SIDNEY — Tax rates are what is on the mind of the Montana Petroleum Association as Montana nears a new legislative session. The organization, which represents oil and gas interests throughout the state, has been on tour to communities across Montana, to share its concerns with a variety of stakeholders.
They were in Sidney this week to talk about the changing Montana’s tax structure as it applies to oil and gas infrastructure.
Alan Olson is executive director of MPA. He pointed out that houses, when they are assessed, are adjusted by a multiplier as their market values increase, to help keep tax rates fair.
A house built in the 1950s, for example, might now be worth $250,000 in market value. but the tax multiplier has been adjusted downward so that taxes on grandma’s house aren’t suddenly breaking her bank.
But refineries and other oil and gas infrastructure are being treated much differently, and in ways that are likely to inhibit investment in the infrastructure necessary to curtail flaring.
“When we do an upgrade of a refinery, if you’re going to put $200 million into upgrading that refinery, we just tack that to the top and add $200 million to the valuation of that refinery,” Olson said.
The Calumet refinery is a case in point. It was upgraded from 10,000 barrels per day to 25,000, which cost around $400 million to do. That doubled workforce and more than doubled output. But it also increased the tax burden disproportionate to what the investment can bring in revenue.
Olson suggested a fairer approach would be to look at valuing refineries similar to agricultural land, on its productive capability.
“Let’s value these assets on what they are capable of producing,” Olson suggested. “I think that is something we can look at.”
The idea is just in the discussion phase right now, Olson added, and he’s looking for help from stakeholders on how to adjust things without hurting the revenue stream for government entities.
“The last thing we want to do is anything that stifles revenue for local governments, counties and schools and cities,” he said. “So that is where we have to have discussion. I’m reaching out to the oil, gas and coal counties to talk about it.”
If someone puts a new motor in their truck, their license plate fees don’t go up, Olson said. Refineries shouldn’t be treated differently for investments that keep the lights going. That’s essential to assuring that natural gas is brought to market instead of flared and means better royalties for mineral right owners, and more tax revenue for the Department of Revenue.
Montana’s refineries are small, Olson added. They are among the smallest assets of the companies owning them, and thus have to compete on a broader scale for investments. A tax structure like Montana’s does not help those refineries make a successful case for improvements.
“I don’t have all the answers,” Olson said. “But we will be working on it, and we will be asking for help from county commissioners and legislators. This is going to have to be a group effort.”
Olson said another bill they will be bringing to the table is a new drone bill.
“This one will be a lot cleaner than the drone bill that didn’t make it through the session last time,” Olson said. “It will deal strictly with critical infrastructure.”
The bill will seek a 400-foot no-fly buffer zone around the outside and overhead for oil refineries, power generation, oil production and above ground pipeline facilities, railroads and railyards, prisons, and telecommunication structures.
Drones could still be flown there with the permission of the entity’s owner, Olson added.
“We do use drones,” he said. “We use them for refinery and pipeline inspections, and for drilling rig inspections and oil production facility inspections.”