Just before the 2019 session of the North Dakota Legislature, Sen. Rich Wardner came up with the ideal name for what would become House Bill No. 1066, Operation Prairie Dog. This bill would aim to provide up to $250 million from oil and gas tax revenue for funding infrastructure needs across the state, including $115 million to the Municipal Infrastructure Fund, $115 million to the County and Township Infrastructure Fund, and $20 million to the Airport Infrastructure Fund. These three funds represent the three allocation “buckets” that are covered by the bill.
“Operation Prairie Dog is one we set up to help political subdivisions (cities, counties, and townships) last session with infrastructure needs. Our roads and bridges need major repairs, and the property tax revenue source dedicated to them in the ND Constitution doesn’t keep up. We have used oil money for 'one time' projects like this to help keep property taxes from bearing the burden of these types of repairs. We have used oil revenue to provide property tax relief over the years in this manner,” District 10 Representative David Monson said.
But that was before the price of oil fell dramatically and cut sharply into anticipated oil tax revenues, delaying the filling of those buckets. Monson, along with the District 10 Representative Charles Damschen and Senator Janne Myrdal, stated that North Dakotans need to 'remember that oil is a finite commodity and will run out at some time in our future'. Monson specifically notes that during his time as a ND legislator, he has seen oil swing from $7 per barrel to over $100 per barrel and back down to below $40 per barrel. The same goes for oil production numbers increasing from thousands to hundreds of thousands to over a million barrels of sweet Bakken crude a day.
“So, this is the fate of the Prairie Dog Bill. The oil price and production slipped since Covid-19 causing the oil revenue to drop below the trigger points needed to fill the Prairie Dog buckets. Thus, the expected money to the political subdivisions is not there. This causes some hardships, obviously, as they were making plans to do a lot of infrastructure repairs and maintenance this summer with that extra money,” Monson said.
City and town officials have put planning infrastructure projects on hold in the meantime. Blake Crosby, executive director of the North Dakota League of Cities, said that city officials are being told not to expect any funds from the Prairie Dog Bill during this biennium. In Cavalier County, Operation Prairie Dog would have been a much-needed boon to the necessary projects still waiting to even be started. County road supervisor Terry Johnston knows that the Prairie Dog Fund does not look promising for a means of income for projects at this time which is very unfortunate for one of the main thoroughfares the county wanted to address.
“The county was depending on the Prairie Dog Funds for many projects, such as an improvement on County Road #55 through the Pembina Gorge and other gravel road projects,” Johnston said.
The City of Langdon had viewed the potential funding from Prairie Dog as a nice bonus to make the proposed projects for the city easier for residents to handle when it comes time to pay for it. Moore Engineering's Andrew Aakre has worked closely with the City Commission on finding funding for their street and infrastructure projects. Thus far, the city and Moore have been diligent in finding the best sources of funding in the form of grants and low interest loans. Fortunately, for the city, the way they only viewed the Prairie Dog money was “as nice to have” rather than "counted on" funding option.
“The first thing I thought when I learned about Operation Prairie Dog was that it seemed like it would be a perfect avenue for the city to find money for street improvements. At the time, the price of oil and the tax revenue that is the Prairie Dog Fund was high enough to where Langdon was going to be able to completely re-do all the streets in the proper fashion within three to four years,” Langdon City Commissioner Jerry Nowatzki said. “However, when COVID hit and pretty much took the bottom out of the oil market, Prairie Dog money is not going to happen for us, and I'm a pessimist, so I'm going to say at least three years now before the bucket is full, and they disperse the money.”
Sponsors of the bill expect the promise of Operation Prairie Dog will be fulfilled eventually. That eventually is dependent on when the price of oil and production comes back. Wardner said the decrease in oil tax revenue to North Dakota was due to falling oil prices, the pandemic’s effect on travel and other use of petroleum products, and a recent federal court’s order to shut down the Dakota Access Pipeline.
“When you put the three of those together, it’s going to be very difficult to have enough revenue to fill the Prairie Dog buckets.”
The current sense of when funds could be available for infrastructure projects is 2021 after the current biennium. Rep. Mike Nathe, R-Bismarck, a lead sponsor of the bill, said the money is critical to cities and counties. “We have an aging infrastructure system in this country and in North Dakota," he said. "We have billions and billions worth of infrastructure needs."
