House approves tax incentives for exploratory oil wells to spur innovation outside proven zones

The North Dakota House passed Senate Bill 23-97, a measure creating tax incentives aimed at encouraging oil and gas exploration and innovative enhanced-recovery techniques outside the core Bakken and Upper Three Forks producing zones.

Representative Jay Olson, speaking for the Finance and Taxation Committee, said the bill revises an earlier vehicle and now provides incentives for drilling in newer zones and for technologies that increase production from existing formations. "This is incentive. It does not cost the state anything," Olson said, describing temporary exemptions that apply to the first 300,000 barrels produced over the first 36 months of production from qualifying wells and an exemption for natural gas used on-site to power equipment or reinjected for enhanced recovery.

Committee members described the policy as a way to encourage risk-taking and to gather data on unproven plays; they noted the state’s revenue stream could decline as mature wells enter stripper status, and the incentive is designed to prod innovation and exploration. Representative Hedlund said the committee tightened the language to limit the incentives to one well per spacing and to ensure qualifying uses are narrowly defined; he referenced an estimate that the middle Three Forks might yield substantial additional reserves if recovered with new technology.

Representative Nelson questioned whether the bill sufficiently considered recent decisions on stripper-well policy; other members said a separate study on stripper wells had been authorized and that the bill’s exemptions address a different policy objective. The bill passed on final vote 89 yeas and 5 nays and was declared passed.

Votes at a glance: Final passage of Senate Bill 23-97 — 89 yea, 5 nay.

The bill delegates implementation details to the tax commissioner and requires policies that define eligible wells and recovery techniques; fiscal impacts were noted as contingent on market conditions and pace of development.