State environmental board waits to plug 40 abandoned natural gas wells as $15.5 million lawsuit is pending

Forty natural gas wells were drilled from 2006 to 2010 among the grassy plains and buttes in the vicinity of Buffalo, S.D. Small huts surrounded by cattle fences stand atop the wells. Rapid City Journal file photo

PIERRE, S.D. — A state environmental board decided it does not have the authority to begin plugging the 40 abandoned natural gas wells in western South Dakota, but will be seeking public comment to find a way to move forward.

The Board of Minerals and Environment on Thursday, July 18 , met to discuss the next steps to bring Texas-based Spyglass Cedar Creek LP's abandoned wells into compliance as soon as possible, but found themselves stuck: The company was required to post a $20,000 bond in case the wells, drilled between 2006 and 2010, needed to be plugged, but Spyglass officials "forgot" what the bond was for and cashed it for different purposes last year.

Now, the 40 wells sit idle, leaving them vulnerable to leaks and environmental hazard. With a $15.5 million lawsuit still pending against Spyglass, the board does not have the $1.2 million necessary to bring the wells into compliance.

The state's Department of Environment and Natural Resources suggested the board use a bond for a different failed oil project to start plugging the wells, but the board on Thursday rejected the idea. The state does not give them such authority, they said. And with the bond for Quartz Operations' failed project near Wasta being only $130,000, board member Doyle Karpen said it would only be a "drop in the bucket," compared to the total $1.2 million cost to plug the Spyglass wells.

"I think the only way we can correct this is go to the Legislature and ask for money," Karpen said.


Board Secretary Gregg Greenfield said to use the Quartz bond without being given authority is "one of those 'ask for permission or beg for forgiveness' type of decisions."

"I don't have a problem begging for forgiveness if the threat imminent to the public," Greenfield said, but it isn't: Administrator of DENR's Minerals and Mining program Mike Lees said Thursday that staff surveyed the wells last month and no leaks were detected.

Unless there are leaks, the wells don't pose an immediate environmental or public risk. But the longer they sit idle, the more susceptible to leaks they become.

Greenfield added that the board "has some obligation to exhaust its remedies against Spyglass and to do everything we can to make sure that they live up to their obligation before we go using money from other places."

Deputy Attorney General Richard Williams said in a July 10 letter to the board that both Spyglass and one of its general partners, March Kimmel, were served in May. The servers were unable to personally serve the other partner Kevin Sellers, he said, but was contacted by an attorney representing Sellers in the case in June. Sellers has until July 27 to file an answer, and Spyglass and Kimmel until August 1.

Without funds available, the board unanimously decided to at least begin pursuing a public hearing process to get feedback from landowners and other interested parties on what course they think is best to pursue.

The meeting stirred up questions about responsibility: If Spyglass doesn't chalk up the money to close the wells, who should ultimately bear the cost? Lees argued that it should not be taxpayers.

"Is it the taxpayer’s responsibility to pay for Spyglass's mess?" he asked the board. "Businesses go broke all the time. Is it taxpayers’ responsibility to pay for it?"


But board chair Rexford Hagg contended that the public does have an interest. Many of the wells, he said, were drilled on public land.

"It's not like taxpayers are paying for some kind of private interest," he said. "The state has a huge interest itself in doing something at least about its own wells."

And board member John Scheetz pointed a finger at the Legislature for having an inadequate bonding requirement in the first place. Even if Spyglass never cashed its bond, $20,000 wouldn't nearly cover the cost of plugging all of the wells. He said, "The Legislature should take responsibility."

"The only way we can get their attention is to say it was under-bonded," Scheetz said. "Now we're coming back to you to fix it because you created it."

Mearhoff is a Minnesota Capitol Correspondent for Forum News Service. You can reach her at or 651-290-0707.
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