Four Madison Formation Wells Approved In Pondera County

Neighbors visit a drilling rig working on the Eastern Slope of the Rockies. Sun Times photo by Darryl L. Flowers

Published: Tuesday, May 6, 2014 3:08 PM CDT
Compiled by Darryl L. Flowers

4/19/2014 To 5/1/2014

New Locations

Four Madison Formation wells were approved in Pondera County.

In the Pondera Field, Balko, Inc. was greenlighted to drill the State A 2X, located at NE NE SE 16-27N-4W (2400 FSL/400 FEL) with a proposed depth of 2,100 feet.

Three wildcat wells, listing Black Butte Energy LLC as operator, were approved: the Castle Rock 1A, located at SE SW 24-28N-5W (660 FSL/1869 FWL), with a proposed depth of 3,100 feet; the Castle Rock 3, located at NW SE 24-28N-5W (1843 FSL/2040 FEL), with a proposed depth of 3,000 feet and the Castle Rock 2, located at NE SW 24-28N-5W (1850 FSL/2250 FWL), with a proposed depth of 3,000 feet.

New Locations – Horizontal Wells

In Richland County, Whiting Oil and Gas Corporation was greenlighted for three wells, all targeting the Bakken Formation.

The Asbeck 12-31-1H has a Surface Hole Location (SHL) at SW NW 31-24N-60E (2320 FNL/260 FWL) and a Probable Bottom Hole Location (PBHL) of 19,196 feet at NE 32-24N-60E (660 FNL/240 FEL); the Buxbaum 21-5-1H has an SHL at 5-24N-60E (260 FNL/1685 FWL) and a PBHL of 22,000 feet at SW SW 17-24N-60E (240 FSL/660 FWL) and the Prewitt 21-25-4H, which has an SHL at NE NW 25-25N-58E (250 FNL/2590 FWL) and a PBHL of 21,048 feet at SE SE 36-25N-58E (240 FSL/660 FEL).

Re-Issued Locations

In Carbon County’s Elk Basin Field, Encore Energy Partners Operating LLC. was re-issued a permit for the Elk Basin Unit 380. The Madison Formation horizontal well has an SHL at NW NE 34-9S-23E (900 FNL/1399 FEL) and a PBHL of 6,227 feet at NE NE 34-9S-23E (1214 FNL/1042 FEL).

In Fallon County’s Cedar Creek Field, Fidelity Exploration & Production Co. was approved for two re-issued well permits. The Fee-BR 2826 has an SHL at NE NW 17-5N-61E (1240 FNL/2586 FWL); the Fee-BR 2827 has an SHL at SW SE 17-5N-61E (1184 FSL/2471 FEL). Both wells target the Eagle Formation at a proposed depth of 2,000 feet.

In Musselshell County, Antelope Resources, Inc. was approved for a re-issued permit for the Kluzek 18-11-28, located at SW SE 18-11N-28E (660 FSL/1980 FEL). The Kluzek will target the Tyler Formation at a proposed depth of 3,320 feet.

In Powder River County’s Bell Creek Field, seven permits were re-issued for wells operated by Denbury Onshore, LLC.

The Federal 6207, located at SW NE 12-9S-53E (1976 FNL/2014 FEL will target the Skill Creek Formation at a proposed depth of 4,798 feet; the Unit 6202, located at NW NE 12-9S-53E (575 FNL/1909 FEL) will target the Muddy Formation at a proposed depth of 4,757 feet; the Unit D 606, located at SE NW 6-9S-54E (1936 FNL/1932 FWL) will target the Skull Creek Formation at a proposed depth of 4,759 feet; the Unit 6208R, located at SE NE 12-9S-53E (1890 FNL/597 FEL) will target the Skull Creek Formation at a proposed depth of 4,863 feet; the BCUD 514R, located at SE SW 5-9S-54E (1252 FSL/1574 FWL) will target the Skull Creek Formation at a proposed depth of 4,750 feet; the Unit 5602, located at NW NE 6-9S-54E (487 FNL/2302 FEL) will aim for the Skull Creek Formation at a proposed depth of 4,827 feet and the Unit 5612, located at NW SW 6-9S-54E (1914 FSL/479 FWL) will target the Skull Creek Formation at a proposed depth of 4,822 feet.

Three re-issued permits were approved for wells in Toole County’s Kevin-Sunburst Field. Two of the wells list Somont Oil Company, Inc. as operator: the Fenna Bruins 26, located at NW SE 9-35N-2W (2337 FSL/2342 FEL) and the Howling A 13, located at NW SW 10-35N-2W (2410 FSL/1090 FWL). Both wells will aim for the Madison Formation at a proposed depth of 1,800 feet. In the same field, the Wallewein 22-1, operated by Vecta Oil & Gas, Ltd.. was approved for a re-issued permit. The Wallewein is located at SE SW 22-36N-1W (1170 FSL/2169 FWL) and will drill for the Duperow Formation at a proposed depth of 4,000 feet.

Completions

There were three Bakken Formation well completions reported during the period, all in Richland County.

Continental Resources Inc. reported the completion of two wells. The McHenry 2-35H, with an SHL at NE NW 35-24N-52E (295 FNL/1598 FWL) and a Bottom Hole Location (BHL) of 13,830 feet at SE SW 35-24N-52E (237 FSL/1994 FWL) reported an Initial Production (IP) of 504 Barrels of Oil Per Day (BOPD), 488 Thousand Cubic Feet of gas Per Day (MCFPD) and 232 Barrels of Water Per Day (BWPD). The Parsons Federal 1-6H, with an SHL at NE NW 6-26N-53E (359 FNL/2098 FWL) and a BHL of 18,470 feet at SE SW 7-26N-53E (236 FSL/1964 FWL) filed an IP report of 719 BOPD, 255 MCFPD and 1,000 BWPD.

The third completion reported in Richland County was the Clyde & Alma 24 1H, operated by Kraken Operating, LLC. The Clyde & Alma has an SHL at NE NW 24-26N-51E (220 FNL/2338 FWL) and a BHL of 12,235 feet at SE SW 24-26N-51E (666 FSL/2368 FWL). The IP was 539 BOPD, 470 MCFPD and 393 BWPD.

In Toole County’s Kevin-Sunburst Field, Somont Oil Company, Inc. reported the completion of the State 57, located at E2 SW NE 36-35N-2W (1980 FNL/1540 FEL. No IP was reported.

Expired Permits

In Richland County, there were two expired permits for wells listing Continental Resources Inc. as operator: the Custer 1-7H, located at NE NW 18-27N-54E (508 FNL/2125 FWL) and the Washburn 1-18H, located at NE NW 18-27N-54E (547 FNL/2096 FWL).

In Sheridan County, the permit for the Bubba 3558 41-24H, operated by Epyon Oil, Inc., expired. The location was SW SW 24-35N-58E (250 FSL/250 FWL).

Darryl L. Flowers is the publisher of the Sun Times in Fairfield, Montana, www.fairfieldsuntimes.com, and can be reached at publisher@fairfieldsuntimes.com.

Geology Firm With Office In Fairfield Working With Glacier County Oil & Gas Lease Owner

Joe Large Sun Times photo by Darryl L. Fliwers

By Darryl L. Flowers
Published: Friday, January 31, 2014 10:43 AM CST
The former Fairfield town office on Central Avenue doesn’t look like the type of place where the next Rocky Mountain resource play is being planned. The office is cluttered with geology notes on the wall. Large computer screens sit atop a second-hand conference table. A coffeemaker left over from the town hall days still sits on a table next to the door.

Now the office serves as the western Montana office of RPM Geologic, a firm that specializes in helping oil companies find their targets when drilling miles below the earth’s surface.

Part of RPM Consulting, RPM Geologic is headed by Joe Large, a geologist who ended up in Montana courtesy of the US Air Force. After completing his stint with the Air Force, Joe earned his geology degree at Virginia Tech.

Joe has long been intrigued with the potential for gas development along the Rocky Mountain Front. “Science and history make it obvious that there is a gas deposit under the Eastern Slope of the Rockies.”

As evidence, Joe cites the enormous success a few miles over the Canadian border, at the Pincher Creek, Waterton, and Lookout Butte fields. “For almost a century, there has been a steady stream of research that shows the geology of the Canadian gas fields continues along the Rockies.” Joe adds, “When you examine a map of development along the Front, from Canada to the United States’ southern border, you can see gas and oil production spread along the entire length. Except Montana”

Joe and his colleagues at RPM believe they have found the sweet spot, the Sidney Longwell Federal Oil and Gas lease near East Glacier. RPM has agreed to develop the lease. “We met with Mr. Longwell, and quickly came to an agreement.”

Reached at his home in Baton Rouge, Louisiana, Mr. Longwell told the Sun Times, “We are looking forward to working with everyone to resolve the problems and start development of the lease.”

RPM will drill and develop the lease. “RPM Consulting has been doing turn-key oil and gas wells for several years,” said Large. “Now we want to expand, we want to build on our expertise and move into exploration and production.” As a turn-key firm that oil companies use to plan and drill wells, RPM has a history of bringing wells online under budget and on time. “We can pull in the best talent, can stay focused and make sure the operation moves smoothly.” He adds that when drilling close to sensitive areas, being able to complete the job in an efficient manner is key. “The less time you spend drilling, the less impact you have on the surface area.”

