Bill Summary – FastDemocracy

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68th Legislature 2023                                                                                           HB 485.1
                                                HOUSE BILL NO. 485
                                          INTRODUCED BY J. KASSMIER
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  A BILL FOR AN ACT ENTITLED: “AN ACT REVISING STRIPPER OIL TAX LAWS; REVISING TAX RATES
  FOR STRIPPER OIL PRODUCTION; AMENDING SECTIONS 15-36-303 AND 15-36-304, MCA; AMENDING
  SECTIONS 12 AND 13, CHAPTER 559, LAWS OF 2021; REPEALING SECTIONS 3, 4, 5, 8, 9, 10, AND 14,
  CHAPTER 559, LAWS OF 2021; AND PROVIDING EFFECTIVE DATES.”
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  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
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          Section 1. Section 15-36-303, MCA, is amended to read:
          " 15-36-303. (Temporary) Definitions. As used in this part, the following definitions apply:
          (1)   "Board" means the board of oil and gas conservation provided for in 2-15-3303.
          (2)   "Department" means the department of revenue provided for in 2-15-1301.
          (3)   "Enhanced recovery project" means the use of any process for the displacement of oil from the
  earth other than primary recovery and includes the use of an immiscible, miscible, chemical, thermal, or
  biological process.
          (4)   "Existing enhanced recovery project" means an enhanced recovery project that began
  development before January 1, 1994.
          (5)   "Expanded enhanced recovery project" or "expansion" means the addition of injection wells or
  production wells, the recompletion of existing wells as horizontally completed wells, the change of an injection
  pattern, or other operating changes to an existing enhanced recovery project that will result in the recovery of
  oil that would not otherwise be recovered. The project must be developed after December 31, 1993.
          (6)   "Gross taxable value", for the purpose of computing the oil and natural gas production tax, means
  the gross value of the product as determined in 15-36-305.
          (7)   "Horizontal drain hole" means that portion of a wellbore with 70 degrees to 110 degrees deviation
  from the vertical and a horizontal projection within the common source of supply, as that term is defined by the
  board, that exceeds 100 feet.
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68th Legislature 2023                                                                                              HB 485.1
          (8)   "Horizontally completed well" means:
          (a)   a well with one or more horizontal drain holes; or
          (b)   any other well classified by the board as a horizontally completed well.
          (9)   "Incremental production" means:
          (a)   the volume of oil produced by a new enhanced recovery project, by a well in primary recovery
  recompleted as a horizontally completed well, or by an expanded enhanced recovery project, which volume of
  production is in excess of the production decline rate established under the conditions existing before:
          (i)   commencing the recompletion of a well as a horizontally completed well;
          (ii) expanding the existing enhanced recovery project; or
          (iii) commencing a new enhanced recovery project; or
          (b)   in the case of any project that had no taxable production prior to commencing the enhanced
  recovery project, all production of oil from the enhanced recovery project.
          (10) "Natural gas" or "gas" means natural gas and other fluid hydrocarbons, other than oil, produced at
  the wellhead.
          (11) "New enhanced recovery project" means an enhanced recovery project that began development
  after December 31, 1993.
          (12) "Nonworking interest owner" means any interest owner who does not share in the exploration,
  development, and operation costs of the lease or unit, except for production taxes.
          (13) "Oil" means crude petroleum or mineral oil and other hydrocarbons, regardless of gravity, that are
  produced at the wellhead in liquid form and that are not the result of condensation of gas after it leaves the
  wellhead.
          (14) "Operator" or "producer" means a person who produces oil or natural gas within this state or who
  owns, controls, manages, leases, or operates within this state any well or wells from which any marketable oil
  or natural gas is extracted or produced.
          (15) (a) "Post-1999 stripper well" means an oil well drilled on or after January 1, 1999, that produces
  more than 3 barrels but fewer than 15 barrels a day for the calendar year immediately preceding the current
  year if the average price for a barrel of crude oil reported and received by the producer for Montana oil
  marketed during a calendar quarter is less than $30. If the price of oil is equal to or greater than $30 a barrel in
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68th Legislature 2023                                                                                              HB 485.1
  a calendar quarter, there is no stripper tax rate in that quarter.
           (b)   The average price for a barrel is computed by dividing the sum of the daily price for a barrel of
  west Texas intermediate crude oil for the calendar quarter by the number of days on which the price was
  reported in the quarter.
