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Published March 17, 2011, 09:08 PM

Republican ND House Leader Pushes for Oil Company Tax Cut

North Dakota's oil industry has resumed its push to coax a tax cut from the GOP-controlled state Legislature, and the House's Republican majority leader is taking the lead in the effort.

By: Associated Press,

BISMARCK, N.D. (AP) — North Dakota's oil industry has resumed its push to coax a tax cut from the GOP-controlled state Legislature, and the House's Republican majority leader is taking the lead in the effort.

Rep. Al Carlson, R-Fargo, said the proposal would allow gradual cuts in North Dakota's 11.5 percent oil tax rate as production rises. The levy could fall to 9 percent if average production exceeds 700,000 barrels a day for three straight months.

North Dakota now pumps about 342,000 barrels a day, which is more than triple the state's production of five years ago. Carlson's proposal envisions the oil tax falling in increments of 0.5 percentage points as production targets are reached.

Should average oil output top 425,000 barrels a day for three months, the tax would drop to 11 percent. Three subsequent decreases would be granted for each increase of 75,000 barrels daily, the proposal says. The final tax break would come once oil output hit an average of 700,000 barrels. Tax cuts would be locked in once targets are reached.

The revamped tax structure would apply to all oil production, not just to newly drilled wells. It would scrap almost all of a bewildering array of tax exemptions and oil production "triggers," part of a web of incentives that the Legislature has approved during the past two decades as oil prices rose and fell.

"It reduces the tax on oil. It makes us more competitive. It allows those guys to have a plan for commitments to everything from pipelines to natural gas development to the orderly development of these cities to handle the pressure," Carlson said.

Carlson wants the Senate's Finance and Taxation Committee to attach his proposal to a separate oil tax bill, sponsored by Rep. Keith Kempenich, R-Bowman, that the committee is reviewing.

A group of industry spokesmen, including Harold Hamm, chief executive officer of Continental Resources Inc., an Enid, Okla., company with broad holdings in western North Dakota, pushed the idea during a committee hearing. The panel's chairman, Sen. Dwight Cook, R-Mandan, said he was unsure when, or if, the committee would vote on the amendment.

The Senate committee's two Democrats, Connie Triplett, of Grand Forks, and Jim Dotzenrod, of Wyndmere, said Thursday they were concerned the approach would give western North Dakota's booming oil industry a fresh incentive to expand even more rapidly.

There is considerable strain already on the region's roads and public works, and arriving workers have difficulty finding places to live, they said.

"It seems like an invitation to a gold rush, rather than an invitation to stable, sustainable kind of development," Triplett said.

Carlson's amendment should have its own public hearing, Triplett said. "We are talking about a major alteration of state tax policy," she said.

Sen. Bob Stenehjem, R-Bismarck, the Senate's majority leader, said that given the intensity of oil exploration with North Dakota's current tax rates, a proposal to cut taxes "is not going to be an easy sell."

Carlson said he has encountered skepticism about the idea from Republicans.

"I think it would work. Whether or not we have the appetite to do it, we'll see," Carlson said. "But you know what, if you have an idea like that, you have to run it."

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