Companies plan oil wells near SD's Bear Butte

[November 20, 2010]  PIERRE, S.D. (AP) -- Work is under way to develop an oil field near Bear Butte in western South Dakota that could eventually produce 4 million barrels of crude.

The state Board of Minerals and Environment on Thursday approved Nakota Energy LLC's application to establish a 960-acre field for the production of oil and gas, with spacing of no more than one well in each 40-acre tract.

Bob Townsend, administrator of the minerals and mining program in the state Department of Environment and Natural Resources, said developers already have drilled one well to discover oil in the area.

The spacing order allows the company to ask the department for a permit to drill a second well to learn how best to develop the field, Townsend said Friday.

The oil field, located on private land, is slightly more than a mile from Bear Butte, an important religious site for American Indians that juts above the prairie on the northern edge of the Black Hills. Developers said the oil field should not bother anyone at Bear Butte.

The project was developed by the Inyan Kara Group, a Rapid City firm of geologists that generates prospects for oil and gas operations.

Tony Petres, president of Inyan Kara, said he hopes drilling on the second well can begin within three weeks. Additional wells will provide more information on how best to drain the reservoir of oil, he said Friday.

The Bear Butte project is in Meade County, far from existing oil and gas wells in the northwestern corner of South Dakota.

Petres said estimates indicate about 6 million barrels of oil are in the reservoir, and about 4 million barrels can be recovered.

The oil is at a relatively shallow depth, around 400 to 650 feet below the surface. It likely came from deeper in the area or migrated from sources to the north, Petres said.

With the existing spacing order allowing only one well in each 40-acre tract, the field has room for about a half dozen wells, Petres said. If tighter spacing is needed, more wells would be drilled, he said.

Petres said the oil field is not visible without binoculars from state Highway 79, which is located just west of Bear Butte.

"It's nothing that's going to stand out as you cruise by the butte, that's for sure," Petres said.

Ranchers in the area face pressure to allow their land to be subdivided for development, but they likely would be better off making some money from an oil field that would operate for 10-15 years before the land is returned to its original condition, Petres said.

Townsend said no opponents to the project appeared at the Board of Minerals and Environment hearing, but a ranch family urged the board to make sure water supplies are protected during the oil drilling.

[Associated Press; By CHET BROKAW]

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