Resource Regulators

The inside story of the N.D. Department of Mineral Resources including perspective from the Departments top leaders on well permitting, oilpatch trends and the future of the Williston Basin.
By Luke Geiver | January 21, 2014

When Lynn Helms became Director of the North Dakota Department of Mineral Resources in 1998, the drilling rig count was at zero and oil prices had recently plummeted only seven months after taking the position.  “We were doing emergency rulings to allow operators to shut wells in. Everybody thought the price of oil would recover, but no one knew when,” Helms told me on a cold, bright December day from his Bismarck office. Roughly seven months after taking the Directors job in 1998, light sour crude from Bottineau County, N.D., was going for less than $4 per barrel, he explained to me with his arms and legs crossed while leaning back in his chair, a concerned look on his face and the December sun shining through the cracks of his window blinds onto the leaves of his impressive office plant collection. “But, things have changed,” he added, leaning forward in his chair, uncrossing his arms, his bearded cheeks high on his face as he smiled.

Over that December day, I held one-on-one sessions with many of the DMR’s top regulators— including Helms, the face of the department—to learn how the regulatory agency responsible for overseeing one of the most important energy developments in the world has dealt with extreme industry change, overcome challenges and formed a process to deal with new issues directly related to the state’s oil and gas industry. Although portions of every conversation that day included discussions of hometowns, alma maters and trips––Helms of German heritage and his wife of more than 30 years visited Norway last summer––each regulator expressed the sense that the DMR has a serious story to know, one that will continue to affect how shale energy resources are developed in North Dakota and the rest of the country.
 
Helms on Helms
“A lot of what is involved with this position is about protecting the environment and human safety,” Helms said, when asked about his role with the Department of Mineral Resources. Because of that, he made a point early in our conversation to explain the early portions of his life in northwestern South Dakota, “riding horses, chasing cows and hunting on the prairie.” The son of a cattle rancher, Helms grew up adjacent to U.S. Forest Service land that the family ran cattle on. “It set a tone for how I view the world,” he said.

Between his days living and working within the open country, extreme rural setting and his time as North Dakota’s top oil and gas regulator, Helms developed an impressive resume that seems tailor-made for his current position. Following his time in Rapid City, S.D., at the School of Mines and Technology, he took a job with Texaco in Billings, Mont., as a production engineer that included duties related to drilling operations. “That was an introduction by immersion. I supervised drilling rigs and more. I got a hands-on lesson,” he said.

While Helms was in Montana working in the declining Cut Bank oilfield discovered in 1928, Williston, N.D., was experiencing an oil boom. Helms took a job in Tioga, N.D., with Hess Corp. to get in on the action. Eventually, Helms became an asset team leader for Hess, leading a team that included a geologist, physicist and production engineer. “We put together budgets and presented them to John Hess,” he said. “One of the biggest things that came out of that that influenced this job is the testifying I did before the Industrial Commission.  When those guys sit on the other side of the table and their attorneys are asking them questions, I know what they are up to.”

During his early days with Hess in the '80s, he was also on a team responsible for plugging and reclaiming the Clarence Iverson well, the first well to recoup oil in North Dakota.

By the '90s, Helms was faced with a dilemma. To remain at Hess, Helms needed to move to Houston. “The buzz word at the time was global mobile, if you were going to move up the ladder you took jobs in Kazakhstan or Equatorial Guinea,” he explained with a laugh. “I didn’t want to leave North Dakota. This job opened up and what a blessing it has been.”

Since taking over the position, Helms believes one of the biggest changes he has dealt with has been the use of hydraulic fracturing by industry to recover oil and gas. “Horizontal drilling was also one of the biggest changes ever,” he said. “Much of the oil [in the Williston Basin] laid in wait for a technology like horizontal drilling to come along.”

