Stripper Wells and Tax Breaks -- Williston Oil Basin, North Dakota

This is very, very interesting.

This is the crux of the story:

Stripper wells are broadly defined in North Dakota as those that produce fewer than 30 barrels of crude daily. The state has a pair of oil taxes that are applied to wells: A 6.5 percent extraction tax and a 5 percent production tax.

In 1980, voters approved an initiated measure to exempt stripper wells from the extraction tax. A year later, the Legislature tweaked the exemption to include the leased area - or spacing - on which the well was located. The spacings can be as high as 1 square mile, enough room for several wells that could meet the tax-exempt designation. Once a well or spacing meets the stripper criteria, it holds the designation indefinitely.

I wouldn't lose a lot of sleep over this. The article says the state is losing $30 million/year over this exemption. I'm sure the number is debatable but even if it's accurate, I understand the oil industry accounts for about $1 billion/year (I could be way off on this; I haven't checked recently) in taxes to the state. This does not include all the taxes paid by individuals employed in the industry, nor all the taxes paid by businesses supporting the drillers.

But, and this is a big, big "but," --- on second thought, I will hold this thought for now.

It is my understanding that the designation of "stripper" well is not automatic, just because the well is producing less than 30 bbls of oil per day. It is my understanding that a driller must apply for stripper well status for a well. The NDIC will make the determination. My hunch is that the NDIC is taking this very issue very seriously. That may be one of the reasons why the legislature is not eager to change the law.

[The bigger question I have: exactly what is the difference between "extraction" and "production"? That's a rhetorical question. I don't expect any answers.]