New oil forecast shows proposed conservation fund would receive $259 million in 2015-17
BISMARCK – A new forecast released Friday gives a clearer picture of how much of North Dakota’s oil tax revenue would go into a proposed conservation fund on the November ballot.
If voters approve the Clean Water, Wildlife and Parks amendment, it will create a conservation fund and trust that will receive an estimated $49 million in the last six months of the 2013-15 biennium and $259 million in the 2015-17 biennium, according to an oil tax revenue forecast finalized Friday by the state Office of Management and Budget.
The fund and trust would receive 5 percent of the state’s share of oil extraction tax revenue for the next 25 years.
Opponents of the measure have warned that it would take $150 million per year in oil taxes away from other priorities, based on what they say are conservative projections for oil production and price.
Measure proponents have so far rested on a figure of up to $75 million a year – a number supplied by OMB based on the April 2013 legislative forecast for the current biennium – but have acknowledged it could go higher.
The 2013 forecast assumed the state’s oil production would reach 830,000 barrels per day by the end of the current biennium on June 30, 2015, but production had already topped 1 million barrels per day by April of this year.
The new forecast projects that oil production will grow to 1.3 million barrels by the end of the current biennium and to 1.4 million barrels a day by June 30, 2017, OMB Director Pam Sharp said. The forecast assumes a crude oil price of $90 a barrel throughout the entire forecast period, she said.
Jon Godfread, vice president of governmental affairs for the Greater North Dakota Chamber and a spokesman for the Common Sense Conservation coalition opposing the measure, called the $75 million figure used by proponents “misleading.” The forecast for 2015-2017, which breaks down to $129.5 million per year, is more in line with opponents’ projections, he said, adding OMB forecasts tend to be “very conservative.”
“I think our $150 million number is definitely in the ballpark, if not probably a little conservative at this point,” he said.
Steve Adair, chairman of the measure’s sponsoring committee and operations director for Ducks Unlimited’s Great Plains Region, called Friday’s forecast “great news” and another indication of the prosperity oil and gas development is bringing to the state.
“The pie is larger. It’s more funds for roads and schools and hospitals and also to fund this measure to make sure we have great quality of life in this state,” he said. “It ought to be good news for all of us.”
At $259 million every two years, the fund and trust would accumulate roughly $3.2 billion over 25 years. The Common Sense Conservation group has a higher projected cost for the measure of $4.8 billion during that time period, based on oil production hitting a peak of 1.8 million barrels a day, Godfread said.
“We’re still very comfortable with that,” he said.
Adair said proponents have hesitated to estimate the measure’s long-term cost because of fluctuating oil prices and widely varying production estimates. But he said they’ve collected project ideas statewide that amount to an annual cost of roughly $400 million.
“We’re very comfortable with the 5 percent being right there to meet the needs in the state and allowing enough for the important important work we need to do with infrastructure and education,” he said. “North Dakota has enough resources to take care of all of these needs.”
Ten percent of the revenue would go into the trust and 90 percent into the fund. The amendment would require that at least 75 percent of the revenue deposited into the fund be spent every year. Earnings from the trust would be transferred to the fund to be spent on programs after Jan. 1, 2019.
A 13-member advisory board would review grant applications and make recommendations to the state Industrial Commission, comprised of the state’s governor, attorney general and agriculture commissioner.
Supporters say the conservation fund is needed to protect clean water and wildlife and preserve the state’s history of hunting, fishing, birding and other outdoor recreation. Opponents have criticized the amendment’s language as being vague and say it doesn’t provide specific requirements for the types of projects eligible for funding, except that the funds could be used to purchase land.
The two sides also debate whether the Outdoor Heritage Fund created by lawmakers last year is adequate to meet future needs. The fund is capped at $30 million from state oil and gas production tax revenue this biennium. Friday’s forecast estimates the fund will receive about $23.8 million in 2013-15 and $29.6 million in 2015-17.
Measure sponsors submitted more than 41,000 signatures to the secretary of state’s office, which has until Sept. 8 to determine whether they gathered the necessary 26,904 signatures of qualified voters.