In the opinion of the RPM management, the gas potential under the Longwell lease is only part of the attraction. The location offers onsite access to a pipeline network for distribution. Situated on the lease, in an area designated as a  “utility and transportation corridor” by the U.S. Forest Service, are two natural gas transmission lines operated by NorthWestern Energy. Running some distance from Highway 2 is the original “Kalispell” gas line and the newer, larger “Lewis and Clark Loop”. The Lewis and Clark Loop line splits form the older line east of the lease property and runs along the older line for seven miles before it rejoins the original pipe. Also running over the lease is the Burlington Northern Railroad.

“Here we have a set of major natural gas transmission lines, enabling us to tap in and send Montana produced energy across the state, and we also have the nation’s major railroad on the lease… a railroad that is pursuing natural gas as a source of energy for their locomotives… clean energy, ready distribution and access to markets. We fell like we’ve hit a home run.”

Joe’s optimism is borne out in comments made by the late Doug Strickland, a Petroleum Geologist whose work led to the discovery of the Covenant Field in central Utah. AAPG (American Association of Petroleum Geologists) Explorer reported, in 2011, on Strickland’s optimism about development in Glacier County: “Strickland grew excited about the possibility of a major gas field lurking to the west of the new Bakken play. “I’ve been working in this part of Montana for 25 years. One of the largest prospects I believe I’ve ever mapped is in the western portion of the Blackfeet Reservation,” he said.

He described a trend that started in Canada and extended south into the Glacier mountain front.

“Across the border, there are three major fields within six miles of the United States,” he said. “There’s a swath in there that looks very prospective.”

 “There is a resource play out there, and companies like resource plays. They’ve 

mostly ignored the thrustbelt,” Strickland said, commenting on the industry’s lack of interest in the Glacier mountain front. “Companies have been leery of the risk and the exploration costs,” he noted. “Northwest Montana is very remote.”

A geologist with insight into the complexities of thrustbelt exploration, Strickland felt the Montana mountain front held important and overlooked potential. “It’s very difficult for people to understand the geometry of the thrusting, much less what the prospect looks like,” Strickland said.

“What’s neat about this area is that you’re just six miles from word-class production – it’s six miles across the border,” he added.

The Longwell lease is only a few miles from the Reservation’s western border, in the heart of the overthrust belt.

The history of commercial oil exploration in Montana began not far from the Longwell lease, near Kinta Lake. The first sale of natural gas in Montana was recorded in the area where Lake Sherburne is now. Says Large, “We are building on a long history of exploration and research of well documented oil and gas exploration in Montana, both by the government as well as the industry. People such as Mel Mudge developed geological maps of the region that are still being studied today, and well respected Great Falls petroleum geologist Bill Hansen who conducts annual field schools of the region, we are building on a huge body of research in this project.”

An exploratory well on the lease was approved in the 1980’s. Repeated attempts to stop the drilling failed until politics intervened and the well was put into suspension. That three decade suspension is what has landed the Forest Service and Mr. Longwell in Federal Court.

Joe Large thinks the plan RPM has may quiet a lot of the criticism from the anti development organizations. “What drives most of the complaints, though unfounded, about oil and gas drilling is hydraulic fracturing and, to a lesser degree, horizontal drilling over great distances. Our plan for this site makes those worries moot.” According to Large, the deep formations they expect to drill are naturally fractured, broken up by the same forces that created the Rockies. “Based on the study of wells drilled in the area, and to the north in Canada, the target zone of production is naturally fractured, allowing the natural gas to migrate to the well bore.” The wells will be drilled vertically, and while there may be some short “lateral” legs, they most likely will not exceed 1,000 feet in length. “It’s an overthrust region and with the jumbled nature of the rocks miles below the earth, if you extend a long lateral you run the risk of ruining the well.”

According to Large, in researching comments regarding plans to drill on the lease, he noticed that a great deal of worry was expressed over the use of “reserve pits,” open pits, lined with a heavy material, that act as storage for water used in the drilling process. “We will use a closed system. There will not be a reserve pit, so that is another concern we are addressing.”

If the lease proves capable of gas production, the long term visual effect will be minimal. Gas wells do not require a pumpjack, the large machinery found on many oil wells. Instead a pipe comes out of the ground with a valve assembly, the gas is piped to a gathering station located at a suitable spot where it would tie in with transmission lines.

Large told the Sun Times that, according to available reports, some of the wells in Canada can, at current prices, produce gas at a value of $75,000 per day. “Imagine what that would mean for the citizens of Glacier County. For the schools and other county operations. The burden it would take off the shoulders of the taxpayers in Montana.” Twelve percent of the sales from production on a federal lease is collected in taxes. Half of that would flow to the state of Montana, with roughly half of that going to the county in which the production occurred.

Could 1942 Court Case Result In Faster Development?

In its research into the Longwell lease, as well as other leases being held up by politicians and activists, the Sun Times discovered that Mr. Longwell’s lease, as mentioned earlier, runs under the railroad. Sidney Longwell owns the oil and gas that lies beneath the Burlington Northern tracks. He also owns the oil and gas under Highway 2, under the NorthWestern Energy gas lines, under the Qwest Communications lines… under any of the rights of way that cross his lease. And his rights to develop those minerals are affirmed by at least two decisions from the highest court in the land. In the landmark case, Great Northern Railway Company v. U. S., 315 U.S. 262 (1942), the United States Supreme Court ruled that the surface occupant of a right of way across federal lands did not have claim, unless otherwise specified, to the subsurface minerals.

The case holds particular significance to Mr. Longwell’s lease since the Great Northern case came out of the same area.

In the Great Northern case, the railroad had made plans to develop three oil wells along the right of way. For years, lower courts had been ruling that the railroads could only use the right of way surface. Great Northern, according to the Supreme Court decision,  “asserted that it proposed to drill three separate oil wells-the oil from the first to be sold commercially, that from the second to be refined, the more volatile parts to be sold and the residue to be used on petitioner’s [Great Northern] locomotives, and that from the third to be used in its entirety by petitioner as fuel.”

The wells were to be located in Township 29 North, Range 15 West and Township 32 North, Range 24 East. But the court ruled against the railroad, saying that the federal government would retain the oil and gas so that those could be sold to another party.

The Great Northern case was reaffirmed in 1957 when the same issue came before the United States Supreme Court in the case United States v. Union Pacific R. Co., 353 U.S. 112.

The Great Northern case was cited in a more recent case, Marvin Brandt v. United States. The Brandt case was argued before the U.S. Supreme Court earlier this month by attorney Steve Lechner, with Mountain States Legal Foundation. Mountain States is representing Sidney Longwell in his litigation against the U.S. Forest Service before the district court in Washington, DC.

The Great Northern ruling could provide a means by which RPM could bypass the issue of surface occupancy that is being used to hold up the drilling. “We may be able to locate a drilling rig on these rights of way and move forward with our wells,” said Large.

Drilling on, or near, the rights of way would put the wells squarely into the corridor as defined by the Forest Service in their Finding of No Significant Impact (FONSI) from 2004 when the agency approved the Lewis and Clark Loop pipeline. Large says that the FONSI documents are of vital importance in the current process of seeking approval to move forward. “In their findings related to the pipeline, the Forest Service made determinations that seem to contradict what they are saying now about Mr. Longwell’s lease, those findings involve a pipeline that travels across the lease for bout two miles.”

When asked what he thought the chances were of drilling a successful well on the lease, Large responded, “Ninety percent… maybe more.” Challenged on that high degree of confidence, Large cited other wells drilled in the area: the Morning Gun, Kiyo and Two Medicine.  “Just about every one of those wells had good gas or oil shows, but at the time getting gas to market was impossible and gas was selling for about $0.07 per thousand cubic feet, when the Morning Gun well was drilled. Today, with transmission line access and a decent price, those wells would be productive.”

Near the lease boundary, at Lubec, at least one gas well was drilled around 1905. The well, drilled by the Spokane Petroleum Company, was located near the railroad tracks at Lubec. Montana newspapers eagerly carried news of the well, with one article in the Anaconda Standard reporting that “gas had been flowing undiminished for days.” The report went on to say that the light from the burning gas would light the trains up as they passed by. The well was slightly over 1,000 feet deep.

Challenges Face Central Montana’s Heath Oil Play

By Mike Ellerd
For Petroleum News Bakken
Published: Friday, June 21, 2013 4:15 PM CDT
While the Heath tight oil play in central Montana has received its share of attention in the last few years, the play has yet to prove economic. Conventional, vertical exploration in the Heath dates back to the mid-1980s, and more recently several operators have been drilling modern horizontal wells, but with apparently limited success based simply on the current lack of activity. Still, five of the six wells drilled last, in 2012, had the best results to date.

Although the jury may officially still be out, Petroleum News Bakken decided to take a closer look at the Heath in an attempt to better assess the prospects of the play. The approach was to look at what has been done strictly in terms of horizontal exploration and production in the play over the last four years by taking a more quantitative look at available exploration and production data. Several people familiar with the play were contacted to provide some insight beyond what the data indicate.

