NEW TOWN, N.D. - The Three Affiliated Tribes and the state of North Dakota announced on Friday the signing of an oil and gas tax agreement that should pull the tribe from its current lull in oil production.
"This agreement should help open the doors to oil and gas exploration on the Fort Berthold Reservation," said North Dakota Gov. John Hoeven. "The additional activity will provide economic development, jobs and revenue for the Three Affiliated Tribe and its members, while recognizing and maintaining tribal sovereignty. It's a win for the tribes, a win for the state's oil industry and a win for the state of North Dakota."
TAT Chairman Marcus Wells said the agreement allows the tribe and state "to work together to provide more stability in the taxation of oil and gas in western North Dakota."
The lack of a state-tribe tax agreement - and bureaucratic delays within the Interior Department - has paralyzed oil production and extraction on the Fort Berthold Reservation. Production activity should eventually match that on private lands, considering more than $70 million in oil lease bonuses have been paid to individual trust land owners since last November.
The tax agreement has been under negotiation for the last 18 months.
"It's good for development on the reservation and reverses some uncertainty, for a time period," said Gray Powers, a spokesman for Simray Production Co. in Richardson, Texas. "The economics of development won't be suffering because of unequal taxation on the reservation or off the reservation."
Drilling activity on trust land - Indian land managed by the Interior Department - is expected to increase once the tax agreement goes into effect July 1.
Hoeven is expected to arrive at the Three Affiliated Tribes council chambers in New Town on June 10 to sign the agreement. The state will collect all taxes and distribute all revenue to the three tribes, or Mandan, Hidatsa and Arikara Nation. The tribe will not receive any back taxes.
Wells has said the tax revenue will be used for tribal social services, roads, health care and law enforcement.
The tax will be paid by oil production companies and calls for a 50-50 tax split between the state and tribes on an 11.5 percent tax on tribe-owned and individual trust lands.
The tax will not affect royalty payments to individuals, which are nontaxable.
An 11.5 percent tax also applies to fee lands, property owned privately by individuals. The tribe will receive a
1 percent tax on fee lands, compared to the state's 4 percent tax. The state has temporarily waived a 6.5 percent extraction tax on all land within the reservation.
The three tribes cannot impose any tax higher than the agreed 11.5 percent tax until July 2010. Tribal leaders expect to ask the North Dakota Legislature to reconsider the tax rate in 2009, said Damon Williams, the MHA Nation tribal attorney.
"Right now, we're getting our foot in the door," said Williams. "Now is the time for the state and tribe to work together. We all want production. We all want development in the state."
Meanwhile, production on the Fort Berthold Reservation has been nearly stagnant since some of the first oil leases were signed more than three years ago, a problem some say rests between the tribe and the Bureau of Indian Affairs.
"It doesn't take three years to get a drilling permit," said Hugh Baker, a land owner who has the reservation's only active drilling rig on trust land in his back yard. "They just don't have the people in there who know how, or what they should know."
The BIA has been sending staff people from New Mexico, South Dakota and Montana to assist the Fort Berthold Agency, which sits atop the Bakken reserve, one of the country's largest continuous oil formations. The oil boom is being bolstered by new technology that allows oil extraction from the reserve.
"There has never been anything like this in the Great Plains Region; nothing has ever come close to this magnitude," said Michael Black, the BIA's deputy regional director for Indian services in Billings.
He said the Interior Department's Office of Special Trustee expects to pay more than $100 million in oil lease bonuses to Fort Berthold individual trust land owners by the time the leasing phase is complete.
The next step will be the drilling process. Ideally, it should take 90 days to get a drilling permit, Black said.
"Nothing ever goes as fast as people want it," he said. "We have regulations and laws we have to follow."
Reporter Jodi Rave can be reached at 1-800-366-7186 or at firstname.lastname@example.org.