A recent news report about North Dakota’s oil tax being reviewed by the state legislature’s interim Taxation Committee was only partly right: The production tax is being reviewed by an interim committee, but not the taxation group and the scope of the review goes far beyond taxes.
North Dakota Legislative Management, the 17 lawmakers that essentially conduct the work of the legislature between its biannual 80-day sessions, tasked the interim Energy Development and Transmission Committee with finding an independent consultant to conduct a study that will help North Dakota’s lawmakers develop a “legislative vision” of “long-term policy issues” for the oil industry, including and “revenue and expenditures.”
Two firms submitted proposals for conducting the study, Kadrmas, Lee & Jackson, or KLJ, a multi-disciplinary engineering and planning firm based in Bismarck, and The Louis Berger Group Inc., a Morristown, N.J-based consulting firm that provides engineering, architecture, program and construction management, environmental planning, and economic development services.
The study was actually mandated by a bill passed in the most recent legislative session in early 2013, House Bill 1198, which tasked legislative management to “study the likely changes to oil industry practices, production, impacts and tax policy in the foreseeable future of North Dakota,” requiring the body to obtain the services of an independent consultant with “demonstrated insight into current and future production advances,” including enhanced oil recovery techniques, the “effects of mature production areas on state and local tax policy; future infrastructure needs; and environmental considerations.”
The North Dakota Legislative Council, which provides legislative management with assistance from its staff of attorneys, fiscal analysts, information technology, support, and library personnel, sent out a request for proposals, or RFP, on Sept. 10, looking for a consultant to complete the oil industry study by Aug. 29, 2014.
The consultant awarded the bid would be required to make “periodic written reports” to the energy committee on its tentative findings and recommendations.
In November of each (even-numbered) year between sessions, legislative management meets to consider the results of all committee work and may accept, reject or amend committee reports. Legislative management, currently headed by Sen. Ray Holmberg, then presents its recommendations, together with bills and resolutions necessary for implementation, to the assembly.
The late August deadline would give legislative management time to review the consultant’s study and the energy committee’s comments, and make oil policy recommendations to the North Dakota Legislative Assembly — the formal name of the state’s legislative body.
Holmberg will have final say on the oil and gas policy recommendations forwarded to the assembly.
To be considered Oct. 31
A review of the RFPs submitted by Kadrmas, Lee & Jackson and The Louis Berger Group was initially scheduled for Oct. 14, but Timothy J. Dawson, counsel with legislative council and the person who issued the RFP, told Petroleum News Bakken Oct. 10 that he expected to reschedule that review to Oct. 31, so that the two companies might present their proposals directly to the energy committee.
The chairman of that committee, Sen. Rich Wardner, will select the winning bid, subject to the approval of Holmberg.
That award will likely occur within a few days after the presentations, Dawson said.
Per the RFP, the “expectation” is that the base proposal would be under $125,000 and each level of additional analysis under $50,000.”
As part of the study’s objective to help develop a long-term legislative vision for the oil industry, the study is “meant to provide answers to what would be the effects of changes in taxation, e.g. changes in rates and incentives; and whether the tax revenues collected would be adequate to meet expenditures, especially for infrastructure needs and environmental costs,” the RFP said.
Editor’s note: HB 1198 dealt primarily with oil extraction taxes and the state-tribal oil tax agreement, but also provided for income tax withholding for oil and gas royalty payments to nonresidents.
