South Dakota sues firm’s general partners over 40 natural-gas wells in Harding County

Capitol News Bureau
KELO Court Two

PIERRE, S.D. (KELO) — A lawyer for the South Dakota Attorney General’s Office might have found a way to make a San Antonio, Texas, company take financial responsibility for 40 natural-gas wells that it left unattended for years.

Rich Williams brought a civil lawsuit this week against Spyglass Cedar Creek and also named its general partners, March Kimmel and Kevin Sellers.

The wells are on other people’s properties in Harding County. The state Board of Minerals and Environment has been trying since 2012 to weed through the mess.

Williams electronically filed the suit Monday against the partnership as well as Kimmel and Sellers. He received an official case number Wednesday from Hughes County Circuit Court.

The suit seeks $15,490,000 for penalties against the partnership and the men.

Williams told the state board Wednesday his next step is sending a nationwide process server to track down Kimmel and Sellers.

The defendants have 30 days to answer after they receive the suit.

“I’m going to try to get them served right away. It’s a matter of finding them and handing them the paperwork,” Williams said. 

Spyglass Cedar Creek is a limited partnership formed under Texas law. Kimmel and Sellers are general partners in the business, according to Williams.

His interpretation of Texas law is Kimmel and Sellers as general partners are liable for debts and obligations of the limited partnership.

That’s the lever Williams cites in the lawsuit. Rex Hagg, a Rapid City attorney and the state board’s chairman, said that is a significant point.

“Now that you’ve told us that,” Hagg said to Williams, “this is huge.”

Board members voted 5-2 Wednesday to hold off until their July meeting. One of the “no” votes came from Dennis Landguth of Rapid City, who earlier in the meeting urged the board take action.

“I think it’s sometimes better to act and do something, and then if there’s some complaint about how we handled the money, we can take it from there,” Landguth said.

“Let’s move ahead,” he continued. “Let’s figure out some way to move this thing ahead.”  

Watching from the audience was Harding County Auditor Kathy Glines.

“It’s kind of like the dog chasing the tail scenario,” Glines said.

She said several legislative attempts died.

“We’re frustrated too. We just wanted you to know we’re paying attention,” she told the board. “The concern is we need to get the wells taken care of, whatever we need to do.”

Spyglass posted a $20,000 plugging and performance bond and a $20,000 surface-restoration bond with the state Department of Environment and Natural Resources a decade ago.

Since then, one of the bonds was secretly cashed out by a person from Spyglass. The department has $9,850 left from the other.

Department officials estimated plugging the 40 wells and making other repairs would cost about $887,000.

The situation rose to the department’s attention in 2012 when landowners Roy Gilbert and George Acton said they had problems with Spyglass.

The state Office of School and Public Lands canceled state leases in 2013 because of non-payment by Spyglass.

Repeated inspections by state and federal officials didn’t produce results either.

Landowners Don Hett and Mark Heairet complained in 2015.

Williams, the deputy attorney general, said the state board had several possible routes under South Dakota laws for handling proceeds from the case.

Williams specifically cited South Dakota statutes 34A-10-2.2 and 2.3 and chapter 45-9.

Auditor Glines offered consolation and praise.

“We feel your pain, literally,” she told board members. “I like what you’re doing. You’ve got some great potential to stir some money up.”  

Hagg, a former state legislator, said he wanted to wait to “see a few more cards” on the table.

“We’ve done everything we possibly can do,” Hagg said. “We’re not standing still.”

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