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Oil & Gas Taxes History

Oil And Gas Gross Production Tax

2013 Session 

  • Income tax withholding is required for certain oil and gas royalties.
  • The revenue sharing percentage of oil and gas tax revenue subject to the Tribal agreement was changed to 50% of all revenue.  The Tribe is required to report annually on investments in infrastructure on the Fort Berthold Reservation.

2011 Session 

  • Removed the city cap of $750 per capita in the distribution formula for gross production tax.

2009 Session 

  • Increased the distribution of Gross Production Tax (GPT) to counties and cities.
  • Created an infrastructure fund for distribution to townships with impact.
  • Required counties and townships to levy 10 mills for road purposes.
  • Required counties and townships to submit annual reports providing information on the use of revenue received for transportation purposes.
  • Provided for an exemption from GPT for gas that would otherwise be flared when it is used in a generation unit producing electricity for use on site or for sale.

2007 Session

  • The expiration date for the gross production tax exemption for shallow gas wells was eliminated. 
  • The distribution formula for the county share of gross production tax was increased to 100% of the first million, 75% of the second million, 50% of the third million, and 25% for amounts over $3 million.  A county may receive $1 million in addition to the amount of the cap if during the fiscal year the county levies a total of at least 10 mills for road and bridge purposes.

2003 Session 

  • An oil and gas research council was created and an Oil and Gas Research Fund was established with a continuing appropriation provided. 
  • A temporary exemption from gross production tax was provided for gas produced from shallow gas wells through June 30, 2007.

1999 Session 

  • The legislature changed the manner in which unallocated oil and gas gross production taxes collected from unidentified sources is distributed.  Previously, the unallocated taxes were distributed to the county with the lowest total gross production tax distribution for the fiscal year.  After June 30, 1999, the unallocated taxes are distributed to each county in the same proportion as total gross production tax allocations for the fiscal year.

1997 Session 

  • The periods for assessment or refund run from the due date of the original return or the date the original return was filed whichever is later.  The Tax Commissioner has two years after an amended return is filed to audit that return and assess any additional tax that is due.
  • The Tax Commissioner has authority to require purchasers to file monthly reports by electronic data interchange or other form of electronic media and can waive the producer's requirement to file a monthly return. 
  • Legislation passed that authorized the use of alternative methods for signing, subscribing, or verifying a return filed by electronic means, including telecommunications. 
  • A Permanent Oil Tax Trust Fund was established for the deposit of oil extraction and gross production tax revenues, which exceed specific amounts in a biennium.

1993 Session 

  • The interest accrual period was changed on tax refunds for periods after June 30, 1993. Interest begins to accrue 60 days after the due date of the return, after the return was filed, or after the tax was fully paid, whichever occurs later.
  • Tax from undetermined sources will be allocated between the State General Fund and the county that received the least amount of revenue during the fiscal year.

1991 Session 

  • The tax on gas was changed from 5% of gross value to an annually adjusted flat rate per mcf. Procedures were provided for determining gross value at the well of oil under arm’s length and non-arm’s length contracts.
  • The legislature approved the Taxpayer Bill of Rights.

1989 Session 

  • The law was changed to specifically state the gross production tax is a real property tax. 
  • The revenue distribution formula was amended, effective July 1, 1991 to allocate 33 1/3 % of the first one-fifth portion to the Oil and Gas Impact Grant Fund.

Oil Extraction Tax

2015 Session   

  • A 10-year oil extraction tax exemption is available from first incremental production for a certified tertiary recovery project that uses carbon dioxide. 
  • A certified tertiary recovery project in a Bakken or Three Forks formation is not exempt from July 1, 2015 to June 30, 2017, after which the incremental production is exempt for a period of 5 years.   The five-year exempt period begins July 1, 2017, or the date incremental production begins, whichever is later.
  • Reduced the oil extraction tax rate from 6.5% to 5%.
  • Provides for the oil extraction tax rate to increase to 6% if the average price exceeds the trigger price for 3 consecutive months.  Established a trigger price of $90, indexed annually based on the average closing price of WTI.  Tax rate reverts back to 5% if the average price is below the trigger price for 3 consecutive months. 
  • Eliminated the 15-month and 24-month new well exemptions and the reduced 4% rate.
  • Eliminated the exemptions for work-over wells, two-year inactive wells, horizontal reentry wells, and Indian Land wells.
  • Eliminated the “large trigger” and “small trigger” provisions that provide for rate reductions and exemptions.