In short, it was found that drilling activity in the play since 2009 has actually been somewhat limited, and production results from what activity there has been is spotty. What the play holds in the future remains to be seen, but from what Petroleum News Bakken found, the play has several significant challenges.

The formation 

The Heath formation is part of the Big Snowy Group that overlies the Madison Group in central Montana. The Heath is a late Mississippian, organic-rich shale and limestone formation lying at a depth of approximately 3,500 feet and ranging in thickness from 200 to 300 feet. The Tyler sandstone formation overlies the Heath formation. Occasionally the Heath is referred to as the Heath-Tyler formation.

According to a report prepared by Great Northern Gas Company in 2009, the Heath formation is dominated by organic-rich black shale and an organic-rich limestone known as the Heath or Van Dusen limestone. According to the report, this limestone is generally 50 feet to 75 feet thick, and is composed of thinly bedded, petroliferous limestones, dolomites and shales. Great Northern says the Heath limestone is considered the primary source rock interval in the formation and was, at the time of the report, the proposed target for horizontal drilling.

The Montana Bureau of Mines and Geology identifies two key members of the Heath formation. First is a middle carbonate member consisting of thin limestones and dolomites that is up to 40 feet thick. That middle carbonate member overlies what the bureau refers to as a “hot” shale known as the Cox Ranch member. That “hot” shale ranges in thickness from 10 feet to 60 feet with high organic content.

The Heath prospect extends across northern Rosebud and southern Garfield counties and west across portions of Petroleum and Musselshell counties then into the eastern portions of Golden Valley and Fergus counties.

Exploration of the Heath dates back to 1919 when Van Dusen Oil discovered oil in the Devil’s Basin field of the Heath in Musselshell County, but it wasn’t until the mid-1980s that the play was actively explored with conventional exploration beginning in the Devil’s Pocket field in Musselshell and Golden Valley counties. Horizontal exploration, however, only began in the last few years and focused on Musselshell, Petroleum and Rosebud counties with some additional exploration in Garfield.

Montana Board of Oil and Gas Conservation data

Data on oil production in Montana is maintained by the Montana Board of Oil and Gas Conservation, a division of the Montana Department of Natural Resources and Conservation.

Going back through 2009, which is as far back as the board has hearing dockets posted on its website, Petroleum News Bakken found a total of 109 applications filed with the agency to drill horizontal oil wells in the Heath formation. Most of those applications, 73, were filed in 2012, followed by 29 filed in 2011. Six applications were filed in 2010, none in 2009, and one has been filed in 2013 and is on the board’s June hearing docket with hearings scheduled for June 5 and 6.

Leading in total Heath applications is Cirque Resources LP with a total of 35 applications. Fidelity Exploration and Central Montana Resources, CMR, tie for second place with 33 applications each. True Oil LLC filed six applications in 2011, Cabot Oil and Gas Corp. filed one application in 2010, and Onshore Holdings LLC has filed the most recent application seeking to drill a horizontal well in the Heath or Bear Gulch Member of the Tyler formation in Musselshell County.

Petroleum News Bakken then looked at the total number of wells that have actually been drilled in the Heath formation since 2009. No wells drilled by Cabot Oil and Gas were found, nor were any found that were drilled by True Oil in the Heath. CMR was found to have drilled 10 Heath wells, Fidelity has drilled five, and Cirque has drilled four, for a total of 19 horizontal wells drilled in the Heath formation since 2009, all of which were completed in either 2011 or 2012.

What did the wells produce? Of the 19 Heath formation wells drilled and completed by CMR, Fidelity and Cirque since 2011, only five are currently producing — four of Fidelity’s wells andone of Cirque’s wells. All of the remaining 14 Heath wells are listed as shut-in, abandoned or dry. Nearly all 19 wells produced some oil but all, except the five that are still producing, exhibited sharp production declines.

All five of Fidelity’s wells are in northern Rosebud County. The company’s Kincheloe 11-23H well went on production in July 2012 and produced a total of 2,598 barrels of oil through November 2012, but that well has since been shut in. The Kincheloe produced 1,134 barrels of oil during 20 days of operation in July 2012, i. e., days that the operator reported a well was actually pumping for some period of time during the day. Thus the Kincheloe had a rate of 57 barrels of oil per day, but production quickly declined, and it produced only 40 barrels in nine days of production in November 2012 for a final rate of 4.4 bopd.

The best of Fidelity’s four remaining wells is the Schmidt 44-27H, which has produced a total of 26,041 barrels of oil over 335 producing days for an operated daily average of 77.73 bopd. Fidelity’s Coffee 31-2H has produced 18,394 barrels over 243 producing days since going on production in August 2012 for an operated daily average 75.70 bopd. The Grebe 31- 33H well has similar results producing a total 17,799 barrels over a total of 224 producing days since going on production in September 2012 for an operated daily average of 79.46 bopd. The fourth producing Fidelity well is the 71 Ranch 44-1H, which went on production in October 2012 and has since yielded 5,936 barrels over 181 producing days for an operated average of 32.80 bopd.

Combined, Fidelity’s five Heath wells have produced a total of 70,768 barrels over a total of 1,098 operating days since March 2012, for an average production of 64.45 bopd per well.

Cirque Resources’ wells 

The one producing Cirque well is the Rock Happy 33-3H-2, also in Rosebud County. Since going on production in November 2011, that well has produced a total of 34,310 barrels of oil over 371 producing days for an operated daily average of 92.48 bopd. This is the highest producing well of all of the Heath sells that Petroleum News Bakken found in the Montana board’s database.

Two other Cirque wells, the Hit Parade 31-3H and the Lucky Strike 10-4H, in Musselshell and Garfield counties, respectively, are both shut-in, but they produced totals of 3,495 and 4,185 barre; s, respectively, and had operated daily averages of 19.97 and 24,75 bopd, respectively. The fourth Cirque well is the Rock Happy 33- 3H, which is listed as abandoned by the Montana board but did produce a total of 1,003 barrels over six days of operation in January 2012.

Collectively, Cirque’s four wells have produced a total of 42,993 barrels over a total of 721 operating days for an average of 59.63 bopd per well.

Central Montana Resources

All 10 of CMR’s wells are in Petroleum County, and all were tested between February 2011 and May 2012. One well produced no oil at all, another produced only one barrel and still another produced only eight barrels. Total oil production from the remaining seven wells ranged from 176 barrels to 2,286 barrels, and average operated daily production in those seven wells ranged from 1.62 to 6.13 bopd. According to board records, no CMR wells have produced since September 2012. In total, the 10 CMR wells produced 5,527 barrels over 2,299 operating days for an overall average of 2.40 bopd per well.

All together, the production data that Petroleum News Bakken evaluated from the Montana board’s data base indicated that 19 Heath wells produced a total of 119,228 barrels over a total of 4,118 days of operation for an operated average daily production of 28.97 bopd per well.

What’s the problem?

Montana board geologist Jim Halvorson has heard about drilling problems due to rock stability issues, but Halvorson believes the biggest problem in developing the Heath is the lack of over-pressure.

“You’re not as deep and you’re not as hot, and you probably didn’t generate as much oil, and sometimes the source is actually thinner, ” Halvorson told Petroleum News Bakken. He said there wasn’t evidence of over-pressurization in central Montana from the early vertical wells, and if the goal is to try to get oil to move out of tight rock, he believes that over-pressure is significant.

“I think you’ve got oil in the system, but figuring out a way to get that oil to move out of tight rock into the well bore is the issue, ” Halvorson said. “You can frack and access the oil that you’re in contact with after the frack, but then getting any significant volume to move out of the rock into your fracture system is going to be impeded with lower pressures. ”

That may be an oversimplification, Halverson said, but added that he is seeing more and more reference to pressurization as the problem with the Heath. “If I had to put one thing in central Montana into my opinion, it’s probably the lack of significant overpressure, and it hinders production. ”

An independent producer’s view

Tom Hauptman is an independent oil and gas producer with more than 35 years of experience based in Billings, Mont., and is the owner of KGH Operating Co. Hauptman told Petroleum News Bakken that while he personally has no direct experience in the Heath, he knows there have been a number of companies that have been exploring the play but with limited success. Hauptman believes a lot of people, he included, believe there is oil in the Heath, but he said the technology simply doesn’t exist to efficiently extract the oil.

“The Heath presents a multitude of challenges compared to the Bakken, ” Hauptman said. First, the Bakken, at between 11,000 and 13,000 feet, is much deeper than the Heath and is highly overpressured with the energy necessary to move the oil to the surface. The Heath, on the other hand, is shallow and under-pressured, “so you’re not getting Mother Nature to try and help you push it out. ”

The other challenge, according to Hauptman, is the rock itself. “The Bakken is like tombstone and you can drill through it with no problem at all … because it’s competent rock. ” But the geology of central Montana has been “up and down geologically many, many times, ” Hauptman added, and as a result the Heath Shale is highly faulted. That faulting, he said, present serious problems for drillers.

