The Western Dakota Energy Association hosted a pair of webinars during the past week to provide WDEA members an idea of the impact that the downturn in oil prices will have on Gross Production Tax revenue.
Brent Bogar, WDEA's "Numbers Guy", shared various oil price and production scenarios, explaining that lower price and production would reduce incoming GPT revenue up to 50% in some jurisdictions, depending on the duration of the downturn. Bogar said because of the order in which the GPT formula "bucktets" fill, it is unlikely the non-oil city and county/township Operation Prairie Dog buckets will fill. The buckets were established by the 2019 Legislature to provide infrastructure dollars to non-oil producing areas of the state.
The state treasurer's office has a web page that show the order and current status of the buckets. Revenue is currently flowing into a $200 million bucket earmarked for the state general fund. After it fills, the Lignite Research Fund will receive $10 million before the first GPT dollars will flow into a Prairie Dog bucket that would provide funds to North Dakota cities with more than 1,000 people. Bogar believes that first $30.4 million municipal bucket will fill, but before additional dollars go unto other Prairie Dog buckets, the formula provides $400 million to the Strategic Investment and Improvement Fund (SIIF). But based on current oil price and production estimates, Bogar said the SIIF bucket will not completely fill.
The coronavirus pandemic and oil price war are not just affecting oil tax revenues. Bogar said local political subdivisions need to be aware that sales and property tax revenues will also take a hit.
Click here to listen to Bogar's comments.
Click here to see a series of charts prepared by the State Treasure's office that explain how oil and gas extraction and production taxes are distributed.