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Legislators won't change oil tax trigger when it hits $90

Rep. Craig Headland, R-Montpelier, makes a point during Thursday's floor discussion on Finance and Taxation Conference Committee's report on House Bill 1166, dealing with the oil sales tax trigger on Thursday at the state Capitol in Bismarck. Mike McCleary / Bismarck Tribune

BISMARCK—An oil tax trigger will remain in place after House members killed a bill Thursday containing Senate amendments that would have eliminated it.

House Bill 1166 was defeated by an 8-81 vote.

As originally introduced, it would have removed the final oil tax trigger remaining in state law. In 2015, legislation passed permanently lowering the state's 6.5 percent oil extraction tax to 5 percent effective Jan. 1, 2016. The state's gross production tax was left untouched at 5 percent.

The trigger being proposed for removal kicks in if the price of oil averaged above $90 per barrel for three consecutive months, at which point the extraction tax would increase to 6 percent. It would return to 5 percent if prices dropped back below $90 for three months.

However, the Senate language crossed out the language eliminating this trigger. The Senate went on to add permissive language eliminating the percentages in the section of statute relating to oil extraction tax rates, which was done to allow for language stating that the tax rate is the same on trust lands on both state land and within reservation boundaries.

House members voted 67-22 to accept the Senate amendments and conference committee report, opening the door to rejecting the bill outright.

"This does not change the extraction tax on tribal lands or the tribal agreement," bill carrier Rep. Jason Dockter, R-Bismarck, said. "This reflects the current practice of the tax department and makes it consistent with current law."

Democrats disagreed with that assessment.

"We are putting in jeopardy the whole process of contracts and tribal agreements," Rep. Kathy Hogan, D-Fargo, said.

Rep. Craig Headland, R-Montpelier, countered that, in state statute, the Legislature is authorized to set tax rates, not the governor.

"He can't negotiate anything beyond with what we allow him to," Headland said, referring to state-tribal tax deals.

Several more lawmakers debated the state and tribal tax compact issue before House Majority Leader Al Carlson, R-Fargo, rose as the primary sponsor of HB1166 and urged it to be rejected as amended.

"The first thing I'd like to do is apologize for introducing this bill," Carlson, said. "This debate was supposed to be about a simple tax policy."

Carlson argued throughout the session that he'd disagreed with the upper trigger during final work on the 2015 legislation. He considers it bad policy that punishes the industry for success during good times.

"It's dead," Carlson added after the floor session when asked whether or not the issue would come back in another bill.