Headlines abound at legislative energy day
Three headlines emerged from Energy Day at the state Legislature.
The event, sponsored by Bakken Backers, drew about 150 people to the state capitol on Tuesday, March 7.
Ryan Rauschenberger, the state tax commissioner, suggested that North Dakota faces a “new normal” in sales tax collections, which drive the state’s general fund.
That’s the first headline.
Taxes on retail sales – those paid by individual shoppers — have remained relatively stable. On the other hand, taxes on business -to- business sales have gone down.
Business-to-business sales make up a larger share of sales tax collections. “It’s essentially a new base to our economy,” Rauschenberger said.
The problem for projections is that the decline in oil prices has driven efficiencies in oil product, and it’s impossible to know the impact on sales taxes.
Helen Currie, the event’s keynote speaker, underlined Rauschenberger’s conclusion. “The worst of the oil market downturn is likely behind us,” she said.
That’s the second headline.
An unknown element in predicting oil field profitability is how much of the cost savings during the downturn “will be given back” to oil field service businesses as prices rise, she said. The “give back” drives sales tax collections on business-to-business sales.
Currie, chief economist for ConocoPhillips, one of the world’s largest oil and gas producers, spoke via telephone, because weather kept her in Denver.
She predicted that the global oil market should start to rebalance. Demand will rise worldwide, including in the United States. American oil production likely will increase in the Bakken field in western North Dakota. The Permian, a Texas oil field, will be another locus for increased activity.
Rauschenberger emphasized the difference in the impact of oil development in Texas and North Dakota, the top oil producing states.
The gross value of Texas production in 2016 was $52.4 billion or $1,882 for every Texan. In North Dakota gross production was $16.9 billion, but that amounted to $22,273 per capita in North Dakota.
The differential makes predicting tax revenues much more difficult in North Dakota, since individual taxes make up a much smaller share of collections.
The third Energy Day headline came from Trey Wilson, president of MBI Energy Services, which he identified as “the largest North Dakota-based diversified oil field service company.”
Wilson said he expects “a significant amount of activity” in the Bakken, both in drilling new wells and in bringing drilled but uncompleted wells into production. Last year’s average was 50 wells per month, he said; in 2017, that number will be 85 wells, he predicted. That will require adding “hundreds of jobs.
“The limiting factor is people,” Wilson said.
Lt. Gov. Brent Sanford said “the future is bright,” he said.
He also acknowledged that “our budget problem is a significant bump in the road.”
Wilson and Jessie Veeder, a singer and writer from Watford City, emphasized the importance of quality-of-life issues in attracting and retaining workers.