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Legislative fiscal analysts present oil-and-gas revenue downturn scenarios that could cut biennial receipts by up to $1.1 billion
Summary
Legislative Council analysts presented two oil-and-gas scenarios to Legislative Management: a 13% production decline and a combined 13% production plus 15% price decline. The larger scenario could reduce state oil-and-gas allocations by around $1.1 billion over the biennium and affect multiple state funds.
Legislative Council fiscal staff told Legislative Management on June 26 that an extended decline in North Dakota oil production and a drop in oil prices could materially reduce state oil-and-gas tax allocations.
Adam Matiek, a Legislative Council fiscal analyst, presented two alternate scenarios based primarily on low-case data from S&P Global: one assuming a 13% decline in production, and a second combining the 13% production decline with a 15% drop in price. He said the combined scenario could reduce allocations by roughly $1.1 billion across the biennium and noted knock-on effects for the Resources Trust Fund, political subdivisions, State Investment Fund (SIF), and several dedicated buckets.
Why it matters: the scenarios would reduce available cash for projects and commitments that legislative leaders and agencies had planned to use in the next biennium. Matiek said SIF spending relies in part on cash on hand, but a drop in Resources Trust Fund revenues and smaller transfers to political subdivisions and airport infrastructure programs could require legislative corrections later.
Details: in Matieks lower-production-only example, the state would see about $570 million less than the legislative forecast across affected buckets; the combined lower-price-and-production example reduced allocations by about $1.1 billion. He described particular vulnerabilities for the Resources Trust Fund (near $100 million loss in the combined scenario) and the $65 million scheduled payment toward unfunded PERS liabilities that would disappear under that scenario.
Matiek said the scenarios used S&P Globals low-case materials and adjusted some figures for simplicity; he identified pipeline disruption (such as Dakota Access constraints), exhaustion of high-yield Bakken well sites and mergers and acquisitions as potential drivers. Committee members asked about timing and how the governor and Office of Management and Budget (OMB) would respond if revenue revisions materialize; Matiek and other staff explained the governor would typically issue allotments and revise forecasts, and that Legislative Management could act preemptively if leaders wished.
Staff and members said closer monitoring of forecasts is prudent. Matiek said future S&P Global forecasting arrangements are under discussion but that staff aim to align presentation timing with the executive forecast and consider additional interim updates during volatile periods.
For now, the projections serve as planning scenarios to help Legislative Management weigh contingency options and inform appropriations strategy in the coming months.
