North Dakota Mineral Resources Director Lynn Helms believes the state needs to rethink how it handles sales taxes in revenue forecasting.
Helms said during the oil boom, sales tax rose rapidly – and as things slowed in the oil patch, sales tax collections dropped.
"Of course, there was the materials that go into wells when they're drilled, and the materials that go into hydraulic fracturing," Helms said in an interview. "Those two things will come back when drilling activity increases."
However, Helms saids a big driver in the spike in sales tax was the rapid growth in drilling rigs moving into the state.
"Every rig, when it moved into the state, had to pay sales tax," Helms said. "There was a surge of 218 rigs that came in during the 2012-2013 time frame. Then every one of those was replaced by 190 of the new 'walking rigs' when they moved to multi-well pad drilling."
Helms said those rigs are still here – they’re parked in the oil patch.
"e're not going to see a surge in rigs coming into the sttate again, and we have to factor that in to the revenue forecast," Helms said. "That part of the sales tax bubble is not likely to come back."
Helms said it will likely have a substantial impact on the March revenue forecast. But he said there are signs that fracking activity could be on the increase in North Dakota – and that could help the sales tax numbers.
