State oil production just getting started
BOWMAN -- Oil production in the state has only just begun, North Dakota State University ag law professor David Saxowsky warned farmers and ranchers Wednesday.
"The rush the last several years was the oil companies getting permits and spacing their units," Saxowsky said during a meeting sponsored by the North Dakota Farmers Union at the Bowman Golf Course, which was the third and final session meant to help producers consider the implications of oil field technologies. "As long as oil companies got to the well first, they know they will have control of the space for several years. It was a race for control by the oil companies the last several years."
Saxowsky told the few dozen people at the meeting that there are 8,000 oil-producing wells in the state, but thousands of more are expected in the next five to seven years.
The average lifespan of an oil well is 30 to 40 years, according to Tessa Sandstrom, communication manager for the North Dakota Petroleum Council.
Because of that, Saxowsky said mineral rights owners may want to see about including in their lease that the oil company is obligated to drill the wells at a decent pace.
"There are going to be a lot of wells sitting on some of those well pads when this is all said and done," he said. "We've just begun to drill in western North Dakota, although it will be a gradual growth process."
Saxowsky said much of the concentration in the latest round of drilling is in Mountrail, McKenzie and Dunn counties.
It's a consideration the Dunn County Commission has already started to knock around and try to stay ahead of.
Earlier this month, Dunn County commissioner Daryl Dukart said there has been talk of the county receiving 47 additional rigs by August.
As drilling and exploration increase in the western part of the state, Saxowsky advised producers who have mineral rights to pay attention to their lease and be ready to negotiate the terms with the oil companies.
"There is nothing such as a standard mineral lease, so you may run into confidentiality agreements because of that," he said. "It's important to include in the lease how much activity the oil company has to do in order to have their lease extended, so define it in your lease to the best of your ability."
Saxowsky said mineral rights owners will want to determine how what is produced on their land is valued, and they may want to also include terms for what will happen if the well is dry.
"More than 99 percent of the time, the companies hit in a mature area, though," he said. "Oil drilling has definitely become a science, and you will want to give thought to how you and the oil company will agree to estimate the value of the oil. Farmers do that with their commodities all the time, so this is something you already understand."