Interview: Senator Dwight Cook Introduces Major Oil Tax Reforms

Oil Well Pumps

Today Senator Dwight Cook introduced SB2336 (not available online yet) proposing several major changes to North Dakota’s oil taxes. He took a few minutes to talk with me about the changes after a press conference with House Majority Leader Al Carlson and Senate Majority Leader Rich Wardner announcing them.

Here are the specifics of the “complicated bill” (as Cook described it):

* The bill would require the oil companies withhold income taxes from royalty payments to out-of-state mineral rights holders. Cook says this will raise about $4.1 million in additional revenue for the state.

* Eliminates stripper well exemptions in the Bakken and Three Forks formation, representing about an $83 million tax increase to the oil industry. “They aren’t necessarily fond of that,” Cook told me.

* Raises the threshold for “stripper well status” for wells deeper than 10,000 feet from 30 barrels per day to 45 barrels per day

* Creates an incentive to explore for oil outside the Three Forks and Bakken formations. Cook mentioned that only 2 of the 182 rigs currently operating in North Dakota were outside those formatinos. This incentive reduces the extraction tax from 6.5% to 2.5% for wells outside these formations for the first 18 months of production or the first 75,000 barrels of oil. “This incentive hopefully will spread this activity across the state…so that we’re not completely dependent on Bakken and Three Forks wells.” Cook said this will lose the state about $35 million in revenues.

All of these policies would go into effect for the next biennium, and would amount to about a $23 million tax increase on the oil industry according to Cook.

The bill does one additional thing:

On January 1st 2017 the extraction tax will drop from 6.5% to 4.5% and will eliminate 10 production incentives which trigger based on oil prices. This is the “fix the tax” proposal that former Governor Ed Schafer made a public campaign for during the last legislative session. It would end the incentives, which would actually raise taxes on the oil industry, in exchange for a lower and consistent overall oil extraction tax rate.

Because the oil industry gets taxed less if oil prices fall, Cook noted that the incentives “could cost the state as much as $2 billion.” Ending the exemptions would prevent that from happening.

Rob Port is the editor of In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters.

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  • lucas

    Senator C(r)ook apparently has some pretty important pet projects to fund. He is also proposing all kinds of property tax reforms that does nothing but raise taxes on property owners. Typical politician 1.5 billion dollars is not enough to gouge taxpayers he needs more more more. Makes me wonder why he has an R behind his name, but than i guess todays republicans are nothing but pro-life socialist democrats.

  • sbark

    I overhead New & Views “host” this morning declaring how he didnt trust Cooks or Fongs “numbers’ on these oil tax cuts……………he said he just knows better……….
    funny he “didnt know better” during ObamaCare debates, during the 4 yrs of Harry Reids “no budget” numbers……….he didnt seem to know better enought to be critical of any of the Solyndras, The Stimulus that essentially kept public unions afloat for last 4 yrs………..

  • Dallas

    This bill was written by the North Dakota Petroleum Council. Cook and fellow Republicans sold themselves cheaply.
    Why would we give the oil industry a $500 million a year tax break and make North Dakota citizens pay the cost of highways, schools, law enforcement and other needed infrastructure?
    The industry hits 9 of every ten wells drilled in ND. The President of Whiting, in an interview last year, said his company made great money in North Dakota at $30 a barrel. Insiders say wells in the Bakken pay for themselves in less that a year. They’re making more money than they know what to do with.
    Our tax makes our oil non-competative? Give me a break.
    This is nonsense. The industry financed Hennen, Emineth and his newspaper and bought a former governor to do their bidding. It’s a travesty.

  • Lynn Bergman

    This is the first time I can remember wholeheartedly endorsing a tax reform package. Congratulations to Senator Cook and Republican leadership for finally getting it 100% right! Don’t let special interests change a word of it.

    Mineral owners outside the Bakken & Three Forks, however, shouldn’t get their hopes up… with all wells near 100% successful, it is not likely that incentives will prompt a return to the casino-like risks associated with drilling in unproven formations. And if it does happen, the rewards are much greater than the incentives.
    Again, congratulations to Republican Leadership!