With interest rates at historic lows and the state looking to rebound from effects of the COVID-19 pandemic, Republican legislators this week introduced a $1.1 billion bonding bill to fund major infrastructure and other projects in North Dakota.

Rep. Todd Porter, who chairs the House Energy and Natural Resources Committee, and Senate Majority Leader Rich Wardner described the proposal at a news conference this week. Bond proceeds would be repaid with earnings from the state's Legacy Fund, which last biennium amounted to $455 million.

Wardner said the bonding plan makes good sense in the current financial market, which offers low interest rates and plenty of competition for the work.

Click here to listen to Wardner's comments.

Wardner said proceeds of the bond issue would be used to support major water and flood control projects to which the state has already made a financial commitment, thereby freeing up dollars in other state funds to address additional needs. He said funds devoted to road and bridge infrastructure could be further leveraged with federal dollars to complete major projects such a four-laning additional parts of Highway 85. Due to the decline in oil prices, infrastructure funding to non-oil counties in Wardner's "Operation Prairie Dog" legislation did not materialize, so he said the bonding bill would make good on the state's commitment.

Click here to listen to Wardner's comments.

Wardner said the bonding package would also include significant funding to support the state's lignite industry. He said it would provide $50 million for research into technology to capture carbon dioxide emissions from coal-fired power plants.

The legislation will be introduced as a House bill with Porter as the prime sponsor. He said one aspect of the bill that is most important to him is providing support for career academies and technical education, to provide training in occupations which he expects will be in high demand in coming years.

Click here to listen to Porter's comments.

Specifically, Porter and Wardner's legacy bonding billion would provide:

$250 million for the FM Diversion, Red River Water Supply and Mouse River flood control
$50 million for a water project revolving loan fund
$75 million for an infrastructure revolving loan fund
$60 million for bridges via DOT
$100 million for highway corridor projects
$22.6 million for state parks ($10M for local park district grants)
$141 million for city and county Operation Prairie Dog funds
$10 million for township Operation Prairie Dog funds
$20 million for airport Operation Prairie Dog funds

The package covers many of the same areas in a bonding proposal pitched by Gov. Doug Burgum in his state-of-the-state message. The key difference is that much of the funding proposed by Burgum would be in the form of low interest loans, while the Porter/Wardner bill would provide the money as grants for infrastructure projects.

Click here to read a Bismarck Tribune article about the bonding proposal. Click here for a story from KFYR-TV.

After describing the many difficulties faced last year, Gov. Doug Burgum laid out an ambitious plan for investments in North Dakota to position the state for a prosperous future during his state-of-the-state message this week.

With interest rates at historic lows, Burgum emphasized the opportunity to bond for roads, bridges, career and technical education centers, and other one-time infrastructure projects. He proposed creation of a $700 million revolving loan fund to provide low-cost financing for current and future infrastructure projects. Like the plan pitched by Republican lawmakers, the governor's $1.25 billion bonding proposal would use a portion of earnings from the state’s Legacy Fund.

Click here to listen to Burgum's comments.

Burgum said he was optimistic about North Dakota’s rebounding agriculture and energy sectors, and expressed support for the state’s all-of-the-above approach to energy development. He noted that oil production is holding around 1.2 million barrels per day and the state is meeting its gas capture targets. The governor also mentioned promising research into development of salt caverns that could be used for natural gas storage or to provide essential infrastructure for a petrochemical facility.

Burgum said his administration is working hard to find a market-based economic path forward for Coal Creek Station, the planned closing of which was announced last May. He cited Lt. Gov. Sanford’s "tenacious and effective leadership" in pursuit of a new owner for the 1,100 megawatt facility. Burgum said research into capturing carbon dioxide emissions offers great promise in the state.

Click here to listen to Burgum's comments.

Burgum also proposed additional investments in behavioral health services, upgrading information technology systems, and highlighted investment and growth in the state’s UAS industry.

Click here to view a video of Governor Burgum's speech.

A new streamlined system to report hazardous material spills and releases was announced this week by Gov. Burgum during his state-of-the-state address.

The new system provides a one-stop spill reporting shop for energy producers, transporters and developers. Prior to implementation, energy producers were required to provide notification to several different state agencies.  Project planning began in 2018 as a joint effort led by the Department of Emergency Services and supported by the Department of Environmental Quality, Department of Agriculture and the Industrial Commission’s Oil and Gas Division. 

Click here to listen to Gov. Burgum’s comments on the new program. 

