Monday, June 23, 2014

Discussion Of "Zones" In The Bakken

Disclaimer: this is all opinion. This is how I understand the subject. I throw it out there to help understand the concept of "zones." On a long note like this, I assume there are typographical errors, including spelling errors ("now" for "not" is a huge error) and my flunkie helper who proofreads what I write often misses things. If something seems wrong, it probably is. We'll sort it out over time

I'm getting a lot of questions regarding "zones" in the Bakken in the state of North Dakota. I had avoided posting a stand-alone post on this issue because I do not / did not fully understand it. But with the large Big Bend-Bakken, Slawson case, I have a better understanding (I think).

"Zones" are administrative areas in a particular oil field-pool (for example, Parshall Oil Field-Bakken) in which the area is defined, and rules and regulations are spelled out that affect all wells for which permits are granted in a particular zone. These rules and regulations specify how many wells can be drilled in a particular area; the spacing rules (inherent); the siting rules; the stratigraphic limits; and, other rules and regulations affecting all aspects of oil and gas exploration and production.

These "zones" are determined by the North Dakota Industrial Commission (NDIC). The NDIC is analogous to the Texas Railroad Commission which has the same responsibility as the NDIC with regard to gas and oil exploration and production. Zones are not determined by operators.

These "zones" can be as small as a half-section, perhaps smaller (I don't know). The "zones" would not be as big as an oil field-pool because one needs "zones" only if there are different areas of the oil field-pool that need different rules/regulations. If there are no "zones" in an oil field-pool, then the entire oil field-pool comes under uniform rules and regulations.

Having said that, let's look at some zones in Big Bend Oil Field-Bakken. These examples are taken from the recent case/order.

Paragraph (1) in the order, page 16:
Zone II: the west half of section 10-151-92, Mountrail county, a standup 320-acre spacing unit; five horizontal wells within the Big Bend-Bakken Pool. Note, the boilerplate: "existing and future vertical and directional wells drilled within the spacing unit herein established shall not be subject to this order."
Paragraph (2) in the order, page 16:
Zone VI: the south half of sections 34 and 35, Township 152 North, Range 92 West, and section 35-151-92, Mountrail County, a 640-acre unit; four horizontal wells within each spacing unit ... the same boilerplate follows as in Zone 1. This is a great example of why "zones" are necessary. Look how much easier it is to refer to ZONE VI, rather than saying/writing the "South half of Sections 34 and 35, Township 152 North, Range 92 West, and Section 35, Township 151 North, Range 92 West." See how much simpler it is to simply write/say, Zone VI.
So, there, we have a "zone" as small as half a section for four wells, and another zone encompassing parts of three sections. But note something else: the sections involved are not even abutting each other. Section 35-152-92 is several miles away from 35-151-92.

Paragraph (15) in the order, page 18:
In this order, the NDIC re-defined Zone XXI. This is a great example of why folks like "administrative shorthand." Can you imagine referring to the "long title" of Zone XXI: Sections 2 and 3; Sections 13 and 14; Sections 23 and 24, Township 151 North, Range 92 West; Section 36, Township 151 North, Range 92 West and Section 31, Township 151 North Range 91 West; and Sections 2 and 3, Township 151 North, Range 91 West, Mountrail County.
This zone will allow up to ten (10) horizontal wells, and the order goes on to define the rules and regulations of the zone; how close to the section lines the wells can be sited, for example.

Another wrinkle: a specific section or even portion of a section can be in more than one zone. At first this did not make sense to me, but now it does. Example: section 3 could be in Zone II, a 640-acre spacing unit with its specific rules and regulations, and section 3 could be one of two sections in a 1280-unit in Zone VIII with its one rules; and finally section 3 could be part of a 4-section, 2560-acre unit in Zone XXI, with its own rules and regulations with regard to siting, etc. Zone II might allow one horizontal well; Zone VIII might allow 4 horizontal wells; and Zone XXI might allow one horizontal well to "catch" the section line. At least that's how I see it.

I'm going to quit there. I may have this wrong, but that's how I see it. There may be some additional nuances that I'm missing, and I may have made some wrong assumptions. But I throw it out there for others to tell me where I'm wrong, so we can all learn from this case.


A reader pointed out that all things being equal, one will have less interest in a 2560-acre-spaced well than a 640-acre-spaced well.  One might also remember that some of the newer 2560-acre wells might actually return more than an older 640-acre well. There are a lot of things to consider.

No comments:

Post a Comment