l LAND & LEASING Between the lines

North Dakota leaders seek helpfrom NTSB on rail service issues

l M E R G E R S & A C Q U I S I T I O N S

l P R O D U C T I O N & R E C O V E R Y

Vol. 3, No. 22 • www.PetroleumNewsBakken.com Publication of record for the Bakken oil and gas industry Week of September 14, 2014 • $2.50

Fryburg’s twin loops

BNSF unit trains load at Great Northern Midstream’s Fryburg rail ter-minal west of Dickenson, North Dakota. The debate over the volatil-ity of Bakken crude continued this week in a joint House subcom-mittee hearing in Washington, D.C. (see story below).

VER

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HIT

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PH

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GR

APH

Yl L A N D & L E A S I N G

page3

Horizontal revolutionEOG Resources CEO Thomas on the future of domestic, unconventional oil

By MIKE ELLERDPetroleum News Bakken

A dvances in the development of

unconventional, horizontal oil

exploration have had a significant effect

on U.S. oil production in recent years,

but exactly what does the future look

like for the horizontal revolution?

According to Bill Thomas, chairman

and chief executive officer of EOG

Resources, a company instrumental in advance-

ments in the field, there probably aren’t any more

major domestic plays of the magnitude of the

Bakken or Eagle Ford looming out there, but that

doesn’t mean there aren’t ample opportunities for

the horizontal oil revolution to continue.

In his keynote address at the

Barclays CEO Energy Power confer-

ence in New York on Sept. 4, Thomas

provided an overview of the U.S. hori-

zontal oil revolution and the impact it

has had on domestic crude oil supplies,

the U.S. economy, U.S. foreign policy,

as well as a reduction in carbon dioxide

emissions to 1995 levels as more natural

gas is being used in electric power gen-

eration.

However, Thomas pointed out that 95 percent

of all horizontal oil produced in the U.S. comes

from just six plays, which he said is “really a key

understanding as you think about what’s going on

BILL THOMAS

see FUTURE OF OIL page 13

Expanding Torquay stakeCrescent Point picks up nearly 50,000 net acres from Lightstream Resources

By GARY PARKFor Petroleum News Bakken

Two of the biggest players in Canada’s

Williston Basin region are moving in oppo-

site directions and both are satisfied with where

they are heading.

In a deal between the two, Crescent Point

Energy added muscle to its expanding sub-

Bakken Torquay (Three Forks) stake in a C$378

million purchase of assets in Saskatchewan and

Manitoba, including 3,300 barrels of oil equiva-

lent per day, from Lightstream Resources.

For Lightstream, the transaction enables the

company to surpass its asset sales goal 15 months

ahead of schedule by notching C$729 million in

divestitures this year, trimming its corporate debt

to C$1.5 billion from C$2.3 billion at the end of

2013.

For Crescent Point, Chief Executive Officer

Scott Saxberg said the new properties build his

Based on the results and refinedgeological mapping, Crescent Point saidit has added about 40,000 net acres and140 net drilling locations to its Torquay

inventory.

see TORQUAY STAKE page 15

Between the linesND Trust Lands struggles to deal with complexities of riverbed tracts

By MAXINE HERRFor Petroleum News Bakken

Before the advancement of horizontal

drilling, determining who owned

land along the Missouri River in North

Dakota wasn’t a big concern.

But once operators found the key to

unlocking the plentiful crude beneath that

waterway, it opened the door to great

debate. So from courtrooms to board

rooms, a complex line is causing quite a stir. That

line is the ordinary high watermark, and it delin-

eates the state’s sovereign land.

Under the federal Equal Footing Doctrine, the

state of North Dakota owns all the miner-

al rights that lie between the high water-

marks of all navigable waters at the time

of statehood in 1889. Prior to Bakken

development, the state’s Department of

Trust Lands would approach each river

tract up for lease indi-

vidually. The depart-

ment would take an

aerial photo and draw

the lines to separate acreage, which was

fairly simple dealing with so few leases. However,

by 2007, it was becoming evident that the case-by-

case method was not as efficient as the department

House joint subcommittee hearsperspectives on Bakken crude oil

North Dakota Petroleum Council, NDPC, Vice President

Kari Cutting was among those offering testimony before a

Sept. 9 joint House subcommittee hear-

ing in Washington, D.C., examining the

characteristics and behavior of Bakken

crude oil. The hearing came in the wake

of the Pipeline and Hazardous Materials

Safety Administration, PHMSA, report

on the properties of Bakken crude oil

which was released in July. That report

said that while Bakken crude “does not

demonstrate the characteristics for a

flammable gas, corrosive liquid or toxic

material, it is more volatile than most other types of crude —

which correlates to increased ignitibility and flammability.”

That finding was in contrast to that of the Turner, Mason

and Co. study commissioned by NDPC. Cutting told the joint

subcommittee that the Turner, Mason study “was designed to

provide scientific answers to address the growing perception

that light crude oil is more hazardous than other flammable

liquids or hazardous materials being transported in the

Montana grabs reins to manageprotection of greater sage grouse

An executive order signed by Montana Gov. Steve Bullock

on Sept. 9 seeks to maintain state management of the sage

grouse and avoid federal protection.

The new order outlines guidelines and requirements of a

comprehensive program to preserve vital

sage grouse habitat. It has broad support

from a diverse group of interests, includ-

ing oil and gas industry leaders.

“Montanans recognize that it is in the

best interest of our state, its economy, and

our quality of life, to maintain state man-

agement of the Greater Sage-grouse,”

Bullock said of the executive order.

“Through a public process, and the work

of a diverse group of stakeholders, we’ve

developed a dynamic, and science-based approach to ensure this

bird remains under state management, and is not listed under the

Endangered Species Act.”

The Sage Grouse Habitat Conservation Program will be

administered through a newly created oversight team attached

to the governor’s office in order to maintain state leadership and

KARI CUTTING

see HOUSE HEARING page 13

see RIVERBED TRACTS page 14

see GROUSE PROTECTION page 12

DREW COMBS

STEVE BULLOCK

http://www.petroleumnewsbakken.com

2 PETROLEUM NEWS BAKKEN • WEEK OF SEPTEMBER 14, 2014

Petroleum News Bakkencontents

11 ND weekly county permit totals, Sept. 2-8

11 Top 10 Bakken wells by IP rate, Sept. 2-8

BAKKEN STATS7 Top ND IPs spread from Williams to Stark counties

7 Montana well permits and completions, Aug. 24-Sept. 6. See link: http://bit.ly/1qFccUZ

7 Bakken producers’ stock prices

8 IPs for ND Bakken wells, Sept. 2-8

9 ND oil permit activity, Sept. 2-8

4 Canada’s TSB still has crude-by-rail concerns

4 Bakken-to-Cushing open season launched

5 Natural gas, agriculture join up at Jamestown

NATURAL GAS

MOVING HYDROCARBONS

MERGERS & ACQUISITIONS

3 ND striving to get rails back on track

State leaders urge NTSB to require transparency from railroads and improve service to shippers in both ag and energy sectors

6 Triangle weighs future of subsidiaries

Small improvements in operations result in large revenuegrowth; new strategies considered for RockPile and Caliber businesses

COMPANY UPDATE

ON THE COVERBetween the lines

ND Trust Lands struggles to deal with complexities of riverbed tracts

Expanding Torquay stake

Crescent Point picks up nearly 50,000 net acres from Lightstream Resources

Horizontal revolution

EOG Resources CEO Thomas on the future of domestic, unconventional oil

House joint subcommittee hears perspectives on Bakken crude oil

Montana grabs reins to manage protection of greater sage grouse

SIDEBAR, Page 14: BLM to hold workshop on land surveys

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The state of North Dakota is some-

what limited in its influence over rail

service issues, so several of its leaders

went before the National Surface

Transportation Board, NSTB, on Sept. 4

in Fargo to urge the agency to take steps

to ensure rail service

is reasonable and

equal for the agricul-

ture and energy sec-

tors.