2013 Session

  • The North Dakota Industrial Commission is required to recertify stripper wells reentered or recompleted as horizontal wells.
  • Stripper well property determinations were eliminated after June 30, 2013.  Stripper wells are required to be certified on a well basis.
  • A 35 barrel per day production determination is provided for stripper well qualifications in the Bakken and Three Forks formations.
  • The 60 month oil extraction tax exemption for wells drilled on Indian land was eliminated.
  • An oil extraction rate reduction was provided for wells drilled and completed at least ten miles from an established Bakken or Three Forks formation field.
  • Income tax withholding is required for certain oil and gas royalties.
  • The revenue sharing percentage of oil and gas tax revenue subject to the Tribal agreement was changed to 50% of all revenue. The Tribe is required to report annually on investments in infrastructure on the Fort Berthold Reservation.

2011 Session

  • Extended the 2% rate reduction incentive for horizontal wells to June 30, 2013.

2009 Session

  • Provided an incentive with a reduced oil extraction tax (OET) rate of 2% for horizontal wells drilled when the average price of oil is below $55.
  • Rate increased to full rate of 6.5% when average price is above $70.

2007 Session

  • The legislature provided for an oil extraction tax rate reduction to 2% for the first 75 thousand barrels of oil produced during the first 18 months after completion from a well drilled and completed in the Bakken formation after June 30, 2007, and before July 1, 2008.
  • The expiration date for the gross production tax exemption for shallow gas wells was eliminated. 
  • The distribution formulas for the county share of gross production tax was increased to 100% of the first million, 75% of the second million, 50% of the third million, and 25% for amounts over $3 million.  A county may receive $1 million in addition to the amount of the cap if during the fiscal year the county levies a total of at least 10 mills for road and bridge purposes. 
  • The Governor, in consultation with the Tax Commissioner, is authorized to enter into agreements with the Three Affiliated Tribes relating to taxation and regulation of oil and gas exploration and production within the boundaries of the Fort Berthold Reservation.

2005 Session 

  • The legislature provided for a sales and use tax exemption for carbon dioxide used for the enhanced recovery of oil or natural gas.

2003 Session 

  • An oil and gas research council was created and an Oil and Gas Research Fund was established with a continuing appropriation provided. 
  • A temporary exemption from gross production tax was provided for gas produced from shallow gas wells with an expiration date of June 30, 2007. 
  • The two-year inactive well exemption was amended to clarify the definition of a two-year inactive well and to provide an 18 month provision to qualify the well for an exemption to be consistent with other oil extraction tax exemptions. 
  • The workover well exemption was amended to remove the requirement that a notice of intention must be filed before a workover project is commenced to qualify for an exemption.

2001 Session 

  • The "trigger" provision for exemptions and rate reductions was amended to clarify when the trigger was to be become effective.  All rate reductions and exemptions subject to the trigger provision become ineffective if the average price of a barrel of crude oil exceeds the trigger price for each month in any consecutive five-month period.  The reduced rates and exemptions are reinstated if the average price falls below the trigger price for each month in any consecutive five-month period.  Average price is defined as the monthly average of the daily closing price for a barrel of west Texas intermediate Cushing crude oil minus two dollars and fifty cents.  Trigger price is defined as thirty-five dollars and fifty cents, as indexed for inflation.

1997 Session 

  • A 60-month exemption was created for production from a well drilled and completed on an Indian reservation or on tribal trust land after July 31, 1997. 
  • Previous legislation was amended to keep the current distribution factors at the existing percentages.

1995 Session 

  • The stripper well definition was broadened from 20 to 30 barrels per day for wells over 10,000 feet deep. 
  • The exemption for a horizontal new well was increased from 15 to 24 months and a 9-month exemption was created for a horizontal reentry well. 
  • A 10-year exemption was created for oil from a two-year inactive well.  To get the full benefit of an exemption or the 4% reduced rate, producers were given an 18-month period to file the Industrial Commission’s certification of well status with the Tax Commissioner. 
  • For secondary recovery projects, the sunset for certification was removed.
  • The revenue distribution formula was changed.

