On July 1, the Minerals Management Division of the North Dakota Department of Trust Lands released a list of nominated tracts for the division’s August oil and gas lease auction, and not only is the total acreage the highest for an August lease auction since 2006, but most of the nominated acreage is on the fringe of what is generally considered the extent of the Bakken petroleum system. However, the nominated acreage has not yet been vetted and some could possibly be pulled before the final auction list is issued later in the summer.
All together a total of 54,563 acres in 169 tracts across 13 western and central North Dakota counties were nominated. That is the highest nominated acreage for an August lease auction since 2006, and over 22,000 acres higher than the 10-year August average of 32,406 acres (see chart). Minerals Management Division Director Drew Combs says the acreage is “surprisingly” high, and believes part of the reason is that a number of leases, all of which have terms of five years, are not held by production and are on the verge of expiring.
More than half of the nominated acres are in Slope County in southwest North Dakota and in McLean County nearer the central region of the state. Most of the remaining acreage is in Golden Valley, Ward, Bowman, Mercer, Renville, Billings and Hettinger counties, all on the fringe of the Bakken petroleum system. Only approximately 15 percent of the acres are in the more traditional Bakken counties of Mountrail, Dunn and McKenzie, and in McKenzie County, only 16 acres were nominated, the lowest county acreage nominated (see chart).
Nominators
All of the 169 tracts in Slope County were nominated by Empire Oil Co. of Williston. Enhanced Leasing LLC of Houston nominated most of the McLean County tracts, although 13 were nominated by Blue Sky Properties of Dickenson, and one was nominated by 556 Skyline Investments of Chandler, Ariz. Enhanced Leasing nominated all but three of the tracts in Mountrail County. The remaining three tracts in Mountrail are Missouri riverbed tracts and were nominated by Diamond Resources Co. of Williston. Enhanced Leasing also nominated all but two of the 45 tracts in Ward County with Wells Petroleum of Golden, Colo., nominating the other two tracts.
In addition to nominating the Slope County tracts, Empire Oil also nominated all of the tracts in Bowman and Renville counties and three-quarters of the 62 tracts in Golden Valley County, with Whiting Oil and Gas nominating the balance.
Blue Sky Properties nominated slightly less than half of the 58 tracts in Dunn County, and all of the 26 tracts in Mercer County, all of which are Missouri riverbed tracts. Other Dunn County nominators were Black Ridge Oil and Gas of Minnetonka, Minn., Diamond Resources and QEP Energy.
The seven Billings County tracts were nominated by 556 Skyline Investments, which also nominated one tract in Stark County. Northern Energy Corp. of Bismarck nominated four tracks in Stark County. The remaining three tracks were nominated by Cody Oil and Gas Corp. of Bismarck.
Diamond Ridge Resources nominated both tracts in McKenzie County, and B.J Kadrmas Inc. of Dickenson nominated the single tract in Hettinger County.
The vetting process
With the nominations closed, Trust Lands now begins the vetting process where each track is evaluated by the agency and also by the North Dakota Game and Fish Department and the North Dakota State Historic Preservation Office.
Trust Lands will look into such issues as existing leases, titles, surveys, surface ownership and any possible drilling activity on nominated tracts. Combs says it occasionally happens that a tract gets nominated that has already been leased; those tracts are pulled. And if there is a title issue with tracts that cannot be resolved in time, those are pulled as well. Another possible issue is that current leaseholders have up to the day before the auction to get a well drilled and in production to hold an existing lease, and if that happens before Aug. 6, those tracts would be pulled. However, Combs says that happens only rarely.
The Game and Fish Department looks at wildlife issues, and that is especially important for tracts in which Trust Lands only owns the mineral rights and not the land surface. Depending on the circumstances, Game and Fish may advise no surface occupancy on a tract, and in such cases Trust Lands will pass that information on to bidders so they are aware of potential wildlife issues. The same applies to cultural and historical issues and sites that the State Historic Preservation Office evaluates.
However, in reality very few nominated tracts don’t make it to the auction list, and it is possible that all of the tracts on the August 2013 nomination list will end up on the auction list.
The August auction will be held Aug. 6 in Medora. The location for the auction in Medora has not yet been determined and will be announced later. The full nomination list is available at the Oil and Gas Leasing tab on the Mineral Management Division’s website at www.land.nd.gov/minerals.