“You’re drilling in the Heath and all of a sudden you’re out of the Heath. All of a sudden you’re out 200 feet and you don’t know where to go. Do you go up? Do you go down? Do you do back up and do an open-hole side-track? These are all expensive things to do. This high-tech stuff is not cheap. I have first-hand knowledge of this. When you have those kinds of problems, suddenly your $5 million or $6 million authorization for expenditure is $8 million to $10 million. ” When that happens, Hauptman continued, the number of barrels necessary to reach breakeven increases significantly. A third challenge, according to Hauptman, is that there isn’t the competent rock in the Heath like there is in the Bakken, which, he said, causes serious drilling problems. “As you’re drilling it caves in behind you and you get your bit stuck, and you can’t get out of the hole so then you lose your whole drill string. These are the nightmares they’ve had out there. They don’t have that problem in the Bakken, ” he noted. “The Bakken’s just pretty much wellbore manufacturing cookie cutter. The Heath’s just not that way. ”

But Hauptman firmly believes the Heath has oil. “There’s no question the oil is there. It’s a question of how does one get it out of the ground economically. That’s just the nature of the beast. ”

And it is not unusual in the infancy of an oil play to have less-than-stellar well results. According to Lynn Helms, director of North Dakota’s Department of Minerals, “Things were very slow in the Bakken play for about two years until they cracked the code. ”

© Copyright 2013, Petroleum News Bakken. Reprinted with permission.www.PetroleumNewsBakken.com

DeeThree Exploration Announces $70 Million Bought Deal

Firm has two rigs drilling near MT border in Alberta Bakken

Published: Tuesday, May 6, 2014 3:08 PM CDT
DeeThree Exploration announced Monday that it has entered into an agreement, on a bought deal basis, with a syndicate of underwriters co-led by Cormark Securities Inc. and Macquarie Capital Markets Canada Ltd., including Raymond James Ltd., CIBC, Dundee Securities Ltd., TD Securities Inc., National Bank Financial Inc., and Desjardins Securities Inc., to purchase 5,410,000 common shares of the Company (the “Common Shares”) at a price of $11.10 per Common Share and 752,000 common shares issued on a flow-through basis (the “Flow-Through Common Shares”) at a price of $13.30 per Flow-Through Common Share for aggregate gross proceeds of approximately $70 million pursuant to a short form prospectus (the “Offering”).

The Company has also granted the underwriters an over-allotment option to increase the size of the Offering by purchasing from treasury up to an additional 450,000 Common Shares on the same terms, exercisable in whole or in part at any time prior to 30 days after the closing of the Offering. If the over-allotment option is exercised in full, the aggregate size of the Offering, would be approximately $75 million.

Proceeds of the offering will initially be used to reduce bank indebtedness thereby freeing up additional borrowing capacity to fund a portion of the Corporation’s ongoing capital expenditure program with the Flow-Through Common Share proceeds used to incur eligible Canadian exploration expenditures that will be renounced to subscribers effective on or before December 31, 2014.

Closing of the Offering is anticipated to occur on or about May 27, 2014 (the “Closing Date”) and is subject to the receipt of applicable regulatory approvals, including approval of the Toronto Stock Exchange.

The Common Shares and the Flow-Through Common Shares will be offered in each of the provinces of Canada other than Québec by way of a short form prospectus. The Common Shares will also be offered for sale in the United States on a private placement basis pursuant to exemptions from the registration requirements pursuant to Rule 144A and/or Regulation D of the United States Securities Act of 1933, as amended, in a manner that does not require the Common Shares to be registered in the United States and internationally, pursuant to applicable securities laws.

Lethbridge Alberta Bakken

The Company currently has two rigs drilling wells on its Lethbridge Alberta Bakken property with two wells drilled and completed this quarter and two additional wells in the latter stages of drilling the horizontal production legs. Operations on this property have not been delayed due to spring break up conditions in the area. The Company looks forward to updating progress from this development drilling in the future.

The Company has recently significantly expanded its land position in this core area by acquiring rights to more than 70 additional sections that are believed to include both lower risk development and exploration opportunities.

Acquisition highlights include an agreement with a senior producer pursuant to which DeeThree may earn a 100% working interest in up to 34.5 contiguous sections (22,080 acres) of land located directly on trend and between existing DeeThree production within its Lethbridge Alberta Bakken property. A map of these lands is attached to this news release and may also be viewed on DeeThree’s website atwww.deethree.ca. In consideration, DeeThree has committed to drill one vertical well and one horizontal well by the third quarter of 2014. DeeThree has the right to acquire any lands which are not earned by the third quarter of 2014 in exchange for a cash payment and a further drilling commitment.

-DeeThree press release

Could NAFTA force the Keystone XL pipeline on the United States?

The Keystone XL route through Montana

Commentary

By Kurt Cobb from Resource Insights
Published: Tuesday, May 6, 2014 3:08 PM CDT
As the Obama administration puts off once again any decision on authorizing the Keystone XL pipeline, there are whispers of another intriguing possibility. If the U.S. government fails to approve the pipeline soon or rejects it outright, the Canadians may challenge the delay or rejection under the provisions of the North American Free Trade Agreement (NAFTA) signed by both countries. This move opens up a politically attractive option not previously available to the Obama administration, something I’ll discuss below.

I’ve been wondering about how NAFTA might affect any decision. Under its provisions, Canada is obliged to maintain the same ratio of exports to total production of oil and natural gas as prevailed in the previous 36 months regardless of the situation, that is, emergency or no. The pain of any voluntary restriction by Canada must be borne in proportion to its current consumption. Each party to the treaty would be obliged to suffer the same percentage decline in oil or gas deliveries from Canadian production.

So, what if Canada decides to expand oil production from the tar sands and export that oil to Asia? Would that production be included in total Canadian production for the purposes of the treaty? Could the United States proceed against Canada for reducing the proportion that the United States is receiving from total production?

Or, what if the Canadians build an eastward-flowing pipeline that simply delivers the extra oil to eastern Canada ending that region’s dependence on imported oil? The answers to these questions are not clear to me. The treaty doesn’t seem to envision such scenarios.

But now it seems that with the U.S. government dithering over the Keystone XL pipeline decision, it is Canada that is the aggrieved party. Still, until recently I couldn’t see how the NAFTA rules about export ratios would have any bearing on the Keystone decision. As the importer in the treaty, the United States seems to have an avenue for protesting any reduction or cutoff of oil deliveries, but the Canadians do not seem to have any leverage to force the United States to take more Canadian oil.

However, a reader alerted me to the current thinking in Ottawa which includes preparations for a possible challenge to any rejection by the U.S. government of the Keystone XL. Under entirely different provisions of NAFTA the Canadian government is readying itself to claim that the Keystone XL project is being treated differently from other previously approved pipeline projects which now cross the U.S.-Canadian border and that such discrimination is not allowed under NAFTA.

It turns out that the company proposing the pipeline, TransCanada, would also have standing under NAFTA to bring such a complaint. But the company is at present noncommittal about any such move.

Now let me spin a possible interpretation of these events without claiming any inside knowledge about the motives of the parties involved. With Congressional elections coming up later this year, it seems obvious that President Obama is loathe to anger environmentalists–some of whom are large donors–by approving a pipeline which they claim will aggravate climate change by increasing the exploitation of the tar sands. (Of course, oil from the tar sands could simply be shipped elsewhere.)

The president has now put off any decision for two elections hoping to placate his supporters. But he has angered the Canadian administration in the process.

Now, here is the kind of situation where I’ve asked myself in the past whether Obama just doesn’t see the whole picture or whether he is actually 10 steps ahead of everyone else including me. This is because I fully expected him to approve the pipeline after the 2012 election. I didn’t think he could put it off. And, I thought his own supporters would see him as cynical for merely postponing until after the election a decision he had already made.

But Obama has successfully delayed once again. So, I began thinking along the same lines as I did in 2012: He’ll surely have to approve the pipeline after the 2014 election. He’ll have no choice. His own State Department says that it is no less safe than any other pipeline. In fact, it will be safer because the latest safety technology will be applied. And besides, the State Department says explicitly that the oil will simply go elsewhere if the United States doesn’t take it. So, the president will finally be forced to exhibit his cynicism on this issue.

But with the Canadian move, there is another possibility that would work out perfectly for Obama and the Democratic Party. After the election and seeming to stand on principle, the president rejects the Keystone XL pipeline application. This is hailed as a big win for the environmental movement.

After the celebration dies down, the Canadians challenge the decision under the arbitration provisions of NAFTA. Any decision by the arbitration panel is final. The panel then decides that the failure to approve the pipeline is discriminatory under the treaty and reverses President Obama’s decision. The president reluctantly complies. What else can he do? His hands are tied by the treaty.

Is this what the president wants to have happen? I claim no power to read minds. But, perhaps some people in the administration know the answer. It is possible that they haven’t thought of this scenario, but I doubt. And so, just this once the president may not be 10 steps ahead of me. We’ll see.

-Oilvoice

Teton County: First in State To Produce Oil, Natural Gas

Cable tool drilling rig on display at the Oil Field Museum in Cut Bank. Sun Times photo by Darryl L. Flowers

Region is now in Glacier County

By Darryl L. Flowers
Published: Friday, August 9, 2013 3:05 PM CDT
Last year, as news of oil companies and their landmen scouring the area for minerals was making the headlines, several attempts to report the history of early oil exploration in Montana appeared.

