Category Archives: North Dakota

Did I Miss Something? What Happened in the Energy Sector in the Rockies Around the Holidays

Returning to work after the holiday season may have left many of you wondering if you missed anything important while you were in a cookie-induced holiday slumber. 

Here is a short summary of some key items that happened in the energy sector in the Rocky Mountain region around the holidays to keep you in the loop:

Wyoming Amended APD Rules

Effective December 20, 2019, the Application for Permit to Drill (“APD”) rules have been amended for the State of Wyoming.  The revisions to the APD rules can be found here

It is no secret that the number of challenges to oil and gas operatorship have increased recently in Wyoming and that those challenges frequently result in a costly and time-consuming process that ultimately ends up delaying development. 

Wyoming’s APD rules were amended in response to the increased volume of drilling permits filed in the Cowboy State and are an effort by the Wyoming Oil and Gas Conservation Commission (“WOGCC”) to reduce not only the backlog of permits, but costly battles for operatorship. 

Here is a quick summary of what you need to know about the new APD Rules – for more detail, check out the rules here:

  1. Wyoming remains a “first-to-file” state when determining operatorship – the race is still on.
  2. BUT there are now time limits (2-year anniversary of the most recent spud well in the DSU) and the opportunity/procedure for a challenging operator to seek operatorship.

The new WOGCC Rules – Chapter 3, Section 8, are worth a read for the details; specifically, subsections 8(l) and 8(m), the latter of which articulates the process that a challenging operator will utilize, within the two-year window.  The Notice of Intent to File an 8(m) Application and the 8(m) Hearing Application under Section 8(m) are going to be the new meat and potatoes.  Note that there are ten (10) criteria for the 8(m) Application that must be included when challenging operatorship and these criteria are contained in Section 8(m)(i).   

TAKEAWAY: The takeaway is truly that Wyoming’s rule changes are an effort to articulate not only a clear and streamlined operatorship process in Wyoming, but a procedure for challenges to operatorship as well.  Here’s hoping the changes will address the operatorship issues.    

Colorado Provides Draft Wellbore Integrity Rules

On New Year’s Eve, the Colorado Oil and Gas Conservation Commission (“COGCC”) made the draft wellbore integrity rules available.  The draft wellbore integrity rulemaking was shared on the COGCC website on December 31, 2019 via Google Drive, which can be accessed here or directly from the COGCC website here.  The revisions to the draft form are provided in clean and also redline form to easily see the new changes, which are far too numerous to describe.  The revisions include new definitions, changes in bradenhead testing, isolation of coal seams and protected water, and changes to the requirements for the well location plat, casing and cement plan and requirements for stimulation at depths of 2,000 feet or less provided with a Form 2 A – Application for Permit to Drill, just to name a few. 

TAKEAWAY: The draft wellbore integrity rules were made public at a time when many of us may have missed it, yet they contain significant revisions to the rules.  The deadline to submit a Request for Party Status in connection with the wellbore integrity rulemaking is Monday, January 13, 2020. 

North Dakota Rule Changes in Process

The North Dakota Industrial Commission (“NDIC”) has been in the process of adopting changes to the oil and gas rules in the state since last spring/summer.  The amended rules were approved by the NDIC on or about November 25, 2019 and can be found here.  On December 20, 2019, the final rules were submitted to the Attorney General for a legal opinion on the same, which will be provided on or about January 24, 2020, according to the Timetable for Adopting Oil and Gas Rules

TAKEAWAY: The North Dakota rule changes are in process and will be effective April 1, 2020, reportedly after the Attorney General confirms their legality and after approval of the Administrative Rules Committee. 

Some key things certainly took place in the energy sector in the Rocky Mountain region around the holidays!

North Dakota Reports Record Oil and Gas Production

The June 2019 Director’s Cut was released last week, on August 15, 2019, by Director Lynn Helms, NDIC Department of Mineral Resources – a full copy of the June 2019 Director’s Cut can be found here. It contained some noteworthy info…

The June 2019 Director’s Cut reported the following new all-time high production records in North Dakota:

  • June 2019 Oil Production was 1,424,625 barrels/day and originated primarily from the Bakken and Three Forks
  • June 2019 Gas Production was 2,876,689 MCF/day

In addition, the June 2019 Director’s Cut reported that the number of producing wells increased (based off of preliminary numbers at the release date of the June 2019 Director’s Cut) by approximately 38 wells, also reaching a new all-time high number.

While the statewide rig count for North Dakota is significantly lower than the monster rig count numbers reached back in 2012, as of August 15, 2019 the North Dakota rig count was 61 and the estimated number of wells waiting on completion from end of May to end of June was 983 wells, according to the June 2019 Director’s Cut.

Reaching these all-time high production records this summer is certainly noteworthy.

What is the TAKEAWAY here? North Dakota oil and gas production is sitting pretty and is currently bolstering not just the local economy, but it has been improving the economy of the United States as a whole as well.  

