An oil derrick stands along the horizon southwest of Wasta in 2013 as an RV travels past on Interstate 90. The financial fallout from the failed drilling operation is affecting local firms and the state.

A state board has taken final action to capture $130,000 from a failed oil-drilling company, while acknowledging that an open borehole left deep in the earth near Wasta could be polluting underground water.

The Board of Minerals and Environment met by teleconference Thursday and approved the findings of fact, conclusions of law and order in the case of Quartz Operations LLC. The order revoked the company’s oil and gas permit and required the company to forfeit $130,000 worth of bonds held in certificates of deposit at a Pierre bank. The money will be applied to any future expenses at the company’s failed drilling site, according to past testimony in the case.

The amount of the forfeited bonds pales in comparison to the estimated $2 million that would be needed to plug the aquifers penetrated by the company’s borehole.

There is no plan to undertake such an effort, though, because of past expert testimony indicating that the environmental impact to the aquifers is likely minimal and a plugging operation might be impossible.

Quartz Operations was registered as a corporation in November 2012 by Natali Ormiston, of Deadwood. The company obtained state permits in March 2013 to drill two wells in eastern Pennington County, despite concerns expressed by the state Department of Environment and Natural Resources.

“The Department felt that the location, depth, and target formation of the proposed wells, coupled with Quartz’s lack of experience in the oil and gas field, suggested a higher than typical bond amount should be set,” said the findings of fact.

The company had submitted a $20,000 bond with its application, but the Board of Minerals and Environment required an additional $110,000 as a condition of issuing the permits.

Drilling of the first well began in April 2013 with a goal of reaching 9,700 feet, but the company lost drilling fluid circulation after hitting sediment at about 4,800 feet.

The drillers attempted to plug the area where fluid circulation was lost. The entire 4,800-foot drill string was moved in and out of the hole multiple times. On the third attempt, the bottom of the drill assembly stuck at 2,760 feet.

Later, the company tried and failed to retrieve the stuck drill stem, leaving a 150-foot section in the borehole.

The company also attempted to plug the well but failed when the borehole collapsed at about 1,130 feet. The company then plugged the upper portion of the well with cement structures and reclaimed the surface area with vegetation.

The second well was never drilled, and the permit for that well expired.

The unplugged portion of the first well’s borehole could provide a pathway for upward flow of Minnelusa Aquifer water into the Inyan Kara Aquifer. That’s problematic, because the Minnelusa is believed to have more total dissolved solids than the Inyan Kara. In other words, the Minnelusa could be flowing into the Inyan Kara and degrading the Inyan Kara’s water quality.

The DENR said it does not have sufficient data on the Minnelusa Aquifer in the area of the well to precisely estimate its water quality. But the department estimates that the worst case scenario might be an average of 20,000 milligrams of total dissolved solids per liter. That is 20 to 40 times higher than the level of dissolved solids in the Inyan Kara Aquifer, which is 500 to 900 milligrams per liter.

The findings of fact said that if water does flow from the Minnelusa into the Inyan Kara, it is estimated that the water would not move faster than 28 feet per year, or 1,400 feet over a 50-year period.

DENR officials have said they will monitor water wells in the area.

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Contact Seth Tupper at seth.tupper@rapidcityjournal.com

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