The North Dakota Chamber of Commerce is protesting a bill that would exempt oil drillers from paying an extraction tax if the crude is processed at a North Dakota refinery.
Chamber spokesman Bill Shalhoob told the House Taxation and Finance Committee on Monday that construction of new refineries is being held up by environmental hurdles — not by burdensome taxation or the lack of potential profits.
A new refinery has not been built in the U.S. since the 1970s, although many have been expanded over the years, including the Tesoro Corp. plant near Mandan, North Dakota's sole oil refinery, which processes about 68,000 barrels of crude daily from North Dakota and Montana.
At least two other refineries have been proposed in western North Dakota, including a 20,000-barrel-per-day plant planned by the Three Affiliated Tribes on the Fort Berthold Reservation and another near Trenton that also would process about 20,000 barrels of oil daily.
Dakota Oil Processing LLC of Williston, backers of the plant near Trenton, has pitched the proposal to exempt oil from the 6.5 percent extraction tax if it is processed at a refinery in the state.
Backers have said the exemption would spur construction of new refineries in the state. They've argued that new refineries would bring jobs and economic growth and that the tax break would more than pay for itself. A legislative committee endorsed the idea late last year.
No one spoke in favor of the exemption Monday.
A 5 percent production tax and a 6.5 percent extraction tax on crude oil are levied in North Dakota and the revenue goes to the state's general operating fund, local governments and various trust funds.
An analysis by the state Tax Department said if the exemption was approved, North Dakota would lose more than $258 million in revenue over the next two years, based solely on the production at the Tesoro plant in Mandan.
Tesoro has said the bulk of the refinery's products are shipped through pipelines to eastern North Dakota and Minnesota and sold to customers in the Dakotas, Minnesota and Wisconsin. Gasoline typically makes up about 60 percent of the refinery's production. About 80 percent of the diesel and 35 percent of the gasoline produced at the refinery stays in North Dakota, the company has said.
Shalhoob said the revenue gained from the extraction tax is needed in the state for various projects, including increased infrastructure to keep pace with booming oil production.
Shalhoob said the $258 million in potential lost revenue "is a big number better spent in other places."
The House Finance and Taxation Committee took no action on the bill Monday. The bill is HB1032.