He remembers distinctly when the practice became a reality in the Bakken. After watching Halliburton and a handful of other companies apply the technique in the Elm Coulee field in Montana, Helms said his team began wondering if the process could work in North Dakota. In 2006, EOG Resources hit on a Parshall, N.D., well and then Bud Brigham, founder of Brigham Resources, an exploration and production firm bought out by Norwegian-owned Statoil, started experimenting with multiple stage fracks and increased proppant on a well southeast of Williston. The well came in fantastic, he said, “and the rest is history.”
Horizontal drilling may have ushered in a new era for N.D.'s oil development, but Helms and his team have also issued regulator

“Right at the end of 2009, all of sudden, we started to see all of these company proposals for random horizontal drilling spacing units of all shapes and sizes,” he said. If approved, the random units would have made the development of the Williston Basin appear incredibly cluttered and chaotic. “I told the staff that we were starting to play Tetris, a game of Tetris with 15,000 square miles of people’s minerals. And, if you have ever played Tetris, you know you can never win, the pieces just keep coming.”

The DMR staff analyzed the development happening in the Bakken and estimated that if the Tetris game continued, the amount of land consumed and the pipeline footprint in western North Dakota, would be 10 times as much as what was actually needed. Helms brought together all of the big oil companies operating in the state to explain the DMR’s order and new plan with 1,280 acre spacing units. By implementing a scheme that put all spacing units at 1,280 acre units oriented north and south, the DMR was able to reduce the number of gravel roads needed from 60,000 to 6,000 miles. And, the pipeline footprint was equally impressive, decreasing from 300,000 to 30,000 miles.

Although the industry did react with some negative kickback, Helms said the role of DMR director requires the ability to issue regulations that can not only affect the entire industry, but, to understand and predict where the industry is headed. “I remember in 2008 saying that what was happening here would take us 12 years to drill all of the wells, and people said I was nuts, that oil booms never last that long. They said I was wildly optimistic,” adding that, “In 2010, I said it’s not going to take us 12 years, it is going to take us 20 years. And then they said I was grossly pessimistic.”

Changes in the industry is not something Helms dislikes, however. It’s the main perk of his job. “My job is so fun because I sit in the middle of all of it,” he said, “No two days are ever alike.”

Outside Communicator
Alison Ritter doesn’t have an oil industry background, but if you spoke with her for 10 minutes, you would think she did. “I have to have a working knowledge of what is going on,” she said. Her role as Public Information Officer may not seem as crucial to the DMR’s ability to regulate the industry as others in the Bismarck office, but after listening to her perspectives on the DMR and its role to both the industry and the general public, it was clear that Ritter is the multi-tasking DMR liason the team couldn’t do without. Ritter’s exuberance and authentic interest in her work was obvious. She spoke with an enthusiastic expression the entire session and paused before answering nearly every question, a vocal clue that her intent was to provide the same accuracy to my questions as she would to a mineral owner from Tioga, a drilling supervisor near Dickinson or yet another reporter from a national media outlet looking for the true story of the Bakken.

“I came with an outsider’s perspective. I can bring a new perspective to things, help the department understand what the average person thinks,” she said, speaking on her background in communications and news media production. Ritter frequently fills in for Helms at public gatherings to give presentations on the state of the Bakken, and every day, she fields several media-related calls that had previously been handled by Helms. In 2013, Ritter filled in for Helms at the Williston Basin Petroleum Conference in Regina, Saskatchewan, (while pregnant) delivering a presentation on par with something Helms could have delivered. Ritter accompanied me during the day at the DMR facilities, and during each sit-down session, she added snippets of information to  our conversations ranging from drilling permit trends to well pad designs. 

Ritter also helps mineral owners with questions of their own, and has an incredible grasp on the DMR’s website functions that allow users to predict everything from future drilling activity to the hottest fields in the play. While there, Ritter provided a shortened version of an interactive electronic wall display presentation on par with something seen on ESPN, and at the general computer in the lobby of the facility, she explained a mapping tool available to track future oil production based on the days until an oil lease expires.

“We are trying to prepare people for what’s ahead. We are trying to minimize environmental impacts while maximizing the economic and social impacts of all of this,” she said. When it comes to industry, most calls she fields are from industry representatives in search of a rule clarification. She also helps the operators in some instances herself, or directs a question to the appropriate person in the office if the industry representative or the respective company has a question regarding compliance with a rule. In any given day, Ritter could field five or more calls requesting information for the same story (when I was there the hot topic was weather’s role on production).

Of all the DMR staff members, Ritter best embodies the constant change and learning experience each member has gone through since the development of the Bakken began, she said. The change and learning process is an element of the team she believes is important for the industry and the general public to recognize. “These people really care about what is going on. I see people work really hard and work lots of hours that go unnoticed,” she said. In the 2011-'13 biennium, the DMR staff was also increased by 30 percent with another 20 percent increase expected in the current biennium. Being at the center of the Williston Basin isn’t something Ritter is afraid of though. In her own words, it’s fun.

