State agency still seeks a company to take over South Dakota gas field

Capitol News Bureau
KELO Harding County

PIERRE, S.D. (KELO) — State lawmakers showed frustration Tuesday about a years-long deadlock over natural-gas wells in northwestern South Dakota that haven’t been plugged but aren’t producing.

Cedar Creek began developing the Spyglass field in Harding County in 2008, eventually locating 16 wells on properties owned by the state Office of School and Public Lands and 24 on private lands.

The South Dakota Department of Environment and Natural Resources began enforcement action in 2012 to cure some deficiencies. Three companies have looked at taking over the field but walked away.

The broader issue of either plugging or operating the wells reached the state Board of Minerals and Environment last year.

“When does this end? When does it come to a head?” asked Senator Ryan Maher, an Isabel Republican. The Spyglass situation is now on the work list of the Legislature’s Government Operations and Audit Committee that he chairs.

The state minerals board brought a lawsuit against the well field’s owners this year. Maher however said it “looks like” the board has been dragging its feet: “That’s the perception that’s out there: This board hasn’t been doing its job.”

The board’s nine members are appointed by the governor. The current chairman is lawyer Rex Hagg of Rapid City, a former House speaker.

Mike Lees, who oversees the department’s mining office, said Spyglass Cedar Creek faces potential fines exceeding $15 million. The plugging cost is estimated at $887,700, according to Lees.

The $18 million lien held by New Frontier Energy of Denver would likely put it at the front of the line, ahead of state government, according to Senator Art Rusch, a Vermillion Republican.

“Which might mean our judgment wouldn’t be worth a whole lot,” the retired circuit judge said.

Maher noted Spyglass Cedar Creek owed Harding County more than $169,000 in property taxes and penalties. “They’re left holding the bag too,” Maher said.

Watching from the meeting room’s back row was Ryan Brunner, state school and public lands commissioner. He said Spyglass Cedar Creek had paid about $779,000 so far in royalties to state government.

If the government took control of the wells, the state’s taxpayers would be responsible for the $18 million lien, Brunner said.

He said the well field’s compressor is gone and the MDU gas line that was upgraded two years ago through the area doesn’t connect to the wells any longer.

“As time goes on, it’s going to be more complicated,” Brunner said.

The legislators heard from landowner Ray Gilbert, who has 21 of the wells on his property.

Gilbert said it’s up to people like him to track what has been happening with the wells, because no one is paying attention, other than state regulators making visits every year.

“We’ve had problems ever since the day they come in,” Gilbert said.

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