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Mineral Owner Questions
Question
When leases are purchased whose name is typically used? Does the oil company's name appear?
Answer

Quite often the oil and gas company’s (operator) name is not listed as the Lessee on the oil and gas lease. Many Operators prefer to remain confidential to the public when they are in the leasing stage of an oil and gas exploration play. In order to accomplish that, operators will contract a lease broker to purchase leases on their behalf. Should a Lessor want to know who the eventual operator of the lease will be, the Lessor can inquire about this from the lease broker. Should the lease broker not divulge such information then it is up to the Lessor as to whether or not they want to lease to an entity that is not provided.
 

Mineral Owner Questions
Question
What percent must be leased before they can force others to act? Explain risk pooling.
Answer

There is no specific percent required for an operator to pursue “force pooling” or “Recovery of a Risk Penalty” as it’s defined by the State of North Dakota Industrial Commission (NDIC).  The NDIC has authority to approve such an action pursuant to statute 43-02-03-16.3.  An operator does, however, need to have an interest in the drilling unit of the proposed well, whether it is by lease or mineral, in order to propose the forced action.

Obtaining NDIC approval requires the operator to provide a written invitation to participate in the risk and cost of a well.  If the party receiving the invitation to participate is not subject to a lease or other contract for development (mineral interest), the operator seeking such recovery action must make a good-faith attempt to lease said party.  The risk penalty for this interest owner is 50% of their share of the costs of drilling and completing a well, while an owner with an interest derived by lease or contract realizes a 200% penalty.

The written invitation to participate must include the well site location, depth and objective zone, along with estimated cost, projected commencement date, date the invitation must be accepted and a notice to the invited party about the plan to impose the risk penalty.  The invited party may convey its opposition to the proposed risk notice directly to the operator, or pursue its opposition with the NDIC through hearing.

An election to participate, by the invited party, must be returned in writing to the operator, and is binding provided the well operations are commenced within ninety (90) days after the date the operator advises it must be accepted.  

Mineral Owner Questions
Question
What is Section 38-08-08 of the ND Century Code?
Answer
NDCC 38-08-08 is the statute that defines the process for compulsory pooling and penalties on those who do not participate in the cost and risk of drilling operations. In the absence of voluntary pooling, the Commission, upon the application of any interested person, shall enter an order pooling all interests in the spacing unit for the development and operations thereof.
Mineral Owner Questions
Question
Talk about mineral lease bonus money paid.
Answer

Mineral leases are taken by a wide variety of interests in the oil and gas industry. Sometimes oil companies who plan to drill buy the lease, other times it’s interested parties leasing up parcels in order to get a piece of the action. . Many factors are relevant as to determining the lease bonus, including commodity prices, proximity to existing production, and competition in the area.
 

Mineral Owner Questions
Question
In Texas, operators lease by geological layers not just the well area. Will North Dakota follow the same path?
Answer

This is not likely. The cost of leases (including lease bonus and royalties) has skyrocketed with the success of horizontal drilling in unconventional oil plays. Additionally, the cost of drilling in North Dakota has always been more expensive and is rising quickly with 1,280 acre spaced wells costing nearly $9,000,000. Also, the cost of operations in North Dakota is significantly higher than other areas of the country because of weather alone, and the North Dakota tax structure is higher than our competitors', making it more expensive to do business in North Dakota and thus lowering the return on investment.