HELENA – A pair of bills to impose new taxes or fees to help offset local impacts from booming oil and gas development along the Montana-North Dakota border each had their first hearing Tuesday – with decidedly different receptions.
Democratic state Sen. Christine Kaufmann of Helena is proposing to end Montana’s years-old “tax holiday” on oil and gas production, and use that money to pay for development impacts, primarily in eastern Montana.
But no one from eastern Montana showed up to support the idea, which was roundly trashed by oil and business interests as poor tax policy that would discourage exploration for oil and gas in Montana.
The second bill, from Republican Rep. Rob Cook of Conrad, would allow counties with oil and gas production to impose up to a $5-per-night fee on all lodging facilities, and distribute the money to cities and counties.
Lodging industry representatives didn’t like the idea, but city and county officials said the “user fee” is an acceptable first step toward helping cash-strapped local governments, especially cities, pay for impacts to water, sewer and road systems, as well as police and fire departments.
“These impacts are real, they’re happening now and I’d encourage the committee to start the process of addressing this, by passing this bill,” said Alec Hansen of the Montana League of Cities and Towns.
The two measures are among a half-dozen before the Legislature meant to help eastern Montana communities deal with an influx of workers, traffic and other impacts from an oil production boom, most of which is taking place in western North Dakota.
Jerry Jimison, the mayor of Glendive, said hundreds of oil field workers are staying in Glendive because of housing shortages in the nearby oil patch, and the city needs $16.6 million to upgrade its water and sewer systems.
Court cases also are up 45 percent in Glendive the past two years, felony crimes are up 47 percent and Glendive police have spent 1,500 extra hours investigating a murder in a trailer court, he said.
Cook said his House Bill 452 is the most efficient way to collect money from the people putting pressure on local services: Transient workers staying in local “man camps,” other campgrounds and local motels.
“You’re collecting the money from the people using the services,” he said. “To me, this does make sense.“
The House Appropriations Committee heard Cook’s bill Tuesday afternoon and took no immediate action.
Kaufmann’s Senate Bill 295, heard in the Senate Taxation Committee, has the potential to raise a lot more money – $32 million a year, if oil and gas production remains unchanged – and would split the amount between local governments and a “renewable resources trust fund.”
The bill would end Montana’s long-standing tax break for new oil and gas wells, which, since 1999, have paid only 0.5 percent of production value for 12 to 18 months – after which they pay 9 percent. Under SB295, wells drilled after Dec. 31 of this year would pay the 9 percent rate on any oil or gas production.
Kaufmann’s bill drew support from a variety of conservation and left-leaning groups, which said the tax break has outlived its usefulness and it’s time for the oil and gas industry to pay more for its impacts.
Similar proposals, however, have faced almost united opposition from Republican lawmakers, who control the Senate Taxation Committee, which will vote on the measure this week, and both houses in the 2013 Legislature.
Oil and gas interests said Montana’s “tax holiday” is an incentive to explore for petroleum in Montana, which often has areas where production costs are high and returns less than certain.
“In the absence of the tax holiday, it makes no sense for my client to leave North Dakota and drill wells in Montana,” said John Alke, an attorney representing Fidelity Exploration. “No one in the industry is questioning the desire to help pay for impacts. The problem is, this isn’t the way to do it.”