Oil and Natural Gas Production Tax
Overview
- Oil and Natural Gas producers must file an Oil and Natural Gas Production Tax Return.
- Oil and Natural Gas returns are available in our TransAction Portal (TAP).
Natural Gas Production Tax
Effective 7/1/23, with the passage of Senate Bill 426, the definition of Natural Gas has been expanded to include all forms of inert gas, including helium.
Montana taxes natural gas by percentage of gross value per cubic foot of natural gas produced and sold.
Gross Value Formula:
Gross Value = (Total Cubic Feet - Production Used in Operation) x Average Wellhead Value
- The gross value is the total cubic feet produced each month multiplied by the average wellhead value per cubic foot.
- You may deduct any natural gas used in operating the well.
| Production Category | Qualifier | Working Interest | Nonworking Interest | Reporting Schedule |
|---|---|---|---|---|
| Primary Recovery Production | First 12 months of production | 0.80% | 15.10% | NG-INCENTIVE |
| Primary Recovery Production | Pre-1999 wells after incentive period | 15.10% | 15.10% | NG-PRE99 |
| Primary Recovery Production | Post-1999 wells after incentive period | 9.30% | 15.10% | NG-POST99 |
| Stripper Wells Averaging < 60 MCF per Day | Pre-1999 wells | 11.30% | 15.10% | NG-PRE99 |
| Horizontally Completed Well Production | First 18 months of qualifying production | 0.80% | 15.10% | NG-INCENTIVE |
Oil Production Tax
Montana taxes oil production by percentage of gross value per barrel produced and sold.
Gross Value Formula:
Gross Value = (Total Barrels - Barrels Used in Operation) x Average Wellhead Value
- The gross value is the total barrels produced each month multiplied by the average wellhead value per barrel.
- You may deduct any oil used in operating the well.
| Production Category | Qualifier | Working Interest | Nonworking Interest | Reporting Schedule |
|---|---|---|---|---|
| Primary Recovery Production | First 12 months of production | 0.80% | 15.10% | O-INCENTIVE |
| Primary Recovery Production | Pre-1999 wells after incentive period | 12.80% | 15.10% | O-REG |
| Primary Recovery Production | Post-1999 wells after incentive period | 9.30% | 15.10% | O-REG |
| Stripper Wells (Averaging <10 barrels per day for pre-99 wells or averaging <15 barrels per day for post-99 wells) | Pre-1999 stripper oil | 9.30% | 15.10% | O-STRIP Pre-99 |
| Stripper Wells (Averaging <10 barrels per day for pre-99 wells or averaging <15 barrels per day for post-99 wells) | Post-1999: First 10 barrels of stripper oilAverage quarterly sales price reported for all Montana Oil < $30 per barrel | 5.30% | 15.10% | O-STRIP Post-99 |
| Stripper Wells (Averaging <10 barrels per day for pre-99 wells or averaging <15 barrels per day for post-99 wells) | Post-1999: Over 10 barrels of stripper oil Average quarterly sales price reported for all Montana oil < $30 per barrel | 9.30% | 15.10% | O-STRIP Post-99 |
| Stripper Well Exemption or Bonus (Averaging ≤ 3 barrels per day) | Pre-1999 Stripper Well Exemption Average quarterly sales price reported for all Montana oil < $54 per barrel | 0.80% | 15.10% | OSTR-X3 |
| Stripper Well Exemption or Bonus (Averaging ≤ 3 barrels per day) | Post-1999 Stripper Well Exemption Average quarterly sales price reported for all Montana oil < $54 per barrel | 0.80% | 15.10% | OSTR-X3 |
| Stripper Well Exemption or Bonus (Averaging ≤ 3 barrels per day) | Pre-1999 Stripper Well Bonus Average quarterly sales price reported for all Montana oil ≥ $54 per barrel | 5.30% | 15.10% | OSTR-X3 |
| Stripper Well Exemption or Bonus (Averaging ≤ 3 barrels per day) | Post-1999 Stripper Well Bonus Average quarterly sales price reported for all Montana oil ≥ $54 per barrel | 5.30% | 15.10% | OSTR-X3 |
| Horizontally Drilled | Post-1999 wells first 18 months | 0.80% | 15.10% | O-INCENTIVE |
| Incremental Production | New or expanded secondary recovery production | 8.80% | 15.10% | ENH-INCR |
| Incremental Production | New or expanded tertiary production | 6.10% | 15.10% | ENH-INCR |
| Horizontally Recompleted Well | Post-1999 wells first 18 months (on incremental production) | 0.80% | 15.10% | ENH-INCR |
Production Incentives
Please see the Second Quarter 2025 Incentive Letter for more information about the current oil incentives.