As the public hubbub has subsided and most of the work in the region has fallen below the radar, the Sun Times has continued to dig into the fascinating hydrocarbon history of the Treasure State.

Early this year we came across one of the best papers on the subject, written by  geologist William Boberg. It is still the best work for those who want to focus only on the Flathead / Alberta and British Columbia regions. Boberg’s work was published in the 1984 Montana Geological Society Northwestern Field Conference.

The Sun Times research showed that the earliest mention of oil in Montana dated to the 1860s, when oil was found at a “seep” near a river and was used by wagon trains to lubricate the axles.

But we were not able to pin down the details, so rather than publish an  incomplete history, we held the story.

But we kept digging, searching.

In late July, we were looking for details reported when the Krone, Steinbach and J.B. Long wells were being drilled in Lewis and Clark County, as well as the famous Morning Gun Well that was drilled in Glacier County. The search led us to the Oil Field Museum, part of the Glacier County Museum in Cut Bank.

While the Oil Field Museum certainly has the best display of old drilling tools… including a real “Cable Tool” drilling rig, for instance… it also has an impressive collection of old oil industry journals and company records.

While looking through old issues of the Montana Oil Journal, we came across the crown jewel of Montana’s early oil history.

The in depth report was published in the July 20, 1963 edition of the Montana Oil Journal, which was based in Great Falls at the time.

The article was titled “Outline History of the Development of Oil and Gas in Montana,” and was written by well respected United States Geological Survey geologist Dr. C.E. Erdmann.

According to an Editor’s Note preceding the report, the work was done at the request of Senator Lee Metcalf, Montana Democrat. The note reads, in part, “Included in this report was an authoritative and entertaining report on the history of oil and gas development in the state, by Dr. Charles E. Erdmann of the U.S.G.S., whose headquarters are in Great Falls. Of particular interest to many will be his account near the start of the article, covering the fruitless effort in the state, from 1889 to 1910, to develop production near oil-gas seeps.”

The report is detailed, a little too detailed for the non-geologist. The Sun Times has edited Dr. Erdmann’s report, removing some of the technical details, such as the geological ages of the formations. We have also added some clarifications of the terms Dr. Erdmann used. Otherwise, the report is original.

Outline History Of Oil And Gas Development in Montana

By Charles E. Erdmann, PhD

Introduction

The classical pattern of petroleum exploration in virgin territory is for the first tests to be made in the vicinity of natural surface indications (seeps) of oil and gas, if any have been found. Unusual combinations of geologic conditions are required for the development of these surface features, and their occurrence is transient and infrequent. Their value, however, is that they provide tangible evidence of the local presence of hydrocarbons, thereby raising hopes that commercial accumulations may be found underground. The analogy with surface discovery of inorganic minerals is obvious: both require bold and enterprising spirits if the usually costly and difficult adventure of development is to be undertaken. Because they are few in number, they are soon exploited, and this first stage of exploration is of short duration; but the often amateurish effort frequently clothes it with many colorful and dramatic incidents. If no significant discoveries result, and they seldom do, drilling on easily recognized geologic features such as anticlines and domes may follow with more or less delay. If drilling depths are shallow, as they are in some of the older fields in Montana, this second stage may mark the heyday of the small independent operator.

By the time the obvious surface structures have been recognized and evaluated, a more mature third stage has appeared in which the search for subsurface structures and porous beds and stratigraphic traps is carried on by the sophisticated techniques of geophysical prospecting and study of formation samples or subsurface stratigraphy. Other later stages may involve deeper drilling, secondary recovery techniques and, finally, abandonment. Initially, each stage may appear in order. No firm line between them exists, however, for if the petroleum industry is to prosper, new discoveries must succeed abandonments. Review of the history of oil and gas development in Montana indicates close adherence to this pattern, which will be the outline for this chapter.

Explorations On Surface Indications, 1889-1910

The exact number of oil and gas seepages in Montana is not known with certainty, but probably there are not more than 15 or 20, and some of them have become inactive since they were discovered. Several of them have been known for many years, and were responsible for the pioneer oil excitement. The first of record was noticed August 10, 1864, by members of an immigrant train crossing the northeast flank of the Pryor Mountains on the Bozeman Trail, as a scum of heavy oil on a stagnant pool of water. In this instance the immediate practical application was for axle grease for the wagons. No drilling development followed, and even the report was not made for many years. Furthermore, no rediscovery seems to have been reported. The exact location, therefore, is not known, other than it was northwest of Beauvais Creek toward the East Fork of Pryor Creek Divide. A likely possibility, however, is that it was on some intermittent upper tributary of Woody Creek in T. 4 S., R. 28 E., Big Horn County, near where that drainage was crossed by the Bozeman Trail.

Roscoe seep. The first oil seep to be drilled in Montana was the occurrence of heavy black oil or asphalt near the southeast corner NE1/4SE1/4 sec. 32, T. 6 S., R. 18 E., Carbon County, about 5.5 miles south of the old Roscoe post office. Date of discovery and name of the original locator are not known. In the late 1880’s, however, the area was acquired by Thomas Cruse, who had found the famous Drumlummon lode near Marysville in 1876. The location of the first test, Thomas Cruse well No. 1, was about 650 feet northwest of the seep, and was completed and abandoned in 1889 as a dry hole in the Judith River formation at a, total depth of 1,100 feet. Insofar as known, this was the first organized attempt to discover oil by drilling in Montana. Undeterred by failure, Cruse continued operations in the vicinity of the seep during 1890 and drilled eight more dry holes that ranged in depth from 600 to 800 feet before giving up; and even then he retained ownership of the tract. Others continued to be intrigued by the possibilities, and additional tests were made in 1909, 1931, and even as late as 1947, but without success.

Kintla Lake area. Impressive amounts of pale-yellow, high-gravity (44° API) oil issue from surface deposits at the Sage Creek seeps in southeastern British Columbia, about 8 miles north of the international boundary at the northwest corner of Glacier National Park. The controlling structural feature appears to be a normal fault of great magnitude that can be projected into Montana where it is called the Roosevelt Fault. In 1892 active seepages of oil and gas were discovered in Montana near the northeast end of Lower Kintla Lake, not far east of where the lake crosses the trace of the fault. An organization called the Butte Oil Co. posted a location notice on August 10, 1900. Drilling began late in October 1901, the well location being NW1/4NW1/4NW1/4 sec. 18, T. 37 N., R. 20 W., Flathead County. Late in 1902 work was suspended temporarily, with the hole at a depth of 1,450 feet in very hard “black limestone and iron.” A significant incident was the discovery of gas at a depth of 720 feet, which is said to have burned with a 4-foot flame. As will appear later however this was not the first discovery of gas in Montana by drilling.

In late June 1902 the Kintla Lake Oil Co. of Kalispell commenced operations at their No. 1 well, approximately in the center of NE1/4 sec. 12, T. 36 N., R. 22 W.; and in 1903 a second test is said to have been located toward the center of the section. Both are situated on Tertiary “lake beds” on the left bank of the North Fork of Flathead River. The No. 1 well was drilled to 1,290 feet at least, and the No. 2 to about 1,000 feet. Traces of oil and gas were reported from each, but both were abandoned as dry holes. The circumstances that led to these tests are not known, but they may have been drilled on seeps in the “lake beds” that emerged along faults.

Another old venture, for which there is good authority but no log or operational information, is the Southwest Kootenai Land Oil Co. test on Kintla Creek about 3 miles above Upper Kintla Lake. This locality is approximately in the north center of sec. 8, T. 37 N., R. 19 W., Flathead County, in a deep glaciated valley about 1.5 miles west of the Continental Divide. Drilling is reported to have commenced March 8, 1906, and continued to a depth of at least 600 feet.  In all probability the location was made on the basis of seeps or iridescent films of oil whose origin is more or less identical with those on Cameron Brook at Oil City, Alberta, a short distance northeast across the divide, where petroleum exploration had been going on since 1901.

Swiftcurrent Creek. Sustained efforts to develop oil by drilling on or near obscure surface indications of petroleum and natural gas in Swiftcurrent Creek Valley throughout the nine year period before the district became incorporated into Glacier National Park in 1910 resulted in seven tests that give it the nominal distinction of being the first oil and gas field in Montana and the only locality in the State where drilling on seepages proved successful. Credit for the recognition of these showings appears to be divided between two men: Frank M. Stevenson identified certain exposures of Upper Cretaceous marine shale as “oil shale” in the summer of 1901; and Samuel D. Somes prospecting near where Sherburne Dam is located, observed small pools of oil in irregularities on freshly broken shale and limestone on the floor of his adit in late February or early March 1902.