           (c)   Production must be determined by dividing the amount of production from a lease or unitized area
  for the year immediately preceding the current calendar year by the number of producing wells in the lease or
  unitized area and then dividing the resulting quotient by 365.
           (16) "Post-1999 well" means an oil or natural gas well drilled on or after January 1, 1999, that
  produces oil or natural gas or a well that has not produced oil or natural gas during the 5 years immediately
  preceding the first month of qualifying as a post-1999 well.
           (17) (a) "Pre-1999 stripper well" means an oil well that was drilled before January 1, 1999, that
  produces more than 3 barrels a day but fewer than 10 barrels a day.
           (b)   Production must be determined by dividing the amount of production from a lease or unitized area
  for the year immediately preceding the current calendar year by the number of producing wells in the lease or
  unitized area and then dividing the resulting quotient by 365.
           (18) "Pre-1999 well" means an oil or natural gas well that was drilled before January 1, 1999.
           (19) "Primary recovery" means the displacement of oil from the earth into the wellbore by means of the
  natural pressure of the oil reservoir and includes artificial lift.
           (20) "Production decline rate" means the projected rate of future oil production, extrapolated by a
  method approved by the board, that must be determined for a project area prior to commencing a new or
  expanded enhanced recovery project or the recompletion of a well as a horizontally completed well. The
  approved production decline rate must be certified in writing to the department by the board. In that certification,
  the board shall identify the project area and shall specify the projected rate of future oil production by calendar
  year and by calendar quarter within each year. The certified rate of future oil production must be used to
  determine the volume of incremental production that qualifies for the tax rate imposed under 15-36-304(5)(e).
           (21) (a) "Qualifying production" means the first 12 months of production of oil or natural gas from a
  well drilled after December 31, 1998, or the first 18 months of production of oil or natural gas from a horizontally
  completed well drilled after December 31, 1998, or from a well that has not produced oil or natural gas during
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68th Legislature 2023                                                                                               HB 485.1
  the 5 years immediately preceding the first month of qualifying production.
          (b)   Qualifying production does not include oil production from a horizontally recompleted well.
          (22) "Secondary recovery project" means an enhanced recovery project, other than a tertiary recovery
  project, that commenced or was expanded after December 31, 1993, and meets each of the following
  requirements:
          (a)   The project must be certified as a secondary recovery project to the department by the board. The
  certification may be extended only after notice and hearing in accordance with Title 2, chapter 4.
          (b)   The property to be affected by the project must be adequately delineated according to the
  specifications required by the board.
          (c)   The project must involve the application of secondary recovery methods that can reasonably be
  expected to result in an increase, determined by the board to be significant in light of all the facts and
  circumstances, in the amount of oil that may potentially be recovered. For purposes of this part, secondary
  recovery methods include but are not limited to:
          (i)   the injection of water into the producing formation for the purposes of maintaining pressure in that
  formation or for the purpose of increasing the flow of oil from the producing formation to a producing wellbore;
  or
          (ii) any other method approved by the board as a secondary recovery method.
          (23) "Stripper natural gas" means the natural gas produced from any well that produces less than
  60,000 cubic feet of natural gas a day during the calendar year immediately preceding the current year.
  Production must be determined by dividing the amount of production from a lease or unitized area for the year
  immediately preceding the current calendar year by the number of producing wells in the lease or unitized area
  and by dividing the resulting quotient by 365.
          (24) "Stripper well exemption" or "stripper well bonus" means petroleum and other mineral or crude oil
  produced by a stripper well that produces 3 barrels a day or less. Production from this type of well must be
  determined as provided in subsection (15)(c).
          (25) "Tertiary recovery project" means an enhanced recovery project, other than a secondary recovery
  project, using a tertiary recovery method that meets the following requirements:
          (a)   The project must be certified as a tertiary recovery project to the department by the board. The
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68th Legislature 2023                                                                                            HB 485.1
  certification may be extended only after notice and hearing in accordance with Title 2, chapter 4.
          (b)   The property to be affected by the project must be adequately delineated in the certification
  according to the specifications required by the board.
          (c)   The project must involve the application of one or more tertiary recovery methods that can
  reasonably be expected to result in an increase, determined by the board to be significant in light of all the facts
  and circumstances, in the amount of crude oil that may potentially be recovered. For purposes of this part,
  tertiary recovery methods include but are not limited to:
          (i)   miscible fluid displacement;
          (ii) steam drive injection;
          (iii) micellar/emulsion flooding;
          (iv) in situ combustion;
          (v)   polymer augmented water flooding;
          (vi) cyclic steam injection;
          (vii) alkaline or caustic flooding;
          (viii) carbon dioxide water flooding;
          (ix) immiscible carbon dioxide displacement; and
          (x)   any other method approved by the board as a tertiary recovery method.