Ed Murphy Can See The Future
In an 18-month period that included 2012, the DMR’s Geological Survey brought in as many core and sample boxes to its Grand Forks-based core library as it had in the past 10 years, according to Ed Murphy, state geologist. “We are going through record activity up there [the core library] from companies coming in to look at core and companies that are providing core,” Murphy said. In 2012, the core library received 12,000 feet of core (rock samples taken from North Dakota). “We always say you could lay the core samples and reach from Grand Forks to Fargo.”

Murphy held a core sample of the Middle Bakken in his hand as he explained the incredible growth the Geological Survey team has seen in the past five years. “We love companies to core,” he said, pointing to the small pinhole openings in the rock that could have held hydrocarbons.

Although Murphy’s team’s more glamorous task is to research new geologic opportunities available to potential industries (recently the team helped a company in its quest for diamonds near Drayton), it also has to track core sample submissions. For every well drilled in North Dakota, a drilling team must provide a cutting sample taken from the well. is important for the industry and the general public to recognize. Generally, an operator is given three to six months to send in the core sample to the DMR. But, there is such a backlog at the labs right now that the time before the Grand Forks library receives the samples is much longer.
Once the core library receives the samples, University of North Dakota students are hired to photograph the samples for online viewing. According to Murphy, the core library’s online option for core viewing is second to none in the entire country. “This is the nicest site in the country by far,” he said, scrolling through the images as we viewed the site on a screen at his desk. “We are told that over and over again.” The site allows geologists from Houston to review samples before flying to North Dakota, he added.

“They love looking at others, but, of course, they don’t like others looking at theirs,” he said. But, information is a boon to the development of the play because people are still learning.

For the past four years, Murphy’s three oil and gas geologists have been focused on the Middle Bakken and Upper Three Forks formation, he said, but it’s now time to learn about other formations and provide that information to industry. “We try to anticipate what industry’s needs are.” Or, in some cases, the team tries to reveal where industry can look for new developments.

“There are questions that we can answer now more than ever before. I think that the important thing is that there are still other units out there that with new technology hold promise,” he said. For example, Murphy pointed to the Tyler formation as well as others below the Three Forks. “We are saying to take another look at the Tyler, and companies are. We had a lot of vertical success in other units, and some we didn’t. We are saying regardless of that, think about going back to other formations, the Birdbear and others below the Three Forks. Rethink all of these using this horizontal and fracking technology,” he said with a look, a slight smirk, that implied he knew something the rest of us non-geologists didn’t.

Born To Regulate
High school vacation was an important time for Bruce Hicks. Because his father worked for a small oil and gas company, most of his vacation days were spent pumping and doing roustabout work. “I didn’t really enjoy most of it, but it got me interested in oil and gas.” His interest has blossomed into a 33-year career with the DMR. His main job today is as assistant director to Helms, supervising the oil and gas division. There may be no better person to focus on regulating the oil and gas industry than Hicks. He has the physical demeanor and presence of someone with serious intent, and he isn’t afraid to make tough decisions.  At one point early in his career, he said, “I actually had to regulate my dad, something he was not real fond of.”

Hicks has been integral in the DMR’s efforts to add staff to its offices in Dickinson, Minot and Williston. The frantic hiring effort, in addition to the massive case load increase over the past five years, has added a new dimension to Hick's job. Five years ago, the DMR may have heard 200 to 300 cases a year, but today, Hicks and the team hear roughly 200 to 300 cases per month. The DMR has expanded from one building to two, and the conference room once used for case hearings has been scrapped for a new, much larger room where Hicks, Helms and others hear cases. Helms also performs his monthly Director’s Cut webinars from this the room.

For the field staff, the evolution of the Williston Basin from a play solely focused on the Middle Bakken, to a multi-formation play that now includes several layers of the Three Forks formation, has presented new challenges. “We have to keep track of where these wells are and in what formation they are in,” Hicks said, a task that may sound trivial but becomes difficult when a four-well pad could be drilling into four different formations.

