Ron Ness, the head of the ND Petroeum Council | University of North Dakota
Ron Ness, the head of the ND Petroeum Council | University of North Dakota
Morton County received $40,746 million in property tax relief from North Dakota’s oil extraction and production tax revenue between 2008 and 2022.
That’s according to a report released by the North Dakota Petroleum Association.
The North Dakota oil extraction and production tax, first implemented in 1980, is levied on the value of oil extracted within the state. Combined with a production tax, which applies to the volume of oil produced, these taxes create a major source of income for the state, especially during periods of high oil prices.
Together, these taxes contribute significantly to North Dakota’s Legacy Fund, a sovereign wealth fund established in 2011 to support long-term state projects.
In fiscal year 2022 alone, the oil and gas tax revenue accounted for $1.3 billion, according to the study.
Tax revenue from oil extraction and production in North Dakota directly supports infrastructure, education, and social programs within the state. The revenue distribution follows a formula that directs funds to state and local governments.
A portion of the state’s oil extraction and production tax revenues is allocated to local property tax relief, as well as education, and water infrastructure and flood control projects across the state.
North Dakota’s oil and gas industry is one of the largest in the United States, driven by energy reserves in the Bakken Formation, a shale rock formation that spans parts of North Dakota, Montana, and Canada. Advances in hydraulic fracturing and horizontal drilling made it economically viable to access these reserves, resulting in a rapid increase in production starting in the early 2000s.
North Dakota ranked third among U.S. states in crude oil production in 2023, according to U.S. Energy Information Administration data. The state produced nearly 1.2 million barrels per day in 2023, marking its third-highest annual output.
The state’s oil and gas industry directly employed 14,200 people in 2021, and supported an additional 35,185, according to a 2023 report conducted by North Dakota State University researchers Dean Bangsund and Nancy Hodur.
Wages, salaries, and employee benefits generated by the oil and gas industry was estimated to total $3.9 billion, according to the report.
The Dakota Access Pipeline (DAPL), completed in 2017, also has helped oil and gas tax revenues by providing a more efficient method of oil transportation.
The DAPL is a 1,172-mile underground pipeline that transports crude oil from the Bakken Formation in North Dakota to a terminal in Patoka, Illinois. It crosses four states: North Dakota, South Dakota, Iowa, and Illinois. The pipeline has the capacity to transport up to 570,000 barrels of oil per day, reducing the need for rail transport.
How much in property tax relief did each N.D. county receive from the state’s oil extraction and production tax revenue between 2018 and 2021?
Source: North Dakota Petroleum Foundation's Oil and Gas Tax Study
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