The hearing was

the first of its kind in

North Dakota and

the room was

packed with those

concerned about

trains running on

time. NTSB Chairman Daniel Elliott II

opened the hearing by saying it is a diffi-

cult time for railroading, whether it is the

railroad providing the service or the ship-

per relying on it. Vice Chairwoman Deb

Miller said shippers have voiced their

complaints with the lack of transparency

from the railroads and said she believes it

could certainly be improved. The day-

long hearing was filled with testimony by

North Dakota’s congressional delegation

and other state leaders, members of the

energy and agriculture sectors, and rail-

road officials.

TestimonyBeginning the testimony was Gov.

Jack Dalrymple who admitted BNSF

Railway has made a dramatic improve-

ment in the length of late rail movements

since April, but he said there is “great

apprehension” about how service will

continue through the harvest months. He

asked the NSTB to provide equity among

all commodities.

“The balance between sectors is very

important,” Dalrymple told the board.

“They profess to provide balanced serv-

ice across all sectors so it would be a

good idea to verify that is true.”

The board has been closely monitoring

both Canadian Pacific, CP, and BNSF’s

performance since service problems

erupted last year, and in June it required

the railroads to provide plans and sup-

porting data for moving fertilizer and

grain shipments. NSTB has been critical

of CP for its lack of sufficient progress in

eliminating a sizeable backlog that

remains with the rail company’s system.

Dalrymple told the board it needs to

consider CP’s lack of service an “emer-

gency situation” and asked how it would

govern given extreme circumstances.

“What would you do if no car service was

taking place?” he questioned.

Public Service commissioners Julie

Fedorchak and Randy Christmann also

testified, requesting greater transparency

from the railroads. They told the board

that the commission had asked for infor-

mation from BNSF and CP about ship-

ments, only to be told the railroads are

solely accountable to the NTSB and

would not supply the information.

“I urge you to gather this information

and make it available to shippers,”

Fedorchak said. She suggested the NTSB

require more detailed plans of service and

have the railroads update those plans

every two weeks.

“It’s vital for the board to stay focused

on the service issues so the railroads

don’t back off on their efforts,” she said.

Keeping a watchful eye At an April hearing with BNSF and

CP, the Public Service Commission was

told the railroads would resume normal

schedules in a matter of weeks, but

Fedorchak said both railroads fell short of

that goal and improvements didn’t come

until July “when pressure increased.”

“You need to keep a close eye on their

plans for allocating resources to meet the

needs of the system as a whole,” she said.

Fedorchak also recommended that

NTSB open a field office in North Dakota

as the state is “ground zero” for numerous

commodities shipped via rail so the board

should have local personnel to serve as a

liaison between shippers, railroads and

related entities.

She also addressed concerns in

Chicago which serves as the intersection

for numerous rail systems.

“It’s like the black hole of railroad

challenges. It’s where no one seems to be

responsible or has a plan for fixing it,”

Fedorchak said. She urged NTSB to

address the congestion problems in that

city and modernize the system.

Hold railroads accountableChristmann spoke next, cautioning

NTSB to not assume any scheduling

progress made by the railroads is entirely

legitimate.

“If that progress is based on strong-

arming shippers to canceling orders or

focusing almost exclusively on big unit

trains at the expense of small shippers,

then maybe that progress hasn’t been so

good,” he said.

He reiterated the importance of not

“picking winners and losers” between oil

and agriculture and said he expects NTSB

to demand reasonable and dependable

service for all shippers. He voiced his

frustration about being denied the infor-

mation the commission requested, partic-

ularly because it came “seasoned with

arrogance.”

“Without that valuable information,”

Christmann said, “we must seek help

from you.” He added that NTSB should

have it “at your fingertips.”

Christmann said the rail companies

stated that the data the commission

requested was “too burdensome” to

obtain, so he suggested that when the

board hears from the rail companies, it

should “not buy into their sob stories” but

instead require that they make the data

available.

“When some grain got shipped across

the country is no national security issue,”

Christmann said. “Clarify what you, as

the experts, think is reasonable and

acceptable service, and finally compel the

railroads to live up to that standard.”

As of Aug. 31, BNSF had approxi-

mately 1,016 grain cars past due in North

Dakota, down from 2,400 at the end of

July. CP, however, reported it had more

than 7,500 open requests for grain cars in

the state. Dalrymple reminded the board

that it holds the key to ensuring addition-

al equipment and better service from the

railroads.

“This hearing is not about commodity

groups and public officials coming in and

telling you something,” Dalrymple told

the board. “It is about individual eleva-

tors and farmers out there who have no

place to go. They have no recourse. They

have no power. They have no influence

over the situation, except for you.” l

l M O V I N G H Y D R O C A R B O N S

ND striving to get rails back on trackState leaders urge NTSB to require transparency from railroads and improve service to shippers in both ag and energy sectors

PETROLEUM NEWS BAKKEN • WEEK OF SEPTEMBER 14, 2014 3

JACK DALRYMPLE

JULIE FEDORCHAK RANDY CHRISTMANN

“It’s like the black hole of railroadchallenges. It’s where no one

seems to be responsible or has aplan for fixing it.” —Julie Fedorchak,

ND Public Service Commission

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Petroleum News Bakken seeks ad sales repLooking for experienced salesperson to work from home in North Dakota.Contact Kay Cashman at [email protected] or 907.561.7517

Kay Cashman PUBLISHER & EXECUTIVE EDITOR

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l M O V I N G H Y D R O C A R B O N S

Canada’s TSB still hascrude-by-rail concerns

By GARY PARKFor Petroleum News Bakken

Canada’s Transportation Safety Board

remains concerned that, despite

pledges by the Canadian government,

volatile crude is still being shipped on

North American trains.

A letter from the agency to Transport

Canada delivered just days before the

TSB issued its final report on the Lac-

Megantic tragedy, said hazardous crudes

could be blended with crude that’s

deemed relatively safe, creating a more

volatile shipment than shipping docu-

ments indicate.

Although new Canadian regulations

for testing crude samples require shippers

to make information about the sampling

method they use available to the govern-

ment, the TSB said there is no assurance

that the “variability in the properties of

mined gases and liquids, such as petrole-

um crude oil” are addressed.

The agency noted that while the prop-

erties of gasoline are better understood

and relatively predictable, crude oil and

natural gas can vary from one well to

another and in the same well over time.

In addition, crude that comes from dif-

ferent sources could be blended as it is

loaded on to railcars, the TSB said, set-

ting up a conflict between crude that is

deemed safe in one set of tests and the

final blended product that is loaded on to

railcars.

Developing new standardsUntil Lac-Megantic, regulators had

not understood that crude had the poten-

tial to explode.

They now take a different view of

Bakken crude (which made up the entire

train load at Lac-Megantic) and other

light shale oil, which are believed by

some to be more dangerous than conven-

tional crude.

Transport Canada told the Globe and

Mail that new “strict requirements” under

the Transportation of Dangerous Goods

Act require shippers to properly classify

their dangerous goods.

It said testing criteria are harmonized

with requirements in the United States,

while Canada and U.S. regulators along

with the crude oil industry are developing

standardized tools and processes for test-

ing crude.

The American Petroleum Institute is

expected to release a new set of classifi-

cation and rail loading standards for the

approval of its member companies later

this month.

Although Transport Canada and the

U.S. Pipeline and Hazardous Materials

Safety Administration played a role in

developing those standards they have not

said whether they will automatically

introduce enforcement procedures.

Separately, producers and regulators in

North Dakota are exploring ways to stabi-

lize their production before it is shipped

by developing the means to separate the

most volatile components from the main

product.