U.S. District Judge James Boasberg in Washington, D.C. ordered the pipeline shut down Monday, July 6, an action cheered by some on cultural, environmental and safety grounds. But the action is very detrimental to this bill and to the state’s economy, according to Nathe, and he can’t stress enough - our oil revenue is all predicated on this. Here we thought we were just getting over the pandemic. Things were starting to look up here a little bit.
"The initial flow of oil tax revenue is dedicated largely to the state’s general fund, which means any decrease in oil production and price delays the filling of revenue “buckets” intended for cities, counties and airports," said Joe Morrissette, director of the Office of Management and Budget. Morrissette explained that the problem with having them at the end of the flow of buckets is that they are a little bit more at risk. According to the numbers, he believes it’s likely that out of the $250 million that the legislature anticipated would be allocated through to those infrastructure buckets that were created in that operation, only about $30 million will be received or allocated out of those funds.
“There has been meetings and discussion all spring and summer as to how we will face the upcoming budget and the Prairie Dog Funding. It will be a priority to us in the upcoming session as we fully understand the sweeping effect this unprecedented time has in our state and nation,” Myrdal said.
With the current Republican majority government stating this can wait till the next legislative session in 2021, the North Dakota Democratic-NPL disagrees. Shortly after it became clear the Prairie Dog Funding would fall short, Dem-NPL legislators introduced a $1 billion infrastructure bond plan that would have ensured that the Prairie Dog Program could move forward despite the ongoing oil and gas bust.
“Engineering happens long before bids are offered and projects begun. In Cavalier County’s case, as in the repair of slide project on County 55 through the Gorge, local funds were used in the engineering process. When funds became available through windfall tax receipts, that project was made possible and included funding for engineering,” says District 10 Dem-NPL House candidate Elsie Magnus. “When I left office, I urged commissioners to continue to advocate for improvement of the only decent road from west to east between Highway 5 and the Canadian Border. As happened previously, engineering was done but without the Prairie Dog Bill, the considerable cost makes it prohibitive to even begin. That leaves Cavalier County holding the bag for the cost of engineering, which by the time the legislature decides funds are available, may need to be redone.”
As current Republican leaders at the state legislature tell counties and towns to put necessary infrastructure projects on hold as another oil and gas bust halts the Prairie Dog Program, the Democratic legislators say they had anticipated the resulting shortfall. Their introduction of a $1 billion bond plan and call for a special session to address it to avoid the current situation with Prairie Dog fell on deaf ears.
“North Dakota's infrastructure is the backbone of our state's economy but having received a GPA letter grade of C means the infrastructure in our state is in mediocre condition. The decision to approve $33.2 million in federal CARES Act funds by the North Dakota Emergency Fund aimed at reclaiming abandoned oil wells takes away funding needed to work on local infrastructure, specifically Langdon street repair,” District 10 Dem-NPL Senate candidate Charlie Hart stated.
Hart notes that county commissions across the district are beginning to work on next year's budget, and in conversations he has had with Pembina County commissioners, they indicate the budget will need to be very tight.
“Our District needs Prairie Dog Funding; this would go directly to counties and cities for infrastructure work, but the governor rejected a proposal to call for a special session to fund the Prairie Dog Program, stating the next legislature could provide funding. This delays money needed now for infrastructure until at least next summer. In my opinion, this is unacceptable. I am running for the Senate from District 10 and believe decisions involving large sums of money should be analyzed, discussed, and implemented with local input,” Hart stated.
While the NDGOP assures residents and local governments that Prairie Dog money is coming eventually. Instead, the minority party in the state is advocating for careful and fiscally responsible planning, like the $1 billion infrastructure bond plan Dem-NPL legislators introduced along with a call for a special session.
“There was a request for a special session to address the loss of funds and include input from all legislators, not just the chosen six who are making decisions for all North Dakota voter/tax payers. We need representation for our district to step forth and ask for a special session as many of their constituents feel legislation without representation is not in our best interests,” Magnus said.
Ryan Skor, director of finance in the Office of State Treasurer, said the revenue forecast will be updated in August. Skor explained that when the bill was first discussed in the legislature and ultimately passed, the forecast for oil and gas revenue was much higher than what we're seeing now. Now that oil and gas revenues have fallen significantly in the last couple months, it currently seems unlikely that revenue will be able to fund the main Prairie Dog buckets. This leaves little to no hope for the benefits to be distributed in this biennium.