North Dakota – New Exemptions for Natural Gas Collection Enacted

SALT Report 2438 – Recently enacted North Dakota legislation created two severance tax exemptions for liquids produced from natural gas to encourage use of gas that might otherwise be flared; and expands a sales tax exemption for property used to process natural gas to encourage use of gas that might otherwise be flared. The exemptions are effective July 1, 2013.

Severance Tax

A temporary exemption for oil and gas wells that employ a system that is designed to avoid flaring has been created for a period of 2 years and 30 days from the time of first production. To qualify for exemption, the gas must be:

  • Collected and used at the well site to power an electrical generator that consumes at least 75% of the gas from the well, or
  • Collected at the well site by a gas collection system

This exemption applies to the oil and gas gross production taxes.

An exemption for liquids produced from a gas collection system that utilizes absorption, adsorption, or refrigeration has been enacted for a period of 2 years and 30 days from the time of first production. This exemption applies to the oil extraction tax.

Sales Tax

The sales tax exemption for tangible personal property used to construct or expand a system used to compress, process, gather, or refine gas recovered from an oil or gas well is expanded to include tangible personal property used to construct or expand a gas collection system.

Gas collection systems are defined in the Bill as a system that “intakes at least 75% of the gas and natural gas liquids volume from the well, for beneficial consumption, by means of compression to liquid…separating and collecting over 50% of the propane and heavier hydrocarbons. Or, equipped with other value-added processes that reduce the volume or intensity of the flare by more than sixty percent.”

For Further Information

North Dakota State Legislature – House Bill 1134, Laws 2013