Strong oil prices to spur higher taxes for North Dakota oil producers
Wednesday, May 25, 2022

North Dakota oil producers almost certainly will be paying higher state taxes for at least three months beginning June 1 due to strong oil prices, the state tax commissioner said Wednesday.

The increase in state oil tax collections, estimated at more than $30 million in June, is possible because of a state law that adjusts North Dakota’s oil extraction tax when the three-month average price of a barrel of oil is above a specified “trigger” price.

The monthly averages are figured using West Texas Intermediate prices, the U.S. benchmark set at Cushing, Oklahoma. The trigger price is now $94.69 a barrel. It is adjusted annually for inflation, using a price index for industrial commodities compiled by the U.S. Labor Department’s Bureau of Labor Statistics.

WTI crude was fetching about $110 a barrel Wednesday morning, and has been above the price trigger since Feb. 28.

Kroshus said WTI crude averaged $108.94 in March and $101.92 in April. Prices in May have been “tracking well above the trigger price,” he said.

The oil price would have to fall below $20 a barrel for the remainder of May for the average to fall below the trigger, Kroshus said.

“At this point it’s essentially a given that the oil extraction tax trigger will go into effect June 1,” Kroshus said.

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