Mr. Arildson: You are absolutely right. I mis-spoke. After reviewing the North Dakota Century Code, the following synopsis is correct:
Under NDCC 38-08-08 working interest owners (“lessees”) can be assessed a 200% penalty out of proceeds from production of the pooled spacing unit if they choose not to participate in the cost and risk of drilling and completion. However, mineral owners who choose not to lease are provided a cost free royalty equal to the weighted average royalty in the spacing unit agreed to by all those who leased their minerals. The remaining interest of mineral interest owners who choose not to lease is a working interest in the well and can be assessed a 50% penalty out of proceeds from production of the pooled spacing unit if they choose not to participate in the cost and risk of drilling and completion. In either case the paying owner(s) must make an unsuccessful good-faith attempt to lease the minerals or get the working interest to participate. They must also provide proper notice of intent to impose the risk penalty and inform the non-participating parties that they can oppose the penalty before the Industrial Commission.
I know how to get all the well info via the maps, but I am having trouble understanding the whole force pool, drill the well before you contact the minerals owner, then penalize them for not leasing deal. I can’t get the numbers on some of my division orders to work out to what I thing they should be. Some of the sections are not 640, so trying to back track if I can. Or if you have a great explanation of the state. My mother left a pile of DO when she died and I am trying to work through them. One company actually sent her the pooling order with the plat attached, so was hoping to find more of them. I don’t understand the penalty part. Is it better to be force pooled or to lease?
It depends on whether there is going to be enough production whether I would rather be force pooled or not. $50 per month for a 20% lease can $200 per month after expenses, after the well and penalty are paid off. Multiple wells make it even more attractive because it’s little more work to have 6 wells than it is to have one.
I am sure you know that if the section is not on the north or west sides of the township it should not have been adjusted and should be standard 640’s.
You could always try to calculate from your decimal interest in reverse and I’m sure you have already tried that.
Worst comes to worst, you could call the NDIC and ask, the worst they will say is they are too busy to find the acreage of the spacing for you.
Thank you. That is helpful. Very different than OK where force pooling can be a good thing. I have been trying to get leases signed with companies that won’t return calls or letters. Didn’t want to be force pooled. One even put Arizona in the lease and won’t return my calls when I sent a correction. I will redouble my communication efforts.
Most of the people who don’t want you to go non-consent tell horrorstories about the well having to be treated or refracked. Thes usually come from gas wells. ND wells are comparatively gas poor. If you were to search for how many long lateral horizontal oil wells have been refracked in North Dakota, you aren’t going to find many. I know of four long lateral horizntal wells that were refracked by Marathon after they took them over from someone else. The wells originally had only a single frack stage. Long lateral wells with only 6 frack stages are rare in ND, 10 seems to be about the minimum now. In my opinion and I think the facts bear out, that fracking again into a depleted area of shale to increase oil production is not really effective. I think it’s more cost effective to drill a new well into relatively virgin shale, since the completion in many cases is more costly than the drilling.
Having 5 acres in a 40 acre verticle gas well could be scary if you have to come up with 1/8th of $500,000 but there is a simple solution, sell your part of any such wells if they pay out and recover the penalty and sleep like a baby. Let someone who wants the ulcers worry about it. But do the research on the long lateral wells before you give any credence to the horror stories. Make sure you are comparing apples to apples.
Ooops on the 20% I threw out. I was shooting from the hip, rather than checking my notes. Shooting from the hip, contrary to Westerns, rarely hits the target. Incidentally, on my well, which went confidential in late February, I received a request from the drilling company today for me to fill out a W-9. The accompanying letter (a form letter) suggested they were ready to send out the first of what would be monthly checks. We’ll see.
20% could happen Ed, it’s rare that they overpay someone but not unheard of but more likely the bean counters will stck you with 16%. As for the checks being sent, it’s about time, isn’t it?
Ed, it’s rather strange that I look on the map and I don’t see your well. When I do a well search, it still just says LOCation. I remember seeing the rig symbol back awhile. Either I have gone blind (possible) or someone probably isn’t keeping up with their reporting.
