Posted 8/24/11 (Wed)
By Kate Ruggles
Farmer Staff Writer
The winter and spring months have taken their toll on McKenzie County in many ways. Farmers and businesses alike can recount the many ways in which the snow and rain have ‘put a wrench’ in things.
Similarly, snow, rain and subsequently, road closures have limited drilling opportunities for oil companies, and put on the pressure to take advantage of drilling permits before they expire.
“The dry weather has created a window of opportunity,” says Ron Ness, director of the North Dakota Petroleum Council. And that window is being filled with drilling rigs.
According to Lynn Helms, director of the Department of Mineral Resources, the number of new drilling rigs in the Williston Basin is projected to reach an unprecedented 225 by the end of the year.
“There are at least 1,000 undrilled permits,” says Helms, “and 250 permits in the queue waiting to be approved.”
Helms states that an oil company leases a tract of land for three years, and then applies for a drilling permit. However, the drilling permit is only good for one year. After that, the oil company has to re-apply, go to the bottom of the queue and risk losing its leasehold.
“Companies are trying to keep up with their leaseholds,” states Ness. And, according to him, they are in a race against time.
“If they don’t drill on them before the lease expires, the company will have to renegotiate the contract,” explains Ness.
Since most leases were purchased when the boom began, lease prices were much lower. Now companies will be forced to pay higher prices for the same piece of land, or risk losing that land to another bidder/competitor - a situation the mineral owner might not mind, but the oil companies are trying desperately to avoid.
Therefore, despite the previous winter being one of the worst this area has seen, North Dakota oil drillers are on pace to bring in more drilling rigs than the area has ever seen.
And, more drilling rigs will mean more drilling, which is why North Dakota is also projected to crush the state’s crude production record.
North Dakota produced 64.6 million barrels of crude from the beginning of this year to June. By the end of the year, it is estimated the state will produce 133 million barrels.
The fact that companies have 1,000 undrilled permits only supports the notion that oil production will increase.
“Current permit activity suggests that companies intend to drill 5,000 wells over the next 2½ years,” states Helms. According to Helms, in the last five years, 2,600 wells have been drilled. This will be nearly twice the number of wells drilled in half the amount of time.
Helms further states that 26 percent of the permit requests are for McKenzie County, making it number one in terms of approved, but undrilled permits. This also suggests that the drilling rig activity will be primarily focused right here in McKenzie County.