Posted 10/02/13 (Wed)
By Kate Ruggles
Farmer Staff Writer
A Unit Proposal that would put 25,000 acres between Keene and Mandaree under the operatorship of one lease and one company, is on its way to the North Dakota Industrial Commission.
This Proposal of Unitization, while not the first of its kind in McKenzie County, is the first for the Bakken and Three Forks formations in McKenzie County. And it is the largest proposal ever for McKenzie County.
According to Lynn Helms, director of Mineral Resources for the North Dakota Industrial Commission, though the application for the proposal has not yet been received, a public hearing on the proposal has already been scheduled to take place in Grand Forks on Nov. 13.
“Legally, the documents must be available for study 45 days prior to the hearing,” states Helms. “Therefore, the hearing may need to be rescheduled if the company waits too much longer to file their application.”
The Proposal for Unitization is for Grant Field, which is an area of about 25,000 acres southeast of Keene and along the western boundary of the Fort Berthold Reservation. If the proposal is approved, the entire area, roughly 40 square miles, would come under one lease and QEP would be the leaseholder.
“The Proposal for Unitization will take hundreds or thousands of individual leases and put them under one operator and one formula for payment, so that everyone benefits,” states Helms. “To put it in simple terms, this is a good thing for everyone involved. If it is done right, everyone gets their fair share, more oil is produced and less surface is impacted.”
According to Helms, the proposal will allow more wells to be drilled in the setback areas between leases and spacing units, which according to some studies, could contain roughly one million barrels of recoverable oil.
Additionally, because the area will fall under one operator, it will allow for the injection of things like carbon monoxide so that the overall recovery of oil in this area will increase substantially.
Because the area will fall under one operator, QEP can use fewer pads, treating facilities and less tank batteries, thus allowing them to be more efficient and leave a smaller surface imprint.
According to Helms, QEP is responsible to make sure everything has been done right to estimate the increased oil productivity, and to make sure all parties do get their fair share. Then, once that has been done, the Industrial Commission will carefully review the proposal.
All non-QEP operators in the Grail Field will be compensated for their wells, tank batteries, and any investments they have made, if the proposal is approved and QEP becomes the one and only lease owner.
Helms states that putting together a unit proposal is lengthy and expensive, which is why it is not often done.
“In just this case, 4,000 to 5,000 mineral owners all have to receive copies of the proposal and 60 percent of them have to agree to approve it,” states Helms. “It is a really expensive process and not easily gone through.”
Helms expects to have the unit proposal application to the Department of Mineral Resources in enough time to meet the legal 45-day pre-filing requirement.
In addition, he says that it is quite common for a decision on big units, like this proposal, to take 60 to 90 days for approval. That being the case, Helms expects it will not take effect until the first part of 2014.