State mineral auction pulls in $4.8 million
BISMARCK -- With more than 54,000 mineral acres up for grabs Tuesday, oil and gas companies shelled out more than $4.8 million for the rights to drill into state-owned land.
But the last auction by the North Dakota Department of Trust Lands in May had only 14,800 acres on the auction block and grossed more than $13.1 million.
Drew Combs, director of the Minerals Management Division of the land department, said oil companies know what they are bidding on and are focusing on the "prime stuff," as more land is being explored on the edges of the Bakken formation.
"If you imagine a target, the May auction had a lot more tracts in the bullseye, and this one had a lot more outside the bullseye," Combs said. "But it all has some potential."
Oil company representatives spent Tuesday in Medora during the land department's quarterly auction to secure the exclusive rights to explore and drill in areas around the Oil Patch. But Combs said many walked out after the 16 acres available in McKenzie County, a prime oil county, were sold for $16,160, or $1,010 per acre.
Combs said he was pleased to see the cost per acre of mineral land hit $88, higher than his $10 expectation.
Combs low-balled the value because many acres were on the outskirts of the Bakken oil formation, guessing many would bid low with some uncertainty of what may be in the area.
"Some of these are not in great spots," he said. "Extremely active companies have their defined areas and often won't bid outside their box."
But it didn't surprise Combs about the amount paid in outlying areas such as Slope County, which garnered just over $1 million for 17,400 acres.
"It does have some potential. Everybody is focusing on the Bakken and Three Forks, but they fail to remember we have a lot more producing formations that have always produced oil."
Wildlife, historic sites
Some areas on the auction list drew concern from wildlife groups and historians and were flagged by the North Dakota Game and Fish Department and State Historical Society as having a cultural, historical or environmental significance. The leases stipulate no company can occupy the surface.
Game and Fish flagged flagged the Stewart Lake National Wildlife Refuge in Slope County, recommending no activity above the ground. The minerals were leased for $25 per acre by Empire Oil Co., which nominated the land for auction.
The most immediate concerns to the historical society were one area in Dunn County and one area in Golden Valley County that contains the Beach Clovis cache, the largest collection of early Paleoindian artifacts known in North Dakota. The Golden Valley County land -- two 40-acre tracts -- was leased for $430 per acre by Stewart Geological Inc.
Carter Stewart, owner of Stewart Geological Inc. in Billings, Mont., noted that the tracts are small and nearby land is already leased by the company.
"With horizontal drilling, it might not be an issue at all," he said.
His company is already leasing 25,000 to 30,000 mineral acres in Golden Valley County.
The area in Dunn County contains a quarry of Knife River flint, once used to make stone tools. The mineral rights were purchased by Woodstone Resources LLC for $13 per acre.
Proceeds from the auction go into a fund to help public education in North Dakota.