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Complex, controversial North Dakota drilling operation to be reviewed

BISMARCK – A company developing a controversial drilling mega-unit in Dunn County that initially had a January target for completion will give an update on the progress Wednesday during a hearing in Bismarck.

The North Dakota Oil and Gas Division will hold a hearing at 9 a.m. Wednesday to review the status of the Corral Creek-Bakken Unit, a 30,000-acre oil development near Killdeer.

When the North Dakota Industrial Commission approved the unit four years ago, commissioners were told operator ConocoPhillips would operate three drilling rigs to complete the wells in 3½ years.

But some royalty owners who opposed the drilling plan feared it would take six or more years to fully develop their minerals. The commission set a January 2016 deadline to review the progress, and the commission has the ability to remove tracts of land from the unit or make other adjustments.

Recently, ConocoPhillips has had two drilling rigs working in the unit and the drilling is not yet complete.

However, the company is now drilling more wells in the unit than originally anticipated, said ConocoPhillips spokesman Jim Lowry.

The initial plan included 81 new wells in addition to 12 wells already in the unit. To date, the company has drilled 134 wells, Lowry said.

Alison Ritter, spokeswoman for the Oil and Gas Division, said 161 permits have been issued so far for the unit.

“We’re ahead of what the anticipated schedule was,” Lowry said. “I think it will be a fairly positive report from ConocoPhillips on our progress and our anticipated progress next period.”

Royalty owner David Schwalbe, who was among those who opposed the unit, said he plans to ask several questions during Wednesday’s hearing, including asking for an independent audit of the entire field.

“This thing has progressed to the point where it’s there, it’s going to be there. We can’t reverse this,” Schwalbe said. “What we want now is to bring some honesty into it to make sure everybody’s being treated fairly and to be sure that they’re doing what they’re supposed to be doing.”

Under a unitization agreement, dozens of royalty owners share the revenue of the whole area according to a formula rather than having individual leases for their wells.

But Schwalbe says the way that mineral owners are compensated is so complex that they have no way of knowing if they’re being treated fairly.

“We have asked some pretty good math geniuses to figure this out. I’ve asked people in the industry and they just shake their head,” Schwalbe said. “It’s so complicated that we have no idea what percent we’re getting.”

Lowry said ConocoPhillips is meeting all agreements that were signed with mineral owners.

The Corral Creek unit, which includes Little Missouri State Park, is the only area being developed as a unit in the Bakken. Although several individual mineral owners opposed it, Burlington Resources, which was acquired by ConocoPhillips, the state of North Dakota and the federal government made up more than 60 percent of interest in the unit, which was enough to proceed.

Lynn Helms, director of the Department of Mineral Resources, recommended approval of the unit because he said developing it that way would have less impact on the Little Missouri State Park and it would keep well pads out of the river’s flood plain.

The company also said developing the area as a unit would allow for the recovery of more oil while minimizing the impact to the land.

Nearly a year after the Industrial Commission approved Corral Creek, petitioners in Dunn County sought to have a grand jury investigate whether campaign contributions Gov. Jack Dalrymple received from companies involved in the unit violated bribery statutes. The petitions were dismissed.

Members of the public can speak during Wednesday’s hearing, which is at 1000 East Calgary Ave., Bismarck. The public can also listen to the hearing live at www.dmr.nd.gov/oilgas under the “hearing dockets” tab.

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