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LATEST NEWSDecember 2020 Issue: Lost North Dakota Tax Dollars M.E. Denomy, CPA, MBA Accredited Petroleum Accountant Oil and Gas Companies Use Master Limited Partnerships and Affiliate Agreements to Divert Taxable Income away from North Dakota
Potential Dollars Overlooked: .jpg) Scenario 1: Basic assumptions-annual loss (current price and production) Per barrel price = $45 Production per day = 1,200,000 barrels North Dakota average lease= 1/8 royalty Average PPC= 10% (one major prod. is over 35%) 1,200,000 x 45 X 0.125 x 0.10 x 365 days = $246,375,000 ND income tax exempt Scenario 2: Basic assumptions-annual loss (January 2020 price & production) Production per day= 1,400,000 barrels Per barrel price= $60 North Dakota average lease= 1/8 royalty Average PPC= 10% (one major prod. is over 35%) 1,400,000 x 60 x 0.125 x 0.10 x 365 days = $383,250,000 ND income tax exempt The total postproduction costs to royalty owners (taken by the oil producers) for one year would be $383,250,000. It appears that only a ridiculously small amount of ND State income tax is paid on this wealth generated from ND oil production. Attached is a graphic that provides a simplified picture of what the consequences are on 1,000,000 barrels of oil at $45 per barrel when a $5 PPC per barrel is charged. That equates to $312,000 per day or $113,880,000 per year in untaxed wealth at the current production of 1,200,000 barrels per day and $5 PPC rates. I believe the $5 PPC per barrel is very conservative. The second ND State Income Tax avoidance is due to the PPC’s charged on produced natural gas. That difference may be deduced by subtracting the dollars in red in the previous paragraph from the previous dollars shown in red earlier in this correspondence. Respectfully, Bob Skarphol Williston Basin Royalty Owners Association (WBROA)
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Mission
The mission of WBROA is to educate and encourage Williston Basin Royalty Owners to engage with statewide elected officials, legislators and members of the Judiciary for purpose of providing insight into the expectations of their constituency. | PurposeThe purpose of WBROA is to help enable Royalty Owners to develop the skillset to comfortably communicate their frustrations and expectations when discussing the treatment of the royalty payment issues in question. |
UPCOMING EVENTS
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It’s All About Numbers and PeopleSCR 4010 provides for an interim study of post production deductions from royalty payments. With an extremely small number of legislators receiving oil royalties we have a large job ahead of us to educate the interim committee. It will be “all” about numbers. We must show and convince the interim Energy and Natural Resources members of what we believe are the inadequacies of the treatment of our interests. How do we accomplish that task? It's crucial that we communicate the huge financial losses to royalty owners and the taxpayers of North Dakota due to these Postproduction costs. Read More |