Letter: Low tax rates don’t lure oil, coal development – Billings Gazette, Aug. 12, 2013

August 12, 2013

Categories: Coal, Letters, Oil and gas


Sen. Matt Rosendale criticizes the governor for appointing me to the Coal Board (Aug. 5 letter) because I was responsible for the 30 percent coal tax “that nearly killed Montana’s coal industry.”

In fact, the coal industry nearly killed the coal tax.

Taxes on natural resources do not interfere with the development of natural resources — even if they are as high as 30 percent. The important question is the location of the natural resources. It is a little like selling real estate. If the land in question is well located, it does not matter what the property taxes are.

Shortly after the Legislature reduced the 30 percent tax to 15 percent, the largest coal mine in the Montana-Wyoming area was proposed — in Wyoming. I asked the CEO of the Montana company why, now that they got the taxes about the same in both states, would they build a large mine in Wyoming instead of Montana. The answer I received was that, “The tax rate was not material to our decision.”

Perhaps Montana’s greatest corporate tax giveaway is the 18-month-holiday on the Oil Production Tax. It was supposed to give Montana a greater opportunity to compete with North Dakota — but legislators forgot to copy the North Dakota price cap. Once the price of oil reached $35.50 per barrel, the holiday ended. With the market at over $100 per barrel, North Dakota no longer has a holiday.

The oil extraction tax in North Dakota is 6.5 percent but the same oil pays only 0.5 percent in Montana for the first 18 months. The first 18 months is the best part of most oil wells.

Does the lower tax in Montana mean there are now more oil rigs in Montana than North Dakota since the lower tax was enacted in 1999? No. Not by a long shot. Again, it depends where the oil is located.

As a real estate developer, Rosendale should know this.

Thomas E. Towe


220 South 27th Street, Suite A
Billings, Montana 59101
(406) 248-1154