Landowners in northwest South Dakota have been stuck with orphaned natural-gas wells on their property for several years, but they might get help this winter from the Legislature.
The trouble dates to 2006, when a Texas company called Spyglass Cedar Creek drilled 40 natural gas wells near Buffalo. By 2012, the company was in trouble. Gas prices went down, a lender went bankrupt, and a business partner was indicted for tax fraud.
The wells have been idle ever since. State regulators couldn’t plug the wells, because they didn’t get a big enough bond from Spyglass to pay for the work.
Ray Gilbert is one of the ranchers stuck with wells on his land. He said some legislators took a tour of the wells last fall.
“I know they all felt that something needed to be done, that it was going to be a problem,” Gilbert said.
Now, something might get done, and taxpayers might have to pay for it. The state Department of Environment and Natural Resources has proposed legislation with the governor’s support. The bill would use $727,700 in state money to plug the wells and restore the land to a natural condition.
Another bill proposed by the department would allow it to take $130,000 in leftover bond money forfeited by a separate drilling project, and use that money to help plug and reclaim the wells near Buffalo.
A third bill from the department seeks to prevent similar problems in the future. That bill would raise the minimum bond for oil and gas drillers. Spyglass only had to post $30,000 in bonds. The new minimum would be $50,000 per well, or $100,000 for unlimited wells.
Gilbert supports the higher bonds.
“The good, reputable companies aren’t going to worry about paying it, because their reputation is at stake and they’re going to do things right,” Gilbert said. “The fly-by-night outfits like the one we got in trouble with, they won’t pay it, probably, and that’s probably good. It'll keep them out, and keep the reputable companies in here.”
All three bills are awaiting action by the Legislature.
