North Dakota could see a more than $4 billion shortfall in oil and gas tax revenue due to the slumping price of crude under a revised revenue forecast that lawmakers adopted Thursday.
The figures, accepted by the House and Senate appropriations committees, will be used while crafting the upcoming two-year budget until the final revenue forecast — based on oil trends at that time — is presented to lawmakers in mid-March.
Continue Reading Below
"The sky is not falling," House Majority Leader Rep. Al Carlson, R-Fargo, told reporters.
Carlson and Senate Majority Leader Rich Wardner said the state's economy remains healthy and oil production is forecast to remain steady despite sagging oil prices.
North Dakota trails only Texas in oil production, and its output has risen from about 261,000 barrels daily in 2010 to about 1.2 million barrels daily at present. "We still have about 20 billion barrels of oil that need to be extracted from the ground," Wardner, R-Dickinson, said. "Oil companies are not going to go away."
The state's top priorities, such as investing billions of dollars in infrastructure improvements and millions of dollars in tax relief, will be funded during the next two-year budget cycle but most everything else "is open for discussion," Carlson said.
Gov. Jack Dalrymple's budget plan released in December assumed North Dakota sweet crude would fetch between $74 and $82 a barrel over the next biennium, which ends on June 30, 2017. North Dakota crude was fetching below $40 in some markets Thursday.
Oil revenues play a relatively small part, about 3.6 percent, in the state's general fund, which finances state government and a variety of programs. But the general fund also is financed by taxes on income and sales, which also are affected by depressed oil prices.
Oil and gas revenues for the 2015-17 budget cycle are projected at $4.2 billion, down $4 billion from the December projection, and a decrease of $1.8 billion from the current budget cycle.
The revised budget projection also assumes North Dakota's petroleum industry will see $46 million in tax cuts due to slipping oil prices. A state law forgives a 6.5 percent oil extraction tax if the five-month average price of a barrel of oil slips below a "trigger" price. Currently, that's $52.58 a barrel based on prices for West Texas Intermediate, which was about $45 a barrel on Thursday.
The new forecast assumes North Dakota oil will fetch between $45 to $65 per barrel in the 2015-17 biennium.