Oil and Gas -- Frequently Asked Questions


PERMITTING AND REGULATORY APPROVAL PROCESS

 

How do I gain approval to undertake oil and gas operations?

There are five different approval processes that apply to oil and gas operations: 1.) Orders for spacing, pooling or unitization requests; 2.) The Notice of Recommendation procedure; 3.) Applications for Permit to Drill (APD) for drilling, deepening, or reentering requests; 4.) Underground Injection Control Class II Permits to Inject; and 5.) Sundry Notice Requests for administrative approvals.

    

    1. Orders- Spacing, Pooling, or Unitization Requests:

 

Spacing, unitization, and pooling requests are initiated by the submission of a petition in accordance with ARSD 74:09:01. Spacing, pooling, and unitization requirements are found in SDCL 45-9 and ARSD 74:12. As of July 1, 2012, applications for orders only go to hearing if they are contested after publication of a Notice of Opportunity for Hearing. If there is no contest, orders are issued administratively by the department Secretary.

    

      2. Potential Contested Case Hearings (Notice of Recommendation Procedure):

 

The Department Secretary or designee may grant administrative approval after publishing a Notice of Recommendation for applications involving the following: drilling at exception locations, drilling a directional or horizontal well in an area not already spaced by the board, exception to gas to oil ratios, underground commingling of oil from separate pools, new underground injection permits, major modifications of injection permits, exemption of a portion of an aquifer, and multiple zone completions of oil well. If the recommendation is not contested, approval is granted by the Secretary in accordance with the recommendation. If the recommendation is contested, then the issue is subject to board approval under a contested case hearing. The Notice of Recommendation process is initiated by the submission of a petition in accordance with ARSD 74:09:01.

    

    3. Application for Permit to Drill (APD)- Drilling, Deepening, or Reentering Requests:

 

Permits for drilling new wells, or deepening or reentering existing wells require department approval and possibly the submission of a pit liner variance application. This is initiated by the submission of an application for a permit to drill. Forms and procedures required for obtaining a permit to drill, deepen, or reenter an oil or gas well are available at Oil & Gas Forms.

    

     4. Underground Injection Control Class II Permits to Inject:

 

In conjunction with submitting a petition to initiate the Notice of Recommendation procedure (see "Potential Contested Case Hearings", above), a permit to inject is required for any injection of fluid associated with oil and gas production into, above, or through underground sources of drinking water. For more information on permits to inject contact Brian Walsh of the Ground Water Quality Program at 605-773-3296 or via email. The permit to injection application form is available at Oil & Gas forms.

    

     5. Sundry Notice Requests for Approval:

 

The Department Secretary or designee may grant administrative approval of the following: proposed well cementing procedures, proposed plugging procedures, temporary abandonment of a well, proposed mechanical integrity test procedures, drilling without a blowout preventer, extending the term of an APD beyond 12 months, proposed soil remediation techniques, using produced water on roads for dust suppression, atmospherically discharging water produced from a gas well, surface restoration, construction of produced water handling facilities, conversion of a mud pit to an evaporation pit, dissolving abandoned oil or gas fields, the method of annual gas well test to determine daily open flow, the method of determining production from separate pools prior to commingling, confidentiality of technical data, and the method of and interval for checking tank metering equipment against actual tank measurements. The Sundry Notice form used to approve the requests is available at Oil & Gas forms. (Signed copies of Sundry Notices submitted to request approval for one of these actions will be returned upon approval. However, Sundry Notices submitted to report information will not be signed or returned.)

 

 

 

LEGISLATIVE UPDATES

 

Are there any recent changes to South Dakota's Oil and Gas Laws?

 

The following legislation became effective July 1, 2013.

 

HB 1001 45-5A-5.1

An Act to require mineral developers to give notice to surface owners -

 

Operators must now notify affected surface owners at least seven days before conducting non-ground disturbing mineral exploration activities. This means operators must notify surface owners at least seven days before conducting preliminary site work such as surveying and well staking.

HB 1002 43-30B-1

An Act to provide for the creation of a trust account for unlocatable mineral interest owners -

 

Mineral owners or leaseholders who only own or control part of the mineral interest in a given tract of land may petition the appropriate circuit court to set up a trust for other owners of minerals in the tract who cannot be located.

HB 1003

54-13-1

54-13-2

An Act to revise the purpose of the agriculture mediation program -

 

This Act makes provision for the South Dakota Department of Agriculture to mediate disputes between mineral developers and surface owners over damages to or loss of use of the owner's property resulting from mineral development activities. The Act does not require use of the mediation service, rather, it gives the Department of Agriculture the authority to make this service available to oil and gas operators and affected surface owners.

HB 1004 45-5A-4.1

An Act to provide for the award of treble damages in certain surface depredation cases -

 

This Act adds a section to the existing damage compensation statutes under SDCL 45-5A. The new section provides courts authority to award treble damages in cases where oil and gas developers fail to perform good faith negotiations with split-estate surface owners.

