Friday, February 27, 2015

Random Look At 5120-Acre Drilling Unit In Brooklyin Oil Field -- Spacing, Royalties -- February 27, 2015

A reader asked about Case 23758 in the February, 2015, NDIC hearing dockets:
Application of Continental Resources, Inc. for an order pursuant to NDAC § 43-02-03-88.1 pooling all interests for wells drilled on the overlapping spacing unit described as Sections 17, 18, 19, 20, 29, 30, 31 and 32, T.155N., R.98W., Brooklyn-Bakken Pool, Williams County, ND, as provided by NDCC § 38-08-08 but not reallocating production for wells producing on other spacing units and such other relief as is appropriate.
The question was whether all mineral owners would share equally in oil produced by these wells permitted for this drilling unit.

The following answer applies to those who have mineral rights only in the wells that are permitted in the overlapping 5120-acre unit in the case noted above (8 640-acre sections). The answer below does NOT affect previously drilled wells in this area or new wells drilled in this area in different drilling units.

The answer: regardless of where the well is sited, mineral owners who have interest in any well permitted for the overlapping 5120-acre drilling unit in question, regardless of the length of the horizontal or where the horizontal starts or ends, will share equally with all mineral owners who have mineral rights in this drilling unit which consists of the following sections in T155N-R98W: 17, 18, 19, 20, 29, 30, 31, and 32.

As an example: if a well is sited in section 5-154-98 (outside of the drilling unit) and the horizontal is a long horizontal (two sections) running north into sections 32 and 29, anyone who "owns" minerals in any of the eight sections will share in the royalties of this well. Even if you "own" 10 acres in far northwest corner of section 18-155-98, you will share in the royalties even though the horizontal comes nowhere near that section. Those who own minerals in section 5-154-98 will not share in royalties in this case.

I have not checked all the wells yet, but I don't think there are any permits yet for this overlapping 5120-acre drilling unit. I could be wrong. If I'm wrong, hopefully someone will give me the permit number(s) for wells on this 5120-acre drilling unit. The wells that already exist and are producing, and the wells on DRL status in these sections appear to be on different drilling units. Even the newest permits, which show up only as LOC on the GIS map server (30551, 30552, 30553, and 30554) are permitted for 2560-acre drilling units. There are a couple of wells on confidential status in this area for which I do not know the drilling unit.

The reader noted that there are about six new wells in this area; the reader wondered whether mineral owners in these eight sections would all share royalties from these six new wells. If these six new wells are permitted for different drilling (spacing) units, then "no," owners in all eight sections would not share. If these six new wells are located in the overlapping 5120-acre unit, then mineral owners in all eight sections would share but again, I don't think the "new" wells are in the 5120-acre unit, but I could be wrong. 

I did this quickly. Typographical and factual errors may be present. I will check it again later, but errors may persist. Do not use this information to make any financial, investment, or relationship decisions. If this information is important to you, go to the source (generally the NDIC) or a landman.

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