March 15, 2019 -- Number Crunchers!
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OMB Director Joe Morrissette introduced one of two revenue projections this week
to House and Senate Appropriations Committees to help them develop the state budget.
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ND Senate Unanimous on Prairie Dog
Funding Package Headed to Governor’s Desk
The North Dakota Senate’s vote tally was a sea of green yesterday, reflecting a unanimous 46-0 vote to approve
HB 1066, better known as "Operation Prairie Dog"
The bill got its name from Senator Rich Wardner because it includes an infrastructure funding package, and the senator notes that prairie dogs are good at building infrastructure. The legislation provides for the distribution of the state’s gross production tax on oil. It contains “in lieu of” revenue for the hub cities of Dickinson, Minot and Williston, as well as other cities, counties and school districts impacted by oil development.
Also included in the bill are $115 million infrastructure “buckets” for non-oil cities, counties and townships, as well as $20 million for airport projects. In remarks on the Senate floor, Wardner noted there is no sunset clause in the bill, so it provides funding certainty to North Dakota communities.
Click
here to listen to Wardner’s comments.
Wardner said infrastructure funding provided in the bill will provide some property tax relief to North Dakota citizens.
Click
here to listen to Wardner’s comments.
The measure previously passed the House on an 80-12 vote. The legislation now moves to the Governor’s desk for his signature.
Click
here to see projected city payouts in non-oil regions, and
here to see county amounts.
For an article from the Bismarck Tribune on the bill's passage, click
here.
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Legislature Bumps Up Revenue Forecast
State Expects Oil Price Around $48.00 Per Barrel
After hearing economic outlook presentations from two forecasting firms earlier in the week, the ND Legislature’s Appropriations Committee yesterday approved a substantial increase in its oil price and production forecast for the coming biennium.
The January forecast pegged the price at $42.50 per barrel and production at 1.35 million barrels per day. The revised numbers for the 2019-21 biennium predict the price will be $48.50/barrel in the first year and $48.00 per barrel the second year. Legislators expect production will average 1.4 million bbl/day in the first year of the biennium, and increase to 1.44 million bbl/day in the second year.
The price forecast is just a dollar less than an estimate developed by the state Office of Management and Budget. OMB Director Joe Morrissette provided the administration’s forecast in a
presentation delivered to a joint meeting of the House and Senate Appropriations Committees on Monday. Morrissette said the agency’s revenue advisory committee believes WTI benchmark oil prices will be at $58/bbl in 2020 and $57/bbl in 2021, and North Dakota’s average discount from that price will be $8.50 per barrel.
Click
here to listen to Morrissette’s explanation of how it arrived at the discount figure.
If the forecast is accurate, the state would generate about $2.48 billion in production and extraction taxes the first year, and $2.45 billion the second year. Lawmakers also slightly increased the estimated revenue from sales tax collections, increasing the number from $1.8 billion to $1.87 billion.
Click
here to see the revised revenue forecast. There is one quirk in the forecast. The document shows only $100 million in earnings from the Legacy Fund, when the common expectation is earnings will top $300 million. Insiders speculate the legislature may be planning to earmark a portion of the earnings into one or more newly created buckets, rather than transferring the full earnings amount to the general fund.
Click
here to see a revenue forecast presentation delivered by Dan White with Moody’s Analytics.
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Land Board Wants Money Paid Back
Extraction Tax Misallocated from State Funds
The Board of University and School Lands voted this week to seek reimbursement of oil extraction tax revenue that has been misallocated from several state funds.
Land Commissioner Jodi Smith explained how she discovered the funds were missing during a hearing Wednesday on
SB 2362, a delayed bill intended to clarify where extraction tax dollars are to be deposited. Smith said when she started asking questions about a new agreement for sharing tribal oil taxes, she discovered that for more than 10 years, the state's share of extraction tax collected from oil produced on the Fort Berthold Reservation has not been deposited in the Common Schools Trust Fund, the Foundation Aid Stabilization Fund and the Resources Trust Fund. All totaled, the three funds should have received about $270 million more than they did.
