Completed wells boost by small oil tax trigger
BISMARCK -- Tax Commissioner Ryan Rauschenberger says he's surprised by the strong number of wells that were completed in the past five months while a small oil tax trigger was in play.
The trigger ends Tuesday, but in the meantime, oil companies fracked 586 wells and Rauschenberger expects another 20 could be added by the deadline.
The small trigger went into effect Feb. 1 because of low prices, lowering the extraction tax from 6.5 percent to 2 percent. Overall, oil companies will realize somewhere around $120 million in total tax savings on those wells. The tax break is only on the first 75,000 barrels and ends at the end of this year.
Even though oil companies will pocket the difference, Raschenberger says the state will still collect about $1 billion in oil revenue on those wells over the next biennium.
He said other factors besides the trigger encouraged companies to complete the wells, including the state's one-year deadline to complete wells after drilling and reduced service costs as the number of drilling rigs continues to decline in a low-price market.
There were 72 rigs drilling as of Thursday, down more than 110 rigs since Christmas. Some 950 wells were reportedly drilled but not fracked as of the end of April, according to the North Dakota Department of Mineral Resources.
This is the last time the small trigger will go into effect. The Legislature took it off the books in favor of an overall reduction in the extraction tax from 6.5 percent to 5 percent, which goes into effect Jan. 1 on all wells.