Representatives defeated the bill 71-21 on Wednesday.
The measure has been one of the most contentious of the legislative session. The bill would have lowered tax rates for oil companies in exchange for closing the so-called stripper well loophole that the state Tax Department says is costing the state about $50 million in revenue annually. And it would have given the Three Affiliated Tribes a greater share of the taxes collected from reservation oil production.
Democrats were especially critical of the measure, saying it would have cost the state millions of dollars in lost revenue.
Attempts to close the stripper well exemption have failed in the past three legislative sessions.