MT lease interest rises

Nominated acres for March auction up 8-fold and focused on Williston Basin

Mike Ellerd

Petroleum News Bakken

Activity picked up considerably for Montana’s next oil and gas lease auction scheduled for March with nominated acres up eight-fold over the acres leased in the December auction and most of the activity focuses on Montana’s portion of the Williston Basin.

A total of 35,292 acres in 78 tracts have been nominated for the March Montana Department of Natural Resources and Conservation oil and gas lease auction, an increase of 31,000 acres over the 4,292 acres leased in December and marking the largest acreage in a DNRC auction since June 2012 when 73,185 acres were leased in 187 tracts.

Approximately two-thirds of those 35,000-plus acres are spread across a band of five contiguous counties in east-central Montana beginning with Petroleum County and extending east through Garfield then into Prairie, Dawson and Custer counties (see map). The other approximately one-third of the acres - 10,482 acres to be exact - is in Daniels County in northeast Montana just below the Saskatchewan border.

All those counties except Petroleum County are within the Williston Basin province. Daniels County, albeit on the fringe, also lies within the Bakken petroleum system. In addition, the Heath formation underlies portions of Garfield and Petroleum counties.

Daniels County saga

The 10,482 Daniels County acres include the 9,994 acres that were twice previously nominated for DNRC auctions. All of those acres are back on the list along with an additional 488-acre tract. The 9,994 Daniels County acres were first nominated for DNRC’s September auction but were pulled from the list by the nominator prior to that auction. The acres were again nominated for DNRC’s December auction only to be pulled by the nominator prior to the December auction.

Daniels County saw a flurry of lease activity in 2009 and 2011 when more than 42,000 DNRC acres were leased in each of those years, but the county has seen little state leasing activity since. The last DNRC acreage nominated in Daniels County was in March 2013 when seven tracts totaling 2,748 acres were nominated, although only three of those tracts totaling 1,324 acres were actually leased in the auction. One of those three tracts brought $21 per acre but the other two brought only $1.50.

The other MT tracts

Behind Daniels, the county with the next highest nominated acreage is Garfield (see map) with 9,117 acres in 17 tracts. The last time any acres in Garfield County were leased was in December 2013 when 240 acres in one tract were leased for $1.50 per acre. In May 2013, three Garfield County tracts totaling 800 acres were nominated for a Montana/Dakotas Bureau of Land Management auction but no bids were received on those tracts.

In neighboring Custer County (see map) a total of 5,132 acres in 10 tracts were nominated. Those are the first nominations in Custer County since September 2006 and only the third time Custer County tracts have been nominated over the Trust Land Management Division’s online database going back through 2004. In September 2006, 20,732 acres were leased in 36 tracts in Custer County for an average of $9.36 per acre. And in the previous auction in June 2006, 63 tracts totaling 37,005 acres were leased with each tract bringing $1.50 per acre.

A total of 4,640 acres were nominated in both Dawson and Prairie counties, although the tract size is larger in Prairie County with the acreage spread over eight tracts compared to the 12 tracts in Dawson County. The last time Dawson County acreage was leased in a DNRC auction was in December 2013 when 640 acres in one tract leased for $96 per acre. In June 2013, three tracts totaling 1,275 acres brought from $76 to $270 per acre with an average of $168.62. And in March of that year, 3,194 acres in five tracts were leased for an average of $22.65 per acre. No acreage has been leased in Prairie County since March 2012 when 4,240 acres in eight tracts leased for an average of $3.20 per acre.

The remaining two tracts nominated for the March auction are in Petroleum County and each is 640 acres. The last DNRC acreage leased in Petroleum County was in September 2011 when one 640-acre tract leased for $10 per acre.

The DNRC auction is scheduled for 9 a.m. Mountain Standard Time on March 3. It will be held in the auditorium of the Montana Department of Transportation building in Helena. More information on the nominations and the auction are available on the DNRC Minerals Management Bureau’s website under “Oil and Gas Leasing Information” at http://dnrc.mt.gov/trust/mmb.

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January BLM auction limited to 7 ND tracts

Two of the tracts, one at 62.85 and the other at 233.30 acres, are in the Lost Bridge field in northwest Dunn County just west of the Fort Berthold Indian Reservation. Another 3.91-acre tract is in the Lone Butte field near the McKenzie County line in eastern Dunn County.

Three tracts are in McKenzie County. One is a 2.12-acre tract under the Yellowstone River in the Hay Creek field in west-central McKenzie County. Two large tracts, one at 320 acres and the other at 960 acres, are in the Hay Draw field in central McKenzie County.

The seventh tract is a 160-acre parcel in the Ellisville field in north-central Williams County.

BLM auction perspective

In the last BLM Montana/Dakotas lease auction in October 2014, 14,988 acres in 28 tracts were nominated in Montana and North Dakota, but only 12 tracts totaling 6,390 acres were leased, seven in Montana and five in North Dakota. All five leased tracts in North Dakota were in Golden Valley County. The seven Montana tracts were in Yellowstone (two), Roosevelt (one) and Powder River (four) counties. The 23 tracts not leased in the October auction were scattered from Beaverhead County in far southwest Montana to Prairie County in east-central Montana. Eight state tracts in Prairie County have been nominated for the March DNRC auction (see story, page 1).

Detailed information on the tracts nominated for the January BLM auction is available at the Montana/Dakotas office’s website at www.blm.gov/mt under “Oil and Gas Info | Sales.” The auction is scheduled to begin at 9 a.m. Mountain Standard Time on Jan. 27 at the Montana/Dakotas office in Billings. Registration begins at 8 a.m.

—Mike Ellerd