QEP Withdraws McKenzie County Unit Proposal; Flaring Exemption Denied

BISMARCK – An oil company that proposed developing 25,000 acres in McKenzie County as one large drilling unit has withdrawn its application.

The North Dakota Industrial Commission unanimously agreed Monday to vacate its previous order that granted the proposal from QEP Resources in a 2-1 vote.

Commissioners were set to consider a request from a mineral owner’s attorney asking them to reconsider their decision, but Director of Mineral Resources Lynn Helms said QEP had submitted a request to withdraw the proposal altogether.

Helms did not say if the company cited reasons for withdrawing the proposal known as the Grail-Bakken Unit.

In a statement, QEP said it does not have plans to pursue an alternative plan to create a large unit but looks forward to working with the Industrial Commission and mineral owners to develop the acres.

Even with the commission’s approval of the unit, QEP Resources still needed to get approval from 60 percent of mineral owners and working interest owners. QEP said developing the 2,5000 acres as one large unit rather than individual 1,280-acre spacing units would allow the company to recover more oil while reducing the impact on the land.

Several mineral owners testified in opposition to the unit during a hearing in November.

Gov. Jack Dalrymple opposed the proposal in January, citing the precedent it would set and expressing concerns about the fairness for mineral owners who already have producing oil wells in the unit.

Also Monday, the Industrial Commission unanimously denied a request from the company Gadeco to exempt flared natural gas from taxes and royalties.

Gadeco said in its petition that it is not economic to capture the gas from a well in Williams County. Several mineral owners and landowners objected and argued that a natural gas pipeline is a half-mile away.

Helms recommended Gadeco’s request be denied, saying Gadeco’s efforts to negotiate contracts with gas-gathering companies “have fallen far short of any kind of real efforts.”

“Going forward, they need to be very motivated to negotiate a gas-gathering contract,” Helms said.

Gadeco has operated that well for more than one year in violation of the statute, Helms said.

In addition, the Industrial Commission unanimously agreed to issue a default order against Rio Petro, a company Helms said acquired an old oil well and did unauthorized work on the well.

The Industrial Commission had issued a complaint against the company seeking more than $75,000 in fines for violations of the state’s oil and gas regulations. Helms said issuing the default order will be the first step in confiscating the company’s bond on the well and going to court to pursue the other fines and potentially the cost of reclamation.