American Oil and Gas Reporter - August 2023 - 94

ConventionSec tion: North Dakota Petroleum Council
a reservation. In 2009, the legislature and
tribe came together on the unified taxation
program, and it has been a process getting
to a point where everybody is happy with
it, but that is easier when oil production is
increasing and we are trying to figure out
how to split a growing pie.
" Sometimes it is a big challenge, " Ness
allows. " The regulatory process of dealing
with the U.S. Bureau of Indian Affairs,
the timing and process, and additional
costs must be factored in, but the companies
operating on the reservation for more than
a decade have built a lot of trust. "
According to Bender, oil and gas companies
active on the Ft. Berthold Reservation
have adapted their approaches to accommodate
tribal concerns and priorities.
" They spend a lot of time keeping tribal
council members informed about what
they are doing and why, " he says. " Those
extra steps can be more tedious and difficult
than usual, but these companies are carrying
them out and it works well. "
Bender and Ness credit MHA Chairman
Mark Fox for much or the harmony between
the MHA Nation and the industry. " Chairman
Fox has done great things to improve
the quality of life for Native Americans
on the reservation and has done a fabulous
job, " Bender affirms. " He has promoted
oil and gas activity on the reservation and
put those funds to good use. "
" The MHA Nation has become a great
partner in the responsible development
of its minerals, " Ness reflects. " The tribes
are building new schools, greenhouses
and other facilities. They also have their
own drilling company and have purchased
a pipeline to move product. "
That drilling company, Thunder Butte
Petroleum Co., bought the six-inch-diameter,
31-mile, 15,000 barrel a day Plaza/Wabank
oil pipeline that connects a gathering
system in North Dakota's Plaza/Wabek
fields with Enbridge's terminal in Stanley,
N.D. (AOGR, July 2023, pg. 83).
" Purchasing that pipeline can further
development, " Bender notes. " The ability
to get oil directly to the terminal will net
a higher margin. "
" Again, we have to credit the leadership
of Chairman Fox and tribal council, "
Ness adds. " In the beginning, there was
a lot of fear, apprehension and maybe
opposition. We went from that to acknowledgment
and support to the point
that now we are true partners. It is so
much easier to get the proper infrastructure
in place and to accomplish things when
you can focus on that work instead of the
sort of daily struggle we see on the federal
94 THE AMERICAN OIL & GAS REPORTER
side, where we have to put so much time
and energy into regulatory battles. "
Legislative Session
As they look back on the 2023 North
Dakota Legislative Assembly, Bender and
Ness call the passage of HB 1286 NDPC's
top victory from the session. The bill,
which Governor Doug Bergum signed
earlier this year, repealed the additional
1% extraction tax burden on producers
when the oil price exceeded a certain
threshold. In 2022, Ness says, it kicked
in when oil prices exceeded $95 a barrel
for at least three months.
" Periods of high oil prices are the time
to attract investment, and a punitive tax
based on an arbitrary price trigger deters
that, " Ness reasons. " When the tax kicked
in a year ago, it was pretty detrimental. "
Not only are such windfall-profits measures
poor tax policy, Bender suggests,
they also impose hidden burdens and costs.
He cites the example of how such structures
require companies to devote time and
effort toward keeping their accounting and
information technology records current
with unstable tax obligations.
" Getting rid of that simplifies some
unnecessary complications, " Bender assesses.
" North Dakota already has an unduly
complex structure. Adding the additional
percent compounded the complexity
without raising much revenue.
Getting rid of it was a big victory. "
Objections to the repeal assume that
the industry should bear heavier tax
rates when commodity prices are strong,
he acknowledges, but North Dakota is
not the only state with attractive oil and
gas prospects. " The simpler a state's
tax and regulatory structure, the more
attractive it is to business, " Bender considers.
" We want to point to North
Dakota as a good place to do business,
and cleaning up a complicated extraction
tax structure proves that. "
HB 1286 had many co-sponsors, but
Ness especially credits House Finance
and Tax Committee Chairman Craig
Headland, R-Montpelier, for shepherding
the bill through the process. " He was the
champion, " Ness affirms.
Other bills that caught NDPC's attention
during the 2023 session included:
· SB 2194, which created a royalty
owner ombudsman program;
· HB 1272, which established an
" enhanced oil recovery potential " status
for wells; and
· HB 1427, a well restimulation extraction
tax incentive.
According to NDPC, HB 1427 is intended
to encourage producers to refracture
wells on locations in which such activities
otherwise may be uneconomic. Recompleted
wells are eligible for a 2% extraction
tax-versus the standard 5%-on their
first 75,000 barrels or 18 months of incremental
production.
Meanwhile, the association explains,
by creating an " EOR Potential " well
status, HB 1272 will increase the chance
that technology, policy and economics
will align to enable such projects.
" It is a really big deal to allow producers
to put their wells into that status
for as long as 12 years, " Ness suggests.
" Too many Bakken wells already have
been plugged, despite huge EOR possibilities.
We want to keep that infrastructure,
and this gives operators a new tool. If the
regulatory process shows sound wellbore
integrity and everything lines up, let's
keep everything in place. "
According to Bender, SB 2194 originated
with some North Dakota royalty
owners' push for more extensive royalty
statement requirements. NDPC expressed
skepticism of such data mandates, warning
that they are likely to burden operators
without helping most royalty owners.
Instead, SB 2194 creates a program
within the North Dakota Agriculture
Commissioner's office to act as a resource
for royalty owners with questions or
other issues.
" The Ag Commissioner already has a
similar ombudsman program to help resolve
surface damage disputes, " Bender
observes. " This should help people understand
their royalty statements and determine
if they are being paid correctly. "
The Place To Be
As he gauges the prevalent mood
throughout North Dakota's oil and gas
industry, Bender indicates his fellow
NDPC members seem positive despite
some constraints. " The struggle is trying
to find people, " he clarifies. " From roughnecks
to lawyers, office staff to state government,
it transcends everything. As activity
has picked up, so has the demand
for personnel. "
In response, NDPC has formed an
initiative called Bakken GROW (Global
Recruitment of Oil Field Workers), which
is being led by former Lieutenant Governor
Brent Sanford. " Bringing on someone as
knowledgeable and energetic as the former
lieutenant governor is really the right
step, " Bender says. " I am excited about
his plans for the future. "
American Oil and Gas Reporter - August 2023

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