Oil and Natural Gas Production Taxes
There is a quarterly tax on the gross taxable value of oil and natural gas production.
The 1995 Montana Legislature replaced all existing extraction taxes on all oil and natural gas production with a single production tax based on the type of well and type of production. This tax has been effective since January 1, 1996. The 1999 legislature further simplified the tax by consolidating the number of rates.
There are various rates based on the type of well, type
of production, working or non-working interest, date when production began, and
price of West Texas intermediate crude oil. The oil and gas tax rates have
changed several times in the last few years. Select the oil memo for specific
information on applicable rates and effective dates.
Montana Oil/Gas Tax Filings - Responsibility of
Operator. Effective for production occurring on or after January 1, 1999 to
December 31, 1999.
Montana Oil/Gas Tax
Filings - Responsibility of Operator. Effective for production occurring on
or after January 1, 2000.
Montana Oil/Gas
Tax Filings - Responsibility of Operator. Effective for production occurring on or after July 1, 2001.
Value of Oil
Total gross value is computed as the product of the total number of barrels produced each month and the average well head value per barrel. Producers are allowed to deduct any oil produced that is used in the operation of the well.
Value of Gas
Total gross value is computed as the product of the total number of cubic feet produced each month and the average well head value per cubic foot. Producers are allowed to deduct any natural gas produced that is used in the operation of the well.
Exemptions
Royalties received by an Indian tribe from on-reservation oil production pursuant to a lease entered into under the Indian Mineral Leasing Act of 1938, and all governmental royalties, MMS, State of Montana, or a county and municipal governments in Montana are exempt from taxation.
Filing Requirements
Oil and natural gas producers are required to file quarterly statements
containing information sufficient to calculate the tax due. Tax payments are due
at the time of filing (within 60 days following the close of each calendar
quarter).
New operators can contact our office at (406) 444-6900 to
register in order to get on the mailing list to receive forms and payment
coupons.
Distribution of Oil and Gas Production Tax
In the 2003 legislative session, HB748 changed the method of oil and gas revenue distribution. There are now set percentage splits for each county, with the overall average being approximately 50% to local governments and 50% to support state governemnt. The actual percentage splits can be found in MCA 15-36-331.
Production Incentives
- Incremental production from secondary and tertiary recovery projects are taxed at reduced rates. These reduced rates apply when the average price for West Texas Intermediate crude oil is less than $30 per barrel.
- Production from stripper wells is taxed at reduced rates.
- The first 12 months of production from a newly drilled conventional well and the first 18 months of production from a horizontally completed or horizontally recompleted well are taxed at reduced rates.
