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SD board approves oil drilling permit in new area

Chet Brokaw, Associated Press

PIERRE, S.D. (AP) -- A state board approved permits Thursday allowing a new company to drill two oil and gas wells in a part of western South Dakota that's far from existing wells.

The Board of Minerals and Environment voted unanimously to let Quartz Operations LLC drill the wells roughly 9,700 feet deep about two miles west of Wasta and just south of Interstate 90. South Dakota's main oilfield is in Harding County in the northwest corner of the state.

State Department of Environment and Natural Resources officials said Quartz has provided no information to indicate why it thinks oil might be found in the area. The department also said Quartz Operations, formed in November, has not previously drilled in South Dakota.

Quartz company leader Natali M. Ormiston, of Deadwood, did not testify at Thursday's hearing, but said after the meeting she's been in the oil business for a long time.

State Geologist Derric Iles said he doubts Quartz Operations will find oil, but the drilling is unlikely to cause any harm.

"Based on what I know, the probability of success is fairly low," Iles told the board.

Iles said the Quartz Operation wells would drill into the Precambrian formation, a variety of rocks ranging from 1 billion to 3 billion years old. He said he is not aware of oil- or gas-producing wells drilled into the formation in South Dakota or the surrounding states.

Iles is in charge of a South Dakota effort to encourage more drilling in the state, but he said most companies are reluctant to drill outside of North Dakota's booming oilfields. However, the Quartz wells will provide information about geological formations that are not well-known.

"Personally, I would dearly love to see them drill the hole" Iles said.

The only witness for Quartz Operations in Thursday's hearing was Louis Loehr, of Gillette, Wyo., who has been hired to manage the drilling. Loehr, who has 40 years of experience, said oil drillers are beginning to investigate the Precambrian formation in other countries.

"I think it has possibilities, and I'm looking forward to drilling," Loehr said.

Mike Lees, who regulates oil and gas for the Department of Environment and Natural Resources, said he estimates it will cost Quartz Operations about $3 million to drill each well.

The department recommended that the company post $130,000 surety bonds for each well to make sure the wells are plugged and the land around the drilling sites is restored after the wells are drilled, he said.

Deputy Attorney Roxanne Giedd said oil and gas drilling permits are normally issued by the department secretary, but the issue was referred to the board because department staff wanted the company to post larger surety bonds than are usual in drilling cases.