Some companies involved in rail ship-

ments are adopting new methods which

are over and above federal regulations to

more accurately measure the dangers of

crude that they are extracting or trans-

porting. l

MOVING HYDROCARBONSBakken-to-Cushing open season launched

Enterprise Products Partners launched an open season for binding shipper com-

mitments on its proposed crude oil pipeline running from the Williston Basin to

Cushing, Oklahoma. The proposed 30-inch Bakken-to-Cushing or BTC pipeline

would have an initial capacity of

340,000 barrels per day with expansion

capacity to over 700,000 bpd.

The proposed route begins at

Stanley in north-central Mountrail

County and runs through Montana,

Wyoming, Colorado and Kansas pro-

viding service not only to the Williston

Basin, but also to the Powder River,

Denver-Julesburg, DJ, basins. By servicing those multiple basins, the pipeline would

have the capacity to transport six separate grades of crude oil: Bakken crude, Powder

River crude, DJ crude, Rockies condensate, Rockies processed condensate and

Rockies intermediate crude.

In addition to service in North Dakota beginning at Stanley, the project will include

a lateral servicing the Johnsons Corner area in eastern McKenzie County. That pro-

posed lateral runs west from Johnsons Corner and connects with the main transmis-

sion pipe near the Montana border.

The proposed pipeline would provide service to the Cushing market where

Enterprise has a terminal, and to the hub at Guernsey, Wyoming. Both of those desti-

nations provide options for delivery to multiple markets through third-party pipelines

as well as rail transport.

While the project is subject to sufficient commitments from shippers, Enterprise

expects service to the DJ basin in Wyoming and Colorado to begin in the fourth quar-

ter 2016, and service to the Powder River and Williston basins to begin by the third

quarter 2017.

The open season was launched on Sept. 4 and closes at 5 p.m. Central Daylight

Time on Oct. 17. Additional information on the open season is available on the

Enterprise Products Partners website at www.enterpriseproducts.com/index.asp.

—MIKE ELLERD

The proposed 30-inch Bakken-to-Cushing or BTC pipeline would

have an initial capacity of 340,000barrels per day with expansioncapacity to over 700,000 bpd.

http://www.facilities-design-onshore-2014.com

http://www.petroleumnewsbakken.com


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l N A T U R A L G A S

Natural gas,agriculturejoin up atJamestown


The largest natural gas pipeline to be

built in North Dakota will pave the

way for the single largest private invest-

ment project in the state.

The final plans to build a nitrogen fer-

tilizer plant near Jamestown, North

Dakota, were approved on Sept. 5 by the

board of directors of CHS Inc., a global

agribusiness owned by farmers, ranchers

and cooperatives across the United

States. CHS will invest about $3 billion

to build the plant that will convert natural

gas from the oil fields of western North

Dakota into fertilizers for the region’s

farmers for crop production.

“The board’s approval to move ahead

on this major project is great news for our

farmers and for the entire state of North

Dakota,” Gov. Jack Dalrymple said in a

statement. “The plant will create jobs and

provide our farmers with a reliable sup-

ply of fertilizers. At the same time, the

CHS plant complements our continued

efforts to utilize and add value to the

abundant supplies of natural gas pro-

duced in western North Dakota.”

CHS began studying the feasibility of

the project in 2012 and the 640-acre site

near the Spiritwood Energy Park will

produce more than 2,400 tons of ammo-

nia daily for farmers and retailers in the

Dakotas, Minnesota, Montana and

Canada.

WBI to provide gasWBI Energy’s Wind Ridge Pipeline

Project will provide a consistent supply

of natural gas for the CHS facility. North

Dakota Pipeline Authority Director Justin

Kringstad said though WBI currently has

a natural gas pipeline running near the

area of the proposed fertilizer plant, a

new pipeline is required.

“The existing pipeline through that

area does not have the capacity to serve

the demand of a facility as large as a fer-

tilizer plant,” he told Petroleum News

Bakken.

The $120 million project will consist

of 95 miles of 16-inch diameter pipeline

that will tie-in to the Northern Border

Pipeline Cos.’ existing mainline near

Ashley in McIntosh County in south-cen-

tral North Dakota and then extend north-

east through Logan and LaMoure coun-

ties to the fertilizer facility in Stutsman

County. As proposed, the pipeline will

not require a compressor station, but

WBI Energy will construct a meter sta-

tion at the site of the plant. The project is

regulated by the Federal Energy

Regulatory Commission and WBI antici-

pates filing its application with the

agency in February 2015 for a certificate

of public convenience and necessity.

WBI Energy expects to complete con-

struction of the pipeline by the end of

2016. CHS officials expect the fertilizer

plant to be operational by the first half of

2018. l

Tie-in with NorthernBorder Pipeline

Proposed Fertilizer Plant

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DRAWN BY: LDSDate: 07/21/2014 | SCALE: 1:1,000,000

Project Overview MapWind Ridge Project

WBI Energy

μ

North Dakota

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With strong consolidated business-

es, Williston Basin-focused

Triangle Petroleum must consider

whether to hold on to its Caliber

Midstream and RockPile Energy Services

companies or take a new route to ensure

value. Triangle President and Chief

Executive Officer Jonathan Samuels told

analysts in the company’s Sept. 9 second

quarter results conference call that

Triangle will keep its core business

Triangle USA, but the options for the

other two companies include selling,

spinning off or going public. But he said

the private market multiples are not prov-

ing the selling option to be prudent, so

Triangle is focused on the other two

options. However, don’t expect a shift

anytime soon.

“You have to have an organization

that’s ready for that,” Samuels said. “I

think we have people in place to do that,

but that takes time.”

The company’s fiscal year 2015 sec-

ond quarter ended on July 31 with

increased consolidated revenue to $142

million compared to just over $50 million

the same time last year. RockPile con-

tributed revenue of $61.5 million com-

pared to $15.8 million in the second quar-

ter of fiscal 2014.

RockPile performs services for 10

third-party clients and that number is

expected to increase over the third quar-

ter, particularly as it enters an additional

basin. Neither Samuels nor RockPile

Executive Vice President James Evans

would divulge much information about

the new activity but Evans did say it

involves a client the company has “target-

ed for quite some time” and is also oper-

ating in the Bakken.

“What I would say is that it’s a basin

that’s attractive for us, where we have

deep operating experience. We think the

metrics looks very nice for improved

growth there,” Evans said.

RockPile has also placed a deposit on

yet another completion spread and said it

is comfortable with deploying it immedi-

ately in the Williston Basin.

“However, with the strength we are

seeing in other attractive basins, we are

also confident that we could bring

RockPile’s best-in-class services to a

broader spectrum of operators and contin-

ue to expand our footprint,” Evans said.

RockPile had a backlog of approxi-

mately 25 wells at the end of the second

quarter, including 15 for third-party oper-

ators.

“If you can double your cash flows

from this quarter again through just rein-

vestment of free cash flow, what’s the

optimal time to do something? It’s a bal-

ancing act,” Samuels said. “(We’re) real-

ly in no rush to do anything.”

Mastering techniqueTriangle recently closed on an approx-

imately 46,000 net acres acquisition in

North Dakota and Montana for a com-

bined $120 million. Production on exist-

ing wells has proven a bit better than

what Triangle modeled, but it has not yet

drilled any wells on the new acreage

although Samuels alluded to it being part

of the budget for next year. Chief

Financial Officer Justin Bliffen added

that an in-depth review of the acreage is

encouraging.

“We think we can go up there and exe-

cute better and deliver higher well per-

formance in what we’ve seen in the

acquired wells,” Bliffen said.

