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ND Industrial Commission votes to seize 800 barrels of ‘illegal oil’

BISMARCK - The North Dakota Industrial Commission voted Monday to seize 800 barrels of illegally produced oil in what Department of Mineral Resources Director Lynn Helms said is believed to be a first for the regulatory panel.

BISMARCK – The North Dakota Industrial Commission voted Monday to seize 800 barrels of illegally produced oil in what Department of Mineral Resources Director Lynn Helms said is believed to be a first for the regulatory panel.

The commission denied an application by Denver-based Gadeco LLC to authorize the sale of the oil produced in Williams County.

Helms said the oil came from a neighboring spacing unit on which Gadeco didn’t have a lease.

In its request to sell the oil, Gadeco wrote that the horizontal well was initially drilled Oct. 9, 2011, and “as a result of error,” a portion of the production casing for the well was drilled in the wrong place.

“They were ordered by the commission to cement that part of the well bore off, and instead they fracked it,” Helms said, noting the well bore has since been plugged and abandoned.

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The order approved 3-0 on Monday deems the 800 barrels as “illegal oil” and triggers the process of going through district court to seize the oil and sell it at a sheriff’s sale, with the proceeds going into the state’s general fund, Helms said. The oil is currently sitting in two 400-gallon tanks at the site.

Helms said this may be only the second time the commission has labeled something as illegal oil, the first time being a case in the 1980s when a company was trucking oil from a North Dakota location to a Montana site and selling it from there. However, in that case, the oil was already gone, he said.

Gadeco probably spent $8 million or $9 million on the well “and got nothing for it,” and will also lose out on proceeds from sale of the oil, Helms said.

“So this is a pretty expensive lesson,” said Attorney General Wayne Stenehjem, who sits on the commission with Gov. Jack Dalrymple and Agriculture Commissioner Doug Goehring.

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