Within a short time, 52 oil claims were located under the placer mining law. Companies were organized and consolidated as claims were exchanged for shares, the ultimate operator being the Swift Current Oil, Land & Power Co. The first derrick was erected in November 1902, approximately at the center of SW1/4 NE1/4 sec. 4, T. 36 N., R. 15 W., unsurveyed, on the Lakeside placer claim which had been located by Stevenson. Drilling began in 1903, when the hole was taken to a depth of 430 feet, with a showing of oil; but was abandoned because of inability to shut off water. The rig was then skidded 30 feet west, and work begun on location 1-A, which was completed as an oil well at a total depth of about 550 feet during the summer of 1905. Oil from this well was displayed at the State fair at Helena in the fall of 1905, where the company was awarded a diploma for “the first producing oil well in the State of Montana.” Operations were terminated through lack of finances in 1907, and the properties turned over to Stevenson. In the meantime, however, one other oil well, with an initial capacity of about 20 barrels per day, by bailing, and 2 dry holes had been completed.

M. D. Cassidy, locator of a neighboring claim to the east, became aroused by this activity and organized the Cassidy-Swiftcurrent Oil Co., date of incorporation being July 15, 1905. Approximate location of the first test by this company, which may have been near a gas seep recognized by Cassidy, was in the extreme northeast corner of NW1/4 NW1/4 NE1/4 sec. 3, T. 35 N., R. 15 W., unsurveyed, near the center of St. Louis Placer No. 1. Drilling began in 1907, and continued at intervals into 1909 to a total depth of about 2,800 feet, where the tools were lost. Natural gas was reported from depths of 430, 1,900, and 2,800 feet, the initial shut-in pressure being about 250 p.s.i.

No measurement of volume seems to have been taken, but, upon being ignited, the gas flow from a I-inch pipe is said to have burned to a height between 15 and 20 feet. Cassidy piped the gas into his house, where it was used for heating and lighting until 1914 when the flow ceased, due to caving in the hole. The Cassidy-Swiftcurrent well No. 1, therefore, has the distinction of being the first producing gas well in Montana, even though it had only one customer.

Boulder Creek. Following Somes’ discovery of oil in his adit on Swiftcurrent Creek in 1902, other prospects in the Marias River formation were examined for traces of oil. Favorable indications were reported in an abandoned working on Boulder Creek, probably somewhere near the center NW1/4 sec. 27, T. 35 N., R. 15 W., unsurveyed, Glacier (formerly Teton) County. Recognition of this seep may have contributed to the organization of the Swift Current-Boulder Oil Co., which soon acquired substantial acreage south of Swiftcurrent Creek. Drilling commenced in July 1904, the approximate site being south of the center SE1/4 SE1/4, sec. 11, T. 35 N., R. 15 W., on the left bank of Boulder Creek. A show of gas was reported in shale at a depth of about 1,750 feet, and a show of oil “of a superior quality” was found in the top of a sandstone at a depth of 2,010 feet on July 8, 1905. Operations were abandoned at this depth in the spring of 1906.

This persistent run of failure naturally resulted in loss of interest, and by the close of 1907 such random drilling had come to an end. The Congress passed the act establishing Glacier National Park on May 11, 1910, thereby precluding new ventures. In the meantime, the Lakeside and New Era placer claims in the Swiftcurrent District had been patented, and the patent for the St. Louis No. 1 was pending but held in abeyance as Sherburne Lake project of the Bureau of Reclamation approached realization. More or less ineffectual efforts to recondition the two small oil wells and the gas well persisted for several years, but terminated in the summer of 1919 when the locations were flooded by water rising behind the Sherburne Lake Dam.

No other drilling on surface indications (seeps) has been recorded in Montana.

Exploration Of Surface Structures, 1890-1950

Many anticlines and domes are expressed in rocks at the surface on the Montana Plains. The precise number is unknown, but more than 475 areas, fields, and structures have been named. Approximately 185 fields and structures have been named on the latest edition of the “Structure Contour Map of the Montana Plains” (U.S. Geological Survey, 1955); but only about 100 areas have been proved to contain oil or gas in commercial quantities, and not all are anticlines. The producing fields are shown on figure 7, and their names are keyed by number to the list (available athttp://www.mbmg.mtech.edu/sp28/table1.htm).  This chart, it should be noted, is not a complete list of Montana oilfields, nor does it include the major gas fields.

The surface structures exhibit wide variation in size, shape, and amount of structural relief. Bowdoin dome in Phillips and Valley Counties, and Kevin-Sunburst dome in northern Toole County occupy hundreds of square miles, and are so broad And have such comparatively low relief that the domical structures cannot be visualized on the ground. The Cedar Creek anticline in the southeastern part of the State is more than 100 miles in length, but the narrow Pierre shale inlier along the crest is only a few miles in width. Flat Coulee dome north of the Sweet Grass Hills, on the other hand, is contained within a single square mile. Elk Basin anticline, which straddles the Montana-Wyoming boundary, or Milk River anticline in the Disturbed Belt on the Blackfeet Indian Reservation, are nearly perfect folds in which both flanks can be observed from a single viewpoint.

Not too many years had elapsed since the pronouncement of the anticlinal theory of oil and gas accumulation and, in the absence of an oil seep, a sharp or closely folded anticline seemed the next best feature on which to drill. Recognition of a completely exposed fold in rock requires so little imagination or interpretative skill that when they were observed they were reported, often by sheepherders, and the more evident small folds were described as “sheepherder structures.” Insofar us known, the first test in Montana to be located on an anticline, presumably in accordance with the anticlinal or structural theory, was the R. O. Morse well No. 1, NE1/4 sec. 4, T. 6 S., R. 18 E., Carbon County, on the northeast flank of Roscoe dome, a “sheepherder structure” toward the west end of the Nye-Bowler lineament. It may be, however, that Morse had been attracted to the area by Cruse’s exploration around the Roscoe seep a few miles south, which was then in progress. Drilling equipment in 1890 was very inadequate for a complete test of the structure and the operation was abandoned as a dry hole in the upper part of the Colorado Group at a total depth of 1,100 feet. Subsequent drilling has proved the structure to be dry into the upper part of the Cambrian series at a total depth of 5,928 feet. Chance plays an important part in exploration for oil and gas, and the first discovery of natural gas by drilling on the Montana Plains came unexpectedly in 1893 a few miles southwest of Havre at Fort Assiniboine in a water well in the upper sandstone unit of the Eagle sandstone. Although not of commercial volume, the find directed attention to the possibility of gas development out on the plains, but this did not follow for nearly 20 years.

The first commercial show of natural gas in eastern Montana was found in Gas City dome at the north end of the Cedar Creek anticline in 1913. Drilling was initiated by the Mid-West Oil Co., in November 1912, at their No. 1 well, W 1/2 NE 1/4 NE 1/4 sec. 20, T. 14 N., R. 55 E., Dawson County; but with change of ownership the hole was completed by the Eastern Montana Oil & Gas Co., which developed the field. Drilling continued to a total depth of 2,710 feet, which was reached in April 1914. In the meantime a flow of 500,000 cubic feet of gas per day with a shut-in pressure of 220 pounds per square inch, and some water had been found between depths of 730 and 745 feet in a sand assigned arbitrarily to the Judith River formation. Beginning in 1915 gas for domestic use was supplied to the city of Glendive 10 miles north on Yellowstone River. Peak of production was reached in the fall of 1917, when the combined flow of eight wells amounted to about 10,600,000 cubic feet of gas per month. The field was abandoned in 1925; but other gas production followed along the anticline to the south.

The year 1915 also was notable for the discovery of oil in the Elk Basin anticline in Carbon County, Montana, and Park County, Wyoming, a structure which had first been noticed some 10 years previously by the U.S. Geological Survey. The discovery well, which produced from the Torchlight sand in the Frontier formation at depths of 1,335 to 1,402 feet, was in Wyoming; and about 87 percent of the productive acreage fell in that State. The remaining northern portion of about 120 acres became Montana’s first producing oilfield. The beginning, therefore, was rather small. Four oil wells were drilled in 1915, but were not brought into production until shipping facilities became available the following summer. Two more oil wells and one dry hole were drilled in 1916, and production for the last 6 months of the year totaled 44,917 barrels, with a value of $44,019.

Excellent examples of the possible rewards of deeper drilling are furnished by the development of the Elk Basin field. Natural gas was found in the Cloverly formation, about 1,150 feet below the Torchlight, in 1922, but is now largely exhausted. The major discovery, however, did not come until December 1943 when oil was found in the Tensleep sandstone at a depth of about 4,500 feet. This reservoir proved to have about 215 feet of saturation, the thickest producing section of any field in the State. About 1,375 acres, or 27.5 percent, of this Tensleep pool are in Montana. Finally, in 1946 oil was found in the underlying Madison limestone of Mississippian age.