New field inspectors require training before they can be released to their own wells. Inspectors with engineering and geology degrees are placed on drilling rigs and new inspectors with math or environmental backgrounds are tasked with inspecting facilities, tank batteries and disposal systems.

The business dealings and acquisitions are a challenging aspect of the oilpatch to monitor, Hicks said, but he follows every activity closely because when technology or ownership changes, plans typically change.
In addition to his monitoring efforts, Hicks believes in the power of education. “We have shown other state regulators what we are doing. It has been very helpful to them to see how we took this play and got it more developed on a uniform pattern to minimize the impacts.”

Hicks recognizes the relatively new state of plays such as the Bakken, and because of that, he knows that his job is no longer only about case hearings and compliance issues. It’s also about setting an example for other resource plays. “If you look at some of the other resource plays, they have Bakken-like potential in place there. Almost every sedimentary basin has a source rock there like the Bakken that you could drill into. What we are trying to do is teach everybody and show them what we have learned here and try and avoid some of the early mistakes.” Hicks shared Helm's sentiment on developing spacing units, stating and restating his satisfaction with the ability of the DMR to help the industry see the benefit of energy corridors.

Dave Hvinden Has 2 Smartphones
Dave Hvinden is in tune with the day-to-day activity in the Williston Basin. As the Field Supervisor, he has to be. Before we started talking, he set both of his smartphones to silent, and after the email alert on his computer beeped multiple times in the first few minutes of our talk, he closed his email down. Hvinden is no stranger to pressure from outside voices; he has been a football referee for nearly 30 years. At his position in Bismarck, he tries to communicate what the field staff is seeing throughout the state to the office staff. And, as the play evolves, he is constantly trying to maintain an understanding of the new technologies being used. When asked about the technologies he’s excited about, he laughed, telling me there were too many. But, the use of multipad drilling techniques has his entire team excited, even if there will be new rules and regulations needed to ensure the safety of the new technologies.

“We have people coming in nearly every day saying that they can put a new well pad together better than before,” he said. “I’ve learned to be patient. I think we need to do the right thing rather than do the quick things.”

Although Hvinden’s role is to help with the field staff’s ability to perform their jobs, he also said his entire team has been helping young industry engineers. “We do a lot of troubleshooting for them because they are young in their careers.” For his new field staff, Hvinden typically makes new DMR hires spend a month with experienced field techs, going on ride-alongs and gaining an understanding of how the experienced technicians manage their areas. In total, Hvinden manages 31 field staff. As his phones and email frequency showed that day, he is never idle.

Rich Suggs Lives Geology
To ensure the integrity of a well bore, North Dakota requires cement to be pumped behind the well casing to eliminate fluid migration from the well bore into the surrounding area. As the Petroleum Resource Geologic Analyst, it's Rich Suggs job, to monitor the process. “Once they set casing and then run cement, they run cement bond logs and I review all of those,” Suggs said. “That is one of the critical elements of preserving safety in the Williston Basin and from preventing contamination.”

There are multiple ways to provide Suggs with a cement bond log, but all tool versions essentially provide the same information. Usually, a sonic tool is used to present sound waves into the cement to detect the amount of air or fluid present between the casing and cement. The wave readings can indicate if an adequate amount of cement is present. If the cement is shown to be inadequate, there are various options for the operator, Suggs said. “We may require remedial work. They may have to go in, perforate and punch holes in the casing and pump cement back in to fix the problem. In some situations we can allow the well bore to be monitored based on which formations are open.”

Of the approximate 200 new wells per month that Suggs monitors, remedial work will only be requested on roughly three to four wells. In addition to monitoring cement bond logs, Suggs is also busy making sure operators are sending their core samples to Grand Forks. Because production is not slowing down, Suggs foresees much of the same for his role with the DMR in 2014. But, for Suggs, that is not a bad thing as geology is a very natural part of his life. His wife is also a geologist.

Todd Holweger Is Permitting
In 2006, Todd Holweger was only managing himself. In 2014, Holweger is managing six other oil and gas permitters as the permit manager for the DMR. When a permit for a well pad, seismic procedure or other oil facility is received electronically at Holweger’s office for a new well pad, the permitting team has four individuals who can issue permits and another three that prep the permits for review. The prepping team is tasked with making sure the applications are filled out correctly and include any necessary attachments that document, for example, why an operator has chosen one particular location versus another. If filled out properly with all of the appropriate accompanying information, Holweger’s staff can turn-around a permit in roughly 30 days.

