Not prime real estate

Despite core-county tracts, NDTL lease auction hits eight-year low average

Mike Ellerd

Petroleum News Bakken

Despite most of the 17,878 acres leased in the North Dakota Department of Trust Lands Feb. 3 oil and gas lease auction being within the boundaries of the Bakken petroleum system, the average price per acre was the lowest over the last eight years at just $64.21 and well below the eight-year average of $907 per acre.

Nearly 40 percent of the acreage offered in the auction is in Dunn, McKenzie, Mountrail and Williams counties, but those acres are in outlying regions away from the deep, thermally mature Bakken core (see map).

Minerals Management Division Director Drew Combs said the results of the auction were “nothing too surprising” given the locations of the tracts within the Bakken petroleum system.

But another factor possibly affecting some of the tracts, aside from the current price of crude oil, is their proximity to federal lands. As in the November lease auction, Combs said some of the tracts in the February auction are “island” tracts which are surrounded by Bureau of Land Management properties and which federal permitting requirements could make less attractive.

Who, where and how much

The 17,887.6 acres leased in the February auction were spread across 225 tracts in eight North Dakota counties: Botttineau (1307.69 acres, $19.99 per acre average), Burke (2,284.49 acres, $189.54 average), Divide (3,218.92 acres, $101.87 average), Dunn (3,664.55 acres, $1.12 average), McKenzie (880 acres, $186.36 average), Mountrail (2,451.87 acres, $67.68 average), Stark (3,990.08 acres, $6.04 average) and Williams (80 acres, $33 average).

The highest bid received in the auction for Trust Lands leases was $875 paid by Empire Oil Co. of Williston for a lease on a 160-acre tract in McKenzie County (see table). Behind Empire Oil with the second highest successful bid was Herco LLC of Billings, Montana, with a bid of $675 for a 20-acre tract in Divide County. Herco paid $500 per acre for a 72.55-acre tract, also in Divide County. Eleven other high bidders leased the remaining 222 tracts in the auction (see table).

Picking up most leases was Northern Energy Corp. of Bismarck which secured leases on a total of 14,279.46 acres in 167 tracts scattered among all eight counties represented in the auction. Northern Energy paid between $1 and $400 per acre for its leases, but many of the leases received no bids and Northern Energy was able to acquire them for the $1 nomination fee. Its price per acre averaged just $21.62 for the 167 leases.

Diamond Resources picked up the second highest number of acres at 1,359.12 in 14 tracts all in Burke County for an average of $226.06 per acre. Lease acreages acquired by the remaining successful bidders ranged from 22.65 to 719.20 acres (see table).

Higher Ed tracts top sale

Two Board of Higher Education tracts that Trust Lands offered in the auction brought the highest bids at $6,100 and $2,750 per acre. Both of the tracts - one a 40-acre tract and the other 36.61 acres - are in the College Hill Addition within the Williston city limits. Trust Lands occasionally includes tracts belonging to other state entities in its quarterly auctions.

Sioux County tracks pulled

The initial auction list included 2,717.04 acres in 20 tracts on the Standing Rock Indian Reservation in Sioux County in south-central North Dakota which had been nominated by landowners, but those tracts were pulled from the February auction at the request of the Standing Rock Sioux tribe. The tribe is responsible for the archeology studies and asked Trust Lands for more time to properly vet the tracts as well as more time to plan for the sale of the leases. Trust lands granted the request and the tracts are now in “pending” status.

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