BUFFALO, S.D. (AP) — An oil and gas exploration company is alleging its officials cashed out a $20,000 certificate of deposit intended to serve as a bond for 40 idled natural gas wells in South Dakota because they forgot the money’s purpose.
New Braunfels, Texas-based Spyglass Cedar Creek LP filed a petition last week opposing South Dakota’s revocation of the company’s permits for the wells near Buffalo, the Rapid City Journal reported . A state hearing on the permits is scheduled for Oct. 18.
The South Dakota Department of Environment and Natural Resources started proceedings to revoke the permits last month over the project’s non-compliance with state regulations. The project began in 2006 but ran into multiple issues, including a drop in natural gas prices, a lender’s bankruptcy and at least four lawsuits.
The department discovered last month that former Spyglass partner Kevin Sellers cashed out the $20,000 in 2015. The deposit was meant to help the state pay for plugging the wells if Spyglass couldn’t complete the work.
Sellers’ transaction occurred after a bank notified the company that Texas officials were trying to claim the deposit as abandoned property, said March Kimmel, general partner of Spyglass.
“At the time the bank insisted that the account be closed; neither Mr. Kimmel nor Mr. Seller(s) has any personal recollection of the documentation to the effect that the certificate served as collateral for any obligations to the state,” Kimmel wrote in his petition. “The bank’s correspondence did not indicate that it was being held for such purpose, nor did it indicate there was any requirement that DENR agree to termination of the account.”
The deposit loss leaves state regulators with less than $10,000 from a separate bond to use to manage the idled wells. Officials estimated that plugging the wells could cost more than $850,000.
Kimmel said he hopes to resurrect the project and that Spyglass is working with at least two investors interested in providing funding. But the department’s attempt to revoke the permits will stop such goals, he said.
“Essentially Spyglass cannot give any potential equity partners the assurance they need without assistance and assurance of cooperation or a stay of action against the project from the state,” he wrote.
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Information from: Rapid City Journal, http://www.rapidcityjournal.com