According to Natural Gas Intel’s Shale Daily article entitled Lower 48 Oil Boom, Particularly in Texas and North Dakota, Spurring U.S. GDP, North Dakota’s growth in domestic oil production over recent years has been a key part of the drilling expansion that added as much as 1% to the U.S. gross domestic product (GDP) from 2010-2015.

Thanks to the all-time high production records that were set in North Dakota in June, it looks as though this trend will continue.  

Another Oil Glut Feared?

The headlines are all talking about supply and demand; specifically, oil supply and its impact on the price of oil.  As of the posting of this, WTI Crude is sitting at $58.07 per barrel and Brent crude is at $67.85 per barrel, according to Bloomberg Energy, and it has folks wondering where oil prices will go from here in light of oil inventories rising.  In fact, Oil & Gas 360 just released an article yesterday entitled, Rough Day for Oil: Crude Plunge Approaches 6% discussing the plunge in oil prices in detail.

The recent headlines include:

By way of a reminder, at the end of last year, a “glut” is reported to have helped contribute to the fact that oil prices took a significant tumble to that $45 per barrel mark, that we all would like to forget happened. 

So is another “glut” on the horizon? 

Let’s focus on North Dakota for now:

The North Dakota Industrial Commission (“NDIC”) released its most recent Director’s Cut on May 15, 2019, which can be found here.  North Dakota oil production reportedly bounced up approximately 54,500 barrels of oil per day from February 2019 to March 2019.  In addition, the number of producing wells reportedly increased by nearly 200 wells from February 2019 to March 2019, edging close to the all-time high number of producing wells which was 15,409 in January 2019.

However, the North Dakota rig count is reportedly down 70% from the high; the rig count as of May 15, 2019 was 65 and the all-time rig count was 218 from 5/29/2012.  The Director’s Cut also reports that drilling permit activity has returned to normal, operators continue to maintain a permit inventory that will accommodate varying oil prices for the next 12 months.

Now let’s look at big picture data:

According to the U.S. Energy Information Administration (“EIA”), crude oil inventories have risen – according to EIA data highlights, which can be found here, crude oil inventories as of May 17, 2019 are at 476.8 million barrels, an increase of 4.7 million barrels from a week earlier, and an increase of 38.6 million barrels from one year earlier. This increase was reportedly larger than expected, according to the article entitled, WTI Extends Slide to Weekly Lows Near $61 After EIA Report.

It is no secret that supply has increased, so the question remains as to whether supply has increased to the extent that it will cause a glut.  The upcoming OPEC meeting in June and many other factors may help us in determining where we sit on the supply front. Stay tuned!  

Production Records Reached in North Dakota

One of my favorite pastimes is reading the monthly Director’s Cut from Lynn Helms.  It is like those “You Might Be a Redneck If…” jokes, except it goes like this… “You Might Work in The Energy Sector If…you get excited to read the monthly Director’s Cut.”

The Director’s Cut reports go back to 2010 and are released monthly.  The full archive can be found here.  They look back and discuss in detail the prior months’ production, rig count, completions, etc.  In addition, they provide a helpful section called “Agency Updates” which breaks down all of the goings on in the Bureau of Indian Affairs (“BIA”), Bureau of Land Management (“BLM”), Environmental Protection Agency (“EPA”), U.S. Forest Service, etc.

The most recent Director’s Cut reports provide us with a positive outlook for the oil and gas industry in North Dakota.  North Dakota production levels are reaching record highs…F

To wet your whistle with North Dakota stats, according to the U.S. Energy Information Administration (“EIA”)’s Drilling Productivity Report released on December 17, 2018, which can be found here, the Bakken region produced 1,443 thousand barrels of oil/day in December of 2018 and is expected to produce 1,461 thousand barrels of oil/day in January of 2019

Now, to the Director’s Cut reports…

November 2018 Director’s Cut

The main takeaway from the November, 2018 Director’s Cut is that production records were being set.  Specifically, record oil and gas production levels were achieved in September of 2018 – hitting new all-time highs for oil production, gas production and producing wells. 

In addition, the November, 2018 Director’s Cut provides the following:

  • Over 99% of drilling now targets the Bakken and Three Forks formations
  • Drilling permit activity increased significantly from September to October 2018

December 2018 Director’s Cut

Similarly, the December, 2018 Director’s Cut provides that new records were again reached.  Record oil and gas production levels were again hit in October, 2018 – new all-time highs for oil production, gas production and producing wells were again hit.  

The December, 2018 Director’s Cut also provides that the November rig count was down slightly, but that as of the release date of the report on December 14, 2018, it was back up to October’s level, and that estimated wells waiting on completion is 959, up 31 from the end of September to the end of October.

January 2019 Director’s Cut

The January, 2019 Director’s Cut reflects a slight decline in oil and gas production from October to November; also, the number of producing wells is also down from October to November.   

The Takeaway:  The Director’s Cuts are a great resource. The December, 2018 Director’s Cut provides some insight into the optimistic outlook for North Dakota production and also details the production records that have been reached.  Specifically, the December, 2018 Director’s Cut provides that, “Operators continue to maintain a [drilling] permit inventory that will accommodate varying oil prices for the next 12 months.” Good news!