An exemption for Native American lands in the Biden Administration’s executive order (EO) pausing new leasing on federal lands is “highly significant” for North Dakota’s Bakken Shale play, according to the state’s top oil and natural gas regulator.
Biden’s order directed to the Interior Department’s (DOI) Bureau of Land Management “does not restrict energy activities on lands the government holds in trust for Native American tribes,” according to a Federal Register description. Mineral ownership in North Dakota is overwhelmingly (85%) private, 9% federal, which is 95% Native American, and 6% state-owned.
The EO followed a separate 60-day freeze by acting DOI Secretary Scott de la Vega on new leases as well as drilling permits on existing leases.
Lynn Helms, director of the state Department of Mineral Resources, said his department’s assessment turned up 3,400 potential drilling sites impacted by EO. Another 2,900 potential slots could have been impacted on the Fort Berthold Reservation but are on trust lands. Fort Berthold accounts for roughly 30% of the Bakken production.
“The exemptions reduced the impact of the federal ban from 26% of the state’s future well count down to 14%, almost in half,” Helms said. “So it is very significant that the Fort Berthold trust lands were exempted; overall, more than 6,000 slots were affected but the exemption cut that nearly in half.”
North Dakota state estimates indicate the long-term impact of restrictions on drilling permits and hydraulic fracturing on federal lands could eliminate $576 million in federal royalties between now and 2040. Half of the royalties from federal lands go to the state.
Helms told a webinar with news media representatives last Friday that he expects new drilling to pick up later this year and more rigs to be operating by 2022. The state’s largest operators generally do not operate much on federal lands.
“Our largest, most well financed operators do not operate to a large extent on federal lands, so the increase in drilling activity will take place on private and state lands,” said Helms, citing the example of two big units put in place recently for ExxonMobil subsidiary XTO Energy Inc., which has activated its gas processing plant and connecting gathering pipeline.
“With the current increased prices [more than $48/bbl], it would behoove the ExxonMobil company putting a couple of rigs in place in the Hoffman area,” he said. “We’ve heard they have raised some capital, and they don’t have a lot of operations on federal lands.”
Helms said what is being explored now is the idea of developing some of the lands immediately adjacent to Fort Berthold Reservation for the MHA Nation. “There is the potential to use a partnership there to drill 75 or more wells,” he said.
“The question is can we partner with MHA, and use their exemption to develop some of the adjacent federal lands around the reservation. There is also potential legal action around the communitization agreement the federal government has signed on all of the state spacing units for potential drilling, so the feds have committed their mineral rights to the communitization units.”
Helms said the state thinks there may be an opportunity through the courts to “litigate and open up some of those opportunities.” The resources lying off the western boundary of the Fort Berthold Reservation contain at minimum enough oil to generate about $250 million in extraction and production taxes for the state, he added.
“If the MHA Nation can deliver obtaining some of those resources from within the reservation boundaries, then the state would be willing to share the oil and gas extraction taxes from wells that are located outside the reservation but drilled from inside.”
Helms’ department has done a rough evaluation of the potential and the state legislature is hiring an outside consulting firm to do a more refined evaluation, Helms said. He described the area as including two very large tracts of federal minerals that are “low surface occupancy.”
Pending legislation to solidify a partnership with the MHA Nation has “enormous potential value” to Dunn and McKinzie counties and the state, Helms said.Last month, Canadian producer Enerplus Corp. acquired production and development inventory from Houston-based Bruin E&P HoldCo LLC that is concentrated in the Fort Berthold area near the primary holdings of Enerplus.
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