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The Republican legislators in North Dakota proposed a new $1.1 billion bonding package for infrastructure projects, planning to use proceeds from oil and gas to pay off part of the bonds within the next two decades, Associated Press reports.
The North Dakota Legislature’s bonding proposal adds to Governor
Doug Burgum’s $1.25 billion bonding proposal from December as part of the 2021-2023 budget proposal. The executive budget proposes a $1.25 billion bonding package to support much-needed infrastructure projects – paid for with reliable Legacy Fund earnings, Republican Governor Burgum said last month.
The Legacy Fund receives 30 percent of the oil extraction tax distribution in North Dakota. The $1.25 billion bonding proposal would not raise taxes or rely on tax revenues to retire the bonds, instead using a portion of earnings from the state’s Legacy Fund, Governor Burgum said in his 2021 State of the State Address earlier this week.
Thanks to the Bakken shale, North Dakota has become in recent years the second-largest oil-producing state in the United States behind Texas. North Dakota’s crude oil production accounted for 11.6 percent of total U.S. crude output in 2019, according to EIA data.
Thanks to the booming oil production, North Dakota’s budget has doubled since 2010, but before the 2020 oil price crash, the state lawmakers were used to funding projects without having to borrow money via bonding packages, AP notes.
In April 2020, North Dakota suffered an 81-percent plunge in oil and gas revenues amid the coronavirus pandemic that forced producers in one of the most prolific shale plays to cut production substantially.
Crude oil production in North Dakota is not expected to recover to pre-pandemic levels until late into 2022 due to the demand loss and the growing investor pressure on oil producers regarding environmental, social, and governance (ESG) issues, Lynn Helms, director of North Dakota’s Department of Mineral Resources, said last month.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com