The legislation being considered by the Senate Finance and Taxation Committee would make sure the deposits are correct going forward, but there is currently no provision to repay the missing money. In an interview Monday on the radio program,
What’s on Your Mind, Smith said the Common Schools Trust Fund is owed $65 million, plus about $12 million in interest. She said if the money isn’t paid back, because it’s a permanent fund, the loss would be felt by future generations of North Dakotans.
Click
here to listen to Smith’s comments.
Smith said
Article X, Section 24 of the ND Constitution is clear that 10 percent of extraction tax revenue goes to the Common Schools Trust Fund and 10 percent to the Foundation Aid Stabilization Fund. Article X, Section 22 establishes the Resources Trust Fund, and a separate law provides that 20 percent of extraction tax revenue is to be deposited in that fund.
Click
here to see a flow chart that explains the distribution of oil and gas taxes.
Click
here for a story from KFYR-TV. Click
here for a Fargo Forum story about the repayment debate.
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January Oil & Gas Production Down Slightly
January oil production came in at 1,402,402 barrels a day, down only 300 barrels from December’s final production of 1,402,741 creating what Department of Mineral Resources Director Lynn Helms called a “photo finish” between the months. Natural gas production continued a record-breaking trend with January production up 2.6 percent at 2.72 billion cubic feet a day, up from December’s record of 2.65 Bcf/day.
Click
here to listen to a production summary from Lynn Helms at his monthly news conference.
The volume of natural gas captured statewide increased from December primarily due to a new processing plant that came online. Helms said this was “good news” for the state.
Click
here for Helms' comments.
The number of producing wells in January stands at 15,397, up 28 from December and creating a new all-time record high. Regarding oil prices, Helms continued with the good news noting a $25 per barrel improvement in North Dakota Light Sweet Crude from December to today. Similarly, West Texas Intermediate prices are up $10 a barrel.
According to Helms, rig count has remained steady with today’s count coming in at 65 compared to 67 in December. “Companies are still proposing that they will move to probably about 70 rigs by the end of the year,” Helms said. “So, we are anticipating small incremental rig adds as the year goes on.”
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“Prairie Dog III” Pops Up in House Committee
A bill that its sponsor has dubbed Prairie Dog III had its first hearing before the House Appropriations Committee this week.
SB 2275, introduced by Senate Majority Leader Rich Wardner of Dickinson, would use $55 million in earnings from the state Legacy Fund to purchase bonds to expand an existing low interest infrastructure loan program.
“This matches up with the Prairie Dog bill, the infrastructure definitions, so they work together,” he said.
Wardner said an initial $150 million loan fund was created by the 2015 Legislature, but because only new infrastructure projects qualified, not all the money was used. He said after the criteria was relaxed in 2017 to allow funding of infrastructure replacement projects, the balance of the money was loaned. He said he’s confident the additional $500 million that would be added to the loan fund will find a borrower.
“I think we’ve come to a time in the state with all the needs in the water world, especially in flood prevention, that it makes this mandatory,” Wardner said.
The committee took no action on the bill, which earlier passed the Senate on a 45-0 vote.
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SIRN 2020 Bill Heard in the House
Sponsor Seeks Restoration of Funding
A bill that would fund the development of a new statewide radio network for emergency responders had its first hearing in the Senate this week.
Rep. Glenn Bosch, R-Bismarck, who introduced
HB 1435 to establish a Statewide Interoperable Radio Network (SIRN), pitched the bill to the Senate Government and Veterans Affairs Committee yesterday. The bill previously passed the House on an 85-5 vote, but an amendment removed a $40 million appropriation that would help pay for radios used by emergency personnel. The original bill also provided an $80 million line of credit with the Bank of North Dakota. The House amendment expanded that amount to $120 million to cover the $40 million deduction.
In testimony before the committee, Bosch asked that the House amendment be removed and the $40 million be restored. He said the $5 million in annual revenue from a 50-cent phone fee approved by the 2017 Legislature in
HB 1178 is not adequate to pay a larger loan in a timely manner.
“We got to the point where we were looking at a 30-year loan, and some of the technologies may sunset or become obsolete almost before the loan is paid off,” Bosch said. “It’s also unclear at the $120 million level if the $5 million collected from the 50-cent fee would actually cover the payment.”