Drill times on Triangle’s other acreage

are dropping, with one well spud to total

depth in 11.5 days. The company has

three four-well pads completed in non-

production and three of its four drilling

rigs in operation. Triangle has transi-

tioned its completion designs to using

only cemented liners and hybrid slickwa-

ter style fracks. It is also testing various

forms of artificial lift to improve well

productivity and longevity. Dominic

Spencer, Triangle’s executive vice presi-

dent of operation, said the company con-

tinues to drill out its plugs with two-inch

coil tubing which is “executing better

than ever,” resulting in a 43 percent

improvement over first quarter average

times.

“All of these small improvements and

operational execution add up substantial-

ly and impact our cash conversion cycle

greatly,” Spencer said.

Triangle’s second quarter production

averaged 10,551 barrels of oil equivalent

per day, boepd, marking a 146 percent

increase from 4,287 boepd in the same

quarter a year ago. The company’s total

estimated net proved reserves jumped

134 percent from 22.08 million boe to

51.66 million boe year-over-year.

In June, Triangle ranked as the 20th

largest Bakken oil producer in North

Dakota averaging 13,813 barrels of oil

per day from operated, non-confidential

wells.

Caliber proves beneficialTriangle’s gas gathering company,

Caliber Midstream, generated just under

$3 million in revenue for the quarter.

Triangle currently has 88 of its 99 wells

connected to gas sales and expects to

have all of its wells connected by Nov. 1.

Spencer also noted that 57 wells on 19

well pads are equipped to stabilize the

crude at Caliber’s facility and it is captur-

ing revenues from the resulting vapor gas

during the process.

“(Caliber) feels like where RockPile

was a year ago,” Samuels said, “which is

very, very positive.”

Samuels told analysts that the compa-

ny is reviewing every option to best

develop its businesses and make plans for

structural changes.

“This is a company-wide effort and it

is something that we are digging in to

come up with solutions that maximize

shareholder value,” he said.

He highlighted the fact that since

2010, the business is at its highest value.

“We’ve taken the business from zero

in revenue to the quarter you see today,”

Samuels said. “Now is not the time to

slow down.” l

l C O M P A N Y U P D A T E

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BAKKENStats● B A K K E N C O M M E N T A R Y

Top ND IPs spread from Williams to Stark countiesMIKE ELLERD

Petroleum News Bakken

The top 10 IPs reported for North

Dakota Bakken wells for the week of Sept.

2 through Sept. 8 extend from southwest

Williams County all the way down to

northwest Stark County (see map).

Burlington Resources had the highest IP at

2,902 barrels from a well in the Camel

Butte field in northeast McKenzie County

(page 11). QEP had the Nos. 2, 6 and 8 IPs

ranging between 2,080 and 2,496 barrels

from three common-pad wells in the Grail

field in eastern McKenzie County. Whiting

Petroleum had four wells on the list, two

common-pad wells in the Juniper field in

central McKenzie County that came in

third and ninth on the list, and two com-

mon-pad wells in the Zenith field in north-

west Stark County that came in fourth and

tenth. Statoil had the No. 5 well in the

Buford field in southwest Williams County

at 2,263 barrels, and Halcon Resources had

the No. 7 IP at 2,131 barrels from an

Antelope field well in far northeast

McKenzie County.

Montana IPsIn Montana, Whiting had the highest IP

among the eight well completions reported

between Aug. 24 and Sept. 6 at 1,174 bar-

rels from a Richland County well (see link

to Montana permits and completions on

this page). A neighboring Whiting well on

the same pad came in with the second high-

est Montana IP for the well at 1,077 barrels.

Continental Resources reported six

Montana well completions for the week.

One of those wells is in Roosevelt County

and the other seven are in Richland County.

The Roosevelt County well had an IP of

467 barrels while the seven Richland

County wells had IPs ranging from 258 to

381 barrels.

PermittingA total of 55 new well permits were

issued in North Dakota between Sept. 2

and 8, up two permits from the previous

week (page 11). At 18, most of the permits

were issued for wells in McKenzie County,

followed by 16 in Williams County and 15

in Mountrail County. Three permits were

issued in Stark County and one each in

Burke, Divide and Renville counties.

In Montana, Continental was issued two

permits for Bakken wells in Richland

County, and Epyon Oil was issued one for

a Bakken well in Sheridan County.

ND well transfersBetween Aug. 7 and Sept. 4, 126 well

operators were transferred in North

Dakota, with most, 105 in all, transferred

from Baytex Energy USA LTD to Baytex

Energy USA LLC in Divide County.

In Burke County, eight Madison forma-

tion wells were transferred from Wapiti

Operating to Petro Harvester Operating,

and two Madison formation wells were

transferred from Open Range Inc. to Petro

Harvester. Seven wells in the Mondak field

in McKenzie County were transferred from

Kodiak to Emerald Oil, and three Slawson

Exploration wells in the Antelope field,

also in McKenzie County, were transferred

to White Butte Oil Operating.

A list of those transfers is available at

http://bit.ly/1BsBt8B. ●

BIG

HO

RN

EN

GIN

EER

ING

North DakotaThe best list for North Dakota is updated daily by the North Dakota Oil and Gas Division at www.dmr.nd.gov/oilgas/riglist.asp

SaskatchewanWeekly drilling activity report from the government of Saskatchewan: www.economy.gov.sk.ca/Daily-Well-Bulletin-Weekly-Drilling-Reports

ManitobaWeekly drilling activity report from the government of Manitoba: www.manitoba.ca/iem/petroleum/wwar/index.html

PHOTO COURTESY CONTINENTAL RESOURCES

Looking for a rig report?Company Exchange Symbol Closing price Previous Wed.

Abraxas Petroleum Corporation NASDAQ AXAS $5.40 $5.82

American Eagle Energy Corporation NYSE AMZG $4.74 $5.09

Arsenal Energy USA, Inc. TSE AEI $9.25 $9.05

Baytex Energy USA Ltd NYSE BTE $41.52 $43.91

Burlington Resources Co., LP (ConocoPhillips) NYSE COP $78.99 $80.90

Continental Resources, Inc. NYSE CLR $149.25 $160.00

Crescent Point Energy US Corporation TSE CPG $42.42 $43.15

Denbury Onshore, LLC NYSE DNR $16.19 $16.84

Emerald Oil, Inc. NYSEMKT EOX $7.88 $8.06

Enerplus Resources USA Corporation NYSE ERF $19.92 $21.35

EOG Resources, Inc. NYSE EOG $102.01 $107.74

Fidelity Exploration & Production (MDU) NYSE MDU $30.50 $31.25

Halcon Resources NYSE HK $4.91 $5.66

Hess Corporation NYSE HES $99.14 $100.75

Kodiak Oil and Gas (USA), Inc. NYSE KOG $14.75 $15.96

Legacy Reserves Operating LP NASDAQ LGCY $29.94 $29.88

Marathon Oil Company NYSE MRO $40.02 $41.28

Mountain Divide, LLC (Mountainview Energy) CVE MVW.V $0.39 $0.36

Newfield Production Company NYSE NFX $39.13 $42.78

Northern Oil and Gas NYSE NOG $15.89 $16.70

Oasis Petroleum North America NYSE OAS $46.32 $48.26

Oxy USA, Inc. (Occidental Petroleum) NYSE OXY $98.54 $102.45

PetroShale Inc. CVE PSH $2.15 $1.57

QEP Energy Company NYSE QEP $32.21 $34.48

Resolute Natural Resources Company, LLC NYSE REN $7.32 $7.80

Samson Resources Company (KKR & Co) NYSE KKR $22.56 $23.20

SM Energy Company NYSE SM $89.21 $89.21

Statoil Oil and Gas LP NYSE STO $27.97 $29.15

Triangle USA Petroleum Corporation NYSE TPLM $11.30 $11.83

Whiting Oil and Gas Corporation NYSE WLL $84.09 $91.15

WPX Energy Williston, LLC NYSE WPX $25.51 $26.37

XTO Energy, Inc. (ExxonMobil) NYSE XOM $96.81 $99.11

Bakken producers’ stock pricesClosing prices as of Sept. 10 along with those from previous Wednesday