HB 1006 43-30A

An Act to revise certain provisions relating to the termination of certain mineral interests -

 

The Act prescribes the specific process whereby surface estate owners may succeed to the ownership of lapsed mineral interests underlying their surface property. The provision under this Act mirrors the lapsed mineral succession process outlined in North Dakota law.

SB 1 45-9-15

An Act to revise the provisions regarding plugging and performance bonds for oil and gas wells and to repeal the supplemental restoration bond requirement -

 

This Act increases the plugging and performance bond requirement and eliminates the surface restoration bond requirement. The Act introduces a tiered bonding system, with higher bond amounts for wells deeper than 5,500 feet. The new bond requirement for deep wells is $50,000 per well, or $100,000 for a statewide blanket bond. The new bond requirement for shallow wells (less than 5,500 feet in depth) is $10,000 per well, or $30,000 for a statewide blanket bond. Existing bonds will remain in place until an operator drills a new well, or transfers an existing well.

SB 59

34A-6-113

34A-6-114

An Act to prohibit the disposal of certain oil and gas field waste -

 

This legislation prohibits storage or disposal of liquid oil and gas field wastes in earthen pits or open receptacles unless the facility is directly associated with the development of a specific well or producing property. This Act also prohibits disposal of oil and gas field wastes if the waste's radioactivity level of Radium-226 plus Radium-228 is greater than 5 picocuries/gram above the background radioactivity level at the solid waste facility. Operators still have the option of storing liquid wastes in open receptacles provided the receptacle services a specific well, field, or unit. In terms of disposal of radioactive oil and gas field wastes generated in South Dakota, the limited amount of waste with radioactivity levels above the established threshold must be transported out of state and disposed of in an appropriate facility. Questions regarding this legislation should be addressed to DENR's Waste Management Program at 605-773-3153.

 

 

 

CONFIDENTIALITY OF TECHNICAL DATA

 

What types of information can be held as confidential, and for how long?

In accordance with ARSD 74:12:02:17, the DENR will hold electrical, geophysical, and sample descriptive logs, drill-stem test reports, core analyses and reports, water analyses, producion data, and any other important geologic and engineering data as confidential for six months if requested by the operator in writing. Confidentiality is maintained according to the following schedule:

  • Production Data: Six-month confidentiality period begins on the date of the first monthly production      report.
  • All Other Technical Reports, Logs, and Data: Each report is held as confidential for a six month period beginning on the date the report is submitted.

 

How do I request confidentiality for technical data?

Operators must submit a written request in the form of a letter or a Sundry Notice and Report on Wells (Form 6).

 

 

 

TAXES

 

What taxes apply to oil and gas production in South Dakota?

 

    1. Severance Tax (SDCL 10-39A): For the privilege of severing energy minerals in this state, there is imposed on the owner or operator of any energy mineral an excise tax, to be termed a "severance tax," equal to four and one-half percent of the taxable value of any energy minerals severed and saved by or for the owner or operator.

 

    2. Conservation Tax (SDCL 10-39B): There is imposed on the severance of energy minerals in this state an excise tax, to be known as a conservation tax, equal to two and four- tenths mills of the taxable value of any energy minerals severed and saved. The tax shall be paid by the operator as defined in subdivision 10-39A-1.1(3) .

 

More information on taxation can be found on the Department of Revenue's Special Taxes Division website (Phone: 605-773-3311).

 

 

LEASING AND DRILLING ACTIVITY

 

How do I find out if oil and gas exploration or development is occurring in the vicinity of my property?

Find your property of the Map-Based Data Source. The map will display any recently permitted drill sites and existing oil and gas test holes located near your property. The map provides links to a wide variety of information about each drill site.

 

Another useful source of information is the Drilling Permits page. This page includes a list of all the drilling permits issued in South Dakota since 2005, which can be used to locate general areas of recent oil and gas activity.

 

Where can I find leasing information?

Although a valid lease is generally required before a permit can be issued to drill an oil or gas well, the Department of Environment and Natural Resources does not regulate or have any data pertaining to lease availability or requirements for leasing state, federal, or private lands. You can obtain this information from the following agencies.

  • Federal Lands: United States Bureau of Land Management, Phone: 605-723-8714 (SD Office) or 406-    896-5091 (MT Office)
  • Private Lands: Information available at each County Courthouse, Register of Deeds Office

 

Who should I call to have my property tested for oil and gas reserves?

While the Department of Environment and Natural Resources' Geological Survey Program conducts research and publishes information to promote development of oil and gas resources in South Dakota, the department does not test or explore for oil and gas. Oil and gas exploration is an ongoing process undertaken by private oil and gas production and exploration companies. The Oil & Gas Operators page contains a list of the oil and gas companies currently active in the state that you could consider contacting to see if they have an interest in your property.