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Overview of HB 1358: Oil and Gas Production Tax Distribution in North Dakota

HB 1358 establishes a distribution framework for oil and gas production taxes within North Dakota, implementing a Gross Production Tax (GPT) of 5% and an Extraction Tax (ET) of 6.5%, totaling 11.5%. The law outlines the distribution process for fiscal year 2014, categorizing counties based on revenue generated, with distinct formulas for those earning less than or over $5 million. Key allocations are designated for the General Fund, schools, cities, and townships. Projected distributions and potential formula adjustments are discussed, ensuring transparency and effective revenue management for local governments.

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Overview of HB 1358: Oil and Gas Production Tax Distribution in North Dakota

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  1. HB 1358 Oil & Gas Production Tax Distribution Office of State Treasurer

  2. Two Taxes • Gross Production Tax (GPT) - 5% • Extraction Tax (ET) – 6.5% Total Tax = 11.5% • HB1358 relates to Gross Production only

  3. Fiscal year • Fiscal Year 2014 (FY2014) – began July 1, 2013 – ends June 30, 2014 • Oil Producedin July • Taxes Collectedin August • Revenue Distributedin September to Counties/Cities/ Schools • HB 1358 formula applies to distributions you received beginning September 2013

  4. Current Formula (hb1358) • 2 tiers for split between county & state • First $5 Million – 0/100 • All $$ Over $5 Million - 75/25

  5. current formula (hb1358) • Two distribution formulas: • Counties less than $5 Million • Counties over $5 Million • State Treasurer does ALL allocations to cities and schools FY 2014 and later • Counties responsible for handling prior year adjustments in the proper manner

  6. current formula (hb1358) • 8 Counties Less than $5 Million FY 2013 • Bottineau* • Golden Valley • McHenry • Renville • Slope • Ward • Mercer • McLean * Bottineau County is on pace to receive over $5M in FY 2014 so will most likely move into the “Greater than $5M” portion of the formula for FY 2015

  7. current formula (hb1358) • Counties Less than $5 Million • 45% General Fund • 35% Schools • 20% Cities

  8. current formula (hb1358) • 9 Counties Over $5 Million • FY 2013 • Billings • Bowman • Burke • Divide • Dunn • McKenzie • Mountrail • Stark • Williams County list is subject to change in 2nd year of biennium (Bottineau County will most likely move into this group)

  9. Current formula (hb1358) • Counties Over $5 Million • 60% General Fund • 5% Schools • 20% Cities • 3% Townships (allocated by miles) • 3% Townships (pooled & shared equally) • 9% Hub Cities (pooled & split)

  10. current formula (hb1358) • Counties Over $5 Million • 9% to Hub Cities: • Williston – 60% • Dickinson – 30% • Minot – 10%

  11. Projected Distributions for FY2014* *Projections based on actual distributions through first five months of FY2014, then using the November production numbers for the remaining seven months.

  12. Projected Distributions for FY2014* - Hub cities *Projections based on actual distributions through first five months of FY2014, then using the November production numbers for the remaining seven months.

  13. Potential formula changes • Changing the County/State Percentage for amounts over $5 million (Currently 25%/75% County/State) • Potential Changes: • 50/50 • 60/40 County/State

  14. Potential formula changes • Effects of changing the allocation percentage: • Counties that receive less than $5 million wouldn’t see any changes • Counties receiving over $5 million would see a potentially substantial increase in distributions • It would take considerably longer to fill State Share “buckets” (ie. GF, PTRF, Disaster Relief, SIIF) • As final “bucket”, the Strategic Investments & Improvements Fund (SIIF) would see a potentially significantly reduced total contribution

  15. Projected % increases if formula adjusted to 50/50

  16. Projected % increases if formula adjusted to 60/40

  17. Projected % increases - Hub cities Portion received from 1/5 GPT remains the same. Portion received from 4/5 GPT (9%) increases: *Projections based on actual distributions through first five months of FY2014, then using the November production numbers for the remaining seven months.

  18. HUB CITY school Districts • Would not see any increase in oil & gas distributions under this change. • Currently receive: • Williston - $5.375 Million/year • Dickinson - $2.625 Million/year • Minot - $750,000/year

  19. Distribution information • The formula flow chart and distribution amounts for Oil/Gas producing Counties, Cities and Schools can be found on the State Treasurer’s website at www.nd.gov/ndtreas • Various search options are available. • Note: Oil/Gas was originally a quarterly distribution. Treasurer Schmidt changed this distribution to monthly in December 2007.

  20. Questions ? CONTACT • State Treasurer Kelly Schmidt • Deputy Treasurer Jeb Oehlke • Accounting Manager Ryan Skor 701-328-2643

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