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North Dakota: Legendary. Follow the trail of legends

Ryan Rauschenberger
Tax Commissioner
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Oil & Gas Taxes History

Oil And Gas Gross Production Tax

2013 Session 

  • Income tax withholding is required for certain oil and gas royalties.
  • The revenue sharing percentage of oil and gas tax revenue subject to the Tribal agreement was changed to 50% of all revenue.  The Tribe is required to report annually on investments in infrastructure on the Fort Berthold Reservation.

2011 Session 

  • Removed the city cap of $750 per capita in the distribution formula for gross production tax.

2009 Session 

  • Increased the distribution of Gross Production Tax (GPT) to counties and cities.
  • Created an infrastructure fund for distribution to townships with impact.
  • Required counties and townships to levy 10 mills for road purposes.
  • Required counties and townships to submit annual reports providing information on the use of revenue received for transportation purposes.
  • Provided for an exemption from GPT for gas that would otherwise be flared when it is used in a generation unit producing electricity for use on site or for sale.

2007 Session

  • The expiration date for the gross production tax exemption for shallow gas wells was eliminated. 
  • The distribution formula for the county share of gross production tax was increased to 100% of the first million, 75% of the second million, 50% of the third million, and 25% for amounts over $3 million.  A county may receive $1 million in addition to the amount of the cap if during the fiscal year the county levies a total of at least 10 mills for road and bridge purposes.

2003 Session 

  • An oil and gas research council was created and an Oil and Gas Research Fund was established with a continuing appropriation provided. 
  • A temporary exemption from gross production tax was provided for gas produced from shallow gas wells through June 30, 2007.

1999 Session 

  • The legislature changed the manner in which unallocated oil and gas gross production taxes collected from unidentified sources is distributed.  Previously, the unallocated taxes were distributed to the county with the lowest total gross production tax distribution for the fiscal year.  After June 30, 1999, the unallocated taxes are distributed to each county in the same proportion as total gross production tax allocations for the fiscal year.

1997 Session 

  • The periods for assessment or refund run from the due date of the original return or the date the original return was filed whichever is later.  The Tax Commissioner has two years after an amended return is filed to audit that return and assess any additional tax that is due.
  • The Tax Commissioner has authority to require purchasers to file monthly reports by electronic data interchange or other form of electronic media and can waive the producer's requirement to file a monthly return. 
  • Legislation passed that authorized the use of alternative methods for signing, subscribing, or verifying a return filed by electronic means, including telecommunications. 
  • A Permanent Oil Tax Trust Fund was established for the deposit of oil extraction and gross production tax revenues, which exceed specific amounts in a biennium.

1993 Session 

  • The interest accrual period was changed on tax refunds for periods after June 30, 1993. Interest begins to accrue 60 days after the due date of the return, after the return was filed, or after the tax was fully paid, whichever occurs later.
  • Tax from undetermined sources will be allocated between the State General Fund and the county that received the least amount of revenue during the fiscal year.

1991 Session 

  • The tax on gas was changed from 5% of gross value to an annually adjusted flat rate per mcf. Procedures were provided for determining gross value at the well of oil under arm’s length and non-arm’s length contracts.
  • The legislature approved the Taxpayer Bill of Rights.

1989 Session 

  • The law was changed to specifically state the gross production tax is a real property tax. 
  • The revenue distribution formula was amended, effective July 1, 1991 to allocate 33 1/3 % of the first one-fifth portion to the Oil and Gas Impact Grant Fund.

Oil Extraction Tax

2015 Session   

  • A 10-year oil extraction tax exemption is available from first incremental production for a certified tertiary recovery project that uses carbon dioxide. 
  • A certified tertiary recovery project in a Bakken or Three Forks formation is not exempt from July 1, 2015 to June 30, 2017, after which the incremental production is exempt for a period of 5 years.   The five-year exempt period begins July 1, 2017, or the date incremental production begins, whichever is later.
  • Reduced the oil extraction tax rate from 6.5% to 5%.
  • Provides for the oil extraction tax rate to increase to 6% if the average price exceeds the trigger price for 3 consecutive months.  Established a trigger price of $90, indexed annually based on the average closing price of WTI.  Tax rate reverts back to 5% if the average price is below the trigger price for 3 consecutive months. 
  • Eliminated the 15-month and 24-month new well exemptions and the reduced 4% rate.
  • Eliminated the exemptions for work-over wells, two-year inactive wells, horizontal reentry wells, and Indian Land wells.
  • Eliminated the “large trigger” and “small trigger” provisions that provide for rate reductions and exemptions.

