State agencies and industry outline stakes of 'stripper' well tax status

State tax and mineral‑resources officials briefed the advisory committee on the mechanics and implications of North Dakota’s tax treatment for low‑producing “stripper” wells and compared other states’ approaches.

Nathan Anderson, director of the Department of Mineral Resources, walked the committee through the statutory determination process and emphasized that determinations rely on a 12‑month consecutive production test; non‑producing days are excluded when averaging. Anderson provided updated DMR statistics: roughly 21,000 total wells statewide with about 54% in stripper‑well status by well count; tens of thousands of producer determinations are made periodically. "The tax qualification extends the economic limit on marginal wells which delays the plugging and abandonment and extends the time that these wells pay sales and production taxes," Anderson said.

Shailene, a revenue analyst with the Office of the State Tax Commissioner, presented an interstate comparison showing that most major oil‑producing states have provisions for low‑producing or marginal wells but differ in structure and terminology. She said Alaska appeared not to have the same targeted exemption the committee identified in other states.

Industry perspective: Ron Nes of the North Dakota Petroleum Council urged caution about changes that reduce incentives for older wells. Nes said refracturing (refrac) is expensive—"it'll cost you between 2 to $3,000,000 to do a refrac"—and warned that removing tax incentives could lead operators to abandon marginal wells rather than attempt costly workovers.

Policy implications: Committee members asked how thresholds were set (for example a Bakken horizontal threshold that moved from 30 to 35 barrels per day in 2013) and whether lowering the threshold would push wells into different tax buckets or increase the risk of orphan wells. DMR staff said lowering thresholds requires careful study of economic impacts (operating costs, discount on Bakken barrels) and could have tradeoffs for production, royalty income and plugging liabilities.

Next steps: Members requested more evidence on the economic case for threshold adjustments, data on wells that have been refracked and economic examples from operators showing the costs and payback of workovers and refracs. DMR and the tax department agreed to follow up with additional documentation.