15-36-304. Production tax rates imposed on oil and natural gas -- exemption. (1) The production of oil and natural gas is taxed as provided in this section. The tax is distributed as provided in 15-36-331 and 15-36-332.
(2) Natural gas is taxed on the gross taxable value of production based on the type of well and type of production according to the following schedule for working interest and nonworking interest owners:
| Working | Nonworking | |
| Interest | Interest | |
| (a) (i) first 12 months of qualifying production | 0.5% | 14.8% |
| (ii) after 12 months: | ||
| (A) pre-1999 wells | 14.8% | 14.8% |
| (B) post-1999 wells | 9% | 14.8% |
| (b) stripper natural gas pre-1999 wells | 11% | 14.8% |
| (c) horizontally completed well production: | ||
| (i) first 18 months of qualifying production | 0.5% | 14.8% |
| (ii) after 18 months | 9% | 14.8% |
(3) The reduced tax rates under subsection (2)(a)(i) on production for the first 12 months of natural gas production from a well begin following the last day of the calendar month immediately preceding the month in which natural gas is placed in a natural gas distribution system, provided that notification has been given to the department.
(4) The reduced tax rates under subsection (2)(c)(i) on production from a horizontally completed well for the first 18 months of production begin following the last day of the calendar month immediately preceding the month in which natural gas is placed in a natural gas distribution system, provided that notification has been given to the department.
(5) Oil is taxed on the gross taxable value of production based on the type of well and type of production according to the following schedule for working interest and nonworking interest owners:
| Working | Nonworking | |
| Interest | Interest | |
| (a) primary recovery production: | ||
| (i) first 12 months of qualifying production | 0.5% | 14.8% |
| (ii) after 12 months: | ||
| (A) pre-1999 wells | 12.5% | 14.8% |
| (B) post-1999 wells | 9% | 14.8% |
| (b) stripper oil production: | ||
| (i) first 1 through 10 barrels a day production | 5.5% | 14.8% |
| (ii) more than 10 barrels a day production | 9.0% | 14.8% |
| (c) (i) stripper well exemption production | 0.5% | 14.8% |
| (ii) stripper well bonus production | 6.0% | 14.8% |
| (d) horizontally completed well production: | ||
| (i) first 18 months of qualifying production | 0.5% | 14.8% |
| (ii) after 18 months: | ||
| (A) pre-1999 wells | 12.5% | 14.8% |
| (B) post-1999 wells | 9% | 14.8% |
| (e) incremental production: | ||
| (i) new or expanded secondary recovery production | 8.5% | 14.8% |
| (ii) new or expanded tertiary production | 5.8% | 14.8% |
| (f) horizontally recompleted well: | ||
| (i) first 18 months | 5.5% | 14.8% |
| (ii) after 18 months: | ||
| (A) pre-1999 wells | 12.5% | 14.8% |
| (B) post-1999 wells | 9% | 14.8% |
(6) (a) The reduced tax rates under subsection (5)(a)(i) for the first 12 months of oil production from a well begin following the last day of the calendar month immediately preceding the month in which oil is pumped or flows, provided that notification has been given to the department.
(b) (i) The reduced tax rates under subsection (5)(d)(i) on oil production from a horizontally completed well for the first 18 months of production begin following the last day of the calendar month immediately preceding the month in which oil is pumped or flows if the well has been certified as a horizontally completed well to the department by the board.
(ii) The reduced tax rates under subsection (5)(f)(i) on oil production from a horizontally recompleted well for the first 18 months of production begin following the last day of the calendar month immediately preceding the month in which oil is pumped or flows if the well has been certified as a horizontally recompleted well to the department by the board.
(c) Incremental production is taxed as provided in subsection (5)(e) only if the average price for a barrel of west Texas intermediate crude oil during a calendar quarter is less than $54. If the price of oil is equal to or greater than $54 a barrel in a calendar quarter as determined in subsection (6)(e), then incremental production from pre-1999 wells and from post-1999 wells is taxed at the rate imposed on primary recovery production under subsections (5)(a)(ii)(A) and (5)(a)(ii)(B), respectively, for production occurring in that quarter, other than exempt stripper well production.
(d) (i) Stripper well exemption production is taxed as provided in subsection (5)(c)(i) only if the average price for a barrel of west Texas intermediate crude oil during a calendar quarter is less than $54. If the price of oil is equal to or greater than $54 a barrel, there is no stripper well exemption tax rate and oil produced from a well that produces 3 barrels a day or less is taxed as stripper well bonus production.
(ii) Stripper well bonus production is subject to taxation as provided in subsection (5)(c)(ii) only if the average price for a barrel of west Texas intermediate crude oil during a calendar quarter is equal to or greater than $54.
(e) For the purposes of subsections (6)(c) and (6)(d), the average price for each barrel must be 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.
(7) (a) The tax rates imposed under subsections (2) and (5) on working interest owners and nonworking interest owners must be adjusted to include the total of the privilege and license tax adopted by the board of oil and gas conservation pursuant to 82-11-131 and the derived rate for the oil and gas natural resource distribution account as determined under subsection (7)(b).
(b) The total of the privilege and license tax and the tax for the oil and gas natural resource distribution account established in 90-6-1001(1) may not exceed 0.3%. The base rate for the tax for oil and gas natural resource distribution account funding is 0.08%, but when the rate adopted pursuant to 82-11-131 by the board of oil and gas conservation for the privilege and license tax:
(i) exceeds 0.22%, the rate for the tax to fund the oil and gas natural resource distribution account is equal to the difference between the rate adopted by the board of oil and gas conservation and 0.3%; or
(ii) is less than 0.18%, the rate for the tax to fund the oil and gas natural resource distribution account is equal to the difference between the rate adopted by the board of oil and gas conservation and 0.26%.
(c) The board of oil and gas conservation shall give the department at least 90 days' notice of any change in the rate adopted by the board. Any rate change of the tax to fund the oil and gas natural resource distribution account is effective at the same time that the board of oil and gas conservation rate is effective.
(8) Any interest in production owned by the state or a local government is exempt from taxation under this section.