Robert Nutsch

The discussion primarily focused on the status of the oil and gas industry. Key topics included a recent decrease in oil production (approximately 2% drop) and a smaller decrease in gas production (about 1%), largely attributed to industry efforts to "tap the brakes" and manage gas capture, especially on Fort Berthold. The new gas capture policy appears to be working effectively through increased communication between operators and midstream companies. Weather, specifically heavy June rains causing road closures and resulting in production shut-ins due to weight restrictions, was also noted as a factor in production decreases. Permitting activity increased significantly in July, suggesting proactive planning for winter drilling. The volatile oil market, influenced by tariffs, Iran sanctions, and rising storage, was mentioned. Rig counts dropped, linked to gas capture constraints and fracking crew capacity limitations. Discussions detailed the difficulty in obtaining rights-of-way, particularly on federal lands, with one example taking 455 days, leading to ongoing conversations with the Department of Interior regarding modification of existing and future rights-of-way language. Gas capture rates were slightly below target at 84% statewide. Furthermore, the Industrial Commission submitted comments on Senator Schumer's letter regarding crude by rail rulemaking, advocating for science-based decisions. Legal challenges regarding the Torpedo pad drilling near Lake Sakakawea were also noted. Finally, expectations for future production records were discussed, anticipating a production spike once additional gas processing capacity comes online in the following year.

The meeting provided a review of December 2025 production data, noting a total production of 34,771,242 barrels, representing a 6.38% decrease from November and falling 2.46% below the revenue forecast. Production was heavily weighted towards the Bacan (97.4%). Gas production was 103.5 BCF. Discussions covered low realized tax prices in North Dakota, county-level production dominated by McKenzie County, and US production records. Rig count analysis showed 26 rigs in North Dakota and 551 in the US, with 41% in Texas. Pricing updates indicated WTI oil at $66.80 and Henry Hub gas at 3.04. Operational efficiencies were highlighted, showing significant decreases in spud to stimulation time. Well counts showed a decrease in producing wells and an increase in inactive wells, consistent with historical trends for December/January. Permit activity for January included 72 permits and 63 completions, with growth noted in U-shaped lateral permits. Gas capture remained strong at 95.8% statewide. Formula grant Phase One funds of $25 million were awarded to DMR for reclamation work scheduled for spring 2026. Updates on neighboring states' oil production were shared, alongside analysis of crude oil movement, showing less volume moved by pipeline and an increase via rail to premium markets. Geopolitical risk regarding Iran and its impact on oil pricing was analyzed. Progress on the TC Kinder Morgan Bacan Express project, expected online in May, was confirmed, along with the initiation of the WBI Balcon East binding open season. Regional NGL updates confirmed the Double H pipe conversion to NGL service is proceeding.

The hearing involved managing the Northakota Industrial Commission hearing docket for February 26th, including initial disposition of several cases (continuing or dismissing). Specific cases included continuation of Case Number 32602 and Case Number 32603 (Savannah Energy Operating LLC application for well drilling, incorporating the record from Case Number 32438 due to prior advertising issues). Case Number 32604 (Continental Resources, Inc. application) also incorporated records from Case Number 32440. Case Number 32605 incorporated records from Case Number 32441. Case Number 32606 was dismissed. The hearing proceeded with testimony regarding Case Number 32410 (Phoenix Operating LLC application to establish a spacing unit), including review of land, geological, and engineering exhibits. Case Number 32409 (another Phoenix Operating LLC application) was also heard, with testimony concerning land and geological exhibits.

The proceedings consisted of four scheduled cases before the hearing examiner for the Department of Mineral Resource Oil and Gas Division. All four cases (30116, 30117, 30118, and 30119) involved applications from Scout Energy Management LLC seeking orders pursuant to relevant North Dakota Century Code and Administrative Code sections. Case 30116 concerned a permit to drill an MHMU number 19-h well in Billings County. Case 30117 involved a permit to drill an MHMU number 2R well in Billings County. Case 30118 addressed a permit to drill an FHUMU number g-815r well in Billings County. Case 30119 involved a request to release bonds for certain wells located in Dunn and Burke Counties. In all four instances, no interested parties came forward, and the commission granted the request to continue each case to a special hearing date in June 2023.

The session consisted of hearings regarding specific case numbers consolidated for rehearings following a petition for reconsideration filed by Continental Resources, Inc. Case 32171 involved Continental Resources' application to establish overlapping spacing units in Williams County for drilling up to five wells per unit. Case 32279, an application by Phoenix Operating LLC, sought to amend orders for the South Meadow Bach and Pool to authorize up to four wells within an existing spacing unit in Williams County. Representatives from Continental Resources and Phoenix Operating confirmed they did not wish to supplement the record or cross-examine evidence from the reconsideration process. A subsequent hearing for Case 32492 addressed Phoenix Operating LLC's application to establish a 3200-acre spacing unit and authorize five horizontal wells in Mackenzie County, including detailed discussions on acreage ownership, federal mineral rights, surface use considerations due to administratively unavailable areas, and proximity to existing configured drilling and spacing units. The testimony confirmed Phoenix's intent to bid on federal minerals and seek leases for unleashed interests, with a projected drill schedule for Q4 2026.