A new company is bidding for some of the mineral rights associated with 40 orphaned natural-gas wells in northwest South Dakota, raising the prospect that some of the wells could eventually go back into production.
The 40 wells are near Buffalo. They’ve been idle for several years since the Texas company that drilled them got into financial trouble.
Last winter, the Legislature approved money to plug the wells at taxpayer expense. Old laws didn’t require enough bond money from the company to pay for that process.
A Montana company got the plugging contract for $430,000. The company plugged several wells this fall before it stopped for the winter.
Some of the wells are on public land, and the state owns some of the mineral rights. State School and Public Lands Commissioner Ryan Brunner said a new company wants to lease the rights for seven of the wells.
“They obviously have the motivation that they'd like to put them back into production,” Brunner said, “but their timeline was either now or try to go back in after they've been plugged, and so now would be the opportune time to make a decision.”
Brunner will conduct a public auction for the leases at 11 a.m. Central time Jan. 7 at the Capitol in Pierre. The new company, Rushmore Resources, already submitted a minimum $6,000 bid. If the company wins the leases and puts the wells back in production, state laws amended last winter will require the company to post a bond of at least $100,000.
Brunner said reviving the wells would be good for the state.
“We're in the middle of potentially spending over $400,000 to plug all those wells, so there's an immediate opportunity to save the taxpayers a significant amount of money,” Brunner said, “and long-term, if it all works out and gets back into production, we’ll receive some royalties again.”
Brunner said he doesn’t know if the company will eventually seek rights to all 40 wells. Some of the mineral rights are privately owned.
Rushmore Resources did not immediately respond to an interview request.
-Contact reporter Seth Tupper by email.