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Vol. 18, No. 3 Week of January 20, 2013
Providing coverage of Bakken oil and gas

Shore zone makes auction

One-third of ND oil leases are in disputed water line area of Missouri River

Mike Ellerd

For Petroleum News Bakken

Over one-third of the acres nominated for North Dakota’s Feb. 5 lease auction are in the disputed “shore zone” between the high and low water lines of the Missouri River in Dunn County. The Trust Lands Minerals Management Division has posted auction nominations totaling 27,356 acres in nine western North Dakota counties, and not only is that total below the 10-year average for the February lease auction, it would be even further below average were it not for 9,820 shore zone acres that were recently delineated in a state-commissioned survey.

Shore zone dispute

In 2008, the North Dakota Land Board commissioned a survey to establish the ordinary high water mark of the Missouri and Yellowstone rivers to determine the acreage between those high and low water lines, which under North Dakota law would be considered sovereign land belonging to the state. With the survey now complete, Trust Lands is putting the leases up for sale. A total of 9,900 acres were nominated in Dunn County, all but 80 of which are in the shore zone. Those shore zone tracts are all odd-sized tracts ranging from 161 to 1.61 acres and averaging 93.4 acres.

Who actually owns the shore zone acreage, however, is under dispute, and several landowners have filed suit against the state in Williams County contending the shore zone land belongs to adjacent landowners.

District Judge David W. Nelson rejected a motion to dismiss the case in July and heard arguments Dec. 17 in Williston. He has not yet ruled on the case.

Other nominated acreage

In addition to the 9,900 acres in Dunn County, the Feb. 5 auction will include acreage in Ward (6,858 acres), Slope (4,848 acres), McKenzie (1,474 acres), Burke (1,458 acres), Bowman (1,250 acres), Stark (795 acres), Mountrail (734 acres) and Williams (38 acres). The total acreage consists of 306 separate tracts with an average tract size of slightly over 89 acres.

The total of 27,356 acres nominated for the February auction is slightly below the 10-year average of 30,608 acres and is less than half of the 69,942 acres that were sold in February 2012. The February 2012 total was the highest total acreage sold in a February sale over the last 10 years. The lowest total acreage sold in the February auction over the last 10 years was 4,954 acres in 2003, which is also the lowest acreage of any lease auction over the last 10 years. The highest auction acreage over the last 10 years was in Nov. 2006 when 114,298 acres were sold.

The total sold in 2012 was 106,475 acres, below the 10-year average of 127,648 acres and the sixth highest over the-10 year period. The highest total acreage sold was in 2006 when 231,268 acres were sold, and the lowest was 51,031 in 2003.

Declining Bakken acreage

Minerals Management Director Drew Combs said the state is simply running out of leasable Bakken petroleum system acreage, which includes both the Bakken and Three Forks formations.

Leases in North Dakota are good for five years, and once leases are held by production, he never sees them again.

However, as available Bakken acres continue to decline, Combs believes that conventional plays in the state may be getting more attention. In recent years he has seen acreage purchased in lease auctions as far east as Stutsman County, noting that the only county in North Dakota that has never had any type of exploratory oil well is Towner County on the Canadian border in the northeast quadrant of the state.

Skewed numbers

Combs also believes that the total lease acreage numbers can sometimes be somewhat misleading because under North Dakota law leases can be sold for as little as $1 per acre, thus large amounts of land can be locked up for a small investment.

For example, in the Februnary 2012 auction, 15,844 acres, nearly one-quarter of the acres offered, were sold in Grant County for an average price of $1.17 per acre.

Feb. 5 auction venue

The Feb. 5 Trust Land auction will be held at the Kelly Inn at 1800 North 12th St. in Bismarck and will begin at 9:00 a.m.



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