovec, on May 11, there were 184 drilling rigs in North Dakota, yet the highest number, 68, was found in McKenzie County. Mountrail County had 36 rigs, Dunn County, 34 and Williams County, 20. The remaining 26 drilling rigs were again spread out among the other 13 oil-producing counties in North Dakota.
“Our feelings about House Bill 1358 are somewhat hot and cold,” states McKenzie County Commissioner Ron Anderson. “We have to say thank you, because we are getting back a significant increase in money. But it just isn’t enough. We are getting back a lot of money, but we also have a lot of problems.”
The lack of the Legislature providing more state funds directly to the most severely impacted counties is what troubles county officials the most.
“When you see where the impacts are and where the tax is being generated from, it’s just difficult to understand why more wasn’t given back to those counties,” states Svihovec.
Svihovec estimates that the county will receive roughly $32.5 million per year this biennium. Under the old production tax formula, McKenzie County would have received close to $20 million per year, and in the last fiscal year the county received $18 million.
Also, under the current formula, according to Svihovec, McKenzie County cities will receive $10 million instead of the $5 million under the old formula, and schools will receive $2.7 million, instead of the $1.6 million they would have received if the old formula was still in place.
“We are receiving a significant increase of funds from the new oil and gas production tax formula,” states Svihovec. “But it isn’t enough.”
According to Svihovec, the changes in the formula eliminate the portion of dollars allocated to the county infrastructure fund which was used for grants to townships for oil-impacted roads and to schools for buses. The new formula replaces the funding for impacted townships’ roads, but does not replace the funding the infrastructure grants provided for schools to replace buses.
“The $2.7 million that our schools get is a decrease in what they have received cumulatively in the last two years from formula allocations and infrastructure fund grants,” states Svihovec.
“Additionally, Watford City has identified $190 million worth of projects that need to take place,” states Svihovec. “They will get the $10 million from the oil and gas production tax, but then they have to compete with other oil county cities for much-needed impact grants to help with additional funding.”
And competing with other cities is an understatement.
“In the last biennium, there were $700 million in grant requests from the Energy Impact Grant Fund and they only had $150 million in grant money to award,” states Svihovec. “This year they have reduced that amount by $15 million, forcing impacted political subdivisions to compete with each other for a piece of $135 million, when they all need so much more than that.”
Fortunately, according to Svihovec, separate portions of impact grant money were set aside for sheriff’s departments, EMS providers and fire districts which should free up more of the $135 million for oil-impacted cities.”
Though oil-producing counties did fare better this biennium than oil-producing cities, according to Svihovec, no one made out as well as hub cities.
According to Svihovec, the three identified hub cities of Williston, Dickinson and Minot will receive substantial allocations from the state. Hub city schools will also receive separate allotments from the state. In addition, nine percent of the money that is given to oil-producing counties from the state’s new oil and gas production tax formula is also sent to hub cities.
This raises the question - why wasn’t Watford City identified as a hub city?
“Watford City, though in the epicenter of oil activity, does not qualify as a hub city because it does not have a large enough population,” states Svihovec. “Hub cities must have a population of 12,000 or more residents in the 2010 Census, with at least one percent of its work force working in the oil industry.”
So Watford City loses out on much needed funding, because it is too small, when being a small community is the exact thing that makes the oil industry’s impacts so difficult to take.
“The impacts on Dickinson are not anywhere near the impacts that Watford City and other small communities in oil-producing counties are facing,” states Svihovec.
Part of the problem with the funding, according to Anderson, is that those who are not living here simply do not understand the scope of the oil and gas production impact on small rural communities like the ones found in McKenzie County.
“McKenzie County, along with its cities and schools, will make the most out of the funding they do receive,” states Svihovec. “There is a lot to be done to continue to make our communities attractive places to live and to provide development and growth-ready infrastructure. But McKenzie County and the communities in it have always taken a can-do attitude, and that is no different today with the opportunities and challenges the rapid growth is providing for us.”