Schweitzer Says Taxes not Hurting Oil Development

By Beacon Staff

HELENA – Gov. Brian Schweitzer, on the way out the door later this year due to term limits, sparred Monday with the Republicans who want to replace him as he touted another round of lucrative state oil leases.

The Montana Land Board on Monday approved a recent round of leases for oil rights to state land. The state will get $3.5 million for the right to drill on 273 tracts.

Schweitzer said the state continues to do well, although not nearly as well as next door neighbor North Dakota. But the governor argued that Republican candidates for governor, who he referred to as “jokers,” are wrong to blame taxes and regulations for the disparity.

Schweitzer argues North Dakota has more activity because it has more oil. He said Montana’s oil production tax is already significantly lower.

“They just happen to have more oil. If you were just going to go to where the oil taxes are the lowest, you would go to New Jersey. The problem, of course, is they don’t have any oil,” Schweitzer said.

Schweitzer said new leases are even being made in parts of central Montana as high prices are spurring the industry to look further afield.

Leading Republicans in the race said their criticism on taxes extends beyond just the oil tax to the business equipment tax and environmental regulations they argue harm all extractive industries to a certain degree. In some cases they agreed Montana has been doing a good job of oil development.

The top Democrat running to succeed Schweitzer, Attorney General Steve Bullock, sits on the Land Board that approved the leases Monday. He agreed with Schweitzer that the workforce, tax climate and regulations in Montana are competitive.

“If you listen to the Republicans, you’d think they were being paid by North Dakota or Wyoming. They can’t stop saying how great those places are and how terrible Montana is,” Bullock said.

Former congressman Rick Hill, the top Republican fundraiser in a seven-way primary, said he does agree that geology is a big reason North Dakota is outpacing Montana in production. And he agreed with Schweitzer that Montana has largely been doing a good job of permitting oil wells.

But he said there are other higher costs of doing business in Montana, beyond just the production cost, that do slow development. And like other Republicans, he said overall that regulations are too burdensome in the state.

Hill said a lot gravel is needed it the development process, and it is made more expensive because it is harder to permit a gravel pit in Montana. He argued workers compensation insurance is still too high, although Schweitzer and the Republican-led Legislature last year reached a deal aimed at cutting costs a fifth, and pointed out Montana has a tax on business equipment despised by industry.

“This is real. This isn’t campaign rhetoric,” Hill said.

Former state Sen. Ken Miller of Laurel, vying hard for the social conservative and tea party vote in a crowded primary, said the oil industry believes the state has stiff regulations, a perception that prevents investment.

“They don’t even want to come over here. The industry says that Montana has a reputation for not being friendly,” Miller said. “They are telling me that it is significant and that if they didn’t have a choice, perhaps they would be here. But when they have the choice, they are going to spend their resources and time in North Dakota.”

Former state Sen. Corey Stapleton of Billings said he agrees geology is a big reason why Montana lags compared to its neighbor. But he said the industry doesn’t like the threat of higher taxes, pointing to a failed 2009 proposal from Schweitzer to repeal a tax break for oil and gas.

Stapleton said Schweitzer “is looking for a fight that doesn’t exist.”

“Schweitzer had his time,” Stapleton said. “His legacy will be what it will be.”

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