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Legislative solution sought to abandoned wells

August 16, 2019

PIERRE, S.D. (AP) — South Dakota leaders are considering legislation to prevent the state from bearing the financial responsibility of closing abandoned gas wells.

The state is on the hook for nearly $1 million to plug 40 abandoned wells in northwestern South Dakota. State minerals and mining administrator Mike Lees says the state has never faced this problem before and has no established policy as a result.

“We haven’t had any orphaned gas wells in the last 50 years. This is a new uncharted territory for all of us. ... You’ve inherited this brand new problem,” Lees told the Minerals and Environment Board on Thursday.

Board officials and the governor’s office have started to consider legislation for the 2020 session to increase accountability in state law, the Argus Leader reported.

The state is suing Spyglass Cedar Creek, of Houston, Texas, for abandoning the wells after a drilling project fell through several years ago. The state is seeking $15.5 million from Spyglass as penalty for abandoning the wells, but until the state receives that money, it’s on the hook for nearly the entire cost of the wells. It has only $10,000 in bond money from Spyglass.

Protecting the state, landowners and the environment needs to be balanced with the state’s policy encouraging the use of its oil and gas natural resources, said Bob Morris, a member of the Minerals and Environment Board.

Industry opposition killed a bill in 2013 to increase the bond amount required for shallow wells like the Spyglass project, but that option could be back on the table for the 2020 legislative session. The Department of Environment and Natural Resources is seeking input from gas and oil companies about a proposed bond increase to $50,000 per well.

Several Minerals and Environment Board members support creating an option to allow companies to request a lower bond amount if they can prove plugging a well would cost less than $50,000.

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Information from: Argus Leader, http://www.argusleader.com

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