Million-barrel miles are stranded in the oil patch, but companies and state regulators are coming up with a new drilling plan to get those barrels out of the ground.
The stranded oil is underneath section lines, historic easements that border every mile-square of land so that farmers, sportsmen and others can travel about the countryside.
These section lines are sacred public property and oil regulators have guarded them even more by creating setbacks that force oil wells to stay up to 500 feet away from them.
In the Bakken, the typical 1,280-acre (two section) spacing unit — the length of a horizontal well — result in two miles of oil that can’t be tapped within the setback.
“Industry discovered that with that configuration, there were 1 million barrels of oil that won’t be produced,” said Lynn Helms, director of the Department of Mineral Resources Oil and Gas Division.
If that were just an occasional outcome, it might not be worth a second look.
In reality, however, that oil has been stranded on some 8,000 spacing units to date and the lost opportunity in oil is adding up to hundreds of millions of barrels.
Oil companies are now asking oil regulators to overlap two existing spacing units in order to tap into the oil underneath both the setback and the 66-wide section line inside the new configuration.
That new configuration of 2,560 acres, or a four-section, spacing unit is becoming increasingly standard. Companies are requesting it for new wells. They’re also asking regulators to retrofit existing units by combining two units into one bigger one.
In fact, just on last week’s hearing docket, there were 86 requests from two companies for overlapping units, Helms said.
“It’s become incredibly popular in the last six months,” he said.
He expects that eventually all the “old” 1,280-acre spacing units will be overlapped at companies’ requests.
Helms said this doesn’t mean that oil wells can be drilled right on the section line.
He said he told a company representative at last week’s hearing that his agency will never permit a drilling pad on a section line without prior approval from the county government, which has constitutional authority over section lines.
“This does not mean a rig pad on the section line,” he said. “When they do this it will go off the (existing) pad.”
The way companies get to the stranded oil is by starting from a well in an offset position and then drilling through or over and alongside the section line.
He said the only time his agency would approve an actual section line well is if the county officially closes it for the life of the well. He said that’s happened once in Dunn County near Mandaree and twice in Mountrail County.
“It’s very very rare that it does happen,” he said.
Helms said it adds up to a win-win for everyone involved.
The company gets more profit on its investment from an existing pad, the state and counties get more oil revenue and mineral owners, who own oil right up the center of the section line, receive additional royalties.
Out of thousands of spacing units, Helms said his agency has so far dealt with hundreds of requests for overlapping units.
He said it’s all about timing.
Oil companies have secured the leases on the 1,280-acre units and are working on drilling plans going forward.
“One reason we’re seeing so many is they want to get these incorporated into their plans,” he said. “When the rig is there, they’ll do this off the pad.”