John Bestoloffe | Energy Media Group
“I think the average in North Dakota is 600,000 but many wells recovering 1 million barrels. So there is a tremendous amount of work point forward here,” says Kovacevich. The number of rigs drilling in North Dakota has stayed consistent for some time, hovering in around that 190 mark. These men combined represent 40 of those rigs. While they talk favorably about being in the state, they say the current oil tax may be the state’s own enemy.
Jack Ekstrom with Whiting Petroleum says, “I’m just raising a warning flag for you. The money you are getting in severance tax right now in the full flush and blush of this boom is endangered down the road because of state’s with lower tax rates. You must compete on that level.” Kovacevich says, “there was a lot of hard work on it the last legislative session, and we appreciate the work on it, unfortunately it didn’t get there. But it is still going to be an issue industry raises in the future.”
The tax rate is a factor in the economics of a well, and companies will go where they have the best rate of return. “If you see activity decline, you can bet if this element hasn’t changed, that can be a factor,” says Ekstrom. All three companies continue to make investments, test new technologies and are take chances in unproven areas, all to increase their production and presence in North Dakota. Ekstrom says he recommends North Dakota lowering the oil tax from 11.5% to 5% to stay competitive with other oil producing states. Oil experts say $12 million in royalties are earned every day from North Dakota wells. 40% of that stays in the state.