Montana well permits and completionsTo view the activity between Aug. 24–Sept. 6, 2014, please visit http://bit.ly/1qFccUZ


IPs for ND Bakken wellsSept. 2–8, 2014

see ND IP page 9

This chart contains initial production rates, or IPs, for active wells that were filed as completed with the state of North Dakota from Sept. 2-8, 2014 in the Bakken petroleum system, whichincludes formations such as the Bakken and Three Forks. The completed wells that did not have an available IP rate (N/A) likely haven’t been tested or were awarded confidential (tight-hole) status by the North Dakota Industrial Commission’s Department of Minerals. This chart also contains a section with active wells that were released from confidential status duringthe same period, Sept. 2-8. Again, some IP rates were not available (N/A). The information was assembled by Petroleum News Bakken from NDIC daily activity reports and other sources.The name of the well operator is as it appears in state records, with the loss of an occasional Inc., LLC or Corporation because of space limitations. Some of the companies, or their Bakkenpetroleum system assets, have been acquired by others. In some of those cases, the current owner’s name is in parenthesis behind the owner of record, such as ExxonMobil in parenthesisbehind XTO Energy. If the chart is missing current owner’s names, please contact Ashley Lindly at [email protected]

County (Co.) abbreviations are as follows — BIL: Billings, BOT: Bottineau, BOW: Bowman, BRK: Burke, DIV: Divide, DUN: Dunn, GV: Golden Valley, MCH: McHenry, MCK: McKenzie, MCL: McLean, MER: Mercer, MNT: Mountrail, REN: Renville, SLP: Slope, STK: Stark, WRD: Ward, WIL: Williams


ND IP continued from page 8

ND oil permit activitySept. 2–8, 2014

see ND PERMIT page 10

Abbreviations - Following are the abbreviations used in the report and what they mean:FNL = From North Line | FEL = From East LineFSL = From South Line | FWL = From West Line

see ND IP page 10


ND PERMITS continued from page 9

see ND PERMITS page 11


—Ashley Lindly | [email protected]

ND IP continued from page 9


ND PERMITS continued from page 10


Top 10 Bakken wells by IP rateSept. 2–8, 2014

ND weekly county permit totalsSept. 2–8, 2014

Note: This chart contains initial production rates, or IPs, from the adjacent IP chart for active wells thatwere filed as completed with the state of North Dakota from Sept. 2-8, 2014 in the Bakken petroleum sys-tem, as well as active wells that were released from tight- hole (confidential) status during the same period.The well operator’s name is on the upper line, followed by individual wells; the NDIC file number; wellname; field; county; IP oil flow rate in barrels of oil.

To view this chart in its entirety, please visit: http://bit.ly/1sjbNbp


MERGERS & ACQUISITIONSEmerald closes on Liberty assets acquisition

Denver-based independent Emerald Oil announced on Sept. 4 that it closed on

its previously announced acquisition of approximately 31,500 net acres in North

Dakota from Liberty Resources. The acreage is contiguous with Emerald’s Low

Rider and Lewis and Clark focus areas in McKenzie, Billings and Dunn coun-

ties.

At the time the transaction was announced in early August, the assets had net

production of approximately 400 barrels of oil equivalent per day. Proved

reserves were put at 2 million boepd with a PV-10 (present value of estimated

reserves with a 10 percent annual dis-

count rate) of $51.5 million. There

are 23 new operated spacing units in

the acreage, working interest in 13

existing spacing units and 157 drill

locations. The acreage is 75 percent

operated and 95 percent held by pro-

duction.

The total consideration Emerald

paid for the acquisition is approxi-

mately $109 million, which is subject to customary closing adjustments, and

involves $70.2 million in cash along with the transfer of approximately 4,250 net

Emerald acres in Williams County.

The transaction increases Emerald’s net Williston Basin acreage to approxi-

mately 120,400 acres, which is 75 percent operated and 53 percent held by pro-

duction. The acreage has a total of 104 operated spacing units with 854 drilling

locations.

Prior to merging with Billings, Montana-based Voyager Oil and Gas in 2012,

Emerald was focused on non-operated lease holdings in the Williston Basin.

However, following the merger, Emerald transitioned to operating its assets,

completing its first Bakken well in March 2013.

According to North Dakota Department of Mineral Resources Oil and Gas

Division Records, Emerald currently has 31 active wells in the state, another 27

on confidential status, 12 listed as being drilled and 34 listed as permitted. As of

June, Emerald ranked 29th among the top 50 Bakken oil producers in North

Dakota averaging 2,972 barrels of oil per day for operated, non-confidential

wells.

In Montana, Emerald currently has three wells permitted in Richland County

according to Montana Board of Oil and Gas Conservation records.

—MIKE ELLERD

implement the program based on sound sci-

ence. The order exempts existing land uses

and activities including county road mainte-

nance, oil and gas production, and commu-

nication and power line facilities.

“We appreciate the efforts and leader-

ship from Governor Bullock to ensure that

management of the sage grouse remains in

state hands,” said Dave Galt, Executive

Director of the Montana Petroleum

Association in a statement. “By working

together, we’ll ensure that we can protect

not only this bird, but also economic oppor-

tunity and quality of life for all Montanans.”

Public hearings and NSO bufferThe order was based on recommenda-

tions of the Greater Sage-grouse Habitat

Conservation Advisory Council, which

Bullock established in 2013. The Advisory

Council gathered information, and brought

stakeholders and experts together in a pub-

lic process to recommend conservation

measures to address the threats to the sage

grouse.

Throughout the public hearings, Galt

requested the No Surface Occupancy, NSO,

buffer to be set at 0.6 miles outside of an

active lek instead of the proposed one mile.

The 0.6 mile NSO guideline is based on a

current plan utilized in Wyoming. The new

order does set the distance at 0.6 miles

which means no surface facilities, including

roads, could be placed in that area. Well pad

densities cannot exceed an average of one

per square mile and suitable habitat dis-

turbed should not exceed 5 percent.

However, certain activity that meets season-

al stipulations within some zones could be

permissible on a case-by-case basis.

The order recognizes the importance of

Montana’s private landowners to help pre-

serve vital sage grouse habitat since approx-

imately 64 percent of sage grouse habitat in

the state is privately owned, so incentive-

based conservation projects will be put in

place.

“We all have a role to play in ensuring

the state retains management of the sage

grouse for the benefit of our state’s econo-

my and quality of life,” Glenn Marx, exec-

utive director of the Montana Association of

Land Trusts said.

“Science shows that business-as-usual

will have devastating effects on sage-grouse

over the long-term,” said Janet Ellis, pro-

gram director for Montana Audubon. “We

all need to follow the emerging science and

work closely together to conserve this icon-

ic species. And what’s good for sage-grouse

and sagebrush is good for a whole host of

at-risk wildlife species — making this an

important conservation program for the

state of Montana and our wildlife.”

Program and fundingWhen fully implemented, the program

will have up to six full-time staff. The gov-

ernor’s upcoming budget will include fund-

ing for the program, however until that

budget is approved, Bullock intends to

work with stakeholders to raise private

funds to help the program get started.

The governor’s executive budget, which

is subject to legislature approval, will also

include a proposal for a Sage Grouse

Stewardship and Conservation Fund,

designed to, among other objectives, pro-

mote and fund voluntary incentive-based

non-regulatory programs and practices on

private land to conserve sage grouse habi-

tat.

—MAXINE HERR

continued from page 1

GROUSE PROTECTION

As of June, Emerald ranked 29thamong the top 50 Bakken oilproducers in North Dakota

averaging 2,972 barrels of oil perday for operated, non-confidential

wells.

http://www.percheronllc.com


United States.” The results of that study,

she said, “do not support the speculation

that Bakken crude in particular is more

volatile than all other crude oils or other

flammable liquids.”