The approval of the permit to drill was on 2-21-2013. Ed, either the map was telling lies or they drilled without a permit and I can believe they did drill, not much surprises me anymore.
Ok, I see now where I should have zoomed in. 23651 is due to come off the confidential list 8-22-2013. On the GIS map it shows the file number for a dry well and a number for a permit but does not show the drilled well with confidential status. One would think that that the drilled well would have precedence.
This is a really good review of the major US Shale plays. Has decline curves, etc for Bakken Starts on P. 69. It is a few years out of date and hasn’t caught up on the most recent drilling technology, but a good place to start. Don’t sell unless you have to. This play is going to last for years!
M Barnes, I don’t know but I will look the next time I’m on the site. I would guess that you are interested in verticle, slant drill, or short horizontal wells? The GIS server map shows the long lateral horizontals by default if you select DRILL/SPACING. The unitized areas are usually self explanatory. If you play around with the map you can also find a control that shades the map according to spacing but some of the shades are so close together that my color blind eyes can hardly detect a difference.
If multiple wells better to lease or force pool? Didn’t understand that part. Of course, you don’t know at the beginning which way it will go. How long does the penalty last? Is the penalty different FP vs lease? Is this all written up somewhere that is understandable. The statute does not count. Legal mumbo jumbo.
I’m no an expert, but I disagree with Mr. Coalson’s comments. I have gone non-consent on mineral rights in North Dakota. I so doing, when oil is produced, I will immediately receive revenues of 20% of my share. The other 80% of my share will go toward paying off my share of drilling costs, plus a 50% penalty, not 200%. When my share is paid off, then I receive 100% of my share of the oil, less ongoing drilling costs. Going ‘non-consent’ says that I do not agree to participate on the costs as they’re incurred. I am never subject to AFEs, as I did not agree up front to participate. I await the comments of R W Kennedy, who is our resident guru on such matters.
Right Ed, the status of the well should be confidential, but when I did the search it says LOC. There is also the small matter of the rig symbol from last October / November 2012 and the permit to drill of 2-21-2013. I guess the last place to look is th confidential list.
I’m no an expert, but I disagree with Mr. Coalson’s comments. I have gone non-consent on mineral rights in North Dakota. In so doing, when oil is produced, I will immediately receive revenues of 20% of my share. The other 80% of my share will go toward paying off my share of drilling costs, plus a 50% penalty, not 200%. When my share is paid off, then I receive 100% of my share of the oil, less ongoing drilling costs. Going ‘non-consent’ says that I do not agree to participate on the costs as they’re incurred. I am never subject to AFEs, as I did not agree up front to participate. I await the comments of R W Kennedy, who is our resident guru on such matters.
Ed, the law says the weighted average royalty of the spacing or 16% whichever the operator elects. 20% royalty is just not that much more for what you give up.
Mr. Kennedy, another question. On the area I went non consent in, most of my sisters and cousins accepted a lease offer from Petro Hunt. Drilling is being done by Liberty Resources, LLC. My sisters just received a request for a W-9 to be filled out, sent by Liberty. Since they signed the lease agreement with Petro Hunt, why would they be dealing now with Liberty LLC?
Mr. Coalson, wrote a number of mistakes in his post. I tend to be forgiving when someone mistakenly assumes ND is like someplace else and Mr Coalson did do some reading and admitted that he was mistaken, that is very rare for many landmen I have encountered and he has earned my respect for it.
The terms sometimes make a difference. To me an AFE is the well drilling proposal, a monthly statement/bill would be a Joint Interest Billing. One of my operators sends me a Carried Interest Status of Accounts quarterly to let me know how much it cost to operate for my acres, about a whopping $1.40 per acre per month.
M Barnes, I hope you do your own research. It’s why I don’t ask you to take my word for it and recommend you read the law. I had one landman angry at me because he was telling everyone what the law is and then he wouldn’t admit that he was telling people wrong information. When I wouldn’t let him slide on it, he told me I had no humility and what that has to do with whether he was giving incorrect information or not I don’t know. Just because someone is an oil and gas professional, does not necessarily mean they know what they are talking about in all instances.