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.