North Dakota law exempts some oil and gas production from taxes

The law exempts the first 250,000 barrels of oil from tax for each certified development incentive well. A qualifying well must use a new or innovative drilling or completion method, show it can develop reserves otherwise left undeveloped or underdeveloped, and be expected to increase wells, production, or ultimate recovery. The operator must show that the well meets the development incentive criteria and obtain Industrial Commission certification. The operator must have 40 or more qualifying wells in the Bakken or Three Forks formations, drilled or acquired from July 1, 2023, through June 30, 2025. The Commission may certify no more than 4, 8, or 12 incentive wells, depending on the operator's qualifying well count. The exemption excludes wells within reservation boundaries, certain trust land outside reservations, and certain straddle wells on reservation trust land unless the tribe irrevocably opts in by written notice. The well must be spudded after June 30, 2025, and completed before July 1, 2028. The exemption covers oil produced during the first 36 months after completion. This provision is effective through June 30, 2031.

The law exempts qualifying gas from tax when a well captures it for use or processing instead of flaring it. The exemption applies to gas from a well using one of the listed capture and use systems. A generator must consume at least 75 percent of the well's gas, or a collection system must take in at least 75 percent of the gas and natural gas liquids for a listed beneficial use. Other value-added uses require Industrial Commission approval. The exemption lasts two years and 30 days from first production. This Act applies to taxable events after June 30, 2025.

The law exempts certain gas produced in enhanced oil recovery projects from gross production tax. The exemption covers gas produced as part of qualifying enhanced oil recovery projects that inject gas. The Industrial Commission must create and establish the project after June 30, 2025. It must inject gas to test enhanced oil recovery or carry out such recovery on a fieldwide basis through reservoir unitization. The exemption applies to gas produced after first production following the initial injection. It ends when all gas injected for the project has been recovered.