BISMARCK, N.D. — Oil companies will be charged a higher tax rate than the state on the reservation’s oil production, the chairman of North Dakota’s Three Affiliated Tribes said Friday, a move that non-tribal officials believe is a violation of a revenue-sharing accord and could slow drilling.
The move is the latest in a longstanding disagreement between the tribes and the state over shared tax revenue from drilling on the oil-rich Fort Berthold Reservation, which accounts for about 20 percent of the state’s 1 million barrel-per-day oil production.
The Legislature in 2015 passed a measure that abolishes some price-based incentives in exchange for a lowering the overall tax rate from 11.5 percent to 10 percent.
Three Affiliated Tribes Chairman Mark Fox said it never agreed to the change and want the higher tax rate to pay for road repairs and other consequences of oil development on the reservation, home to the Mandan, Hidatsa and Arikara tribes.
“We intend to collect it and it’s not a new charge,” Fox told The Associated Press. “It existed before and we didn’t agree to the change.”
Tax Commissioner Ryan Rauchenberger said the agreement does not allow the tribes to “impose own its own tax or fees on production,” and that it would be up to Gov. Doug Burgum to decide whether the tribes are in violation of the agreement.
Fox signaled Tuesday to lawmakers that the tribes could pull out of the revenue-sharing agreement because he believes the reduction in taxes violates the accord.
“We’re not bluffing,” Fox told the North Dakota House’s Finance and Taxation Committee, which is examining legislation that would further cut tax increases for producers if oil prices rebound above $90 a barrel — nearly twice what North Dakota sweet crude fetched Friday.
On Wednesday, the tribes passed a resolution stating that it would collect the higher tax.
The agreement between the tribes and the state was authorized by the 2007 Legislature after oil companies said an accord would help promote reservation investment by setting up stable tax rates and rules. Prior to the agreement, only one well was drilled on the reservation, state and tribal data show, a figure that’s grown to more than 1,500 wells since the agreement was signed.
Tax Department data show that since the agreement was adopted, the state has collected $973 million in oil revenue, with the tribe getting $844 million. The state’s share of oil taxes from reservation land is divided among counties, cities, school districts and a number of state funds and programs.
Burgum spokesman Mike Nowatzki said the “governor is not going to comment on it until he has a chance to discuss this with legislative and tribal leadership.”
North Dakota Petroleum Council President Ron Ness said an increased tax rate on the reservation “creates a disadvantage for attracting investment up there.”
“We have said time and time again that a flat, predictable tax structure creates an equal playing field,” he said.
Fox said some operators on tribal land may choose to leave due to the higher tax rate but believes “others will come in and … production will continue.”