Gov. Rounds wants to add to 50 years of oil and gas production

Gov. Rounds wants to add to 50 years of oil and gas production Gov. Mike Rounds is taking positive steps on the heels of the 50th anniversary of oil production in South Dakota to turn around the decline in oil and gas production that has occurred during the last decade. The efforts to increase oil and gas production come as part of the governor's 2010 Initiative to better promote natural resource development in South Dakota to increase the gross state product.

"Encouraging energy development in South Dakota is one of several areas identified in the 2010 Initiative where we can do more to promote South Dakota," said Rounds. "The 2004 Legislature helped promote increased oil and gas development by passing House Bill 1014, the Board of Minerals and Environment has helped by adopting new administrative oil and gas rules, and DENR is helping through an ongoing effort to make geologic data readily available to developers looking for places to spend their capital earmarked for oil and gas exploration."

Rounds added that any oil and gas development activities must include protecting all owners' rights, promoting environmentally appropriate exploring, and prevent the drilling of unnecessary wells.

Jan. 14 marked the 50th anniversary of oil production in South Dakota. The 34-9 State well near Buffalo was drilled by Shell Oil in October 1953.

The Harding County well began producing oil on Jan. 14, 1954, and has produced 341,169 barrels of oil. Over the years, a total of more than 38 million barrels have been produced in South Dakota, mostly from wells in Harding, Dewey, Fall River, and Custer counties.

In 2003, 13 operators of 147 oil wells produced 1,237,098 barrels, and five operators of 61 natural gas wells produced 550,098 thousand cubic feet. The market values for these natural resource products were over $30 million for oil and over $2.5 million for gas. Revenues to the state from severance taxes and School and Public Land royalties and lease bonuses totaled approximately $2.75 million last year.

Although slightly higher than the previous year's totals, production totals for both oil and gas had declined steadily since peaking in 1990 at 1,605,850 barrels of oil and 551,441 thousand cubic feet of gas. Meanwhile, the neighboring states of Wyoming, North Dakota, and Montana have seen increases in production.

The South Dakota Legislature overwhelmingly approved HB1014 during the recently-completed 2004 session. The bill was drafted by the South Dakota Department of Environment and Natural Resources (DENR) to promote oil and gas exploration and development by reducing the percentage of owners required to ratify an oil and gas unit.

"This change will make our percentage the same as North Dakota's," said Fred Steece, oil and gas supervisor with the DENR who has 52 years of experience working as a geologist for the state. "This was important so that operators on both sides of the state line will have a better chance to negotiate unit agreements with mineral owners. Unit agreements allow the use of secondary recovery methods such as air or water injection that can bring a marginal producing well back to life and recover substantial amounts of oil that otherwise would be left in the ground. In this time of tightening oil supplies, unitization is a win-win for everyone."

New rules contained in Administrative Rules of South Dakota (ARSD) 74:10:18:01 to 74:10:18:06 were adopted today by the Board of Minerals and Environment. The new rules standardize the amount of risk compensation to be paid to an oil and gas operator who finances an operation in cases of compulsory pooling and compulsory unitization and will become a part of the existing state rules regulating oil and gas exploration, production and development. They become effective July 1.

The plan to make oil and gas data available over the Internet to developers is being carried out by both the Geological Survey and Minerals and Mining programs in DENR.

Steve Pirner, secretary of the department, said, "Industry officials told us we could generate more interest in South Dakota's largely untested potential for oil and gas by making geologic data more available to those in the exploration business. Therefore, we are making it a priority to compile existing geologic information and make it available in a one-stop shopping place via the

Internet to those looking for places to conduct exploration."

The department's oil and gas Web site at www.state.sd.us/ denr/DES/Mining/Oil&Gas/O&Ghome.htm already contains several types of digitized information that can help the industry make decisions on where to explore for oil and gas in the state. Downloadable maps are available that show the locations of oil and gas test holes and existing well fields. A database containing information from oil and gas test drilling in the state is available for searching.

Also, a database is on the department's geological survey Web site at www.sdgs.usd.edu/ database_selection.html that contains information about core that is available for inspection in the Geological Survey's core repository. Over the next two years, additional information, such as geologic maps, geophysical logs, and other oil and gas records, will be added to these Web sites.

Rounds added, "With the current high oil and gas prices, the time is right for South Dakota to look to promote environmentally friendly oil and gas exploration and development in the state in an orderly, yet economically profitable manner."

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