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South Dakota deals with struggling natural gas project

August 27, 2018

BUFFALO, S.D. (AP) — South Dakota may have to spend $1.2 million to plug 40 wells that have been idle since a natural gas project fell dormant amid a series of problems.

Texas-based Spyglass Cedar Creek LP’s project drilled 40 natural gas wells near Buffalo from 2006 to 2010. The South Dakota Department of Environment and Natural Resources started proceedings to revoke the project’s permits last month, The Rapid City Journal reported .

Spyglass has until Aug. 31 to respond or the revocations will occur automatically. A public hearing will be held in October by the state Board of Minerals and Environment if the company meets the deadline.

Department officials have declined to comment on the revocation proceedings, so it’s unclear what will happen to the wells after the process concludes.

Republican Sen. Ryan Maher, of Isabel, said he’s concerned that landowners may be forced to pay for the dormant wells. Landowners in some cases have the surface rights at well sites but don’t own the mineral rights, he said.

“I think the state has 100 percent responsibility in this and has a responsibility to clean up and make the landowners whole,” Maher said.

Spyglass undertook the project with Colorado-based New Frontier Energy Inc. The project ran into multiple issues, including a drop in natural gas prices, a lender’s bankruptcy, at least four lawsuits and a tax-fraud indictment against a New Frontier official.

Landowners have complained to state regulators about the project’s decline, including deteriorating wells, leaking gas, excessive weeds, poorly maintained fences and erosion problems.

“I will not lease my ground to anyone after dealing with this company,” said Landowner Donn Hett.

The state received almost $800,000 in royalties when some of the wells were in production from 2009 to 2012, according to state Department of Environment and Natural Resources documents. Nine of the wells never went into production.

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Information from: Rapid City Journal, http://www.rapidcityjournal.com

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