What Is the Significance of the Confidential List?

In the past couple of days, I have referenced the "confidential list" on two occasions:

• The current breakdown of wells on the confidential list (by producer)
• A Lodgepole well coming off the confidential list, but still no production information

So, what's the big deal with the confidential list?

I'm going out on a limb because I am an amateur when it comes to the oil industry, and I probably know only one percent of all there is to know (if that much), so take what I present as facts with a grain of salt and check with experts if this issue is important enough to you.

My understanding of the process is this.

First, the oil company only has to request that the well be held in confidential status and that request will be automatically granted.

The period of the confidential status in North Dakota is six months. That is a fact. The question is when does the clock start ticking.

My understanding is that when the permit is requested, the oil company requests that the file/well be designated a "tight hole." That indicates that the well will be on the confidential list when the well is spudded.

This was taken from a reliable source and sounds "legal" enough to suggest it is accurate:

"All information furnished to the director on new permits, except the operator name, well name, location, spacing or drilling unit description, spud date, rig contractor, and any production runs, shall be kept confidential for not more than six months if requested by the operator in writing. The six-month period shall commence on the date the well is completed or the date the written request is received, whichever is earlier. If the written request accompanies the application for permit to drill or is filed after permitting but prior to spudding, the six-month period shall commence on the date the well is spudded."

Once the confidential period is up, the well will automatically come off the list six months later. There are no extensions. The producer can release information before the six months are up, but it is at the producer's discretion. I assume that if there are partners, the partners must not release information prematurely without the okay of the producer who filed the permit.

The obvious reason why producers want their wells to be confidential is to prevent a run-up in the cost of leases if the well was successful, or for other producers to flock to the a new area. Even if a producer has a lease, another producer can come in "top lease."

About a year ago, someone questioned the need for the "confidentiality" of these wells now that "everyone" knew productive the Bakken was. My knee-jerk reaction was to agree. But now that I see the various estimates of how much recoverable oil is in the Bakken, I now understand the continued need for confidentiality. It is also obvious that some fields are better than others, and in large fields, some areas may be better than others.

******

There are some things that remain confidential even when the wells come of the confidential list. The biggest secret, of course, is the use and make-up of proppants. 

One of NDIC's mandates is to maximize oil production and efficiency since the state has a vested interest. The state and surface owners would like to minimize the number of wells required in any given area. Producers would like to maximize oil production from each well. Producers are continually working to improve their techniques: the optimum number of fracture stages, the best mix of proppants, the length of the laterals, and so forth.

When oil companies do not share this information, common sense tells me that opportunities are being missed.

Great strides have been made in medicine because medical researchers publish results of medical studies, ultimately leading to better diagnostic and therapeutic modalities.

Somehow, it seems that the NDIC should require "best practices" and it's hard to do that without sharing information. The oil companies will argue that it is in their best interest to use "best practices" but without sharing information how does one know what works best. I am not advocating the public disclosure of proprietary information but I think there are ways that "best practices" could be shared without breaching that confidentiality.

But in the big scheme of things, the confidentiality list seems to be doing what it was intended to do.

By the way, North Dakota requires core samples of all wells being drilled to be sent to the NDIC library, which I believe is at the University of North Dakota. This library is one of the reasons why the Bakken was able to be developed so quickly. So much information on the geology of the Williston Basin was already known when the current boom began, eliminating the need for additional exploratory wells. It is incredible that one seldom sees an exploratory well being drilled in North Dakota (I don't include "wildcats" targeting the Bakken or Three Forks as "exploratory").

******

I mentioned earlier that I was frustrated that the Zastoupil (#19258) well has come off the confidential list but no production data was provided. It is possible that this is simply an administrative issue, and that we will see production runs a month from now when paperwork catches up with the NDIC. I can only imagine how busy they are.