Spud Date Set

With plans for drilling set for May, the city of Sidney will soon have a horizontal well drilling underneath its soil, and residents holding mineral rights leases are anxiously wondering if the well will tap into a reservoir of black gold.

The project has been making headway for several years as lease agreements were gathered by Bakken Oil, of Sidney, and others. But, it wasn’t until the Montana Board of Oil and Gas Conservation signed the well application docket number 257-2012 on Dec. 13, 2012 that the project became a rapidly moving reality.

The permit allows for four sections, two located in city limits and two other sections north of Sidney. Originally, only two sections were requested and changes to the well application had to be made to ensure the wells were far enough away from city limits. The pad for the well will be built to potentially accommodate multiple laterals on the site and will be located one mile north of town on the Arnold Dige property. Whether or not more than one lateral is set up will be determined by whether or not the first lateral is successful.

XTO Energy of Sidney is in charge of both installing the well and operating the site once the well is operational.

“The chances XTO are taking stem from the well site running a bit to the north of the trough of the Bakken. It’s a big gamble on their part and they have invested extra multiple thousands of dollars into this project because of the vast amount of leases involved. I want to thank them for that,” Sidney Mayor Bret Smelser said.

While the ink on the permit to drill is newly dry, the idea of tapping into the potential for oil underneath the city limits began in the early 1980s with the owners of Elliot Oil.

Although Bakken Oil refused to comment, it would seem the task they had of contacting residents and securing mineral lease agreements must have been very time consuming. Smelser said obtaining leases for such a large endeavor, and with some 2,500 leases obtained in this process, Bakken Oil had a daunting job to complete, yet secured the needed amount of signatures necessary to enable the project to proceed.

Clint Hecker, a lease agreement holder for land located on the 59 East section received his letter from Bakken Oil some time ago. “They made the process simple to understand and participate in,” he commented.

The property sections where residents were offered leases agreements include Township 23 North, Range 59 East, MPM and all sections of 28, 29, 32 and 33. In total, this involves about 2,500 properties.

If the well goes commercial, generating revenues, residents holding mineral lease stand to receive $50 to $100 annually from their leases located in and around Sidney city limits. If the first well is a success, more wells will be set up resulting in more potential revenue for those property owners.

The city of Sidney looks to benefit from its 40 acres of parks that have been leased with the hopes of the well drilling commercial. “We were hoping to lease land underneath the streets and alleys too, but the residents of Sidney are receiving 30% extra acreage for their properties,” said Smelser. With the parks acreage alone, the city would be on tap to receive between $14,500 and $17,000 a year if one well produces between 200 and 300 barrels a day at $75 a barrel.

Smelser said if the well is successful he plans to donate his oil check back to the city to help pay for infrastructure and city employee wages to help offset the costs of trying to keep up with the demands of the oil boom. He is hoping others in the community will do the same and has plans for launching a voluntary campaign.

“Fortunately for the city of Sidney, XTO stepped up and are committed to this project, If this project is successful, it will provide a small revenue stream for Sidney for a long time to come,” Smelser said.