Oil development

Oil development on the Fort Berthold Reservation is pictured on Tuesday, May 7, 2013, near New Town, N.D. 

In October, mixed in with the heap of oil production numbers the North Dakota Department of Mineral Resources churns out every month, was an important footnote: Oil production on the Fort Berthold Reservation had been grossly overstated as far back as 2012.

Department spokeswoman Alison Ritter said an internal audit in October discovered an error in a formula used in an Excel spreadsheet to break out production figures for the reservation.

As a result, the department corrected the error and tacked an addendum onto the October’s “Director’s Cut” report showing that instead of the reservation accounting for nearly a third of North Dakota’s oil production, it actually has been responsible for about 17 percent. Figures listing the number of fee wells and trust wells also were incorrect.

Ritter stressed that the error did not affect the overall oil production figures reported, the production reported to the state Tax Commissioner’s Office for tax purposes or reports on flaring of natural gas.

“It was just strictly the way we reported the (reservation’s) production in the Director’s Cut,” she said, adding, “It was just a calculation error when we were outputting the numbers.”

Media outlets have repeatedly relied on department figures when reporting that the reservation produced almost a third of the state’s oil. Forum News Service reported in July that trust and fee wells on the reservation accounted for more than 358,000 of the 1.2 million barrels produced daily that month, when in fact it was about 200,500 barrels a day, based on the revised figures.

State lawmakers also referred to the reservation being a 30-percent player in the Bakken during debate last April over a bill that will reduce the state’s overall oil tax rate from 11.5 percent to 10 percent on Jan. 1 and eliminated tax breaks triggered by low crude prices. The Three Affiliated Tribes oppose lowering the tax rate, and a meeting Tuesday between state and tribal leaders failed to produce an agreement on updating the oil tax compact that allows the state and tribe to split oil tax revenues 50-50 from oil produced on the reservation.

Senate Minority Leader Mac Schneider, D-Grand Forks, said of the 30 percent production figure on the reservation: "That's ingrained in people's minds."

Former Three Affiliated Tribes Chairman Tex Hall also used inaccurate figures from the state when highlighting the reservation’s oil production during the 2014 tribal oil and gas expo.

Department of Mineral Resources Director Lynn Helms mentioned the miscalculation and addendum during October’s “Director’s Cut” presentation, but it wasn’t reported widely, if at all.

Ron Ness, president of the North Dakota Petroleum Council, said Tuesday he wasn’t aware of it but had noticed that the reservation’s oil production had dropped precipitously.

“I just noticed in the last report, ‘Holy cow, has their production dropped that much?’ ” he said.

Ness said he always thought the one-third figure was “unbelievable” for the size of the reservation, but acknowledged, “I’ve used it in all my speeches.”

The tribes’ chief executive officer, Al Nygard, said Wednesday that discussion about the reservation’s actual oil production has been going on for several months, and a discrepancy between the tribes’ and state’s figures was noticed in late September or early October. The tribes will be doing their own production analysis, he said.

“Until you make that comparison, I think it’s unfair to say one way or the other what is the right number,” he said.

State Tax Commissioner Ryan Rauschenberger said the revised figure of 17 percent of production coming from the reservation is consistent with the breakdown of gross oil tax revenues on and off the reservation.

The revised figures dating back to June 2012 can be found on the last page of the Director’s Cut at www.dmr.nd.gov/oilgas/directorscut/directorscut-2015-10-13.pdf.

 

Reach Nowatzki at (701) 255-5607 or by email at mnowatzki@forumcomm.com.

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