The single biggest spacing unit for oil drilling in the Bakken was approved Tuesday, when the state Industrial Commission created the Corral Creek Bakken Unit with 30,000 acres around and including the Little Missouri State Park.
Typically, spacing units are much smaller at 1,280 acres, but this one north of Killdeer is intended to give the oil companies more leeway to keep wells out of the Little Missouri River floodplain and out of the area's scenic view shed.
It also reflects an unusual situation in which 50 percent of the minerals are owned by Burlington Resources and 10 percent are owned by the federal government. Unitizing requires 60 percent of the mineral owners sign on to it; in this case, only two entities are involved, rather than the dozens, sometimes hundreds of mineral owners associated with one spacing unit.
The effect of the unitization is that all 30,000 acres are treated as one gigantic lease. That means that all mineral owners share in all the oil production from start to finish, instead of just their own, and oil companies can put oil roads or pipelines anywhere in the unit, without having to negotiate easements with private landowners or adhere to section line setbacks.
Some mineral owners worried that since production from just one well in the new unit would be enough to secure, or "hold" all the leases, the companies could leave a portion of the unit undeveloped.
There are already 12 wells in the unit and there was concern that those wells could be used to hold the leases even if no more wells were ever drilled. Meanwhile, those mineral owners would be sharing royalties with everyone else in the 30,000-acre unit.
The Industrial Commission's order included a provision that the oil company has four years to completely drill all 80 wells proposed for the unit. A mandatory hearing will be held in 2016 and any undeveloped tracts would be removed from the unit, the order says.
Department of Mineral Resources Director Lynn Helms said the threat of losing leases that would then be open to competitive bidding should be enough to force Burlington Resources to finish its drilling plan. He said Burlington Resources says it will take three rigs in and drill all the wells in 3 1/2 years.
Helms said the other advantage of creating a unit is that the drilling activity will be lighter on the land.
He said without the unit, the drilling plan would require up to five more well pads, four of those within the boundaries of the Little Missouri State Park, another 15 additional tank batteries for oil storage and would strand 15 million barrels of oil.
"The positives are that this minimizes the footprint, with fewer trucks and less flaring," Helms said. The downside is loss of control on the part of surface owners, who must be compensated for easements but don't get to negotiate specific terms, he said.
Bob and Candyce Kleeman, who have surface acres, but no minerals in the new unitized field, said the Industrial Commission's action to protect all the mineral owners was a good move.
"At least they're trying," Candyce Kleeman said.
Bob Kleeman said that landowners are still losing all control over where easements should be located on their property.
"I'm not saying this (unit) is bad, but we don't want to lose control," he said.
Gov. Jack Dalrymple, who chairs the Industrial Commission, said the first-ever unitization in the Bakken was not intended to serve as a model or set a precedent.
"This does preserve the landscape around the Little Missouri," Dalrymple said.
Attorney General Wayne Stenehjem agreed.
"This protects the scenery much more than anything else would," he said.