Bill Summary – FastDemocracy

****
68th Legislature 2023                                                                                           SB 426.1
                                                 SENATE BILL NO. 426
                                            INTRODUCED BY J. SMALL
  3
  A BILL FOR AN ACT ENTITLED: “AN ACT REVISING THE DEFINITION OF NATURAL GAS; AMENDING
  SECTION 15-36-303, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE.”
  6
  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
  8
          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.
          (8)      "Horizontally completed well" means:
          (a)      a well with one or more horizontal drain holes; or
                                                               -1-                    Authorized Print Version – SB 426
****
68th Legislature 2023                                                                                              SB 426.1
          (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 all natural gas gasses and other fluid hydrocarbons as produced
  at the wellhead and not defined as oil under 82-1-111, except gasses used in tertiary oil production, 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
  a calendar quarter, there is no stripper tax rate in that quarter.
                                                                -2-                     Authorized Print Version – SB 426
****
68th Legislature 2023                                                                                             SB 426.1
           (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
  the 5 years immediately preceding the first month of qualifying production.
                                                                  -3-                   Authorized Print Version – SB 426
****
68th Legislature 2023                                                                                               SB 426.1
          (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
  certification may be extended only after notice and hearing in accordance with Title 2, chapter 4.
                                                               -4-                      Authorized Print Version – SB 426
****
68th Legislature 2023                                                                                            SB 426.1
          (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
  earth other than primary recovery and includes the use of an immiscible, miscible, chemical, thermal, or
                                                                -5-                    Authorized Print Version – SB 426
****
68th Legislature 2023                                                                                             SB 426.1
  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 all natural gas gasses and all other fluid hydrocarbons as
  produced at the wellhead and not defined as oil under 82-1-111, other than oil, produced at the wellhead.
          (11)     "New enhanced recovery project" means an enhanced recovery project that began
  development after December 31, 1993.
                                                               -6-                    Authorized Print Version – SB 426
****
68th Legislature 2023                                                                                             SB 426.1
           (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 c