Hello-
Can someone explain what the following item on this month's hearing docket might mean to a mineral rights owner?
"Proper spacing for the development of the Eightmile-Bakken Pool, redefine the field limits and enact such special field rules as may be necessary"
Thanks for any info-
Bill
Bill, the state laid a grid over the western half of the state and determined that with few exceptions the spacing for Bakken would be 1280 acre, this sounds like they want to change spacing and that almost always means larger and usually 2560 spacing. I'm not fond of the larger spacing, diluting royalty. With twice the acreage, unless your acreage is spread over the entire spacing, you get less royalty. It could work the other way too, you could get paid for the production of someone elses minerals while yours remain untapped. The thing is, I want to be paid for the production of my minerals, I don't want to leech off anyone elses and I sure don't want anyone else to leech off of mine. It's all a maneuver to aid the operators, they still earn the same amount no matter how many acres there are in the spacing.
Redefine the field limits should be self explanatory, they want to move the boundary which may make a difference in the future for field wide rules.
Thanks Mr Kennedy-
Because there has been little activity in this area does this petition mean they might be planning on drilling in the near future? I also am wondering if because of the Army Corp of Engineers easements along the river if they need to expand the spacings to build a platform out of the flood plain?
Bill
You will also want to note the time and place of the hearing, and to participate in the hearing if you have an ownership interest and an objection or concern. To protect any concern or objection you might have as an owner of interests, participation in person or by a representative is important in these matters. Participation may also occur without actual attendance at the hearing in certain circumstances.
David Ganje
Bill, in the language you have supplied, I see nothing in which you could prevail at the hearing even if you had a legitimate concern. I'm pretty sure your lease gave pooling authority so you really have no say over the spacing unless you could come up with a geologic reason and I would not recommend spending the kind of money it costs on a geologist to find out if there MAY be a reason to protest, but most likely there is not. We pay the NDIC O&G Divisions salary but they do not work for us or in the best interest of mineral owners and possibly not in the best interest of the citizens of North Dakota. I'm sure they have positions waiting on them with the oil companies when they "retire" from "public" service. If you show up and protest it will be duly noted and then the operators will get what they want.
thank you both for your input-
Bill,
There are two producers (Oasis & EOG) in the Eightmile field. Now that they have drilled "a well" in a certain spacing, they are required to determine the proper spacing of future wells in their respective spacing units in the Eightmile field.
Oasis has 2560 spacing units in sections 29,30,31 &32 and sections 1,6, 7 & 12 of the field. EOG has 1280 spacing in sections 25 & 36.
Each company needs to determine the proper spacing of future wells based on information from the first wells, which also help determine the limits of the Eightmile field.
So both companies are planning more wells, but they first must determine the proper spacing of the future wells in order to maximize production in the formation.
Hi Ed,
Thanks for your reply-great info.
To further confuse me now Triangle has put a request on the 6/26 docket to amend the field rules to allow 3640 acre spacing for 6 sections in Eightmile. So it would appear that you can have different spacings within a field? I wonder if this larger spacing request allows them to place a rig outside of the flood plain.
Thanks again,
Bill
Bill, they could always place the wellhead about anywhere they want but if they had to drill a 4 mile lateral well it may be un-economic. Existing producing wells to the best of my knowledge stay on their original spacing. New wells drilled in the larger 3640 spacing would have their royalty severly diluted for the lessor mineral owner while the earnings of the lessee/operator remain the same no matter how large the spacing becomes.
If you have a given well in a 1280, your royalty would be reduced by 50% if the spacing were 2560 and 66+% for a 3640. All would be fine if the operators got all the acres into production immediately but that has rarely happened in the Bakken. I have a few spacings in NE McKenzie county drilled 7 years ago on 1280 spacing and the operator received 2560 spacing a few years ago and not a single new well drilled in my 5 spacings, so my question when someone says you get more wells. which wells? Where? When is all this supposed to happen? It's a good area, recent wells adjoining my spacings, with up to date completion techniques, produce twice the amount of oil in half the time, as the early wells. The only reason to not drill more wells is because the operator does not feel like it and may not feel like it for another decade. The spacings were overlarge to begin with to allow the operators to "conquer" the economic oil producing acreage of the western half of the state. The covenant that a prudent operator would work diligently to get the acreage fully into production is totally out the window. The state sold us out.
Bill,
Last November HRC did something similar to spacing where I have a well. All of the units in Eightmile were originally spaced for 1280, like they were in the field where my well is located. I was contacted by the company and they explained that all wells drilled in an "original" 1280 spacing, will be the same as any other well in the spacing. With a 1280 spacing operators must stay 500' from any adjacent spacing. But if they expand the spacing unit, they can develop this larger spacing even more by eliminating the 500' offset (which is actually 1000' when you include the offset in the adjacent spacing; 500' in each 1280 spacing). I have a post where I also have drawings from HRC explaining the new spacing and that any new wells would not be affected as far as royalties are concerned, only the new wells drilled where the "old" offsets (1000') used to be. The royalties there will essentially be cut in half.
With an operation where they drill wells parallel to the section lines of the 1280 spacing, the only wells that are affected are the ones in the middle of the spacing. But, with a 3640 spacing, they will probably do a "fan" type of drill spacing like there is in the SE part of Eightmile.
My recommendation is to contact the company and protest the new spacing (if you have affected mineral acres). However, you will probably get no answer (like me) so I protested to the ND Industrial Commission and ND Oil & Gas Division. They did not answer either but they did tell the company to contact me and explain about 2 days later. They sent email and called me with an explanation...I was satisfied with their explanation.
If you really want to know what will happen, don't wait to protest....I listened to the hearing online when I protested the spacing, and my protest (and a few others) where made part of the official record.
But since they have created the spacing, I'm like R W, no new wells. There is a permit to drill another well, but permits can expire.
Bill Fitzpatrick said:
Hi Ed,
Thanks for your reply-great info.
To further confuse me now Triangle has put a request on the 6/26 docket to amend the field rules to allow 3640 acre spacing for 6 sections in Eightmile. So it would appear that you can have different spacings within a field? I wonder if this larger spacing request allows them to place a rig outside of the flood plain.
Thanks again,
Bill
The thing is that they do not need to create the super 3,640 acre spacing. There could be a new 1280 that overlaps the section lines, it can even be done as a cooperative venture between two different operators, and already has been in Mountrail county and for several years in Oklahoma. A 1280 is a small field in and of itself, 6 sections really is a field. I also have not been seeing as many wells drilled on section lines as I have been seeing the requests for larger spacing. The operators get the 2,560 or larger spacing and drill in the same old places, so far. The larger spacing does not gurantee more wells, wells on section lines or anything else, except that royalty WILL be diluted in any future wells, that is guranteed. It's also guranteed that it has no effect on the operators paycheck, his net revenue interest is going to stay pretty much the same per well.
wow. Thank you both for the education.
Bottom line: I shouldn't plan on an early retirement...
Think about this, in the far future there will most likely be a single well holding all 3640 of it, with a few barrels of oil or a whiff of gas per month. The bigger the spacing, the less likely you or your great grandchildren will ever, ever, get your minerals back and you could well miss out on some chances to profit greater from secondary or tertiary recovery operations. Remember, this is not about drilling on the section lines, they could do that already, but it's a good STORY, plausable, to tell the mineral owners. It's about maximizing the profit of the operator.
agreed-