BISMARCK, N.D. (AP) -- New rules for taxing North Dakota oil wells would close some loopholes in exchange for lower tax rates under a bill introduced Monday by Republican lawmakers.
Sen. Dwight Cook, R-Mandan, said the bill is an attempt to bring "certainty and stability" to the oil industry and the state.
The measure would cut the exemption for so-called stripper wells that the state Tax Department says is costing North Dakota about $50 million in revenue each year. The 1980s-era law cuts taxes for low-producing oil wells to keep them pumping but it also has been applied in recent years to some gushers in North Dakota because they are near the weaker wells.
Stripper wells are exempt from the state's 6.5 percent extraction tax, but not a 5 percent production tax. Attempts to close the loophole have failed in the past three legislative sessions.
Cook said he worked with fellow lawmakers and the oil industry to craft the proposed legislation.
"The stripper well exemption is an exemption that has to go," Cook said at a news conference surrounded by fellow Republicans. The exemption would still be applied to wells drilled before July 1.
In exchange for some concessions, backers of the legislation said companies would be charged an effective tax rate of 9.5 percent beginning in 2017 instead of the 11.5 percent tax rate they're charged now. The proposed tax framework also would cut tax rates to 4 percent on wells drilled outside the rich Bakken and Three Forks formations, where almost all exploration is taking place.
Backers of the bill said the idea is to spur drilling in other areas and encourage long-term development of the state's oil patch.
The new tax structure also would eliminate price triggers that would lessen state taxes for companies if the price of oil falls below a certain level. The concept, adopted in the 1980s during a time of depressed oil prices, adjusts the state's oil extraction tax based on a five-month average price if a barrel falls below a certain price. The so-called trigger price currently is set at $52 a barrel.
House Majority Leader Al Carlson, R-Fargo, said the state could see tax revenue decrease by at least $2 billion if oil falls below the current price trigger.
Cook said he expects the bill to be debated by the House sometime next week.
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Follow James MacPherson on Twitter at http://www.twitter.com/macphersonja .
Source: http://news.yahoo.com/nd-bill-outlines-framework-oil-160851899.html
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