The saga of a failed natural-gas project is ending with a contractor plugging the wells at taxpayer expense.
The project started about 15 years ago. A Texas company called Spyglass Cedar Creek came to South Dakota. The company drilled 40 wells in the northwest corner of the state, near Buffalo.
Within a few years, the company fell into financial ruin. It suffered falling gas prices, a lender's bankruptcy and a business partner's tax-fraud indictment.
Landowners were stuck with the orphaned wells. The state had only required the company to post about $30,000 in bonds, which was far short of the amount required to plug the wells and restore the land to a natural state.
Finally, last winter, lawmakers and Gov. Kristi Noem appropriated money to plug the wells.
Liquid Gold Well Service in Montana won the contract this fall. The state will pay the company up to $433,818 (that's below the $727,700 that was appropriated from the state's Petroleum Release Compensation Fund; the remainder will stay in the fund).
Shane Schwindt owns Liquid Gold Well Service. He plugged seven of the wells recently before the weather turned bad. He plans to come back next spring.
“We’re pumping a lot of fresh water, so it’s nice when it’s above freezing," he said. "And we’re reclaiming the location, so if the ground’s frozen, that makes it a lot harder.”
The first seven wells were about 1,600 feet deep. Schwindt puts a cast-iron plug and 100 feet of concrete near the bottom. Then he fills the hole with a bentonite mix. He tops it off with another 100 feet of concrete near the surface. Finally, he plants grass over the top.
He said there will be no trace of the wells on the surface when he's finished.
The plugging prevents the wells from leaking, but Schwindt said it's not necessarily permanent.
“The way we are plugging them, there is the ability for somebody to come back 50 years from now and re-enter them fairly easy," Schwindt said.
If that ever happens, the state will require a higher bond. Last winter, the Legislature raised bond minimums to $50,000 for one well and $100,000 for unlimited wells.
-Seth Tupper is SDPB's business and economic development reporter.