Several emergency responders attended the hearing to describe the need for SIRN. Testifying in support of the bill, Lt. Glen Ternes from the Bismarck Police Department described radio communication issues that occurred during the Dakota Access Pipeline protest.
“We had to send officers into an area where there was limited to no cell phone coverage and no radio communications,” Ternes said. “If those officers needed to call for help, they had no way of contacting headquarters for assistance, and we had no way of knowing if they were in danger.”
The state Information Technology Department has awarded a $207 million contract to Motorola Solutions Inc. to develop the network over a five-year period. Most of the cost is associated with construction of towers and purchase of radios, with the remainder needed for dispatch consoles.
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Senate Kills Bill Banning DUI Checkpoints
A bill that would have banned law enforcement from using DUI checkpoints sailed through the House in early February on a 79-14 vote but failed in the Senate yesterday. The vote was decisive, with senators killing the bill on a 36-10 vote.
HB 1442 would have prohibited sobriety checkpoints by requiring police to have reasonable suspicion to stop a driver. The bill would have removed the option from state law.
Senate members who opposed banning DUI checkpoints focused on their role as a deterrent, while those supporting the measure questioned their effectiveness.
“While roving saturation patrols do arrest more people for DUI than sobriety checkpoints, the goal is to prevent drinking and driving and not to arrest drunk drivers. It is one tool used to prevent drunk driving by being a deterrent,” said Sen. Diane Larson, R-Bismarck, who chairs the Senate Judiciary Committee. “The checkpoints are advertised and the hope is that people will hear those announcements and think about not driving drunk.”
Click
here for more comments from Sen. Larson.
In support of the ban was Sen. Janne Myrdal, R-Edinburg. In comments on the Senate floor, Myrdal asserted that DUI checkpoints are not effective and resources should be focused on methods that are proven to be more successful.
Click
here for comments from Sen. Myrdal. Click
here for an article from the Bismarck Tribune.
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Driver’s License Fee Increase Passes
With both chambers passing a bill to increase the fee for commercial and noncommercial driver’s licenses, the measure now goes to Gov. Burgum’s desk.
HB 2244 would increase a noncommercial operator’s renewal license from $15 to $30. Other costs for ability testing, applications and reinstatement after suspension, also double under this bill.
During House floor debate, Rep. Mark Owens, R-Grand Forks, said it has been more than 30 years since lawmakers last updated the fees. “It seems like the logical next step,” he said since the fees don’t cover the costs of the program, meaning that road funds must be used to subsidize licensing.
Rep. Dan Ruby, R-Minot, House Transportation Committee chairman, remarked how NDDOT said that fees collected through license operations were about $5 million short of program costs. The bill is expected to generate $5.5 million every two years. Click
here for Ruby's comments in support of the bill.
Those against the measure had a relatively simple argument saying the costs represent a tax increase.
Click
here for comments from Rep. Larry Bellew, R-Minot.
The House passed the bill on a 65-25 vote. It previously passed the Senate on a 40-6 vote.
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Remedy for Pore Space Issue Proposed
A House Energy and Natural Resources subcommittee is tentatively planning to meet again next Thursday to consider new language that may amicably resolve the contentious issue.
Controversy developed a couple weeks ago over
SB 2344, a bill intended to facilitate the temporary storage of produced natural gas to help alleviate North Dakota’s gas flaring issue. The legislation contains a definition for land that excludes pore space, a provision which landowner rights groups have referred to as a “taking.” The subcommittee heard additional testimony Monday and plans to get together again next week to consider an
amendment to the bill.
Subcommittee Chairman George Keiser, R-Bismarck, said he’s hopeful the new language will be agreeable to both landowners, oil producers and oilfield service companies. One of the main points of contention surrounds saltwater disposal wells that inject produced water into underground pore space. Some surface owners believe they should be compensated because water injected by a well on neighboring property likely migrates into spore space under their land.
