Resolution #2012-6 Oil Development Impacts

Cities and towns in Eastern and Central Montana are responsible for managing some of the heaviest impacts of large scale oil exploration and production.   Most Montanans welcome the economic opportunities connected to this development, but many are concerned that the cities and towns in the oil patch are not prepared to provide the services and facilities necessary to accommodate an exploding transient population.

Montana will collect about $250-million in oil severance taxes and royalty payments this fiscal year.  About  $2-million, or less than 1% of this total, is distributed to cities and towns in producing counties, and this meager pot of money is far less than what is really needed to increase police and fire protection, expand water and sewer capacity and provide the other necessary services and facilities. The state must set up a well planned, adequately financed and effectively managed impact mitigation strategy to assure that cities and towns are not overrun by oil development and eventually left to manage the consequences.  Incumbent legislators and the Governor seem to understand the importance of an impact assistance program for municipal governments, and the following list includes some of the funding options that could be considered next winter.

  1. Earmark 25% of the mineral royalties the state receives for oil and gas production on federal lands in Montana to a special account that would provide impact assistance for cities and towns in producing counties.  The money would be distributed by a state board under revised rating criteria, eligibility standards and distribution procedures.  The Legislative Fiscal Analyst estimates that federal mineral royalties will total about $40-million this fiscal year.  The portion that would be earmarked by this proposal would provide about $10-million a year in assistance for impacted cities and towns.
  2. Transfer $12-million from the State General Fund to an impact assistance account.  The 2011 Legislature took this amount from the Board of Oil and Gas Conservation to balance the state budget, which is now running a $482-million surplus.  The Governor has suggested that the money should be returned to the areas where it was collected to pay some of the costs of mitigating development impacts.  This would be a one-time transfer to supplement the grant program recommended in option #1.
  3. Allocate 10% of the more than $100-million in oil severance taxes that currently go to the general fund directly to cities and towns in oil producing counties.   The distribution formula would be based on county oil and gas production and municipal population.
  4. Allow city and town councils to approve a surcharge of up to $5 per night on motel rooms, temporary employee housing and other accommodations to account for the costs of providing services to an expanding transient population.

Recommendation:   MLCT will support and promote legislation that will provide sufficient funds and financing authority to allow cities and towns in impacted areas to manage the consequences of development including increased train traffic resulting from higher volumes of oil and coal production.