House Bill 1483, which would expand an oil extraction tax exemption outside the Bakken and Three Forks formations.
“Drill, baby, drill is real,” Ron Ness, president of the North Dakota Petroleum Council said Tuesday, repeating a Republican mantra for oil and gas development.
The Bakken has produced more than 5 billion barrels of oil, mostly since 2007. North Dakota has 10 other oil production zones that have potential.
While the Bakken is dominated by large, publicly traded companies, Ness said the tax break would encourage more drilling by smaller operators, or wildcatters, “trying to to find the next big thing.”
North Dakota has a 5% oil extraction tax and a 5% oil production tax. The law already allows a 2% oil extraction rate for some oil produced outside of the Bakken and Three Forks formations.
The bill would expand the area of the tax break and increase the amount of oil that would be taxed at the lower rate from 75,000 barrels to 90,000 barrels, though there was some sentiment among the committee that the 90,000 barrel figure should be higher to increase the incentive. The lower tax rate would cut off after 18 months if the production figure is not reached.
The state Tax Department estimated that the bill would cost the state $2.2 million in revenue over the next two fiscal years and just over $2 million in the two years after that.
North Dakota Department of Mineral Resources Director Nathan Anderson agreed that there should be more activity outside the Bakken.
“Right now, these wells aren’t getting drilled, so the tax base on these wells is zero,” he said.
There was no opposition testimony filed or presented to the House Finance and Taxation Committee, which took no action on the bill.
North Dakota, which ranks third in the nation in oil production, produced an average of nearly 1.2 million barrels of oil per day in November. About 3%, or just over 31,000 barrels per day, came from oil wells outside of the Bakken and Three Forks formations, according to the Department of Mineral Resources.
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