The legislation has raised concerns in Bowman County related to plans by Denbury Resources to inject CO2 in an enhanced oil recovery project. Both the Bowman City Commission and the Bowman County Commission wrote letters to the committee this week urging its members to ensure the legislation will not adversely impact or jeopardize Denbury's investment.
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Governor Pitches TR Library to Senate
Governor Doug Burgum went before the Senate Appropriations Committee this week to urge the legislature to provide a $50 million matching contribution that would go toward the construction of a Theodore Roosevelt Presidential Library near Medora.
Burgum said North Dakota is a natural fit for the library because Roosevelt said he would never have become President if not for the transformative time he spent in the Badlands in the 1880s. Burgum said it’s difficult to imagine a leader more deserving of a library and museum than Roosevelt.
Click
here to listen to Burgum’s comments.
Burgum said North Dakota has an opportunity to share with the world the role North Dakota played in transforming Roosevelt into the leader he became.
“We’re standing in the batter’s box right now and we have an opportunity to hit the home run so to speak with this opportunity,” he said.
Burgum said locating the museum in North Dakota has the support of the National Park Service. As proposed, the library and museum would be constructed along with a new visitor center at the entrance to Theodore Roosevelt National Park.
Senate Appropriations Committee Chairman Ray Holmberg, R-Grand Forks, said it’s still too early in the session to make large funding decisions such as the Governor’s request.
Click
here for an article from the Bismarck Tribune about Burgum's pitch.
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School Construction Funds Still Needed
Education committees in the North Dakota Legislature continue to look for methods of providing additional construction dollars to schools, primarily those in western North Dakota that are struggling to keep pace with rapid increases in student enrollment.
The Senate Education Committee heard one of the ideas this week proposed in
HB 1365. The original bill was intended to allow school districts to keep 100% of in-lieu-of revenue dedicated to a sinking and interest fund, rather than having 75% of its value deducted from the district’s Foundation Aid payment. But the bill ran into a major snag in the House Appropriations Committee, which tacked on an amendment to fix a discrepancy discovered in state aid funding calculations used by the Department of Public Instruction.
The amendment, which looks at property tax mills levied in each school district, would result in huge
reductions in state aid payments to several districts. The McKenzie County School District No. 1 in Watford City is at the top of the list with a more than $2.6 million reduction.
McKenzie Co. Superintendent Steve Holen appeared before the committee this week to explain how the discrepancy occurred. Holen said the issue is complex, but is attributable to the 12 percent cap on local mill levy increases. He said in rapidly growing western districts, mill levies were driven lower because of new construction and sizable valuation increases in existing property. Holen urged the Senate committee to strike the House amendment, and to consider other means of recapturing the lost revenue.
Another school funding measure was heard this week. The House Education Committee took its first look at
SB 2214, which would use money from the Strategic Investment and Improvements Fund to finance a $250 million low interest school construction loan program. The bill previously passed the Senate on a unanimous 47-0 vote. Click
here to see video of Senate Education Committee Chairman Don Schaible’s floor remarks when the Senate approved the bill on February 7.
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House Uproots Location for State Forester
Existing state law requires the Office of the State Forester to be located in Bottineau, but it looks like that will change with House passage of
SB 2064, which removes that requirement.
The State Forester position is currently open and the change would allow the hired individual to live wherever they desire, according to Rep. Vern Laning, R-Bismarck. He said a “more central location” would be preferable given the position’s necessary travel to other locations around the state. The
Forest Service has seven sites scattered around the state with the Bismarck location being the largest.
The Government and Veteran’s Affairs Committee gave the bill a unanimous do pass recommendation. Committee Chairman Jim Kasper, R-Fargo, said the bill would greatly assist in the recruiting effort to find a qualified person to fill the vacancy.
Click
here to listen to Kasper's comments.
Rep. Marvin Nelson, D-Rolla, spoke in opposition saying the chief forestry position should remain close to the State School of Forestry located in Bottineau.
Click
here for comments from Rep. Nelson.
Some expressed concern that the bill would eventually lead to relocation of other Bottineau operations, but assurance was given there are no plans to move other forestry employees. The bill passed the House on a vote of 73-16, and now heads to the Governor for signature.
