When considering the likely production of crude oil in the U.S. in the coming months, and the affect that production will have on prices, one of the large variables is the rate of completions, particularly in the Willison Basin in North Dakota. That is because there are more than 900 drilled but uncompleted wells in the state. However, NDIC regulations require that, unless extended, an operator must complete a well within one year of the issuance of the drilling permit.
The tension created by this rule in the era of depressed prices is obvious. As Ron Ness, the president of the North Dakota Petroleum Council (NDPC) recently stated: "Why would we want companies to be forced to spend money or complete the wells when the economics don't warrant it? In today's economic of an over-supplied oil market, it makes no sense."
As a result, the NDIC has "indicated they are leaning towards leniency in their treatment of operators that have drilled but not completed wells within the one-year time frame permitted. Instead of assuming such wells are abandoned, which would otherwise mean an expired drilling permit and about $200,000 in plugging costs, the State plans to give operators more time." The NDIC has stated that they are "leaning toward" issuing a greater number of temporary abandonment permits which in general give operators a one-year grace period, with potential extensions by the NDIC.
The NDPC favors such extensions from the NDIC. As Mr. Ness succinctly put it – "Just defer completions. So they sit on them two years. What's the difference."
We agree that forcing operators to complete wells under non-economic conditions does not seem to be in the interests of operators, royalty owners or the state. At the same time, we are confident the NDIC will assure that any extensions of the time for completing wells do not come at the expense of the environment or general safety.
Difficult economic times require flexibility from both industry and regulators. Reasonable extensions of the completion deadlines would be a measured and prudent step.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
