North Dakota finance committee approves Senate Bill 2397 for oil exploration incentives

Senate Bill 2397 is set to reshape North Dakota's oil and gas landscape, as the Finance and Taxation Committee unanimously recommended its passage during the House Floor Session on April 21, 2025. The bill, which has undergone significant amendments, aims to provide incentives for oil and gas exploration in less proven zones outside the established Bakken and Three Forks formations.

Representative Jay Olson, who presented the bill, emphasized the need for innovation and exploration as the state faces diminishing returns from existing wells. "Our industry has been in harvest mode ever since," Olson stated, highlighting the urgency of diversifying exploration efforts. With many current wells entering "stripper well" status—producing less than 35 barrels a day—tax revenues are expected to decline, prompting the need for new strategies to sustain the industry.

The amended Senate Bill 2397 introduces tax incentives for companies willing to explore new drilling zones and adopt innovative technologies. Key provisions include tax exemptions for natural gas used on-site and for gas reinjected to enhance oil production. Olson assured that these incentives would not cost the state unless companies successfully strike oil, stating, "If they do not take the risk, there's no incentive."

However, some representatives raised concerns about the potential implications of the bill, particularly regarding the previous discussions on stripper wells and their impact on tax revenue. Representative Nelson questioned whether the committee had adequately considered the consequences of past legislation on current revenue streams. In response, Olson clarified that the focus of this bill is solely on fostering innovation and exploration, not on revisiting past decisions regarding stripper wells.

The committee's recommendation for a "green vote" reflects a strong belief in the necessity of this legislation to secure North Dakota's oil future. As the state navigates the complexities of its energy sector, Senate Bill 2397 represents a strategic move to encourage exploration and technological advancement, ensuring that North Dakota remains a key player in the oil and gas industry.