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Bowman County Courthouse
104 1st St NW
Bowman, ND 58623

 

Rising oil prices mean millions for county, cities

July 10, 2015


 

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By BRYCE MARTIN
Pioneer Editor | bmartin@countrymedia.net

In an industry relying heavily upon prediction, little is ever known for sure. That’s how the industry plays out and it directly affects and its citizens.

A tweak of the oil production tax distribution made earlier this year by legislators already meant more money for western North Dakota. According to a consultant hired by the North Dakota Oil and Producing Counties, however, the rising price of oil could mean even more dollars in funding.

Brent Bogar, a research consultant with Jadestone Consulting, presented the welcome news to county commissioners during their regular meeting on Tuesday.

Bogar indicated that initial forecasts of oil were on the low side when the formula change was computed. With oil seeing a bit of a rebound over the last several months, the formula used to compute how much funding western North Dakota would get would actually result in an increase.

While it is a relatively difficult formula to grasp for those not in the industry, the figures used to disperse the massive funds collected from the state’s tax on oil production guarantees large sums of money for North Dakota cities and counties affected by oil. A majority of the funds are focused on western North Dakota, where the affects are felt the strongest.

Bowman County, an oil and gas producing county, is set to receive millions of dollars under the formula change—the formula’s percentage that determines how much is divvied up for western counties was increased from 25 to 30 percent.

Per Bogar’s calculations, however, the county would also receive an additional sum when figuring in the higher price of oil.

Bowman County is one of two counties in the state—the other being Divide County —to also receive a $4 million oil grant, which would be allocated in two years.

Millions of dollars in other oil impact grants were created through passage of the bill, including grants for North Dakota schools, airports, fire departments, law enforcement, hospitals and more.

Bowman County and the cities of Bowman, and have each guaranteed their respective amounts from another revenue stream prompted by the state’s vast oil production. That came in the form of what was called a “surge bill,” also created during the legislative session.

The one-time surge amounts won’t change, and they’ve already been earmarked for special infrastructure related projects in the area.

There’s also a third bit of large-dollar funding that the county and cities will receive, though not for another two years.

A “bucket bill,” HB1377, allocates a percentage of the unobligated balance of the state’s strategic investment and improvements fund and the state share of oil and gas tax allocations. Those funds would be distributed to eligible political subdivisions, such as the county.

Bogar claimed a total of $80 million in additional funds through the “bucket bill” would be available for some western counties and cities, after again computing the formula using the increased price of oil. That translates into more than another million dollars for Bowman County.

“That’s a pretty significant win for oil and gas counties,” Bogar said.

The amount of money that the state disburses from the oil and gas tax is directly related to the flux in the price of a barrel of oil; as it increases, so do the disbursements.

Excluding the already disbursed surge funds, with the updated computations of the oil and gas tax formula and proceeds from the bucket bill, Bogar said the county could receive a total of nearly $10 million over the next biennium.

With the county and cities soon heading into the budget season, Bogar said it was important that they recognize how much potential funding they would receive. Though the bucket payout wouldn’t be budgeted for until next year for 2017.

Bogar suggested the bucket payout be used similarly to how the surge bill funds were spent, as a one-time expenditure.

But the increases in the legislation is also important because, with the new formula and the bucket bill, the oil and gas producing counties in North Dakota “can hold their ground,” according to Bogar, when it comes to leveraging to their benefit during the legislative session.

The price for light, sweet crude oil is currently around $50 per barrel. But there’s huge uncertainty surrounding its pricing future.

One of the biggest unknowns in oil production is the climate in Iran.

“We cave to Iran and give them what they want,” Bogar said, in his opinion. If their oil comes through onto the market, it would provide between 400,000 and 800,000 barrels per day. That’s 70 percent of production.

If that happens, according to Bogar, all bets are off for the future of oil prices.

It also depends on terrorist activity in the Middle East. If the radical Islamic group ISIS attacks one of Saudi Arabia ports, the price of oil could suddenly jump $30 overnight, too.

“That’s what makes (forecasting oil prices) a crapshoot,” he said.

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