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Exemption for oil wells costing state $50M a year

Published on NewsOK Modified: January 21, 2013 at 2:06 pm •  Published: January 21, 2013
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Attempts to cut the exemption have failed in the past three legislative sessions.

Rep. David Drovdal, R-Arnegard, introduced the bill to cut the exemption for the fourth time this session. He said the 1980s-era law was well-intentioned at the time but new technology has allowed companies to drill gushers in areas that were thought to be marginal.

Each well should be classified based on its own production, not its location, said Drovdal, whose district is in western North Dakota's oil-producing region. Drovdal also is a member of the House Finance and Taxation Committee, which took no action on the bill on Monday.

"It's not about raising taxes," Drovdal told The Associated Press. "It's a matter of fairness."

Lynn Helms, director of the Department of Mineral Resources, said North Dakota has about 8,100 wells and 2,800 of them are classified as stripper wells. Of that sum, about 500 are higher-producing wells but carry the stripper well designation.

Helms said tax exemption for stripper wells has helped reward companies for taking risks in marginal areas.

But the exemption also has become one of the most complicated oil taxes because it doesn't always differentiate between an "80-pound weakling and an 800-pound gorilla," Helms said.

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