North Dakota Senate advances tax breaks for fracking

FILE - A flare burns natural gas at an oil well Aug. 26, 2021, in Watford City, N.D.
FILE - A flare burns natural gas at an oil well Aug. 26, 2021, in Watford City, N.D.(AP Photo/Matthew Brown, File)
Published: Mar. 20, 2023 at 9:05 PM CDT
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BISMARCK, N.D. (AP) - The North Dakota Senate passed a bill Monday that would give tax incentives to oil companies for “restimulating” old oil wells in the state through hydraulic fracturing, also known as fracking.

Fracking involves injecting high-pressure water deep underground to extract oil or gas from rock. Environmental groups have long opposed the practice, saying it can pollute groundwater and contributes to climate change.

Supporters said the North Dakota bill would benefit mineral owners and the state, whereas opponents said oil companies can afford to restimulate wells without a tax break.

Restimulation refers to the process of converting an existing oil well — which has produced oil for a while but has experienced a decline in oil production — into an updated oil well with “modern completion treatment” to enhance oil production, according to Marathon Oil Company representative Zac Weis, who testified in support of the bill this month.

The process involves treating an old oil well with fluid under pressure to create fractures in the ground and increase oil production, according to the bill.

Republican Sen. Dale Patten, of Watford City, said the bill would reduce the oil extraction tax to 2% for a restimulated well’s first 75,000 barrels of production, or for the first 18 months of production — whichever comes first. Then, the tax would go back to the full 5%.

“Restimulations increase the ultimate recoverable barrels of oil, meaning more economic value to the state, the mineral owners and the operators,” Patten said in support of the bill. “It reduces environmental impacts for continued use of existing infrastructure, like well site locations and natural gas pipelines.”

Democratic Sen. Merrill Piepkorn, of Fargo, was the only lawmaker to speak against the bill on the Senate floor and said oil companies in “this high profit margin industry are capable of funding this restimulation program on their own.”

The bill passed the Senate with a 42-5 vote; the House passed it unanimously last month. Since the bill was amended in the Senate, it needs to pass through the House in its current form and be signed by the governor before becoming law.

In order to qualify for restimulation, an old oil well would need to be at least five years old or produce less than 125 barrels of oil per day. About 5,400 wells would qualify in the state, Patten said, and the state would still collect sales tax on the work needed for restimulation — that “easily offsets” the loss in tax revenues not collected.