The House has passed a bill to give oil companies incentives to drill in zones outside the Middle Bakken and Upper Three Forks zones.
Senate Bill 2397 also provides incentives for innovations for enhanced oil recovery.
Rep. Jeremy Olson (R-Arnegard) said after initial exploration, the Bakken was unlocked. He said ever since, the industry has been in more of a “harvest” mode than an “exploration” mode.
"We're coming to a point where the harvest is a little thinner, and these proven zones are starting to be drilled out," Olson said. "With the increase in wells entering 'stripper well' status, which is less than 35 barrels a day production, our tax revenue will be decreasing. For the long term stability of our resources, we need to start hunting again."
Olson said the incentives would be a temporary break in state oil taxes for the first 300,000 barrels of oil produced from a qualified well — that from the oil production tax. He said after that, the oil would be taxed normally. And Olson said natural gas produced would not be taxed, if it is used for enhanced oil recovery, or to run on-site equipment.
"Bottom line: this is incentive," Olson said. "It does not cost the state anything. If a company invests and takes the risk, and hit paydirt, then the temporary incentives apply. If they do not take the risk, there's no incentive. We get paid if the risk they take pays off — we just get paid a little later."
Rep. Jon Nelson (R-Rugby) said he could reluctantly support this bill. But he raised concerns about the rise in number of “stripper wells” – they’re wells that produce 35 barrels or less per day, and are exempt from the oil production tax. Nelson said the latest state revenue forecast predicts a 20 percent decrease in oil tax revenue.
"There's manipulation that's taking place, in my opinion," Nelson said. "We need to find out if that's true. If it is, we need to fix it. But we're avoiding that conversation, and we shouldn't be, in my opinion."
The bill passed 89 to 5. It now goes back to the Senate, to see if it agrees with House changes.
