Spacing Unit Question

North Dakota Mineral Rights Mountrail County, ND
#1

This question concerns the Fladeland 14-26HU well, permit #36559 operated by Whiting Oil & Gas, Inc. The well is located in Mountrail County, ND.

On the Department of Mineral Resources website it says the spacing unit for this well is 153-91- sections 25, 26, 35, and 36. When I received my division order from Whiting Oil & Gas, Inc. it also said the spacing unit was those four sections. But my decimal interest is half of what I think it should be. Please note the mineral interest in question is located in Section 26.

Whiting has told me that the spacing is those four sections, however, the ownership is derived from sections 24/27, 25/26, and 35/36 because all of the sections in the new spacing unit are part of previously pooled acreage. Whiting’s position is that minerals in sections 35 and 36 are given credit for 50% of the spacing unit, and sections 24, 25, 26, 27 comprise the other 50% of the ownership. I find this very confusing because the Oil and Gas Commission of ND pooled sections 25, 26, 35, and 36 into a new and separate spacing unit before this well was drilled.

The wellbore travels in the opposite direction of section 27, and is more than a mile from section 24. I have also confirmed with Whiting that if a well is drilled on the opposite side of the section line, being directly on sections 25 and 26, that sections 35 and 36 will still be given twice as much credit as owners in sections 25 and 26.

This may not mean much, but I have never seen another case where certain minerals inside a spacing unit are given credit for twice as much production as others. Whiting has stated they are relying on the ND Century code when deciding the allocation of production from this well. I have asked Whiting if they could direct me to that part of the Century Code and they have not responded.

If anyone is able to offer any insight into this situation I would greatly appreciate it.

Thank you, Seth

#2

You may have to slog through it, but look up “North Dakota Century Code oil & Gas” on a search engine and find the part about poolings.

Whiting is in bankruptcy and COVID work at home orders are making response times slower than usual for many companies.

#3

Thank you. I have read all of the pooling statutes and Chapter 38 of the Century Code, but cannot find anything that seems to apply. Three weeks have passed and Whiting has not answered the email.

I’m still stuck on the fact that they would create a 4 section spacing unit, but then pay owners in six sections, with two of those sections being outside the spacing unit. When this first started I talked to the division order analyst at Whiting. I asked him the purpose of creating the four section spacing unit, but then paying people in six sections. He said he asked the same question to his supervisors and did not receive an answer that made sense to him.

Even the division order analyst at Whiting doesn’t see the sense in this. I’ve talked to several landmen and a geologist that think Whiting has this all wrong.

#4

Overlapping spacing units can be confusing, for sure. If you can get copies of the actual pooling orders involved, I might be able to help you work through it.

I can tell you that the North Dakota Industrial Commission is very good at what they do (they are among the best, IMO), and they would not approve it if it wasn’t protecting everyone’s correlative rights.

#5

This spacing unit was created by order #27679 in the Sanish field. The order pools sections 25, 26, 35, and 36 into a new spacing unit.

Sections 24 and 27 are not mentioned in the order. Owners in Sections 24 and 27 also were not notified of this new spacing unit since they are not included in the order or the legal notices.

The order states that each owner shall recover or receive their just and equitable share without unnecessary expense. Have you seen another instance in the Bakken where certain minerals are given credit for twice as much production as others inside a spacing unit?

#6

PETRA0716150935.pdf (160.3 KB)

See the attached map. Previous wells exist in Sections 24-27 and in Sections 26-27.

When these wells were pooled, your minerals in 26 were put into a two section unit, 26-27. By virtue of that pooling, you share equally with all of the minerals in Section 27. Likewise, for the owners in 24&25.

Sections 35 & 36 were likewise pooled.

The new unit pulls in 35 & 36 and they get full credit, but because 24 owns half of 25 and 27 owns half of 26, they will be part of the new unit, which is why you are diluted by 50%.

Your argument that the new well doesn’t touch 24 or 47 is understandable, but since the new well will drain oil that would otherwise be produced by the existing wells in 26-27 and 24-25, all owners in those wells need to be part of the new well. If they weren’t included, I guarantee they’d be screaming bloody murder, as would you if you were in their position.

It’s not a perfect scenario, but it’s the closest thing to fair there is.

#7

Thank you. What was the purpose of pooling 25, 26, 35, 36 into a spacing unit?

It will seem less fair if Whiting drills another well on the opposite side of the section line from the well in question. Then the physical wellbore will be in 25 and 26, yet owners in 35 and 36 will still be getting paid twice as much.

#8

As the map shows, the new well is being drilled right on the line between 25-26 and 35-36. Thus the reason for including all four sections.

The four-section pooling only applies to this one well. If more wells were to be drilled inside the original units, those units would still be in force. However this seems unlikely given the number of wells already drilled in those units.

#9

Thank you for the replies.

Exactly. As you say, the well is drilled right on the section line between 25-26 and 35-36, so all four sections are included in the spacing. It doesn’t make any sense to me that sections 24 and 27 then come into play. They were left out.

Is it common to declare a spacing unit, then pull in additional sections not included in the spacing for the payment of royalties? Whiting also does not include sections 24 and 27 on their division order, but changed it when asked.

#10

Let me try to explain it another way.

Sections 26 & 27 were previously pooled. So they no longer exist as separate sections for the purpose of Bakken production. Your minerals in 26 were combined with the minerals in 27. You now own half of what they had and they own half of what you had. It is now a 1280 acre unit we will call 2627. Likewise for 24 & 25, we will call that 1280 acre unit 2425.

The new spacing unit encompasses Sections 35 & 36 along with the East half of 2627 and the South half of 2425. Sections 27 and 24 have not been “pulled in” because for these purpose they no longer exist. Those owners only participate by virtue of their ownership in 2627 and 2425.

You can look forward to the day when a lease-line well is drilled under a 27, 28, 33 &34 unit. When that happens you will be in that well even though your minerals aren’t under any of those sections.

#11

Thank you for the replies on this. Are you familiar with Lynn Helms? He’s the director of ND’s Dept. of Mineral Resources. I ran into him a few weeks ago at a hearing, and when I explained the issue, he agreed with me completely, and seemed to think there is no way the other sections should be paid.

Seemed interesting that ND’s top oil official had never even heard of this, and thought Whiting had this all wrong.

Anyway, it looks like nothing can be done without suing someone. Whiting will not even answer emails related to this subject.