Oil, gas lease money welcome in western N.D.

Oil, gas lease money welcome in western N.D.

Money from federal oil and gas lease sales is repairing McKenzie County roads and helping maintain its seven school districts, which have a total of about 760 students.

“We don’t expect to see this kind of money again, not in the near future, anyway,” county auditor Frances Olson says.

The year is ending on a high note for North Dakota’s oil patch.

Federal oil and gas lease sales in the state commanded more interest than in Montana and South Dakota for the third straight year, the Bureau of Land Management said.

Oil and gas lease sales in the three states during fiscal year 2006, which ended in September, totaled $14.3 million, with North Dakota accounting for $13.3 million, the BLM said. Montana had $952,597 in leases, while South Dakota tallied $44,348.

The total for the three-state region was second only to fiscal 2005, when slightly more than $36 million was bid. North Dakota accounted for $35 million of that total.

Oil activity in North Dakota is at its highest level in nearly two decades, said Lynn Helms, the director of the state Department of Mineral Resources. Oil production reached 113,000 barrels daily last week, the highest since July 1987, he said.

Most lease sales in the three-state region have been on U.S. Forest Service land in western North Dakota’s Williston Basin, said Karen Johnson, who heads BLM’s oil and gas leasing division in Billings, Mont.

McKenzie, Billings, Slope and Golden Valley counties shared $11.1 million from federal oil and gas leases in fiscal 2005. The money was distributed earlier this year.

Figures for this year are not yet in.

The counties used the bulk of the money to repair roads torn up by trucks hauling equipment to the oil patch, auditors say. The rest was spent on schools.

McKenzie County, where most of the federal lease sales in North Dakota have occurred in the past two years, got $5.4 million in fiscal 2005. About $5 million was earmarked for road repair and maintenance, and $417,755 was divided among the seven school districts, Olson said.

“It helps hold down tax levies and keep on top of capital expenditures we would not otherwise be able to keep on top of,” Olson said.

Steve Holen, superintendent of McKenzie County’s largest school district, said his district has received more than $500,000 in recent years from the federal lease sales.

“An increase in oil production is a positive for us,” Holen said.

The district, with 1,679 square miles, is the largest in the state but has little property tax base because much of it is federal land, he said.

“The western part of the state is really fortunate to have those kind of things help us out,” he said of the revenue from the lease sales.

Billings County got $3 million from the federal lease sales in fiscal 2005. The county’s only school district, which has two schools totaling 75 students, received $325,000, while the remainder of the money went to road repair and maintenance, county officials said.

Larry Melvin, mineral manager for the U.S. Forest Service, said some 942,000 acres of federal grasslands in western North Dakota became available for leasing after an environmental assessment was completed in 2003. About 84 percent of the acres are now leased, he said.

BLM offered 252,745 acres for lease in fiscal 2006, with 190,100 of the acres leased. The agency said 305 of the 385 parcels offered in the three-state region got bids. Only three of North Dakota’s 140 parcels offered did not receive bids.

BLM likely will offer a similar amount of parcels in fiscal 2007, Johnson said.

Revenue from the oil and gas leases is shared by the federal government and the state or county where the parcels are located, the BLM said.

“It’s a tremendous amount of money that most people in North Dakota do not realize is flowing back here,” Helms said.

He said the state will get $51 million in royalties in fiscal 2006 from the federal government oil and gas production taxes in western North Dakota, as well as about $10 million from state leases for the past fiscal year, and $166 million from production and extraction taxes.

Forty-two drill rigs were working the state’s oil patch last week, the highest number since 1985. Only 34 drill rigs were working at this time last year, Helms said.

North Dakota has 3,608 active oil wells, up from 3,385 last year, Helms said.

“We’ve added a pile of wells in the last year,” Helms said. “The only thing that could bring it to a screeching halt is a collapse in oil prices, but there is no indication of that in the next five to 10 years.

“I think we could ride this for a long time, at least through the end of the decade,” Helms said.

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