Changing Oil Taxes | Video

Jennifer Joas | 1/28/2013

Drilling in the Bakken has become so successful, companies are almost guaranteed to strike oil. But it`s expensive to drill a Bakken well and some state lawmakers want to lower oil taxes to make sure business stays in North Dakota.

With the advent of horizontal drilling and hydraulic fracturing, companies cracked open the Bakken shale and opened up a gold mine. But, other shale plays could soon steal the spotlight.

"Everybody thinks they are all going to stay in the Bakken because it has the oil. Well let me tell you, the shale technology has moved worldwide today. And those rigs go where they make the most money," said Fargo Representative Al Carlson (R).

That is a concern some lawmakers have in North Dakota. They want to make sure the state`s oil taxes are competitive with other states. That is why Mandan Senator Dwight Cook (R) introduced a bill that would lower oil extraction taxes by two percent in 2017.

"Our desire here is to bring some predictability, some stability to this industry. Bring some stability to the revenue stream that we get. We want to keep this to be a viable industry, but we certainly need to protect the revenue that comes to the state," Cook said.

There is a way to collect more taxes. Oil wells that were not producing much before the new technology are currently exempt from oil extraction taxes. Cook`s proposal would require each new well qualify as a stripper well before getting a tax break.

"It is an exemption that has to go away. I think there is a lot of consensus amongst legislators and the oil industry themselves that this exemption has to go away," Cook said.

By changing the stripper well formula, the state will collect an additional $83 million in the next biennium.

The bill would also require the oil company to withhold state income taxes from non-resident royalty owners, and it would provide an incentive to companies to drill outside the Bakken and Three Forks area.

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