BISMARCK – North Dakota is poised to collect nearly $9.8 billion in oil tax revenue during the next two years and $2.2 billion more than previously forecast for 2013-15, according to a new outlook released Friday that had elected leaders calling for additional tax relief, greater funding for western counties and more accurate forecasts.

The preliminary forecast from the state Office of Management and Budget assumes that oil production will grow to 1.3 million barrels per day by the end of the current biennium on June 30, 2015, and to 1.4 million barrels per day by the end of the 2015-2017 budget cycle, OMB Director Pam Sharp said.

The state produced just under 1.1 million barrels per day in June, the most recent figures available show.

The forecast also assumes a crude oil price of $90 a barrel throughout the entire forecast period, Sharp said.

Gov. Jack Dalrymple noted that the revised projection for 2013-15 shows general fund revenues of $4.88 billion, or about $285 million more than the legislative forecast prepared in February 2013.

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The general fund, which covers the general operations of state government, is projected to end the biennium with a balance of $614 million – eight times higher than the $80 million projected in the legislative forecast and $157 million more than an update Sharp presented to state lawmakers in March.

“We continue to enjoy strong growth among a wide range of business sectors in all regions of the state,” Dalrymple said in a news release. “Our economy also continues to generate strong state revenues that can support the priorities of our growing and prosperous state.”

This is the first of three revenue forecasts for 2015-17, Sharp said. Dalrymple will use a revised forecast in November to craft his executive budget recommendation, and the Legislature will refer to a third forecast released in February when making spending decisions.

Revenue forecasts are prepared by OMB in conjunction with Moody’s Analytics, the state Tax Department and the state’s Advisory Council on Revenue Forecasting.

Friday’s forecast increased the oil revenue projection to $7.48 billion for 2013-15, up from $5.28 billion in the legislative forecast, a difference of $2.2 billion.

Some lawmakers – mostly Democrats but also some Republicans – and others have criticized OMB for being overly conservative in its revenue forecasts.

Senate Minority Leader Mac Schneider, D-Grand Forks, said the forecasts “have been routinely and significantly off” and are “entirely unreliable” for planning purposes. He said some lawmakers have used uncertainty over future revenues as an excuse to shoot down arguments for sending more funding to oil-impacted counties in western North Dakota and other proposals.

“I think we need to take a hard look at it, starting with the green-eyeshade folks who make these forecasts,” he said. “I understand this boom is unlike anything we’ve ever seen, and so some inaccuracy is understandable, but if there’s a better model that we can look at, we absolutely should.”

Sen. Ray Holmberg, a Grand Forks Republican and member of the Advisory Council on Revenue Forecasting that met July 25, said forecasts are based on what’s known at the time.

“And we like to be conservative, because I personally would rather be criticized because we ended up with more money than we thought we would have than if we spend more than what comes in,” he said.

Sharp blamed higher-than-expected oil prices and production for the legislative forecast being so far off the mark. It assumed oil prices would be $75 a barrel in 2013-14 and $80 a barrel in 2013-14 and that oil production would reach 830,000 barrels per day by the end of the biennium. Production surpassed 1 million barrels a day in April.

Sharp said her office relied on input from Department of Mineral Resources Director Lynn Helms and North Dakota Petroleum Council President Ron Ness for the revised oil production projections, while the $90 price is roughly halfway between projections by Moody’s and industry advisers.

“We’ll have more information by November, but right now we think this is pretty solid,” she said.

By law, the general fund can receive no more than $300 million from oil taxes. The rest goes into various state funds, the largest being the voter-approved Legacy Fund, which receives 30 percent of oil extraction and production taxes and is forecast to rake in more than $2.45 billion this biennium and nearly $3.19 billion next biennium. Lawmakers can’t tap the rainy day fund until 2017.

House Majority Leader Al Carlson, R-Fargo, said the other big winners will be the Strategic Investment and Improvements Fund, forecast to receive more than $2.3 billion by 2017; the Foundation Aid Stabilization Fund and Common Schools Trust Fund, each forecast to receive $894 million by 2017; and the Resources Trust Fund, which is projected to take in more than $1.7 billion and will support water projects across the state.

“Then it’s time to take a good hard look at our tax structure – not of oil – but of our other taxes and see if there’s some continued reduction we can do,” he said.

Tax Commissioner Ryan Rauschenberger recently proposed boosting state spending on property tax relief from $875 million to $1.36 billion over the next two years. The idea of eliminating the state’s income tax also is expected to resurface next session.

Schneider said the rosy revenue forecast makes now the time to plan long term and make permanent investments in the state’s people, such as a college scholarship endowment.

The huge projected surplus also “entirely makes the case” that a greater share of oil production tax revenue should go to oil-impact counties, he said. The current formula sends 25 percent of the revenue to political subdivisions and 75 percent to state funds. Western lawmakers and local leaders have been discussing a revised split of 60 percent local, 40 percent state.

Carlson and Holmberg agreed the formula needs revising.

“My prediction is that’ll be the key issue of the session,” Carlson said.

Holmberg said eastern North Dakota also has needs that must be addressed, including roads and bridges, human services, flood control and water supply.

While calling the forecast “great news,” Carlson said lawmakers must be careful not to grow government spending too rapidly. He cautioned that the White House and a U.S. Environmental Protection Agency “that doesn’t like coal or oil” could try to impose regulations to halt the hydraulic fracturing technique that has opened up North Dakota’s vast oil reserves and padded state coffers.

“I think you’ve still got to be prudent, because things can change as rapidly as they started,” he said.