Oil and gas companies should pay their fair share

In Montana, we believe in fairness and a level playing field. But right now, oil and gas companies extracting Montana resources are not paying their fair share. From 2008 to 2014, these companies received a tax break of more than $126 million, costing local communities and the state critical revenue to meet infrastructure, social service and public safety needs.

In 1999, the legislature created a huge tax break for oil and gas companies. It lowers the taxation of oil and gas production to almost nothing during the most profitable period of extraction — the first 12 to 18 months. At the time, proponents of the tax break claimed that it would encourage development. Studies show, however, that oil companies do not base their decisions on state taxes.

Quite simply, these out-of-state corporations operate where there is oil, period. We know now that this tax policy has cost Montana hundreds of millions in lost revenue, but the costs have been especially high to the communities who feel the strain on their public services and infrastructure.

Let’s compare. In North Dakota, during times when oil prices are high, a typical Bakken well producer is taxed at an average rate of 10.6 percent. However, Montana taxes these companies at less than 1 percent during the first 12 to 18 months, regardless of how high oil prices are and how much profit a producer makes.

The money Montana hands over to oil and gas companies as a tax break should instead be invested in our communities, on maintaining critical public services like education, water systems, housing and roads. Increasing population in oil- and gas-impacted counties has overwhelmed local police, firefighters, domestic violence shelters and child abuse officials.

What could this revenue have provided? The tax breaks to oil companies in 2014 alone could have instead funded any one of the following:

• Over a third of the projected costs for maintaining roads in Eastern Montana as a result of increased traffic from heavy equipment in the area.

• The critical services provided to victims of domestic violence and their families through the 22 shelters in Montana for six years.

• The state’s costs in addressing disaster and emergency services for 20 years.

• The state’s budget for veteran services and their families for 15 years.

• Three-fourths of the annual state budget for the Montana Highway Patrol.

The revenue Montana lost between 2008 and 2014 could have supported seven years of Early Edge, an investment to ensure Montana’s children enter kindergarten ready to learn.

Aren’t those more important than a tax break for big out-of-state corporations?

We can fix this. I am proposing Senate Bill 374 to ensure oil companies pay their fair share. The bill will place a “trigger” on the tax holiday. When oil prices are high, the state and communities are ensured a revenue stream. North Dakota, experiencing a similar oil boom, has had a similar tax structure in place for several years.

My bill will also ensure that the majority of this revenue goes to where it is needed most — the communities in Eastern Montana. A fund will be set up to address the ongoing infrastructure, safety and social service needs of the communities hit the hardest by the production.

The oil and gas tax holiday is costing Montana millions in revenue for public services and infrastructure. It’s time to fix it and put those dollars to better use.

Sen. Christine Kaufmann, D-Helena, serves on the Senate’s Highways and Transportation, Natural Resources Taxation committees and the Joint Subcommittee on Revenue Estimating.