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)