Cutting also told the subcommittee that

the oil and gas industry in North Dakota

has a strong safety culture that is focused

on zero incidences. “All incidences, large

and small generate a safety investigation

to determine the root cause of the safety

incident,” she said. “Procedural changes

or additional safety measures are imple-

mented to mitigate the root cause and pre-

vent a reoccurrence of a similar incident.

This is true whether the incident occurs

during drilling, completions, production

or transportation aspects of the industry’s

activities,” she said. “Commissioning of

the Turner Mason study is an example of

the industry’s desire to investigate safety

incidences.”

Cutting went on to say that hazardous

materials shipped via rail in the U.S.

arrive safely 99.997 percent of the time. It

is the remaining 0.003 percent of those

shipments that stakeholders, including the

oil and gas industry, tank car builders and

owners, railroads, the state of North

Dakota as well as PHMSA, are focused

on.

“In conclusion, safety always has and

continues to be a core value of the oil and

gas industry,” Cutting said. “The NDPC

and its members believe rail safety

improvements must be developed using a

holistic, comprehensive and systematic

approach that examines prevention, miti-

gation and response,” she said, adding that

“Safety solutions must be data-driven and

produce measurable improvements to

safety without creating new risks or inad-

vertently shifting the risks to other busi-

nesses or operations. To achieve this, col-

laboration is needed among government,

shippers, railroads, and tank car builders.”

The regulatory viewOn the regulatory side, Timothy

Butters, deputy administrator at PHMSA,

compared the results of the PHMSA study

with those of a similar study conducted by

the American Fuel and Petrochemical

Manufactures, AFPM, the latter of which

found Bakken crude falls in the normal

range of light hydrocarbon content,

“including dissolved flammable gases,”

according to Butters. “PHMSA does not

dispute this conclusion,” he said. “The pri-

mary difference between PHMSA’s analy-

sis and AFPM’s analysis is that PHMSA

considered a broader range of crude oils

for comparison to Bakken crude oil,

though both analyses determine that

Bakken crude oil is within the norm for

light crude oils,” Butters said. “PHMSA

notes that light sweet Bakken crude oil

may be more ignitable and flammable

than some other types of crude oil, specif-

ically ‘heavy crude oil.”’

Also testifying on the regulatory side

was Chris Smith, principal deputy assis-

tant secretary at the Department of

Energy, DOE, Office of Fossil Energy. On

the nature of Bakken crude oil, Smith said

that based on laboratory analyses conduct-

ed on samples collected by PHMSA as

part of that agency’s study, Bakken crude

“is more volatile than most other types of

crude and has further indicated that this

greater volatility correlates to increased

ignitability and flammability.”

Smith added that DOE “has not

attempted to make any detailed compari-

son between Bakken crude oil and other

forms of crude oil.” However, he added

that “based on the work done by both

PHMSA and the NDPC and drawing on

its general knowledge of crude oils, DOE

considers Bakken to be a light sweet crude

oil that has a comparatively higher con-

centration of lighter end hydrocarbons and

a higher vapor pressure than many other

crude oils. On that basis, it can be consid-

ered more volatile than some, but not nec-

essarily all, of the other crude oils pro-

duced in the U.S.”

Smith went on to say that DOE

believes “more scientific analysis is need-

ed to better define the relationship

between volatility and ignitability/flam-

mability, to identify what characteristics

of a complex mixture of hydrocarbons are

most representative of its propensity to

ignite, and to better understand the com-

bustion characteristics of various types of

crude oil in the context of the conditions

typically experienced after a derailment or

other type of train accident.”

Other testimonyAlso testifying at the hearing was John

Auers of Turner, Mason and Co. who pre-

sented detailed results of the Bakken

crude study. “At this time, we are not

aware of any field-level crude oil quality

assessments as extensive or as controlled

as this study in the Bakken or elsewhere,”

Auers told the subcommittee. “Bakken is

a light sweet crude oil with very consistent

properties throughout the entire produc-

tion basin,” he said, adding that the prop-

erties measured meet all DOT require-

ments “for safe transport by rail or truck.”

And Mark Zoanetti, deputy chief for

special operations with the Syracuse, New

York, fire department told the subcommit-

tee about training and planning efforts his

department has made to prepare for possi-

ble incidents involving all types of haz-

ardous materials transported through

Syracuse on a daily basis through various

modes of transportation. “From the per-

spective of the Syracuse Fire Department,

the Bakken crude oil trains do not repre-

sent the only challenge for first respon-

ders,” Zoanetti said. “The vast arrays of

other hazardous materials that move

through our jurisdiction require us to be

prepared for all hazards.”

—MIKE ELLERD


HOUSE HEARING

and what could go on in the future.”

Leading among those six plays are the

Eagle Ford and Bakken at 39 and 30 per-

cent of U.S. horizontal oil production,

respectively. The other four areas of

domestic horizontal oil production are the

Permian Basin at 15 percent, numerous

Midcontinent plays at 5 percent, the

Denver-Julesburg Basin at 4 percent, and

the Powder River Basin at 2 percent.

“So currently 69 percent of all of hori-

zontal oil production is really only from

two fields,” Thomas noted, adding that

“the Bakken and Eagle Ford have domi-

nated the production growth so far and

they’re still dominating the production

growth.”

While the Eagle Ford and Bakken have

seen some remarkably rapid development

growth in recent years, Thomas noted that

the rate of production growth in those two

plays is beginning to slow down. “We are

beginning to see, certainly in the Bakken,

that rate of growth is slowing,” he said.

“And we are starting to see the early signs

in the Eagle Ford that that rate of growth

is slowing. In absolute terms, they are still

growing quite strongly, but they are

beginning to slow. It is like all fields do.”

Now to the futureSo what does the future hold for

domestic horizontal exploration? Thomas

believes the future lies in plays consisting

of combination plays which tap multiple,

vertically stacked oil-bearing formations.

“First of all, we don't see another

Bakken or Eagle Ford out there,” he said.

“And when I say Bakken or Eagle Ford, I

am talking about two giant oil fields,

world-class oil fields that are 15 billion to

20 billion barrels of recoverable oil.” He

said those two fields “have driven this

tremendous amount of horizontal growth

up to date.”

And while the Permian Basin is one of

the larger horizontal oil plays in the U.S.,

Thomas said EOG foresees slower

growth in that basin. “The Permian —

very large reserve potential, tremendous

reserve potential. But in our opinion, we

do not see that the Permian will be able to

grow as fast as the Eagle Ford.”

For pure shale plays, Thomas said only

the highest quality shales are economical-

ly feasible to develop. “If you look at

shales, to get oil out of shales, you are

only limited to the very, very best shales.

There are not that many shales that are

capable of producing oil,” Thomas said.

“So there is limited potential, I believe,

for new shale oil plays,” he continued,

adding that “We do see potential for addi-

tional gas plays, wet gas plays, maybe

even condensate plays with shale,

because it is a bit easier to make gas from

shales.”

But that doesn’t necessarily paint a

dark picture for unconventional domestic

oil plays, and Thomas is optimistic about

the potential for vertically stacked plays

involving a combination of formation

types such as tight sandstones and tight

carbonates “because the frack technology

works there just as well as it did in the

shale.”

The Delaware Basin in southeast New

Mexico and western Texas is an example

of one such play. The stratigraphy in that

basin is similar to the Bakken in that there

are high-quality shale intervals overlying

overpressured sandstones, which, in turn,

overlie other shales. The upper shale in

that play is the Leonard, which has an

estimated oil content of 50 percent. It

overlies the Bone Spring sandstone with

an estimated oil content of 70 percent oil

content. Thomas said two EOG wells

completed in the Bone Springs sandstone

in the second quarter made 1,200 to 1,500

barrels of oil per day. And under the Bone

Springs sand is the Wolfcamp shale with

an estimated 31 percent oil content.

