This question pertains to the Bakken in North Dakota.
Suppose a mineral owner has a lease that is about to expire in a totally undeveloped drilling and spacing unit. Before the lease expires, can an oil company petition the NDIC to add the undeveloped DSU to a larger or different DSU that has one producing well, and afterward claim that the the undeveloped acreage is now held by production?
Thanks
Dogbert, I would protest because the issue may be decided in court one day, after a well is drilled in the undeveloped drilling spacing. They can do absolutely anything if you don't protest. Not protesting can be the same as giving permission, it's called "waiver"
Up to now, all I have heard is that a producing well spaced 1280 remains a 1280 even after the drill spacings are doubled in size when they make a 2,560 by joining two 1280's. If the well were capable of producing but had not yet produced and or royalty checks been sent out, I could see them trying to pull a fast one and once again I would protest.
As an example, some people had depth severance clauses to release the Three Forks if only the Bakken were drilled but the commission declares the Bakken and Three Forks a common source of supply, after the fact, so to drill a well into any part of the Bakken or Three Forks now means you are producing both with a single well drilled into either. An operator sought to have the three forks and Bakken declared a common source of supply and the NDIC asked the petitioning oil company if there were any reason the ruling should not apply to the entire field? The NDIC gives away mineral owners rights even when the oil company doesn't ask for them, the oil company was only asking for one spacing.
It's like the drill and run problem that arose previously, in the last month of a lease the operator brings in a rig that can't drill the well to the total depth to begin / continue operations so that leases don't expire. My operator KOG has started asking the commission to extend the leases for spud wells and says that if there is not a rig capable of drilling the well to it's total depth on site in 90 days, that they will plug and abandon and recover / restore the wellsite. I doubt they would say that if they did not have to.
To answer your exact question, the operator could petition in that situation and I believe that the NDIC would grant their petition if it were totally unopposed because the NDIC does not work for us, they will not even consider if it is equitable unless someone opposes the petition, do not expect the NDIC to protect you.
Mr. Kennedy's comments are very thoughtful and based in fact. Take them to heart. The voters of ND should petition the governor to make him a NDIC Commissioner so the owners get a fair deal.
Further, look into the details of the lease for provisions that may unilaterally extend the primary term. I recently saw a Transcontinental Oil lease form that could extend the lease for drilling purposes then defined "drilling" to include permitting, building pads, and other miscellaneous actions. Other provisions in the lease may have precluded the lessee from using some of these excuses to extend the lease unilaterally but who wants to have the expense of a lawsuit to break a lease.
Know and understand what your lease says then act accordingly as Kennedy suggests, especially concerning the risks of doing nothing.
There is a president in McKenzie county where a producing unit was expanded and drilled but the royalty from the producing well(s) pre expansion continued to be pid on the smaller unit.