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Large Unit Drilling, Flaring Proposals Stall in North Dakota

Two controversial proposals for the robust Bakken oil patch in North Dakota came to an end Monday with more of a whimper than a bang, according to the three-member Industrial Commission.

Commissioners are Gov. Jack Dalrymple, Attorney General Wayne Stenehjem and Agricultural Commissioner Doug Goehring, and they were set to review a request to reconsider permission previously granted to Denver-based QEP Resources Inc. to develop 25,000 acres in McKenzie County as one unit.

However, in a surprise move, QEP withdrew the plans and said it has given up on the idea of a large unit development.

North Dakota operators usually operate on a 1,280-acre spacing unit basis, and even with approval, QEP needed an OK from 60% of the mineral and working interest owners in the area, something that was looking doubtful given the amount of opposition emerging.

"QEP appreciates all of the work the industrial commission has contributed to support the Grail Unit approval process," a spokesperson Wednesday told NGI's Shale Daily. "Although we do not have plans to pursue an alternative unitization agreement, QEP looks forward to working with [the commission] and mineral owners to develop the acreage. QEP remains committed to supporting the local communities in which we operate."

QEP earlier received the commission's approval on a 2-1 vote. Dalrymple had voted against the plans, indicating it would set the wrong precedent and be unfair to mineral owners that already have produced oil wells in the QEP unit.

Separately, the commission rejected a request by Gadeco LLC for flaring exemptions for paying taxes and royalties on associated gas. Gadeco has contended that it is uneconomic to capture gas at one well in Williams County, but the Department of Mineral Resources chief Lynn Helms disagreed.

Helms alleged that Gadeco's efforts to negotiate gas gathering contracts fell "far short of any kind of real effort." He added that in the future the company needs to be "very motivated" to negotiate gas-gathering contracts as an extension of the state's newly stepped up efforts to reign in flaring in the Bakken (see Shale Daily, March 5).

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