By Mike Nowatzki
BISMARCK, N.D. – A revised state revenue forecast presented Thursday to North Dakota lawmakers predicts the effects of sagging oil prices will cause oil and gas tax revenue to drop more than $4 billion over the next two years compared with the December forecast used in the governor’s budget proposal.
The House Appropriations Committee voted 22-1 to adopt the new forecast, which will be used for budgeting purposes until the next forecast is released in March.
“These numbers are closer to realistic of what’s going on right now than what the governor’s budget had in it,” said Rep. Jeff Delzer, R-Underwood, the committee’s chairman.
Legislative Council budget analyst Allen Knudson, who presented the forecast, said the assumptions were based on discussions with the state tax department, the Industrial Commission’s Oil and Gas Division and the oil and gas industry.
The forecast projects oil and gas tax revenue will be down nearly $762 million for the remainder of the 2013-15 biennium, which ends June 30, and $4.05 billion during the 2015-2017 budget cycle, compared with the December forecast.
That assumes a crude oil price of $42 a barrel for the rest of this biennium and a range of $45 to $65 a barrel during the next biennium, with oil production remaining constant at 1.2 million barrels per day. The price for West Texas Intermediate crude was hovering around $45 a barrel Thursday morning, and the wellhead price for Bakken crude is typically discounted up to $10 below the WTI price.
The forecast also assumes that an oil price “trigger” exemption based on crude prices being below $55 a barrel for a single calendar month will be in effect between February and May, reducing oil extraction tax collections by $46 million. A “big trigger” exemption based on prices being below $52.59 a barrel for five consecutive months also is predicted to be in effect from June to March 2016, resulting in an $883 million drop in oil extraction tax collections in 2015-2017.
Compared with the December forecast, general fund revenue would be down $130 million for the rest of this biennium and $550 million in 2015-17.
Changes to ongoing spending proposed in Gov. Jack Dalrymple’s budget would leave the general fund with a shortfall of $128.6 million, based on the new forecast. That assumes lawmakers will approve the governor’s proposed $100 million in individual income tax relief and $25 million in corporate income tax relief.
When adding the impacts of proposed legislation, “There would potentially be a shortfall of a little over $1 billion if you were to approve everything that’s out there,” Knudson said.