          (26) "Well" or "wells" means a single well or a group of wells in one field or production unit and under
  the control of one operator or producer.
          (27) "Working interest owner" means the owner of an interest in an oil or natural gas well or wells who
  bears any portion of the exploration, development, and operating costs of the well or wells. (Terminates
  December 31, 2021, 2022, 2023, and 2024, on occurrence of contingency until December 31, 2025--secs. 13,
  14, Ch. 559, L. 2021.)
          15-36-303.     (Temporary -- effective on occurrence of contingency) Definitions. As used in this
  part, the following definitions apply:
          (1)   "Board" means the board of oil and gas conservation provided for in 2-15-3303.
          (2)   "Department" means the department of revenue provided for in 2-15-1301.
          (3)   "Enhanced recovery project" means the use of any process for the displacement of oil from the
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68th Legislature 2023                                                                                             HB 485.1
  earth other than primary recovery and includes the use of an immiscible, miscible, chemical, thermal, or
  biological process.
          (4)   "Existing enhanced recovery project" means an enhanced recovery project that began
  development before January 1, 1994.
          (5)   "Expanded enhanced recovery project" or "expansion" means the addition of injection wells or
  production wells, the recompletion of existing wells as horizontally completed wells, the change of an injection
  pattern, or other operating changes to an existing enhanced recovery project that will result in the recovery of
  oil that would not otherwise be recovered. The project must be developed after December 31, 1993.
          (6)   "Gross taxable value", for the purpose of computing the oil and natural gas production tax, means
  the gross value of the product as determined in 15-36-305.
          (7)   "Horizontal drain hole" means that portion of a wellbore with 70 degrees to 110 degrees deviation
  from the vertical and a horizontal projection within the common source of supply, as that term is defined by the
  board, that exceeds 100 feet.
          (8)   "Horizontally completed well" means:
          (a)   a well with one or more horizontal drain holes; or
          (b)   any other well classified by the board as a horizontally completed well.
          (9)   "Incremental production" means:
          (a)   the volume of oil produced by a new enhanced recovery project, by a well in primary recovery
  recompleted as a horizontally completed well, or by an expanded enhanced recovery project, which volume of
  production is in excess of the production decline rate established under the conditions existing before:
          (i)   commencing the recompletion of a well as a horizontally completed well;
          (ii) expanding the existing enhanced recovery project; or
          (iii) commencing a new enhanced recovery project; or
          (b)   in the case of any project that had no taxable production prior to commencing the enhanced
  recovery project, all production of oil from the enhanced recovery project.
          (10) "Natural gas" or "gas" means natural gas and other fluid hydrocarbons, other than oil, produced at
  the wellhead.
          (11) "New enhanced recovery project" means an enhanced recovery project that began development
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68th Legislature 2023                                                                                              HB 485.1
  after December 31, 1993.
           (12) "Nonworking interest owner" means any interest owner who does not share in the exploration,
  development, and operation costs of the lease or unit, except for production taxes.
           (13) "Oil" means crude petroleum or mineral oil and other hydrocarbons, regardless of gravity, that are
  produced at the wellhead in liquid form and that are not the result of condensation of gas after it leaves the
  wellhead.
           (14) "Operator" or "producer" means a person who produces oil or natural gas within this state or who
  owns, controls, manages, leases, or operates within this state any well or wells from which any marketable oil
  or natural gas is extracted or produced.
           (15) "Post-1999 well" means an oil or natural gas well drilled on or after January 1, 1999, that
  produces oil or natural gas or a well that has not produced oil or natural gas during the 5 years immediately
  preceding the first month of qualifying as a post-1999 well.
           (16) "Pre-1999 well" means an oil or natural gas well that was drilled before January 1, 1999.
           (17) "Primary recovery" means the displacement of oil from the earth into the wellbore by means of the
  natural pressure of the oil reservoir and includes artificial lift.
           (18) "Production decline rate" means the projected rate of future oil production, extrapolated by a
  method approved by the board, that must be determined for a project area prior to commencing a new or
  expanded enhanced recovery project or the recompletion of a well as a horizontally completed well. The
  approved production decline rate must be certified in writing to the department by the board. In that certification,
  the board shall identify the project area and shall specify the projected rate of future oil production by calendar
  yea