After years of violating contracts with the state, a company operating 40 natural gas wells in northwestern South Dakota is getting one last chance.
The Department of Environment and Natural Resources’ Board of Minerals and Environment met on Thursday in Pierre to discuss the fate of Spyglass Cedar Creek LP. The board was originally scheduled to conduct a contested enforcement hearing to possibly rescind the company’s permits, but ultimately gave them one more month to turn their operations around.
Prior to the board’s meeting, a lawyer for Spyglass negotiated with the state’s Office of Attorney General a consent agreement that requires Spyglass to obtain a $200,000 bond by Jan. 15, which will be financed by investors, according to Deputy Attorney General Richard Williams, who presented the negotiated agreement to the board.
Spyglass also agreed to make improvements to bring their wells back into compliance by July 1 and to bring a total of 20 wells back into production by Sept. 1. Spyglass owns and operates 40 wells in South Dakota.
Spyglass also admitted fault in the agreement to several violations of its permits, including leaving unproductive wells unplugged and having wells improperly signed or suffering “erosion issues.” The Texas-based company also caught heat when they cashed out a previous $20,000 bond, saying they did not remember the purpose of the money.
The board unanimously approved the agreement by a roll call vote Thursday, with chairman Rexford Hagg calling it “the last straw.”
Hagg said that the board has been “generous” with second chances for Spyglass and that the only thing to lose from the agreement is 30 days. If Spyglass doesn’t comply by Jan. 15, its permits can be rescinded by the board without any additional hearings or notice to the company, and the state will have $190,000 in additional bonds on top of Spyglass’ current approximate $10,000.
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“There’s a great part of me that doesn’t have any faith that this will get done, based on the track record,” Hagg said. “But if they can post that bond, I don’t think we’re any worse for wear.”
He added, “If they can get that posted, I think there’s motivation there once they post that bond to address these things in a timely fashion.”
After six years of hearing complaints and requests to take action, Hagg said he thinks an extra $190,000 is worth allowing Spyglass one last month to make things right. If they don’t, Hagg said the board can take the $200,000 bond and confiscate Spyglass’ equipment and wells.
“Whatever we can do by law, I think we’re prepared to do it in January,” he said.
The board’s next meeting is scheduled for Jan. 17.
Board member Doyle Karpen said before the board’s vote, “hopefully we all learn from this so it won’t happen again.”
He added, “We never should have gotten to this point.”