Posted 9/02/14 (Tue)
By Neal A. Shipman
It is pretty hard to comprehend all that is happening in McKenzie County and Watford City in just a daylong tour. But that is what the North Dakota Petroleum Council was hoping to accomplish when they invited 40 North Dakota legislators to come to this part of the state last week and see for themselves how energy development has completely transformed this part of the state.
Comprehending the change that our county and cities like Watford City have undergone in the past five years is hard enough for those of us living here. With nearly 20,000 people now living in and around Watford City, and McKenzie County now accounting for over a third of the state’s oil and natural gas, the impacts that the growing energy industry is having on this particular part of the state is staggering.
The city and county governments, along with our school systems literally don’t have the financial resources that they need to meet the demands for new roads and water and sewer systems. And that says nothing of the lack of funding for new jail facilities, schools and the other needs this region needs to develop to handle the growth.
With over a billion dollars needed over the next six years to build out this infrastructure, city and county officials are hoping that Governor Dalrymple and the North Dakota Legislature will be receptive to changing the formula for the sharing of the Gross Production Tax (GPT) that is coming from the oil and gas wells of western North Dakota. Currently, the state is receiving 75 percent of those billions of dollars of tax revenue every year, while 25 percent of the funds are being returned to the oil-producing counties.
But that formula isn’t getting things built out fast enough in the most impacted areas of the oil patch, like McKenzie County. With Watford City only getting between $12 and $15 million annually in GPT revenue and the city looking at needing over $285 million for new city streets and water and sewer projects, it is obvious that there is a huge funding shortfall.
This is why the oil-producing counties are asking the Legislature to consider a six-year change in the GPT formula. A change that will funnel 60 percent of that oil tax back to the local government, while the state would get 40 percent.
That infusion of cash will provide counties, like McKenzie County, and cities, like Watford City, with the ability to leverage those funds and be able to finance the needed streets, roads, and other infrastructure needs.
While the $1 billion that McKenzie County and Watford City needs over the next six years may seem like a lot of money, when compared to the estimated $12 billion in taxes that oil and gas wells in McKenzie County will generate to the state over the same time frame, it isn’t.
If North Dakota wants to grow the oil industry, then it has to be willing to invest a significant portion of the oil revenue that the state is receiving in the cities and counties that need the money to grow and develop.