The immediate effect of the original Elk Basin discovery was to direct attention to the Montana extension of the Bighorn Basin and the country to the north where interest still centered on sharp-dip structures; but prospecting resulted only in dry holes. One of the more prophetic of these efforts was the first test on the large, Woman’s Pocket anticline, which was spudded May 6, 1916, by the Foster Oil Co., in C SW1/4 NE1/4 sec. 15, T. 8 N., R. 20 E., Golden Valley County, and completed in June 1918 by the Tri City Oil Co., at a total depth of 2,215 feet. The trace of oil from 1,550 to 1,565 feet, and two other minor shows at greater depth, were the first evidence in Montana of the occurrence of petroleum in the Kootenai formation, and provided the incentive for further exploration of that unit. Although still far short of commercial production, more tangible encouragement soon came from the Devil’s Basin anticline to the northeast where the Van Duzen Oil Co. well No. 1 spudded in the Kootenai formation in NE1/4 SW1/4 NW1/4 sec. 24, T. 11 N., R. 24 E., Musselshell County, on August 10, 1919. Drilling continued to a total depth of 2,031 feet on November 6, 1919. In the meantime, 10 or 12 barrels of oil had been found in a 6-foot limestone at a depth of 1,167 feet in what was then called the Quadrant formation later it was shown the producing horizon was the Heath Formation. The trend of exploration continued toward the northeast, and the next structure to be drilled was Mosby dome on the elongate Cat Creek anticline. Here the Franz Oil Corp. well No. 1 (now Continental Oil Co., Charles 1-A) was started December 18, 1919, and was completed at a total depth of 1,014 feet as a 30-barrel oil well on February 20, 1920. Production was obtained from the second Cat Creek sand of the Kootenai formation between the depths of 998 to 1,014 feet. This famous discovery well, which in itself never produced more than 700 barrels of oil, resulted in the development of the Cat Creek field, the first important field in the State and, for its size, still one of the most productive and most profitable that has been found. Exploitation was rapid. A peak production of 2,080,826 barrels per year was reached at the close of 1923; and cumulative production to the close of 1961 has amounted to nearly 20 million barrels of oil.

The discovery of the Cat Creek field definitely carried the struggling Montana petroleum industry beyond the nascent stage; but national significance was not achieved until the oil discovery on the Kevin-Sunburst dome in Toole County 2 years later. Actually, there were two oil discoveries; and the short interval between them compounded the excitement they raised. Oil was found first on April 14, 1922, when the Gordon Campbell, Kevin Syndicate-A. Goeddertz well No. 1, NE1/4 NE1/4 NE1/4 sec. 16, T. 35 N., R. 3 W., was completed as a 20-barrel producer between depths of 1,770 to 1,790 feet in the basal sandstone unit of the Sawtooth formation and the eroded, weathered upper surface of the Mission Canyon formation of the Madison group. In the second, oil was found June 5, 1922, when the Ohio-Sunburst Oil Company’s R. Davey well No. 1, SE1/4 SE1/4 SW1/4 sec. 24, T. 36 N., R. 2 W., was completed as a 150-barrel producer between depths of 1,535 to 1,564 feet in a sand at the base of the Kootenai formation, which later was named the Sunburst sand. These discoveries, together with the great size of the dome, first production from rocks of Paleozoic age in the Rocky Mountain region, shallow drilling, and demonstrated production from a low-dip structure, attracted immediate attention from major oil companies and numerous small operators. The result was remarkable and, by the close of 1922, out of a total of 42 completed tests the field could show 22 producing oil wells, 4 wells producing both oil and gas, 3 Sunburst sand gas wells, 3 dry holes with shows of oil and gas, and 8 dry holes, with 11 tests drilling. Peak oil production of 6,457,217 barrels of oil was reached rapidly in 1926, since when it has been declining; and cumulative production to the close of 1961 has amounted to 66,189,439 barrels, which is not far from its estimated ultimate production of 70 million barrels of oil. Peak production of natural gas of 4,950 million cubic feet was reached in 1928, with cumulative production of about 78 billion cubic feet through 1961. With the development of the Kevin-Sunburst field the petroleum industry became firmly established.

Tribal Representative Refuses To Budge In Mitigation Process

From a Forest Service map. The red outlines show authorized but suspended oil and gas leases in the Badger-Two Medicine area. An Associated Press report that appeared April 4th incorrectly claimed that the Solonex lease was the only one that had not been relinquished. Sidney Longwell’s lease indicated by the box at upper left.

By Darryl L. Flowers
Published: Tuesday, April 15, 2014 4:30 PM CDT
While the first in a series of “Section 106” meetings held earlier this year was cordial and focused on the Section 106 procedure, the meeting held two weeks ago showed patience is wearing thin, with one side refusing to engage in mitigation, the sole purpose of the Section 106 process.

The meeting was held at the Lewis & Clark Interpretive Center in Great Falls in order to accommodate a larger audience; the meeting held earlier this year was held at the U.S. Forest Service offices in Great Falls. The audience, however, was smaller than the earlier gathering.

William Avey, Chief of the Lewis & Clark and Helena National Forests lead the meeting. John Murray spoke for the Blackfeet. Sidney Longwell, the original owner of the lease traveled from Baton Rouge, Louisiana to attend. He was joined by Steve Lechner, an attorney with Mountain States Legal Foundation. Lechner, fresh off an astounding 8-to-1 landmark decision before the United States Supreme Court is representing Mr. Longwell.

The meeting got underway with Mark Bodily, of the Forest Service, explaining that the purpose of the meeting was to seek “something that will work for Solonex (Mr. Longwell’s company that now owns the mineral lease) and the tribe.” Bodily next explained the “Area of Potential Effect,” or APE, that considers visual, audio and olfactory (smell) in determining an APE, done in consultation with the SHPO (State Historical Preservation Office) and THPO (Tribal Historical Preservation Office). Bodily said the “entire Badger-Two Medicine should be considered an APE.” Bodily continued, saying that in the process “we look at direct, indirect and cumulative effects.”

Sidney Longwell, confined to a wheelchair, asked what had changed over the years, with Bodily replying, “It was based on current information at the time. We completed a recent [third] ethnographic study and determined it eligible for listing under the NHPA (National Historic Preservation Act). It is spiritually, traditionally valuable.”

Lease operator Joe Large, with RPM Geologic, asked Bodily the meaning of “indirect” effect. Bodily attempted to explain indirect effect using a lengthy, wandering analogy involving a rock thrown through a window. At the end of the explanation, Steve Lechner, the attorney for Mr. Longwell asked Bodily to put the analogy in writing.

Lechner asked Bodily, referring to the first Section 106 meeting held in 2003, how large the Traditional Cultural District (TCD) was at that time. Bodily replied he did not know the size at that time, but said that the TCD now covered the entire Solonex lease of 6,247 acres in Glacier and Flathead County. The TCD has now been expanded to approximately 160,000 acres. Lechner commented, “The TCD has increased three times in the past two months.”

Lechner, challenging the Forest Service’s efforts to keep moving the goalposts over the past decades to keep Solonex from drilling a well, said, “The undertaking [drilling a well] has not changed in 30 years.”

Joe Large, speaking to tribal representative John Murray, asked why it was okay to drill within the boundaries of the reservation, but not on land owned by the American people. Large pointed out that there were a dozen drilled wells within five miles of the lease.

Murray, with his voice dropping so low as to be hard to hear at times, said in response, “We are not some failed attempt to be like you. I can’t tell you where that border (border of the reservation and the Badger-Two Medicine) is. Murray went on to talk about how the Bible was “re-written 1,100 times.”

Lechner, following up on Large’s question, asked Murray, “If you can drill here, why can’t you drill here?” Murray replied, “It doesn’t fit our spiritual knowledge system. The Blackfeet knowledge system is still intact.”

Murray then commented on the current struggles of the Blackfeet tribe to govern themselves, a struggle that is often page one fodder for the Great Falls Tribune, “Embezzlement… stealing… politics… the reservation is in a shambles right now.”

Sidney Logwell asked Mark Bodily if the Badger-Two Medicine is a formal TCD, without any congressional action. Bodily explained that, yes, the region is eligible, with the optional next step being an actual listing on the National Historic Registry.

It should be noted that during the determination of the TCD, the “opposing” side, in this case Sidney Longwell, has no say in the process and are not allowed to challenge any findings. Neither is any input sought from the public, and the ethnographic studies on which the public lands are removed from public use are not put out for peer review.

While the area is often portrayed as “pristine,” or “untouched” the area of the lease includes a major highway and railway line, used for both freight and passenger trains. Also crossing the lease are two NorthWestern Energy natural gas pipelines, Qwest Communications communications lines and electrical lines. Multiple roads, easy noticeable in satellite imagery, plainly show evidence of past human activity in the form of seismic testing that was conducted in the 1970s and 80s.

When NorthWestern Energy sought permission to add a second natural gas line in the last decade, the U.S. Forest Service issued a “FONSI,” or Finding Of No Significant Impact. In the fidning, the Forest Service and the SHPO both found no archeological or cultural issues with the pipeline. The FONSI also reaffirmed that, in accordance with the 1895 treaty, the Blackfeet Tribe only retained limits rights to the land, those rights being fishing, hunting and gathering wood for heat or construction. Longwell owns the oil and gas located under those lines.

The FONSI refers to the area as a transportation and communications corridor. The approved well is less than two miles from this corridor.

Longwell, speaking bluntly, asked, “The TCD cannot stop us from drilling. How many meetings will we have? When are we going to start mitigating the problems? Enough policy discussions, it’s time to move forward.”

The Forest Service’s Mark Bodily replied, “We are on the cusp now.”

Bodily then asked John Murray what are some of the potential effects that need to be mitigated. Murray answered, “You know what a bridge looks like. You know what a Forest Service Road looks like.” Lechner shot back, “Those effects have been studied ad nauseam via Environmental Impact Studies (EIS). You can’t start from square one.”

