Shell games

“The Conjurer,” (c.1502) painted by Hieronymus Bosch. Note the pickpocket robbing the victim as he bends over for a better look.

Shell games have been around since being played by the ancient Greeks. Even today, the slight of hand regularly cheats unsuspecting victims out of their money. The “shells” used have been actual walnut shells hiding a small pea, cups and balls, bowls and most recently bottle caps. The perpetrator of the games puts the pea under one of three or more shells. The shells are then moved around so quickly that the player cannot keep track of the pea. The con man frequently slips the pea from under the shell and into the palm of his hand in the midst of the flurry of action. Of course it is impossible to guess which shell the pea is under, because it is not under any of them.

The game is so often dishonest that the term “shell game” has come to be a synonym for fraud.

I feel like the North Dakota legislature is engaging in a shell game.

Friday of last week, after I had written my column, a bill was introduced into the House of Representatives by way of the Delayed Bills Committee to make substantial and permanent changes to the state’s oil extraction tax. This was essentially the same legislation as was defeated in the last session with a few minor cosmetic changes. By Monday, the bill had been heard in the  House Finance and Taxation Committee, given a “do pass,” sent to the house floor, voted on, approved and sent to the Senate. Friday, April 17, was the 70th day of the Legislature’s constitutionally mandated 80 day session.  As I write this, the bill is being debated in the Senate Finance and Taxation  Committee who are proposing amendments to the bill. Their decision will probably have been made by the time you read this.

Did anyone notice which shell the pea is under?

Not only are the shells being shuffled in a blur, I have the uneasy feeling there is a slight of hand involved.

The taxes on oil production are not a simple 11.5 percent as is often reported. There are price triggers which change the percentage. There are incentives for new wells and for new wells which capture the natural gas produced. There are exception for wells which are almost dry. Then there are the triggers that reduce the taxes when the average price of oil drops below $55.09 a barrel. The bill as it was introduced in the House by Speaker Al Carlson of Fargo provides a permanent reduction in the extraction tax from 6.5 percent to 4.5 percent ( the 5 percent gross production tax which is collected in lieu of property taxes would not be affected.) The slight of hand in the bill is that this reduction wouldn’t take effect unless the “big trigger” which currently reduces the extraction tax when the average price of oil falls to $55.09 per barrel and stays there for five months. The trigger is predicted to be pulled by June of this year.

Proponents of the bill say our tax structure is archaic and outdated, complicated, and causes all kinds of insecurity in the market and for our state’s revenue. They claim our taxes are too high and are not “competitive.” Some oil company representatives claim our taxes are the highest around, even though many studies have shown the claim to be untrue when all the exemptions, triggers and incentives are included in the analysis.

If reducing the oil extraction tax rate is good for North Dakota, why the speedy shuffling of the shells? Why wasn’t it introduced along with other bills at the beginning of the session? The rushing of this bill through the legislative process does not give analysts time to evaluate the impact on the revenues of the state, not just this year, but for the next 30. It does not give citizens from the far corners of the state a chance to be at committee meetings. It does not give legislators time to hear debate needed for them to make good decisions about policies which have long term impacts.

Who will benefit from this measure? Are the taxes we charge on the oil being sucked out from under our state really a significant factor in determining whether or not oil is drilled in the state? There is little evidence to show that tax levels have any influence on oil extraction rates. According to the oil industry, the number one factor in making those decisions is the world price of oil. This something over which our North Dakota legislature has no control.

It is not the job of the people we elect to guard the interests of the oil industry. Their job is to look out for the citizens of this state today and for the interests of generations to come, long after all the wells run dry.

Once more. Watch the pea. Which shell is it under?

Copyright © 2015 Janet Jacobson and Sustaining the Northern Plains