Lateral and vertical facies variations within the predominantly eolian upper member of the Minnelusa Formation control both the regional reservoir distribution and the localization of oil-producing trends.

Sands sourced by northeasterly trade winds were deposited in a land area bounded on the west by the Lusk embayment, which was a shallow, restricted extension of the Permo-Pennsylvanian sea. This embayment was present throughout Minnelusa deposition, and was located in the western portion of the present-day Powder River basin. Another extension of the epeiric sea, located in western South Dakota, formed the eastern boundary of the land area. In the northern part of this area, an inland sand-sea developed; in the southern part, the sand supply was less and isolated barchan dunes migrated over a coastal sabkha. Dune sandstones are bounded laterally by predominantly sandy interdune deposits in the north and by coastal interdune deposits, including sandstone, dolomite, and anhydrite, in the south. Major marine transgressions deposited laterally extensive dolomites that separate the dune sandstones.

Interdune deposits constitute permeability barriers adjacent to dune sandstones. The dune sandstones, which can be of excellent reservoir quality, were subjected to early cementation by anhydrite. Later dissolution of the anhydrite cement, facilitated by good to excellent sorting and possibly enhanced by hydrocarbon migration, led to development of significant secondary porosity. Interdune sandstones are less well sorted and so did not develop good secondary porosity. Interdune carbonates and evaporites have virtually no permeability. The coastal interdune deposits in the southern part of the region, therefore, form more effective lateral permeability barriers than do the sand-dominated interdune deposits in the north.

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