The state of South Dakota is suing a privately-held Texas-based exploration and production company for $15.5 million for abandoning 40 natural gas wells in Harding County, Kallanish Energy reports.
The South Dakota Department of Environment and Natural Resources (Denr) is requesting the court require Spyglass Cedar Creek and its general partners, Kevin Sellers and March Kimmel, to bring the wells in northwestern South Dakota into regulatory compliance.
Denr also wants the defendants to pay the state $15.5 million in penalties for abandoning the wells, according to the complaint filed in Hughes County, the Sioux Falls Argus Leader newspaper reported.
It would cost the state nearly $900,000 to plug the 40 wells, which Spyglass drilled between 2006 and 2010, The Associated Press reported.
According to the Denr complaint, Spyglass posted two bonds as part of its permit application, one for $20,000 and another for $10,000. But the South Dakota Attorney General’s Office learned last July Sellers had cashed out the $20,000 bond, leaving the state with only the remaining funds to plug the wells.
Spyglass then entered into an agreement to post a $200,000 bond by January when the state Board of Minerals and Environment began taking steps to revoke Spyglass’ permits last year. But that money never materialized. The Board removed its permits and in March, levied $15.5 million in penalties on the company.
The problems with the wells began in February 2012. Nine of the wells weren’t producing any gas and for the first time in what would become a seven-year-long issue, DENR directed Spyglass to bring its wells into compliance by either returning the wells to production, plugging the wells or submitting a request for temporary abandonment. Spyglass didn’t respond to the state..
By August 2012, half of the 40 wells weren’t producing anything and needed to be brought into compliance. All 40 of the wells were out of compliance by 2014 and inspections began finding that some of the wells were leaking gas.
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