Legislative Progress Breakdown

North Dakota Petroleum Council
By Alexis Brinkman | May 24, 2013

The 63rd Legislative Assembly of North Dakota will go down in history as the state’s longest legislative session. Legislation covering every aspect of the oil and gas industry was discussed throughout the course of the session and work continued for the North Dakota Petroleum Council all the way to day 80. Following is a breakdown of the results in some of our top issues:  

Oil Impacts
Increasing funding for oil-impacted cities, counties and townships was one of the most important issues of the session and from the beginning, the bill proposed by Rep. Robert Skarphol was the vehicle to get it done. At the end of the day, HB 1358 included $1.143 billion for fixing roads, building infrastructure, providing law enforcement and emergency medical services and more. This was one of NDPC’s biggest issues this session, as ensuring the needs of our impacted communities are met is very important to our industry. The additional funding for western North Dakota provided in this bill is only the beginning of what’s needed to build up the necessary infrastructure, but it is a great step in the right direction.

NDPC also worked in support of additional staffing for various state agencies, including 15 new highway patrolmen for western North Dakota, nine new Department of Health staff members to deal with oil-related issues, and 22 new positions at the N.D. Industrial Commission to help meet the increasing demand in oil-impacted areas.

Landowner and Surface Rights
A multitude of legislative measures addressing various landowner and surface rights issues were passed. Prior to the session, we spent time working with the Dunn County Landowner’s Association to put together HB 1333. This bill includes many tools to address concerns from landowners who have multiple easements crossing their land and others who are hesitant to grant easements across their property. It includes an expanded mediation program and an abandoned well fund. Among other legislation addressing surface rights is a bill that allows flares, tanks and treaters to be placed at a greater distance from occupied dwellings at the request of the landowner for wells located within 1,000 feet of that dwelling.

Oil and gas development has brought about tremendous changes on the Fort Berthold Indian Reservation. The tribal tax agreement was one of the most important issues of the session for NDPC. After countless meetings with industry, legislative leadership and the tribal council and multiple attempts to pass an agreement, a deal was made during the final afternoon of the session. That agreement was put into HB 1198, which will split production and extraction tax collections 50/50 between the Three Affiliated Tribes and the state. Needs for increased funding within the reservation are the same as those across the oil patch, and the new agreement will provide the funds necessary for the Three Affiliated Tribes, the Mandan, Hidatsa and Arikara Nation, to meet the growing demand for infrastructure, housing and social services. HB 1198 also made some major changes to the oil and gas tax structure, including:

• Requires the oil operator to withhold income taxes from nonresident royalty owners after Dec. 31. This requirement applies only to producers with production exceeding 350,000 barrels per year. 

• Provides a non-Bakken/Three Forks new-well incentive. This incentive subjects the first 75,000 barrels produced during the first 18 months from the time a well has been drilled and completed to a reduced tax rate of 2 percent. The well must be outside of the Bakken/Three Forks formations and 10 miles or more outside an established field.

• Eliminates all stripper-well properties and requires every new well completed after July 1, 2013, to qualify for stripper status individually.

• Raises the stripper-well threshold on Bakken/Three Forks to 35 barrels of oil per day from 30.

• Extends the $55 one-month triggered incentive on horizontal wells for two years.
Many, many other issues were addressed throughout the course of the session, from flaring and pipelines to water, trucking and workforce issues. All in all, it was a long and difficult session, but in the end the oil and gas industry fared very well, and great progress was made in addressing the impacts and challenges faced in western North Dakota. 

Author: Alexis Brinkman
North Dakota Petroleum Council



Bills Bringing Change:

Taxes (HB 1198)
-Reduced tax rate of 2 percent for wells drilled 10 miles or more outside of non-Bakken and Three Forks fields for first 75,000 barrels produced.
-All stripper-well properties now eliminated. New wells completed after July 1, must qualify for stripper status individually.
-Stripper-well threshold increased to 35 bopd.
-Splits production and extraction tax collections on trust lands 50/50 between Three Affiliated Tribes and N.D.
-Splits production and extraction tax collections on fee lands 50/50 between TAT and N.D.
-Five-year tax holiday for new wells on fee lands eliminated after July.
-Annual report on infrastructure expenditures, fees and costs imposed on oil and gas industry required by TAT.
-10 percent must be spent on infrastructure.
-(Formal agreement still in development between Gov. Jack Dalrymple and TAT).

Water (SB 2233)
-Transfers responsibility for all existing Western Area Water Supply Authority debt to state.
-Prohibits WAWSA from preventing others from developing state’s water resources.
-Allows WAWSA and independent water providers to construct lateral pipelines to connect to oil and gas industry.
-Requires WAWSA to receive approval from State Water Commission.
-Fine for water appropriation violation increased from $5,000 to $25,000 per day.

-Penalty for pipeline safetystandards increased from $10,000 to $200,000.
-Permit requirements for pipelines sited in previously permited areas or corridors lessened.
-Underground gathering pipelines must include location files available to landowners.
-Increased penalty for failure to call before digging.

Flaring (HB 1134)
-Allows gas collection for compression to liquid for value-added products.
-Tax exempts collected gas for first two years after production.
(HG 1410)
-Exempts materials used in liquefying gas from sales and use tax.
-Exempts fuel used by BNSF for LNG construction facility from use tax.

Failed Bills
-Required tax and royalty payments after one year following initial production if flaring occurs.
-Property tax exemption for new natural gas gathering  and collection systems.
-N.D. Pipeline Authority’s ability to lend for refineries.
-Major changes to oil and gas taxation.
-Tax on industrial water use.
-Additional $50 million for more Hub Cities, including Watford City, N.D.