Pre-99 Stripper Well
- A Pre-99 stripper well is an oil well drilled before January 1, 1999 that produced more than 3 barrels per day but fewer than 10 barrels per day in the prior calendar year.
- There is no price restriction on a Pre-99 stripper well.
Post-99 Stripper Well
- A Post-99 stripper well is an oil well drilled on or after January 1, 1999 that produced more than 3 barrels a day but fewer than 15 barrels a day in the prior calendar year if the average quarterly sales price reported by a producer for all MT oil is less than $30 a barrel.
- If the price of oil is equal to or greater than $30 a barrel in a quarter, there is no stripper tax rate for post-99 wells in that quarter.
How Stripper Well Exemption or Bonus is Determined
- The average quarterly sales price reported by the producer for all Montana oil determines whether the stripper well exemption or the stripper well bonus is available to that producer for that quarter.
- Starting January 1, 2022, on the OSTR-X3 schedule, there are separate Working Interest columns for pre-99 and post-99 wells under both the stripper well exemption and the stripper well bonus.
Stripper Well Exemption
- If a producer's average quarterly sales price is less than $54, then the stripper well exemption is available for that quarter.
Stripper Well Bonus
- If a producer's average quarterly sales price equals or is greater than $54, then the stripper well bonus is available for that quarter.
New/Expanded Tertiary Production (approved March 23, 2017 – February 18, 2019)
- For new or expanded tertiary production (working interest taxed at 6.10%) approved by the board of oil and gas conservation between March 23, 2017 and February 18, 2019, the average price for a barrel of west Texas intermediate crude oil must be less than $54 a barrel in order for the incentive for incremental oil production to be available for that quarter.
- The average price for the quarter ending June 30, 2025 is $64.5673.
- Since the average price is not less than $54, this incentive is not available for this quarter.
- View Second Quarter 2025 West Texas Intermediate Prices.
New/Expanded Tertiary Production (approved on or after February 19, 2019)
- New or expanded tertiary production (working interest taxed at 6.10%) approved by the board of oil and gas conservation on or after February 19, 2019 is not subject to any price trigger.
Exempt Royalties
The following royalties are tax-exempt:
- Tribal royalties from on-reservation oil production leased under the Indian Mineral Leasing Act of 1938.
- All government royalties, including:
- Office of Natural Resources Revenue (ONRR)
- State of Montana
- County and municipal governments
Reporting and Payment Options
- File and pay through our TransAction Portal (TAP) or
- Make an ACH Credit Payment
Due Dates
Returns are due 60 days after the end of the calendar quarter:
- First Quarter: May 30
- Second Quarter: August 29
- Third Quarter: November 29
- Fourth Quarter: March 1
Penalties and Interest
The Oil and Natural Gas Production Tax is subject to uniform penalties and interest.
Revenue Distribution
We collect Oil and Natural Gas taxes and distribute the revenue between the state and counties. Each county receives a percentage of revenue as shown in 15-36-331, MCA.
The remaining revenue is divided:
- 2.16% to the natural resources project state special revenue account (15-38-302, MCA)
- 2.02% to the natural resources operations state special revenue account (15-38-301, MCA)
- 2.95% to the orphan share account (75-10-743, MCA)
- 2.65% to a state special revenue fund for the Montana University system (15-10-109, MCA)
- Remaining proceeds go to the state general fund