After a discussion about the Forest Service Record of Decision on the original Solonex permit (at that time American Petrofina of Texas was the lease operator) and a nearby Chevron well, Joe Large brought the meeting back to point, “At the last meeting, I discussed mitigation,” referring to Joe’s presentation in the January Section 106 meeting that, using technology not available 32 years ago, the wells could be drilled using a smaller footprint, in a much shorter time, and without the use of a “mud pit.”

Longwell asked the tribe, represented at the meeting by Murray, to “Give a little. Let the tribe give us permission, we will honor their religious beliefs, but we need some consideration.”

Murray answered, “I don’t think the traditional people are willing to give.” Murray then suggested that Longwell take tax credits to abandon the lease, or “drill somewhere else.”

Through lawsuits filed with the federal courts environmentalists have succeeded in putting exploration on hold. With the cooperation of anti-energy legislators, an attempt continues to force the mineral owners off their leases. The government offered lucrative tax incentives… taxpayer money… to leaseholders in hopes they will relinquish their leases, thereby not only depriving the federal and state treasuries of royalty revenue, but making the taxpayers foot the bill. Alternatively, leaseholders could swap for public land in another area and begin the multi-decade fight with federal agencies and environmentalists all over again.

When Joe Large asked about the fluid nature of the boundary between the reservation and the lease, John Murray said “we opposed wells on the reservation. We tried to enlist the help of organizations such as Earth Justice.” Lechner asked if the Blackfeet would oppose drilling outside the TCD, with Murray answering, “You could drill on my land. We think we have ancient rights of endowment.”

After an explanation of the SHPO process, Mark Bodily said the group needed to look at the proposal and consider mitigation. John Murray seemed to end the need for further discussions on mitigation by stating, “No drilling.”

Sidney Longwell came back with, “I want to be able to drill.”

Bodily asked about the possibility of moving the well location. However, Longwell, Lechner and Large ruled that out, saying that if there were any changes in the APD (Approved Permit to Drill), the entire process would have to start over again. “No matter what else we may consider, we will cannot give up our approved APD,” said Large.

As the discussion turned from mitigation to asking what would happen if Solonex abandoned any further attempt at mitigation with the Blackfeet, Forest Service Chief Avey, referring to a case cited in the previous meeting as being the basis for the Section 106 proceedings, said, “The court case was dismissed without prejudice, so the case can be brought again.” However, shortly after the January meeting, the Sun Times was the first to correctly report that, in fact, the case was dismissed with prejudice, meaning the case can not be brought to the court again. At the time, the Sun Times published fax pages that prove the Lewis and Clark National Forest office in Great Falls was aware of the decision. The case was decided by a federal judge in Great Falls.

As Murray and Bodily offered suggestions that Longwell move the drillsite, despite being told earlier that would start the 30 year process over again, Longwell commented that the lease was probably one of the highest potential prospects in the “lower forty-eight.”

While to some Longwell’s comment might seem to be hyperbole, the region has undergone extensive study since the first oil wells in Montana were drilled along the shore of Kintla Lake, now part of Glacier National Park. In last week’s issue, the Sun Times carried a report out of Canada that said a well, in the thrust belt just over the Canadian border, was producing 570,000,000 cubic feet of natural gas per day. When the Waterton, Pincher Creek and Lookout Butte fields were being developed just over the border, newspapers and trade journals of the time carried regular reports of wells producing in excess of 100,000,000 cubic feet of gas per day. Due to the heat and pressure from the events that formed the Rockies, wells in the thrust belt tend to produce gas and gas condensates. Some wells in the region are capable of producing a “distillate,” or naturally occurring gasolene.

As the meeting wore on, the frustration began to show with Lechner, the attorney, asking William Avey, if the dialogue continues, will it mean “more NEPA (National Environmental Protection Act) studies… more EIS (Environmental Impact studies}…. more NEPA studies… more EIS studies…” Avey replied, “Pretty much.” Longwell said to Avey, “Mr. Avey, you have put up a brick wall. You are pushing out the ‘little guy’.” Longwell continued, “Mr Avey, if the Forest Service had done it’s job thirty years ago, we would not be here today.”

Zane Fullbright, a Bureau of Land Management Archeologist who was in the audience, cut to the chase with a comment that caught the room by surprise, saying, “The tribe is not the decision maker on this. The solution could be slapping five million dollars into the hands of the tribe.”

Joe Large asked Avey what effects the TCD has on Multiple Use, a legal doctrine that makes clear that all uses are to be considered for public lands. Avey replied that Multiple Use does not mean every piece of land can be used for every purpose, not answering Large’s question.

Rudy Tanklink, a Great Falls resident asked how many TCDs are in Montana. A member of the State Historic Preservation Office, one of the consulting parties taking part in the meeting, said there were many “large ones” in Montana. According to a document listing TCDs across the country provided to the Sun Times by the Forest Service, there are not that many TCDs, but they are concentrated in the western states. The Badger-Two Medicine, at about 160,000 acres, ranks third in size. Many of the TCDs are small in size, some only a fraction of an acre. Many of the larger TCDs have been determined to be “eligible,” which, according to the Forest Service automatically makes the lands that fall with a TCD… a full fledged TCD, or a de facto wilderness, done without congressional approval.

Longwell told the consulting parties that the Forest Service’s determination that the Badger-Two Medicine was a TCD could not stop the development of the well. Bodily said that was correct, but any adverse effects have to be addressed before drilling could move forward.

As the meeting drew to a close, the Forest Service pressed Longwell to continue the process. Lechner, the attorney, asked that more information hidden from the public in the most recent, heavily redacted ethnographic study, be disclosed. Lechner showed a page with all the text blacked out, drawing a laugh from the room. This is the third study conducted at taxpayer expense, yet the Forest Service refuses to disclose the findings. The Forest Service replied that it would consider the request. “You are asking us to mitigate issues with the wellsite, but you are not telling us what you want us to mitigate,” said Lechner.

A few days after the most recent 106 meeting, news  reports carried by the Associated Press reported that the fight by Sidney Longwell to drill the well began in the 1990s. The report also claimed that Sidney’s lease was the only lease still active in the Badger-Two Medicine. Both reports are incorrect.

As recorded with the Bureau of Land Management (BLM), the agency that is responsible for the subsurface minerals (oil and gas), this process began on September 22 of 1981, when the lease, or “case”, was established. On that date, a non-competitive “lottery” was held. The lottery was the idea of the Reagan administration, the intent being that the average citizen should be able to have a shot at getting a producing, profitable oil lease.

In May of 1982, the lease was issued to Sidney Longwell.  On October 1, 1985, the lease was suspended. In suspension, the clock on the 10 year lease term does not advance, but nothing can be done to develop the lease. The reason for that  suspension was the Badger-Two Medicine Environmental Impact Study.

Curiously, according to the BLM records, the suspension was lifted for one day. On June 29 1993, it was lifted, and the next day the suspension was re-instated. The record shows that the second suspension was a Secretarial Decision / Badger 2 Medicine.

As to Sidney Longwell being the only holdout in the Badger-Two Medicine, that too does not reflect the record.

A document dated 2011 lists “Federal Leases within the Badger-Two Medicine Area.” The four page document lists almost 50 leases, including the Sidney Longwell lease. Of those, about 30 leases have been relinquished. Most of those leases show the of the leases were held by Chevron and Trout Unlimited. The BLM seems to have scrubbed their database of the detail reports regarding the relinquished leases, making it impossible to find out if the leaseholders traded for other properties, or took the tax incentive.

The remainder of the leases, are, like Mr. Longwell’s, still held in suspension. A read of the details of the leases shows a mix of original leaseholders, from individuals, to firms like BHP, now BHP Billiton, the world’s largest mining company, based in Australia. Current leaseholders include Hess, Devon, Fidelity Exploration & Production and JMI Energy. That group, and Devon itself, have a majority of the leases.

One lease, known as MTM 55320, is held by the J.G. Kluthe Trust “A”. The lease contains 3,982 acres.

The list includes “Solenex,” a misspelling of the name of Sidney Longwell’s company, Solonex. Also shown is a lease, 7,640 acres, held by W.A. “Tex” Moncrief, Jr of Moncrief Oil, based in Fort Worth, Texas. Moncrief Oil was founded by legendary Texas “Wildcatter” Monty Moncrief.

Of all the leases still in suspension in the Badger-Two Medicine, the Moncrief lease is the only one that has a history of modern drilling activity. In the early 1960s, the “Kiyo” well was spud. Shortly after drilling began the bit punched through an underground cavern. Circulation was lost and drilling ceased. The rig was moved a short distance and the Kiyo 1-A was spud in 1963. The Kiyo 1-A was drilled to 11,500 feet, encountering the Bakken Formation at 2,810 feet and again at 4,662 feet. The repeated formations are a classic example of an overthrust.

The Kiyos are included in the Traditional Cultural District, despite being located near a communications facility on Mount Baldy. A road passes near the wellsites, offering access to the Mount Baldy facility. While most of the road is on US Forest Service land, the road begins on private land, and those landowners, in a dispute with the Forest Service, no longer allow the agency access.