Posted 9/30/14 (Tue)
By Neal A. Shipman
Western North Dakota legislators are proposing to introduce two bills in this upcoming North Dakota legislative session that could bring help to McKenzie County and Watford City. And those two bills have county and city officials optimistic that there is light at the end of the tunnel when it comes to making needed infrastructure improvements in this region.
One of the bills would provide $800 million in surge funds to oil-impacted areas of the state, while the second would change the formula used in the distribution of the state’s Gross Production Tax (GPT) to favor oil-producing counties.
“We’re just asking for help to be able to get whole by 2020,” states Ron Anderson, chairman of the McKenzie County Board of County Commissioners. “We need a change in the GPT formula in order to get our roads upgraded to handle the oilfield traffic that we are experiencing, and we need the surge funding so that we don’t lose the 2015 construction season.”
With Watford City looking at over $350 million in needed infrastructure costs to meet its projected population of 17,000 city residents, and the county looking at hundreds of millions of dollars to upgrade roads and to build a new jail facility, both Anderson and Watford City Mayor Brent Sanford say that it is necessary that the Legislature address the problems of western North Dakota.
Currently, the state of North Dakota takes 75 percent of the GPT, while oil-impacted counties receive 25 percent of the fund. Under the proposed legislation, the oil-impacted counties would receive 60 percent of the funds, while 40 percent would go to the state.
“The goal of this bill is to provide communities with long-term revenue to provide infrastructure for the people in western North Dakota, who are experiencing the daily effects of population increases, county and city road projects, and housing shortages as a result of the oil boom,” states Sen. Rich Wardner, a Dickinson Republican. “Doing business in the Bakken region costs at least one-third more per project than it does in other areas, with the cost of housing being one of the major drivers of high prices. Recruiting and retaining teachers for school districts and employees for cities and counties, who all need housing, is another significant expense. The extra dollars from this formula change will aid the counties, cities and school districts to build the infrastructure to meet the demands. Meeting the demand is the only way to drive down some of the costs.”
And for Sanford, the change in the GPT formula would have a big impact for Watford City.
“The city needs the 60-40 formula split in order to be able to borrow money to do our projects,” states Sanford. “We know that we’re going to have to borrow money, it’s essential for our city and school. And we need a state infrastructure loan program where we can borrow at low interest rates from the state.”
The rapid growth in Watford City’s population, according to Sanford, is creating serious funding issues.
“We’re building a new $20 million waste treatment plant that is going to be too small when it opens,” states Sanford. “It is only designed to handle a population of 7,500 people, so we are looking at a Phase 2 expansion right now.”
According to Sanford, the city intends to commit half of the proposed GPT funds that it receives for the waste treatment plant, and use the other half to fund the new Events Center.
Currently, the city receives approximately $12 million a year in GPT funds and is expecting that to grow to $30 million annually under the formula change.
“The oil industry is crying for family housing in Watford City. But we can’t get that housing until we can get our infrastructure in place,” states Sanford. “The only way to keep the oil dollars rolling into the state is to reinvest them where it is needed.”
While the change in the GPT formula is critical for the long-term improvements in Watford City and McKenzie County, Anderson and Sanford say that the release of state money, through the proposed surge funding bill, is equally critical.
The city is proposing to spend $30 million to upgrade and lengthen three city streets to facilitate better traffic flow in Watford City, while the county is planning to spend $50 million to upgrade three county roads.
Sanford and Anderson also welcome the support of the North Dakota Petroleum Council for surge funding and GPT formula bills.
“The industry is finally standing up for us,” states Sanford. “They really hit the nail on the head with the rationale for the need of these two bills.”
Last week, the Petroleum Council said it would push for passage of the Surge Funding Bill within the first 30 days of the 2015 Legislative Session.
“This initial surge of funding will help oil and gas-impacted communities and counties get a start on many of their projects right away this spring, but this will only be a small, first step in ensuring they get the funding they need going forward,” said NDPC Board of Directors Chairman Perry Pearce.
In addition, the council said it favors the change in the state’s GPT formula.
“Returning more of the oil tax revenues back to the communities is critical over the next few years as employees make decisions on whether to make these communities their home,” said Pearce. “New infrastructure will vastly improve the quality of life in western North Dakota and benefit the entire state as communities catch up and continue their contribution to a growing, diversified statewide economy.”
According to the Petroleum Council, increased funding for oil and gas-producing counties would help with recruitment and retention of workers, both for the oil industry and other sectors, protect the state’s revenue stream, prevent road closures and well shutdowns, and improve county road systems.
“The Petroleum Council is going to make these issues our number one priority in the upcoming legislative session,” said NDPC President Ron Ness. “We will be working with our 550 members to engage in the legislative process to help get these bills passed and signed into law.”