North Dakota pays its way with much more than just oil and gas taxes.

• Author: Persily, Larry
• Position: ECONOMY

Many Alaskans want their state to be more like North Dakota--for all that oil production that moved the northern Great Plains state ahead of Alaska as the nation's second biggest oil producer.

But be like North Dakota for personal taxes?

Thinking about buying a new car or truck in North Dakota? Add in $1,500 for the 5 percent state tax on a $30,000 pickup truck. And you'll owe state income tax on the wages you earn to pay for that new truck (used trucks, too).

You'll also see the tax difference when you fill up at the pump. North Dakota collects twenty-three cents a gallon on gasoline and diesel. Alaska's rate is just eight cents a gallon--it was the same eight cents back in 1961.

Prefer flying your own plane to driving? There is a 5 percent state tax on the purchase price or market value of aircraft registered in North Dakota (just 3 percent if the plane is used for agricultural purposes).

It may surprise Alaskans to know that North Dakota's general fund--the same kind of discretionary money that Alaska legislators, the governor, and the public battle over every year--gets far more of its revenue from sales tax, personal income tax, and motor fuel tax than it does oil and gas production and extraction taxes. Most of North Dakota's oil and gas revenue goes into savings or designated spending accounts: a larger percentage than Alaska deposits into its Permanent Fund.

North Dakota's diversified income stream helps protect public services from painful budget cuts when oil prices are low.

To fully understand, let's start at the wells and work our way to the dollars.

A Primer

Alaska North Slope producers are expected to pump an average 508,000 barrels of crude per day in the state fiscal year ending June 30, according to the Department of Revenue's spring forecast. That means the trans-Alaska oil pipeline is three-quarters empty from its peak flow in 1988.

More than 2,100 air miles to the southeast, the Bakken Shale oil and gas play in North Dakota is booming, reminiscent of Alaska's heydays of the 1970s and 1980s. In January of this year, North Dakota produced an average 1.2 million barrels of oil per day--almost 13 percent of total US production--according to the US Energy Information Administration. Only Texas produces more.

Though painfully low oil prices have idled drilling rigs--leading the energy information agency to predict Bakken production will slip backward just a bit, at least through May--North Dakota is still counting a lot more oil and gas dollars than Alaska.

The Peace Garden State--named for the border park it shares with the Canadian province of Manitoba--collects 5 percent tax on the gross value of oil production and a 6.5 percent extraction tax, also on the gross. The state website explains the production tax "is imposed in lieu of property taxes."

Like Alaska, North Dakota has its share of tax incentives. Some wells can qualify for a 4 percent extraction tax rate and some wells in the Bakken can get a 2 percent rate. The reductions and/or exemptions can apply to new wells, work-over wells, stripper wells, inactive wells brought back to life, horizontal re-entry wells, and enhanced-recovery wells.

The production tax on natural gas varies, and is set each year...