With the 2014 midterm elections drawing near and North Dakota’s 64th legislative session soon to follow, North Dakota Petroleum Council President Ron Ness outlined what he sees as the more important industry-related issues the Legislature will be addressing during a talk he gave at the council’s annual meeting in Dickinson on Sept. 25.
Those issues include additional funding to oil-impacted counties and the distribution of the $7.5 billion to $9 billion in oil tax revenues estimated to be collected during the biennium along with waste management, flaring, pipeline release prevention, and reclamation and landowner relations. In addition, Ness addressed a controversial conservation measure, the fate of which North Dakota voters will decide in the November election and which the Petroleum Council opposes.
But before looking ahead, Ness took a quick look back at the 63rd legislative session. “We had what I thought was a brutal legislative session in 2013,” Ness said. “For the oil and gas industry we had 86 bills that were related to oil, 160 bills that we tracked as an industry … and we attended 150 hearings and testified at 60 of them.”
Industry related bills passing the 63rd session provided more than $1 billion to oil impacted cities, counties and townships along with additional money for highway improvement projects, dust control and medical facilities along with new staffing for various state agencies including Health, Transportation, Highway Patrol and the Industrial Commission.
“There has been a lot of discussion about what the Legislature didn’t do for western North Dakota for the oil and gas industry, but don’t misunderstand - the Legislature and the governor did a lot for western North Dakota,” Ness said, noting that anticipating growth and demand is difficult. “So at the end of the day, they did a lot, but the reality is they just need to do a lot more.”
Surge funding
And “a lot more” can begin with the proposal recently announced by Senate Majority Leader Rich Wardner that would provide some $800 million in “surge” funding to oil and gas producing counties along with a change in the funding distribution formula (see story on page 8). Ness said the Petroleum Council’s board of directors passed a resolution during the meeting supporting the surge funding proposal.
“So we’re going to support this,” he said. “We’re going to ask you to engage. And we’re putting our … full force and effect of our organization and membership behind this effort because it’s time to get this done and get it done right.”
And on a related topic, another issue Ness sees coming up in the next session is allocating the $7.5 billion to $9 billion oil tax revenues that the state is expected to take in over the 2015-17 biennium. Funding needs across the state, he said, pose a “tremendous challenge” for legislators. “The more money there is, the harder … the legislative process is because there’s lots of hands and needs, and having to sort through all of them is a tremendous challenge.”
Measure 5
Before moving onto other legislative issues, Ness addressed Measure 5, a constitutional amendment that will be on the Nov. 4 ballot redirecting 5 percent of the revenue from the state’s oil extraction tax into a trust to fund efforts related to outdoor conservation (see story on page 1). Ness said the Petroleum Council opposes the measure, which he said under current oil production levels would amount to approximately $300 million per biennium of the state’s oil tax revenues.
“To prioritize this amount of money ahead of everything else that we’re going to talk about legislatively is just bad policy,” Ness said. “And putting it in our constitution is even worse policy.”
He noted that most of the oil tax revenue collected is earmarked with only 16 percent being discretionary. “And now you’re going to take 5 percent of the 16 percent of the discretionary fund that they use for tax relief and things like that.” He said the measure would create the sixth highest-funded agency in the state “without any rules, without anybody to answer to.”
Ness said much of the money backing the measure comes from out-of-state sources and he urged attendees to get involved in opposing the measure. He said a coalition of 70 state organizations, including the Chamber of Commerce and 37 farm groups, is opposing the measure and “they need your financial support because this coalition does not have the resources to take on these out-of-state groups that have funded this measure,” adding that he “just cannot emphasize enough the importance of it.”
Waste management
Of industry-related issues likely to be addressed in the upcoming legislative session, Ness said waste management could be the most important. “I think this is probably going to be the biggest issue going forward and we are going to see legislation.”
He explained that the state’s governor-appointed EmPower Commission developed a series of proposals that will be put into bills, one of which is an incentive for managing waste through a production tax incentive to encourage recycling of drill cuttings for such uses as road improvement rather than sending the cuttings to landfills. “This is a piece of legislation that is going to move forward and one that I think benefits the landowner, it benefits the state because it can mean less problems with waste management, and certainly in the long run it can benefit you as landowners.”
Other legislative issues
Flaring is another industry-related issue likely to be addressed in the session. Ness said the new rules adopted by the Industrial Commission went “a little bit above and beyond” what the council’s flaring task force recommended, and the industry is now under pressure to get gathering infrastructure in place. And while building gathering infrastructure has its own set of problems, including securing easements, he is optimistic such issues can be resolved.
Ness also believes there will be discussion in the session about pipeline releases and monitoring systems. He believes the industry in North Dakota has done a good job in preventing releases and cleaning up after the releases that have occurred, but said there is room for improvement. “We just have to continue to strive better, get better, do better.”
Reclamation of surface impacts and the relationships with landowners is another important issue Ness sees going forward. With the exploration and production push in the Bakken, reclamation issues were not always adequately addressed. “We got in a hurry in 2009-2010,” he said, adding that industry is now paying the price with landowners becoming “hypersensitive” to access and reclamation issues.
The Petroleum Council is also sensitive to those issues, and as part of the flaring task force, the council formed a right-of-way task force which Ness said has met with landowner groups and has developed a number of initiatives that the council will be releasing. Those documents include frequently asked questions about easements, project summary documents and a land agent code of conduct. “And we have documents that we’re going to be pushing out because you’re only as good as the landman you send to the landowner’s farm.”