The reporting system can be accessed here or by calling 1-833-99SPILL (1-833-997-7455). Spill reporting requirements remain the same. A series of training videos will be posted to the spill.nd.gov website for users to reference.

Prior to the reporting system’s implementation, state agency representatives initiated an outreach campaign to notify industry stakeholders about the new platform and to provide training to those who wished to participate. 

"By using a whole-of-government approach, we have developed a reporting system that will help North Dakota more effectively respond and mitigate impacts from unanticipated spill events,” said Cody Schulz, North Dakota Homeland Security director. “We have also strengthened our response capabilities by partnering with energy industry groups, instructing them on the state’s reporting requirements and giving them the tools and training to report accurately.”

North Dakota oil producers have been challenged by low prices, adverse weather, worker shortages and coping with excessive natural gas production. But the biggest concern in coming years may be onerous federal regulations coming from the administration of President-elect Joe Biden.

"These people are not friendly to oil and gas," said Lynn Helms, director of the Department of Mineral Resources, in a presentation this week to the House Appropriations Committee. Helms provided the committee the names of Biden's nominees to key cabinet positions with jurisdiction over public lands and the environment. He said North Dakota has about 7,500 spacing units for oil and gas production, and about 2,500 of them have some connection to either federal minerals or to surface controlled by the federal government. Helms said the implications of an anti-oil agenda pose "many very significant threats" to North Dakota producers.

Click here to listen to Helms' comments.

Helms said if a fracking ban was imposed by the Biden administration, it would affect drilling activity in wells touched by federal minerals, but under current law would not apply to other wells within the spacing unit.

North Dakota is not likely to see a resurgence in drilling activity if the price forecast of oil industry executives is accurate. Helms said 65% of CEOs think crude prices will remain between $45 and $55 per barrel throughout 2021. He said that price is too low to generate new drilling activity, but it is high enough that companies will continue to complete DUC (drilled but uncompleted) wells. As of October, there were 724 DUCs in the state.

Helms said midstream problems will also continue to challenge producers. He said the Northern Border natural gas pipeline is essentially full of North Dakota gas, and new options for handling excess natural gas and associated gas liquids will be needed soon. 

Click here to listen to Helms' comments.

Helms concluded his presentation with some positive news. He said the state has now permitted two slurry wells that will have the capacity to handle much of the TENORM waste (technologically-enhanced naturally occurring radioactive material) produced in the state. He said industry researchers are also evaluating data which suggests that costs of completing a well can be significantly reduced, which could mean additional drilling at lower prices.

Click here to listen to Helms' comments.

Helms also had positive news about the state's use of CARES Act dollars to plug abandoned wells, reclaim the sites and create an incentive to complete DUC wells. He said collectively the programs created 3,700 jobs and have returned 275 acres of ag land to production. Helms said he's heard "rave reviews" from farmers and ranchers in Bottineau and Renville Counties.

Click here to view video of Helms' testimony to the House Appropriations Committee.

The chairman of the Mandan, Hidatsa and Arikara Nation urged North Dakota legislators to review the oil tax agreement revised last session during his address to the opening session of the 2021 Legislature.

In his Tribal and State Relationship address, MHA Chairman Mark Fox said he wants the tribe to share in tax revenue from oil wells that straddle the boundary of the Fort Berthold Indian Reservation, including wells that begin off the reservation and extend horizontally across the border into reservation lands. The existing agreement allows the tribe to collect revenue only for wells that begin on the reservation.

Click here to listen to Fox's comments. 

Fox said fixing the tax agreement is part of the solution for a devastating year in which the oil price collapse led to a significant drop in revenue for the MHA Nation. He said federal relief dollars did not make up the difference and the gap has been “really devastating.” 

Fox also urged lawmakers to help with infrastructure development specifically as it relates to capturing natural gas. A higher percentage of gas is flared on Fort Berthold than in the Bakken as a whole due to a lack of pipelines and processing plants.

Click here to listen to Fox's comments. 

Fox is a U.S. Marine Corps veteran and earned his law degree in 1993 from the University of North Dakota. He was accompanied in the House chamber by his seven-year-old son, Elijah. Fox was first elected Chairman in 2014 and is currently serving his second term. 

Click here for a Bismarck Tribune article on Fox’s address. 

North Dakota lawmakers heard proposals that could eventually allow “road trains” to travel on some state and federal highways in the state. Two related bills were heard before the Transportation Committees in both the House and Senate.

