Oil patch residents can weigh in on using North Dakota's Legacy Fund earnings

Sen. Rich Wardner, R-Dickinson, majority leader and member of the interim Legacy Fund Earnings Committee, sees priorities in spending the earnings on North Dakota’s infrastructure, behavioral health and workforce development.

Residents of the Bakken oil patch have a chance to tell North Dakota lawmakers how they’d like to see the state’s oil tax savings account used.

The Legislature’s interim Legacy Fund Earnings Committee meets at 6:30 p.m. Wednesday and 8:30 a.m. Thursday at the Rough Rider Center in Watford City. The 2019 Legislature approved the committee of 11 legislative leaders to take public input on how to use the fund’s earnings, which eclipsed $455 million in the 2017-19 budget cycle.

North Dakota voters in 2010 approved creating the fund from 30% of the state’s monthly oil and gas tax revenue — savings that couldn’t be touched until July 1, 2017. The Legacy Fund has about $6.75 billion.

The committee planned two meetings for public input from outside of Bismarck, and last met in November in Fargo.

Watford City, where Lt. Gov. Brent Sanford was once mayor, is at the heart of the Bakken and is the McKenzie County seat. The county leads the state in oil production and produced 18.2 million barrels last November.

State tax data show McKenzie County generated more than $87 million in gross production and oil extraction taxes for November 2019, including $9.6 million distributed to the Mandan, Hidatsa and Arikara Nation.

It’s hard to tell how many people might turn out for the Watford City meetings. As of Wednesday, the Legislative Council had received no public comments in advance of the meeting. The public can submit comments to Adam Mathiak with the Legislative Council at amathiak@nd.gov.

McKenzie County Commission Chairman Tom McCabe plans to attend and expects other local officials will, too.

He said the commission has discussed the proposed four-lane expansion of U.S. Highway 85 from Belfield to Watford City as a potential use of the Legacy Fund, but he added he doesn’t know if that’s possible.

The $34 million, 2.2-mile Long X Bridge segment is the only portion of the estimated $479 million, 62-mile project to take shape.

“It’s the largest road need for the whole industry,” McCabe said. The highway is an arterial route through the state’s oil patch.

The 2019 Legislature gave North Dakota’s Department of Transportation up to $50 million in borrowing authority from the Bank of North Dakota for the project from Watford City to the bridge, should matching federal funds come into play. The state submitted two grant applications in 2019 for federal funds but was denied, and will apply for a $54 million federal grant. Construction on that 11-mile segment would begin in 2023.

Sen. Dale Patten, R-Watford City, said “it’s appropriate” to use the Legacy Fund to improve North Dakota’s highway infrastructure.

“Highway 85, as far as four-laning it, I think, is both a safety and transportation infrastructure project that needs to be done,” he said, but he noted the highway is not the only important piece of infrastructure in the state. Roadways are vital for moving products in North Dakota’s primary industries of energy and agriculture, he said.

The 2019 Legislature considered numerous ideas from state lawmakers and Gov. Doug Burgum for using the fund. Ideas included replacing income tax, creating an infrastructure revolving loan fund and kick-starting a state-administered paid family leave program, among others.

In his 2018 budget address, Burgum proposed a slate of projects using $300 million of Legacy Fund earnings.

But all those proposals either failed to pass or were funded in other ways.

The Legacy Fund’s earnings have so far been used to balance state budgets and to backfill a shorted state school aid fund.

Proposals and priorities

The Legislature can tap up to 15% of the fund’s principal every two years, but only by two-thirds votes in the House and Senate.

But the earnings, which accrue over a two-year budget cycle and then transfer to the state’s general fund, have been the Legislature’s area of focus.

Burgum in his 2020 State of the State address last month outlined a model to grow the Legacy Fund to more than $26 billion by 2033.

His proposal would reinvest about half of the fund’s earnings in its principal. Earnings not put into the principal would be used in three different areas: infrastructure, property tax relief through “smart growth incentives” and “transformational legacy projects,” such as career academies.

Senate Majority Leader Rich Wardner, R-Dickinson, who sits on the committee, said he prefers Legacy Fund proposals that would advance infrastructure projects, behavioral health needs and workforce development initiatives.

He’s still weighing a ratio of earnings that could potentially be reinvested and spent from the fund but says he’s “not very far apart” from Burgum’s model.

Wardner and House Majority Leader Chet Pollert, R-Carrington, who chairs the committee, see some proposal or ideas as likely to come forth from the group’s work.

“One way or another there will be a proposal, whether it’s from the committee or from an individual, there will be a proposal,” said Wardner, who added “we cannot do nothing.”

“I wouldn’t be surprised if we see a few bills, maybe,” Pollert said. But he’s not sure the whole committee would agree yet on a bill draft before hearing more information in meetings.

Next steps

Patten is “optimistic” about turnout of the general public for the Watford City meeting. The committee is meeting after typical workday hours and again the following morning.

Pollert expects to hear different input in Watford City than in Fargo, given the oil activity. And he’s received emails about how to use the earnings.

“I got a couple the other day saying we need to provide free lunches for school kids,” he said.

The Watford City meetings will have security from local law enforcement after an outburst from hecklers at the Fargo meeting, Pollert said.

He expects the committee to have two more meetings and to next meet in Bismarck.

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