“In 2006, I received two to three permits per day. Now, I’m getting 20 permits per day. It is up to 100 permits per week,” Holweger said. The office staff will issue permits based on a case-by-case basis, a point Holweger made several times during our discussion. And, the entire team insists on being consistent and looking for the same elements in each permit. After the office staff reviews a permit, a field inspector will also review a proposed well site and add more stipulations if necessary.

The idea of efficiency isn’t only big in the drilling and completions world. Holweger preaches the same ideals in his office, and, he even urges those submitting applications to practice what they preach as well. An attention to detail can minimize the number of days for any operator who has issued a permit. As an example, he points to cases that require an affidavit allowing a surface location to be placed outside of a spacing unit. Operators that don’t submit the affidavit with the original permit application will then have to be called by Holweger’s staff and obtain or send in the proper documentation before the team can proceed in the permitting review.

In the event that a potential well site is environmentally challenged, Holweger said an operator should provide a simple, one-page Word document explaining why the well pad has been placed in a certain location. “The operator might just state briefly that they checked four other spots and this was the best one. Without that, the only thing that we really see is the rough area and we don’t know that they have evaluated other sites,” he said.

Although four is currently the average number of wells per pad in North Dakota, Holweger expects that number to rise. “You are going to see a lot more wells on a pad, but, just because you have more wells doesn’t mean the pad is going to be huge,” he said. “The most wells on a pad in the state is currently 14. We’ve got a couple of pads with future wells noted on the pad for up to 22,” a number Holweger recited with a hint of excitement and exhaustion behind his voice, and a tone that implied to me that it was time to stop talking and to get back to permitting.

Predictions for 2014
Numbers from Holweger’s permitting office make it easy to see where the Williston Basin is headed. For 2013, 58 percent of all permits were for wells on multi-well pads, a 10 percent increase from the previous year. The same rough increase will continue in 2014. “You are going to see more and more wells on existing pads where they have to enlarge the pad just a little bit,” Holweger said. And, the entire staff is starting to see a new spacing unit era taking shape. Using 1,280-acre spacing units has been a major success so far, but Helms, Hicks and Holweger all believe it is time to start 2,560 acre spacing units. “We will strand roughly 4 billion barrels of oil if we go by 1,280 acre spacing units,” Holweger said.

Hicks believes technology, and a move towards infill drilling is driving permits to be redone. “From what I’m seeing,” Hicks said, “we are getting so many infill wells drilled that it is getting pretty complicated on spacing units and the sizing and who gets paid for what wells,” adding that, “when we start having a lot of overlapping spacing units, it is probably best to see if someone will come in an unitize a certain portion so that wells can be drilled out to their maximum extent.”

The spacing unit change will result from greater use of multi-well pads, the biggest change set to happen in the Williston Basin in 2014, Helms said. “The exciting thing is that they will be able to drill more wells with less trucks and less rigs,” he said.  “Economically, it is going to be a challenging year for oil companies, but by multi-well pad drilling and reducing construction that is going on in the frontend of the well pad, costs will go down. Multi-well pads are going to save the prairie. It will make it possible to drill more wells with less rigs and it will make it more economic.”

The evolution of the oil and gas play and the move to unitization and multi-well pads is exciting to Helms and the entire DMR team, but it isn’t unexpected. During his Hess days, Helms said he learned that in the oil business, innovation must be constant. Spend a day with any of the DMR team members, and that theme shows up again  and again. When I asked Helms about the DMR story, what it means, what is important to know about the group at the center of a shale energy proving grounds that has garnered global attention both good and bad, he stuck to that theme of innovation. “I would like people to know how hard we work and how focused on performance and continuous improvement we are. We never stop thinking about the next session, the next rule, the next improvement on how we regulate or publish information. We aren’t just working hard on what we’ve learned,” he said from his office that December day, his bearded cheeks tense from the serious tone he had taken to the question. “We are working to improve on what we can do in the future,” he said, the bearded smile returning to his face as the word future exited his mouth.
 
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Author: Luke Geiver
Managing Editor, The Bakken magazine
lgeiver@bbiinternational.com
701-738-4944