2013 Session

  • The North Dakota Industrial Commission is required to recertify stripper wells reentered or recompleted as horizontal wells.
  • Stripper well property determinations were eliminated after June 30, 2013.  Stripper wells are required to be certified on a well basis.
  • A 35 barrel per day production determination is provided for stripper well qualifications in the Bakken and Three Forks formations.
  • The 60 month oil extraction tax exemption for wells drilled on Indian land was eliminated.
  • An oil extraction rate reduction was provided for wells drilled and completed at least ten miles from an established Bakken or Three Forks formation field.
  • Income tax withholding is required for certain oil and gas royalties.
  • The revenue sharing percentage of oil and gas tax revenue subject to the Tribal agreement was changed to 50% of all revenue. The Tribe is required to report annually on investments in infrastructure on the Fort Berthold Reservation.

2011 Session

  • Extended the 2% rate reduction incentive for horizontal wells to June 30, 2013.

2009 Session

  • Provided an incentive with a reduced oil extraction tax (OET) rate of 2% for horizontal wells drilled when the average price of oil is below $55.
  • Rate increased to full rate of 6.5% when average price is above $70.

2007 Session

  • The legislature provided for an oil extraction tax rate reduction to 2% for the first 75 thousand barrels of oil produced during the first 18 months after completion from a well drilled and completed in the Bakken formation after June 30, 2007, and before July 1, 2008.
  • The expiration date for the gross production tax exemption for shallow gas wells was eliminated. 
  • The distribution formulas for the county share of gross production tax was increased to 100% of the first million, 75% of the second million, 50% of the third million, and 25% for amounts over $3 million.  A county may receive $1 million in addition to the amount of the cap if during the fiscal year the county levies a total of at least 10 mills for road and bridge purposes. 
  • The Governor, in consultation with the Tax Commissioner, is authorized to enter into agreements with the Three Affiliated Tribes relating to taxation and regulation of oil and gas exploration and production within the boundaries of the Fort Berthold Reservation.

2005 Session 

  • The legislature provided for a sales and use tax exemption for carbon dioxide used for the enhanced recovery of oil or natural gas.

2003 Session 

  • An oil and gas research council was created and an Oil and Gas Research Fund was established with a continuing appropriation provided. 
  • A temporary exemption from gross production tax was provided for gas produced from shallow gas wells with an expiration date of June 30, 2007. 
  • The two-year inactive well exemption was amended to clarify the definition of a two-year inactive well and to provide an 18 month provision to qualify the well for an exemption to be consistent with other oil extraction tax exemptions. 
  • The workover well exemption was amended to remove the requirement that a notice of intention must be filed before a workover project is commenced to qualify for an exemption.

2001 Session 

  • The "trigger" provision for exemptions and rate reductions was amended to clarify when the trigger was to be become effective.  All rate reductions and exemptions subject to the trigger provision become ineffective if the average price of a barrel of crude oil exceeds the trigger price for each month in any consecutive five-month period.  The reduced rates and exemptions are reinstated if the average price falls below the trigger price for each month in any consecutive five-month period.  Average price is defined as the monthly average of the daily closing price for a barrel of west Texas intermediate Cushing crude oil minus two dollars and fifty cents.  Trigger price is defined as thirty-five dollars and fifty cents, as indexed for inflation.

1997 Session 

  • A 60-month exemption was created for production from a well drilled and completed on an Indian reservation or on tribal trust land after July 31, 1997. 
  • Previous legislation was amended to keep the current distribution factors at the existing percentages.

1995 Session 

  • The stripper well definition was broadened from 20 to 30 barrels per day for wells over 10,000 feet deep. 
  • The exemption for a horizontal new well was increased from 15 to 24 months and a 9-month exemption was created for a horizontal reentry well. 
  • A 10-year exemption was created for oil from a two-year inactive well.  To get the full benefit of an exemption or the 4% reduced rate, producers were given an 18-month period to file the Industrial Commission’s certification of well status with the Tax Commissioner. 
  • For secondary recovery projects, the sunset for certification was removed.
  • The revenue distribution formula was changed.

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