prairie dog buckets

Graphic showing status of Prairie Dog buckets.

Oil tax revenues are down by at least $1.4 billion for the 2019 to 2021 forecast in the state’s latest revision and down $1.8 billion for the 2021 to 2023 forecast, according to figures shared recently with the Western Dakota Energy Association. That represents close to a 30 percent drop.

With barely six months left in the biennium, Brent Bogar, with Jadestone Consulting, told WDEA members the numbers mean that only the first municipal Operation Prairie Dog bucket for $30.4 million is likely to fill.

Those dollars could potentially go out in December or January, depending on how accurate budget forecasts turn out to be.

In the hierarchy of funding “buckets,” oil and gas revenues have so far filled about $174 million of the $200 million General Fund bucket. After that, there’s a $10 million Lignite Research Fund to get through before any money would hit the Municipal Operation Prairie Dog Fund.

Bogar said his calculations show about $240 million to $280 million dropping into the $400 million Strategic Investment Improvement Fund once the Municipal OPD fund fills.

“There’s really no scenario I’ve seen, and working with others in the forecasting environment, there is really no scenario to see that SIIF fund of $400 million completely filled this biennium,” Bogar said. “That is not exactly happy news to hear, but that is the reality of it.”

That will leave the County OPD for $30.4 million, City/County OPD for $169.2 million, and Airport OPD for $20 million all unfilled during this biennium.

Bogar said he would not be surprised to see further revisions downward for the budget forecast.

“If we’re not completing wells at the rate we need to to maintain production, that is going to decline some more,” he said.

Operation Prairie Dog doesn’t impact funding streams from the Gross Production Tax, Bogar added, and so doesn’t affect funding that is going out to WDEA counties.

For estimated GPT for counties, the latest projections show $37.6 million for Williams County, $89.5 million for McKenzie, $3.089 million for Divide, $1.1 million for Stark, and $42.78 million for Mountrail.

“Even these forecast numbers, I’d highly encourage not to use them as the gospel to put budgets together,” Bogar warned. “But it is something as just kind of a base to look at where we are at.”

Current conditions with the COVID-19 pandemic mean lower for longer prices, Bogar said, and that means likely flat lines for production as well.

“Even if demand picks up, for our production to really grow, that is going to take a long-term price increase,” Bogar said. “And when we have OPEC and Russia who can bring on production much quicker to take that market share, we don’t see a significant change in the near term there.”

Bogar said he’s been asked whether legislators might use principal from the legacy fund to help with the shortfall.

“The legislators I’ve talked to, there is no appetite for that,” he said.

There is, however, discussion of bonding at the state level to fund major infrastructure type projects, Bogar said.

“If you have 2.5 to 3 percent inflation rate on construction and you have bond rates at roughly 1/6, 1/7, you are saving money paying for that project today versus waiting for cash in hand,” Bogar said.

There have also been some talking about increasing the gas tax for roads and bridges, Bogar said, but added, “Obviously, it gets thrown out there, but the legislative environment is not keen on new taxes or increases.”

Bogar said it is still not known whether any more stimulus funding will come about either before or after the election.

Like so many other things have been for 2020, that, too, is a wait and see situation.

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