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Teresia McGinnis , a representative from XTO Energy, answers questions from Bruce Hicks, assistant director of the North Dakota Oil and Gas Division, during a public hearing on Wednesday, April 4, in Bismarck for a proposed oil drilling unit near Lake Sakakawea. (Mike McCleary / Bismarck Tribune)

Oil companies differ on plans to drill near Lake Sakakawea

BISMARCK—XTO Energy proposes to develop more than 26,000 acres near Lake Sakakawea as one large drilling unit, a plan the company says will allow oil wells to be farther away from the lake.

Company representatives said Wednesday, April 4, that developing the oil resources as one large unit rather than smaller individual units will allow more oil to be recovered while reducing impacts to the sensitive terrain.

"A more comprehensive plan would reduce surface disturbance, reduce truck traffic and also reduce flaring," Deni Wieland, an engineer for XTO Energy, said during a North Dakota Oil and Gas Division hearing.

But representatives from Petrogulf Corp., one of an estimated 150 working interest owners within the proposed unit, objected to the proposal, known as the Hofflund-Bakken Unit.

Doug McLeod, president of Petrogulf, said variability of geology in that area makes developing the resources as one unit unfair.

McLeod and others from Petrogulf suggested that XTO instead develop the area as smaller units.

Oil and Gas Division officials requested additional information from XTO during the more than five-hour hearing and will make a recommendation to the North Dakota Industrial Commission, led by Gov. Doug Burgum.

The proposal needs approval from 55 percent of royalty owners and working interest owners in the unit. The level of support the proposal currently has was not presented during Wednesday's hearing.

Attorney Lawrence Bender, representing XTO, estimated the unit has about 3,000 royalty owners.

Lake Sakakawea covers a large portion of the proposed unit, located in Williams and McKenzie counties.

XTO's plans

Developing the area as one large unit provides greater flexibility for well pad locations and allows facilities to be centralized, reducing impacts to the environment, Wieland said.

XTO and regulatory agencies prefer to locate oil wells at least a half-mile away from Lake Sakakawea, he said. The U.S. Army Corps of Engineers has said it will not allow XTO to drill additional wells from existing well pads that are closer to the lake, according to Wieland.

XTO representatives also said developing the area as a unit will reduce waste and allow additional oil to be recovered.

Royalties from mineral tracts under Lake Sakakawea that are in dispute due to ongoing litigation or recent state legislation would be withheld until the disputes are resolved, said Teresia McGinnis, XTO division landman.

The company does not yet have specific well pad locations or plans for developing the unit, Wieland said. If the project is approved, XTO would begin drilling with one rig in the unit as soon as possible and most likely dedicate two to three rigs to the unit, he said.

Second-largest unit

If approved, the Hofflund-Bakken Unit would be the second largest oil drilling unit in North Dakota, behind the Corral Creek-Bakken Unit, a 30,000-acre development near Killdeer that includes Little Missouri State Park.

In 2014, QEP Resources received approval from the Industrial Commission for the 25,000-acre Grail-Bakken Unit but later withdrew its application.

Director of Mineral Resources Lynn Helms said regulators evaluate whether a unit proposal would prevent waste and whether the royalty distribution formula is just and equitable. In addition, regulators consider whether the unit will reduce the footprint on the land or provide other benefits, Helms said.