HCR 3001 is a concurrent resolution urging Congress to temporarily amend restrictions on state highways and interstates that are a part of the National Network to allow North Dakota and surrounding states to conduct a road train pilot program. The House Transportation Committee gave a “do-pass” recommendation and the measure will move to the full House next week 

SB 2026 would give the governor the power to set size limits for road trains as long as they comply with existing axle weight limits. The Senate Transportation Committee did not vote on the bill this week. 

Those supporting the measure in the House committee cited the need to create efficient methods to get North Dakota products to market as well as the challenges associated with a shortage CDL drivers. Because of this shortage, Matt Gardner representing the ND Motor Carriers Association (NDMCA), said it was important to look at alternative ways to move more freight with fewer drivers. 

Click here to listen to Gardner's comments.

In the Senate committee meeting, Arik Spencer representing NDMCA said while the association supports the concept, "SB 2026 has several issues that must be addressed before these combinations can be utilized.” Spencer said the maximum weight and length of a vehicle must be supported by appropriate infrastructure, and proper training should occur.

Click here to listen to Spencer's comments. 

Those opposing the measures spoke of potential safety issues related to large trucks that could pose dangerous driving conditions leading to more traffic fatalities. Others spoke of potential damage to roads and bridges. Organizations testifying in opposition included the ND Association of Counties, BNSF Railway, a Cass County engineer, and a trial attorney from Fargo with a practice representing families who have suffered death or catastrophic injuries in crashes involving commercial vehicles. 

Click here for an article from the Bismarck Tribune and here for an article from the Fargo Forum focused on this week’s hearings on the measures. 

North Dakota legislators are being asked to change a 40-year-old law that allows the state to collect up to 18% interest and 12% in penalties on unpaid royalties.

The law dates back to 1981 when inflation and interest rates were at record highs, but times have changed and the law should be changed to reflect that. That's according to Rep. Jason Dockter, R-Bismarck, who pitched HB 1080 to the House Finance and Taxation Committee this week. Dockter said the bill would help create “a little more certainty with the Fed’s fund rate” as it relates to royalty payment penalties. 

The proposed legislation aims to reduce the maximum amount of interest and penalties the state can charge for late royalties to a base interest rate set by the Bank of North Dakota plus 4%. The bill also extends the time before interest and penalties begin to accrue to 150 days. Earlier legislation had the charges starting on oil royalties after 30 days, and natural gas royalties after 60 days. 

North Dakota Petroleum Council President Ron Ness told committee members during Wednesday's hearing that rates should be more equitable with what other industries pay. 

Click here to listen to Ness's comments. 

As 2021 begins with President-elect Biden taking office and Democrats assuming control of the Senate, Ness feels the oil industry will face an uphill battle. He calls the maximum rate of 30% a “significant hammer” for oil and gas companies. 

Click here to listen to Ness's comments. 

In regard to the royalty penalties, Ness feels the industry has been punished unfairly. Two lawsuits are currently underway involving Bakken oil producers over the rate dispute, and some companies are withholding payments pending the court decision. 

Land Commissioner Jodi Smith did not offer the department’s view on the legislation at the hearing, but said she would return to the committee with more information following a special meeting of the Land Board.

Click here for a Bismarck Tribune article about the hearing. 

Most legislative committees meet only two or three times a week, but members of the House and Senate Appropriations Committees meet nearly every day of the session to decide how state tax revenue will be spent.

One of more than a dozen state agency budget bills that WDEA is tracking will have its first hearing Monday morning before the Senate Appropriations Committee. SB 2012 is the budget of the ND Department of Transportation, and is scheduled to be heard beginning at 8:30 Monday. The baseline budget calls for spending about $1.4 billion over the 2021-23 biennium. Gov. Burgum has proposed just over $1.8 million in spending, which would include money generated by his bonding proposal (see article in December 4, 2020 newsletter).

The first hearing on the Public Service Commission's budget (HB 1008) will be held Monday at 9:00 a.m. in the House Appropriations Committee. The same committee will take its first look at the budget of the Industrial Commission (SB 2014) Wednesday morning at 8:30. The same day, the budget of the state Lands Department (SB 2013) will have its first hearing before the Senate Appropriations at 2:30 in the afternoon. The Senate Committee will review the budget of the Department of Environmental Quality (SB 2024) on Thursday at 1:30, and will go over the Department of Corrections budget (SB 2015) beginning at 8:30 Friday morning.

Click here to see the full list of next week's committee hearings on the bills which WDEA is tracking.