Another stacked unconventional play

EOG is pursuing is in the Denver-

Julesburg Basin in northern Colorado

where the company is simultaneously

developing the Niobrara shale and the

deeper Codell sandstone. EOG estimates

the oil content of the Codell sand at 78

percent and the Niobrara Shale at 71 per-

cent.

In the Powder River Basin of

Wyoming, EOG is pursuing two separate

sandstones, the Parkman, estimated to

have a 69 percent oil content, and the

Turner sandstone with an estimated oil

content of 34 percent.

“So these are just examples of some of

the emerging things that could be happen-

ing and are happening today and direc-

tionally where we see the exploration

potential for the U.S.”

The export incentiveThomas noted that predictions are for

the growth in U.S. oil production to slow

down and eventually flatten out by 2020.

He also said that if unconventional, hori-

zontal plays develop at a normal pace,

production in those plays will flatten by

2020 as well. “So what we need is some

new plays,” he said. “And we need some

new significant plays to continue the

growth beyond 2020.”

But to encourage exploration for new

plays, according to Thomas, there must

be incentive. As U.S. light crude produc-

tion continues to gain on domestic light

crude refining capacity, in the absence of

other markets, the demand for domestic

light crude will wane. The solution,

according to Thomas, is lifting the ban on

U.S. crude exports, “Because if we are

going to carry on the growth of U.S. hor-

izontal oil forward from 2020 forward,

we are going to have to have new plays.

And we are going to have to have the

export ban lifted to lift the uncertainty

and to encourage new exploration and

new inventiveness going forward.”

Thomas added that domestic refining

capacity will stay ahead of domestic pro-

duction over the next few years, but

beyond that, the incentive must exist if

there is to be more domestic exploration.

“We have got a few years left, but we

really need to aggressively move towards

exporting oil if we are going to continue

the curve … beyond 2020.”

International prospects?While Thomas sees the potential for

more horizontal play exploration in the

U.S., outside of the U.S. he said the costs

would be too high at the present time.

“The issue in the success on these hori-

zontal plays is that you have to have low

costs. They will not work in a high-cost

environment,” he said in response to an

analyst’s question, pointing out that out-

side the U.S., the services and infrastruc-

ture simply don’t exist for economically

viable horizontal shale development. “So

to get your well costs down to an accept-

able level that you can make money is

very, very difficult anywhere right now,

except in the U.S. You don't have the

service infrastructure. You just don't have

all the things you need to really drive

down the cost to make them economical-

ly successful.”

While that situation will likely change

at some point in the future, Thomas does-

n’t believe that change will come in the

short term. “So there will be, at some

point down the road, I am sure there will

be successful horizontal shale or maybe

even oil plays elsewhere in the world, but

we see that as much further down the road

— five to 10 years, something like that.”

More about EOGEOG Resources, under the direction of

then CEO Mark Papa, was one of the

leaders in developing horizontal oil pro-

duction beginning with multi-stage frac-

tured wells in the Permian Basin in 2000

(where the company is still active), in the

Barnett shale in Texas in 2003 and in the

Bakken in 2006. EOG continued horizon-

tal shale exploration expanding into the

Eagle Ford in 2009, and since has refined

its technical knowledge of shale develop-

ment. That strategy has now positioned

the Houston-based independent as the

largest crude oil producer in the Lower 48

states.

In North Dakota, EOG ranks as the

fourth largest Bakken oil producer, aver-

aging 71,731 bpd in June for operated,

non-confidential wells according to North

Dakota Department of Mineral Resources

data. l


FUTURE OF OIL

needed it to be. As a result, Trust Lands

hired the engineering firm Bartlett & West

to survey the river and develop maps that

show ordinary high watermarks according

to State Water Commission guidelines

which differentiate it as “that line below

which the action of the water is frequent

enough either to prevent the growth of veg-

etation or to restrict its growth to predomi-

nantly wetland species.” With that defini-

tion as the basis, the survey began with a

study of the river from the Montana border

to the Highway 85 bridge near Williston.

“That was an on-the-ground survey

where they went out in a boat, jumped off

onshore, walked up to the high lands until

the vegetation changed and made marks in

the ground, plotting all that in the summer

of 2009,” said Trust Lands senior land pro-

fessional Keith Bayley. Additional field

work was conducted the following summer

in questionable areas along that same

stretch of the river. Bartlett & West were

again contracted to delineate the high

watermark from Williston to New Town

and then on to the Garrison Dam. Since the

state only owns up to the high watermark of

the river, it took additional research to

determine the boundaries under Lake

Sakakawea (see map). Some 1958 aerial

photographs were used to outline the origi-

nal river channel before the dam was built.

The same process was involved when

working near the Garrison Dam when

Bartlett & West utilized photographs of the

river from the 1940s before the dam exist-

ed. The survey fulfilled Trust Lands’

responsibility to the people of North

Dakota so that mineral leases could be

nominated for sale.

Drew Combs of the Minerals

Management Division of Trust Lands said

it is important for people to understand the

state’s position. “This wasn’t a big land

grab on the state’s part,” Combs said. “We

had to do the survey because it was obvious

people were drilling, and … we had to get

modern with it to tell what we owned.”

While these new maps helped the state

determine its boundaries based on state

statute, the Bartlett & West survey is just

one of many surveys available causing con-

flict between parties battling over owner-

ship. One of the biggest rubs is with the

federal government. Bayley said the feder-

al definition of the ordinary high water-

mark is based on cadastral standards and an

administrative rule, but it also takes into

account hundreds of years of case law.

“So it seems to me like it’s a much more

complex definition, but one of BLM’s sur-

veyors said ‘It’s pretty easy, you just walk

down to the water and you can tell where it

is,’” Bayley said in describing a conversa-

tion at a recent meeting with Bureau of

Land Management officials. “So that seems

to be something of a definition that doesn’t

reflect reality.”

A series of court casesTo complicate matters, a statute written

prior to statehood said the upland or ripari-

an landowner on a navigable waterway

owns the mineral rights down to the low

watermark. So with two contradictory

statutes, a court case eventually emerged.

Petroleum News Bakken has reported on

the case of Reep v. State from 2013 which

challenged the issue of who owns the min-

erals between the high and low watermarks

on the Missouri River. The court, in a unan-

imous decision, found in favor of the state

of North Dakota declaring that the state

owns up to the ordinary high watermark.

The court also pointed out that the Bartlett

& West survey conducted for the state is

not the only legitimate survey. In fact,

Bayley said two of three pending lawsuits

against the state are due to survey methods.

Combs said it will take a series of court

cases to determine how the riverbed own-

ership will be completely resolved, and due

to backlogs in the court system, the deci-

sions will take years. For instance,

Wilkinson v. State is a case that challenges

the use of the Highway 85 bridge as the

starting point for Bartlett & West’s survey

and depending on the court’s judgment, it

could dictate the validity of that survey.

However, the court case won’t be heard for

more than a year.

“You can’t start asking the next set of

questions until you get an answer (from the

first case),” Bayley said. “Some of it

depends on whether we get good decisions

— not whether the state wins or loses,” he

continued, “but whether we get substantive

decisions from the Supreme Court so they

weigh heavily on everybody and really

describe what things are supposed to look

like. But if we get decisions that don’t say

much, or only address one single issue, it

will depend on the decision as to how many

more you get.”

A moving targetIn order to hold a lease and begin

drilling for oil, operators need to determine

whom to pay. Since the boundaries are con-

flicting, Combs said operators will some-

times pay the wrong entity and then the

money needs to be returned once proper

determinations are made.

“If we’re wrong, we’ll pay you back.

We do it all the time,” Combs said.

However, he said many private fee own-

ers will insist they have title to a particular

parcel of land when they really don’t.

