- Associated Press - Wednesday, May 13, 2015

BISMARCK, N.D. (AP) - Unless oil prices take a sudden nosedive, North Dakota’s petroleum industry won’t start reaping this year the benefits of a tax break that would decrease state tax collections by nearly a half-billion dollars, officials said Wednesday.

“More than likely it’s not going to happen,” state Tax Commissioner Ryan Rauschenberger said at a news conference.

North Dakota has two principal oil taxes, a 5 percent production tax and a 6.5 percent extraction tax. The extraction tax as imposed by a 1980 voter initiative during a previous oil boom. A state law forgives the extraction tax if the five-month average price of oil slips below a “trigger” price of $55.09 a barrel.

Since January, the average monthly oil price has been below the trigger, giving producers hope that the tax break might appear. If oil prices had averaged below the benchmark in May, it would have marked the fifth straight month below the trigger price. Instead, May’s average price has been about $4 more than the minimum and has not slipped below the trigger this month.

North Dakota sweet crude was at $61.47 on Wednesday morning.

Should May’s average price stay above the trigger, North Dakota’s treasury is likely to collect about $80 million more each month through November than had been expected, according to Rauschenberger and Ron Ness, president of the North Dakota Petroleum Council.

State budget analysts had estimated the trigger would be in effect from June through April 2016, costing the state an estimated $863 million in lost revenue during that time.

“It appears we will not hit the trigger,” Ness said Wednesday. “Unfortunately, that $80 million-a-month stimulus could have been significant. I was really hoping it would kick in.”

The prospect of the big tax cuts had North Dakota lawmakers scrambling before adjourning last month to approve a new oil tax framework that cuts the state’s overall oil tax rate from 11.5 percent to 10 percent, while abolishing the trigger for drillers Dec. 1.

Republican lawmakers said lowering the oil tax rate will provide a stable and predictable tax policy that will increase production, spur investment and help grow the state’s economy. Democrats said the measure is a giveaway to the oil industry and will ultimately cost the state billions of dollars in tax revenue.

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