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Major Milestone Reached on Hwy 85 Project
Environmental Impact Statement Completed
The Final Environmental Impact Statement and Record of Decision for the US Highway 85 project from the I-94 Interchange to the Watford City bypass has been completed, marking a significant milestone in the expansion of the highway.
The FEIS/ROD is available for public review at the North Dakota Department of Transportation website. Click
here for the document.
The project, which includes replacing the historic Long X Bridge over the Little Missouri River south of Watford City, encompasses approximately 62 miles of roadway in Stark, Billings and McKenzie counties. Beginning at the I-94 interchange with Highway 85 and extending north to the Watford City bypass (McKenzie County Road 30), the plan is to expand the segment from a two-lane highway to a four-lane highway following the existing roadway path.
The next phase is replacement of the Long X Bridge, which will be bid this spring. Construction on the remainder of the Hwy 85 project has not been determined and funding has not been identified.
Click
here for a news release from the ND Department of Transportation.
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Seasonal Load Restrictions Start Next Week
You know it’s approaching spring when you hear that seasonal road restrictions will begin for some North Dakota highways.
The ND Department of Transportation typically places load restrictions on highways from March to May, commonly known as frost law season. The agency encourages truckers to check the load restriction map daily as restrictions may change quickly due to weather.
Statewide seasonal load restriction information is available by calling 511 or clicking
here.
Load restriction email updates are also available. Click
here to sign up.
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Plastics Pipe Institute Seminar
A two-day seminar is coming to Williston in April to allow interested companies to take full advantage of plastic pipe and composite pipe in oil and natural gas gathering and water transfer applications.
The seminar, offered by the Plastics Pipe Institute and the North Dakota Petroleum Council, will feature a host of industry experts. It is scheduled
April 11–12 at the Four Points by Sheraton in Williston.
Seminar options include participation in one day or both days.
For more complete information, click
here. To register for the event, click
here.
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Write it Down!
WDEA Annual Meeting
Get this on your calendar! The Annual Meeting of the Western Dakota Energy Association will be held:
October 30 - 31, 2019
Grand Hotel
Minot, ND
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Quick Connect
- Can Bakken producers finally put a lid on natural gas flaring? -- RBN Energy
- McKenzie pland to address the residential housing shortage -- KXMB-TV
- By the numbers: School building plans in Williston's District 1 and District 8 -- Williston Herald
- SD tribal leaders pull out of state-tribal ceremony after Keystone XL bills -- Dickinson Press
- Annual meeting to highlight Tioga Medical Center's care improvements -- Tioga Tribune
- Feds to ease land restrictions meant to protect bird across the West -- Associated Press
- Extreme cold shuts down ND wind farms, energizing debate on their reliability -- Fargo Forum
- Food Pantry Challenge donates 16,020 pounds of food to local food pantries -- Minot Daily News
- PSC Hearing: Bowbells locals voice support, concerns over potential wind farm -- KFYR-TV
- Job Services ND: Jobs continue to heat up in Bakken, even as job fair nears -- Williston Herald
- House Appropriations committee seeks answers about research dollars -- Fargo Forum
- State Senate approves study of North Dakota Capitol accessibility -- Bismarck Tribune
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Factoid of the Week
Each oil rig in North Dakota creates in-state expenditures of $64 million along with $150 million in direct and secondary impacts plus $1.47 million in tax revenues. Each rig also creates 199 direct and secondary jobs. Every well drilled with that rig creates $1.8 million in gross business volume and $148,000 in salaries and wages.
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March 19
Dickinson
March 26
Minot
March 27
Bismarck
March 27
Watford City
March 29
Williston
March 30
Dickinson
April 3 - 4
Bismarck
April 11
Minot
April 24 - 25
Bismarck
April 30 - Stanley; May 1 - Grand Forks; May 2 - Jamestown
July 16-17
Bismarck
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Oil prices and rig count
March 15, 2019
WTI Crude: $58.52
Brent Crude: $67.16
Natural Gas: $2.80
North Dakota Active Rigs: 65 (down 2)
3/15
/2018
-- 57 rigs
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Geoff Simon
Editor/Executive Director
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