“Unfortunately, rivers move. And there-

fore, so does your title. You lose some, you

gain some. It’s almost the only circum-

stance in the U.S. (where) that happens,”

Combs said. “Normally it wasn’t a big deal

until you put oil below it … and now it’s

become a big deal.”

The state is eager to obtain answers to

the many territorial questions and develop a


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RAY PALERMO

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STANLEY

PLAZA

ALEXANDERWATFORD CITY

NEW TOWN

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River Survey Phases

0 10 205 Miles

Dept. of Trust LandsSurvey Locations

Survey Lines

MajorRoads

Lake Sakakawea

Fort Berthold Indian Reservation

Phase I Survey Area

Phase II Survey Area

PhaseIV

Survey Area

BLM to hold workshop on land surveys The Bureau of Land Management, BLM, will host a workshop to help indus-

try deal with the challenges of operating on federal and Indian lands in the Bakken

on Oct. 9 in Billings, Montana.

Since March 2013, BLM has hosted workshops on drilling permits, inspection

and enforcement, and collaborative resources stewardship. The next in the series

is titled, “Communitization Agreements” which includes discussions on land sur-

veying related to activity in North Dakota and how to handle difficult mineral sit-

uations. Communitization involves pooling federal and/or Indian lands with other

lands when separate tracts under the federal and Indian lands cannot be inde-

pendently developed and operated in conformity with an established well-spacing

program. BLM land surveyor Josh Alexander will explain why and how river re-

surveys are being performed and how they affect federal minerals. Other presen-

ters will share guidelines on getting communitization agreements approved quick-

ly and how to avoid common errors.

Drew Combs of the Minerals Management Division of North Dakota Trust

Lands said it is important for industry and other interested parties to appear at the

workshop to give input into the process because the federal government has been

uncooperative in its dealings with the state and industry regarding riverbed sur-

veys, related leases, and minerals.

“This is a really serious deal, but it’s kind of tough because we’re almost deal-

ing with an unmovable force,” Combs said. “Something’s going to have to hap-

pen. We’re going to have to take it to the next level; what that is I don’t know.”

The workshop is a partnership with the North Dakota Petroleum Council and

will take place at the Hampton Inn at 5110 Southgate Drive in Billings, Montana,

from 8 a.m. to 5 p.m. Attendees are requested to RSVP by Sept. 26 to kmuilen-

[email protected].

—MAXINE HERR


RIVERBED TRACTS

see RIVERBED TRACTS page 15

“This is not about us getting moreacreage for the state. This is about

finding out what the law is andapplying the law. We just want to

find out how to do it, just likeeverybody else.”

—Keith Bayley, ND Department of TrustLands


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RENTAL

company’s drilling inventory to C$2 bil-

lion of future investment in the Torquay

play alone.

He said that once a string of recent

deal making is completed and increased

capital spending takes effect, Crescent

Point expects to grow its production per

share by more than 7 percent this year.

The company is now targeting an exit

rate for 2014 of 155,000 boe per day, with

daily production for the year expected to

average 140,000 boe per day, while cash

flow from operations is forecast at $2.6

billion.

Package detailsThe Lightstream package provides

almost 50,000 acres of Mississippian con-

ventional formations and 27,000 acres of

undeveloped freehold interests.

Crescent Point will also pick up three

parcels of Bakken rights near its

Creelman enhanced oil recovery project

in southeastern Saskatchewan.

Other attributes include 72 net inter-

nally identified drilling locations, expect-

ed free cash flow of C$51 million over

the next 12 months, tax pools of C$375

million, and netbacks of about C$62 per

barrel based on West Texas Intermediate

prices of US$100 per barrel and C$4.65

per thousand cubic feet of natural gas at

AECO prices.

Independent engineers have assigned

reserves to the properties, with 13.2 mil-

lion boe listed as proved plus probable

and 8.6 million of proved, generating a

reserve life index of 11 years proved plus

probable and 7.1 years of proved.

The acquisition metrics are estimated

at C$99.394 per boe of production at the

current output level, resulting in a netback

of C$62 per boe, while reserve prices are

calculated at C$24.85 of proved plus

probable and C$38.14 of proved.

The company said that in addition to

consolidating its core operating area, the

assets offer high-netback, conventional

light oil assets with low decline rates,

with the majority of undeveloped land

located in an emerging fairway with “sig-

nificant exploratory potential.”

Torquay expansionCrescent Point said it continues to

delineate and expand its Torquay resource

play in several directions with successful

step-out drilling results in southeast

Saskatchewan.

It disclosed that so far 15 vertical

delineation and eight horizontal step-out

wells have been drilled across the play, all

with “encouraging results.”

Based on the results and refined geo-

logical mapping, Crescent Point said it

has added about 40,000 net acres and 140

net drilling locations to its Torquay inven-

tory.

Most recently, a step-out well on lands

previously acquired in the Flat Lake area

has extended the play about 36 miles to

the west, with a well yielding an average

250 barrels per day over the first month

and “trending above the company’s cur-

rent internally generated 175,000 barrels

of expected ultimate recovery type well.”

Crescent Point said that at a C$3.2 mil-

lion all-in well cost for a 1 mile long hor-

izontal well, a 175,000 barrel type well

generates a rate of return of about 130

percent and pays out in 11 months based

on a WTI price of US$97.50 per barrel.

The company said that this year it has

been actively consolidating land in the

Torquay fairway at Flat Lake through

land sales and acquisitions, giving it

exposure to 614,000 net acres.

To extend that pace of development it

has hiked its 2014 capital budget to

C$314 million from an original C$200

million and now expects to drill up to 57

net wells this year, 12 of which are step-

out horizontal wells.

Saxberg said Crescent Point is “very

excited about our successful step-out

wells that have expanded the play in sev-

eral directions.”

Other operationsThe company also reported that cur-

rent production at its Uinta Basin in Utah

is 13,800 boe per day, up 6,000 boe per

day since its Ute acquisition almost two

years ago and credited the rise to an oper-

ated program of recompletions and verti-

cal drilling, including 39 gross non-oper-

ated horizontal wells.

It said a review is under way involving

the sale of non-core assets in Alberta to

further sharpen the focus on its asset base.

The proceeds from any divestitures

will help accelerate development of the

core Bakken, Shaunavon and Uinta Basin

plays.

“We’ve been very active this year on

the acquisitions front, but we remain dis-

ciplined,” Saxberg said. “We continue to

balance our debt levels with our growth

prospects.”

If the Crescent Point deal is completed

as scheduled by Sept. 30, Lightstream

said its asset sales this year will have

involved 20.9 million boe of proved plus

probable reserves, C$112 million of net

annual operating income and a reduction

in capital outlay by C$88.7 million.

Lightstream’s new guidanceBy factoring in the sale of its remain-

ing southeast Saskatchewan assets,

Lightstream has revised its 2014 guidance

to an average 40,000-42,000 boe per day

from 41,000-43,000 boe per day a month

ago, lowering its exit rate for the year to

36,500-39,500 boe per day from 40,000-

43,000 boe per day.

The company said it currently has four

rigs operating in southeast Saskatchewan

and central Alberta and plans to drill 38

wells within its Bakken and Cardium

business units, with 31 brought on stream

before the end of the year. l


TORQUAY STAKE

standard to work with into the future.

“This is not about us getting more

acreage for the state,” Bayley said. “This

is about finding out what the law is and

applying the law. We just want to find

out how to do it, just like everybody

else.” l

Editor’s Note: With BLM openly dis-puting the state’s survey findings, the

state continues to seek some commonground with federal officials. Next week,Petroleum News Bakken will outline thechallenges facing the state, fee ownersand operators due to resistance fromBLM and how they are affecting leaseand royalty payments. The followingweek the third and last installment in theseries will address how fee owners canbecome engaged in the process.


RIVERBED TRACTS

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l LAND & LEASING Between the lines

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