When a mineral exploration company drills a well, then signs an agreement turning over the well to the landowner so it can be used as a water well, is the company off the hook for the well? And does the state require a bond from the landowner before the conversion is complete?
Plain-English summary
A mineral exploration company drilled a well on private land in South Dakota. After the exploration was done, the company and the landowner agreed in writing that the landowner would take over the well, either to develop it as a water well or to plug it. Mr. Pearson, working in regulation, asked AG Meierhenry two questions: did the agreement actually relieve the company of its mining-law responsibility for the well, and could the state require the landowner to post a bond until the well was developed or plugged?
Meierhenry walked through the bridge statute, SDCL 45-6A-6.14: "If any mineral well drilled are to be ultimately used or are to be converted to water wells, it shall be the responsibility of the user to comply with the provisions of chapter 46-6." That statute is a clean handoff. The mining-law responsibility for the well (which would otherwise belong to the exploration company under SDCL chapter 45-6A) shifts to the water-well user when the well is converted. The user (landowner or lessee) then operates under SDCL chapter 46-6 (the ground water appropriation chapter), which requires a permit for non-domestic ground water use.
So the answer to question 1 was yes. The contract did exactly what the statute contemplated: transferred title and responsibility from the company to the landowner. The exploration company is absolved.
On bond requirements, the answer to question 2 was no. The general bonding provision in SDCL 45-6A-6.2 applies only to mining operators, the parties who are conducting the exploration program. A landowner taking over a converted well is not an operator. Nor does SDCL 45-6A-6.14 itself authorize a bond from the new water user. So no bond can be required from the landowner during the conversion period. The landowner still has to comply with SDCL chapter 46-6 (get the ground water permit, follow the rules), but no separate bond.
The practical effect: a mineral exploration company in South Dakota can clean up its inventory of drilled wells either by plugging them itself or by handing them off to landowners who want to use them for water. The handoff completely shifts the regulatory burden. The state's interest in the wells continues, but through the ground water permit framework, not through the mining bond.
Currency note
This opinion was issued in 1980. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. SDCL chapter 45-6A and chapter 46-6 have been amended over the decades. Federal and state environmental regulations now layer over the basic conversion framework: groundwater quality protection, abandoned well plugging standards, and oil/gas well decommissioning rules have all expanded. Anyone managing a well conversion today should check current SDCL provisions, DENR (now DANR) rules, and any federal hooks under the Safe Drinking Water Act underground injection control program.
What the opinion meant at the time
For mineral exploration companies in South Dakota, the opinion confirmed a clean exit path. After drilling a non-producing exploration well, the company could either plug it itself (at the company's cost) or convey it to a landowner with a written agreement under SDCL 45-6A-6.14. The conveyance route shifted both responsibility and cost to the landowner. From the company's perspective, this was an attractive option whenever a landowner wanted the well for water and was willing to assume responsibility.
For landowners taking over converted wells, the opinion meant they were assuming the well's regulatory burden in exchange for getting a functional water well at the cost of plugging it. They needed to get a SDCL chapter 46-6 ground water permit if the use was anything other than domestic. They did not have to post a bond, but they did have to follow the appropriation rules.
For state water rights administrators, the opinion confirmed that the ground water permit framework was the operative regulatory tool after a conversion. The mining-side bond did not follow the well. The water-side permit and reporting did.
For lenders and title examiners checking on a property with a converted well, the opinion clarified the chain of responsibility. The exploration company's signature on a SDCL 45-6A-6.14 conveyance was enough to end its mining-law liability; the landowner's signature accepting the well shifted the going-forward water-law obligations to the landowner.
Background and statutory framework
South Dakota's western half includes significant oil, gas, and uranium exploration activity. Many drilled wells turn out to be dry holes for the original mineral target but encounter usable groundwater. Plugging a producing-water well that a landowner actually wants for stock or irrigation use would be wasteful. The state's policy response was SDCL 45-6A-6.14: convert rather than plug, and let the new use carry its own regulatory framework.
SDCL chapter 45-6A is the mineral exploration chapter, governing exploration permits, drilling reports, plugging, and the bonding required of mining operators. The bonding under 45-6A-6.2 is meant to ensure that an operator who walks away from an exploration program is on the hook financially for the abandonment. Once a well is converted under 45-6A-6.14, the operator is out of the picture and the chapter 45-6A bonding no longer applies.
SDCL chapter 46-6 is the ground water appropriation chapter. Anyone using more than the small "domestic use" exemption volume needs a permit from the state water rights program. The permit specifies allowable use (stock, irrigation, industrial), volume, and reporting obligations. A landowner inheriting a converted well steps into this regulatory framework: get the permit, use only what is authorized, report as required.
The two-chapter structure (45-6A mining-side, 46-6 water-side) is designed for clean separation. SDCL 45-6A-6.14 is the bridge. Meierhenry's opinion confirms the bridge does what it says: when you cross it, the rules change but you don't acquire a new bond on top of the new permit.
Citations
- SDCL 45-6A-6.14 (mineral well conversion to water well)
- SDCL chapter 46-6 (ground water appropriation)
- SDCL 45-6A-6.2 (mineral exploration operator bond)
Source
Original opinion text
Landowner Assuming Responsibility of Mineral Well Converted to Water Well
Dear Mr. Pearson:
You have requested an official opinion from this office in regard to the following factual situation:
FACTS:
An agreement was made between an exploration company and a landowner wherein the landowner agreed to assume the responsibility of developing or plugging an exploration well.
Based on the above facts, you have asked the following questions:
QUESTIONS:
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Does this agreement absolve the company of its responsibility for the mineral well?
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If the answer to No. 1 is yes, then is a bond required of the landowner until such time as the mineral well is developed?
IN RE QUESTION NO. 1:
Before addressing your question of whether the agreement absolves the company of its responsibility for the mineral well, notice should be made of the fact that state law specifically provides for such an absolution. SDCL 45-6A-6.14 states as follows:
If any mineral well drilled are to be ultimately used or are to be converted to water wells, it shall be the responsibility of the user to comply with the provisions of chapter 46-6.
SDCL Chapter 46-6 deals with the appropriation of ground water, and requires that a permit to appropriate ground water be obtained if the water will be put to use for other than domestic purposes.
Thus, SDCL 45-6A-6.14 statutorily allows a mineral well to be converted to a water well, with the responsibility for the development of the well transferring to the well user (landowner/lessee). The purchase agreement referred to in your question does little more than give effect to this statute, by specifically transferring title and responsibility for the mineral well from the well driller to the landowner or lessee who will use the well for water. As this transfer of responsibility is specifically contemplated in SDCL 45-6A-6.14, the purchase agreement is indeed valid, and the exploration company is absolved of its responsibility for the mineral well.
IN RE QUESTION NO. 2:
You have asked whether, under SDCL Chapter 45-6A, a bond may be required from the landowner until the mineral well is developed into a water well. The bonding provision regarding mineral exploration, and mineral wells drilled pursuant to exploration, is contained in SDCL 45-6A-6.2. Only an operator, one who is conducting the exploration program, is required to submit a bond. Therefore no bond can be required under the general bonding provisions of SDCL Chapter 45-6A.
In addition, SDCL 45-6A-6.14 does not specifically give the state authority to require a bond from the water well user. Therefore, no bond may be required from the landowner. Notice should be made, however, of the fact that the landowner/lessee (water well user) is required to comply with the State's statutes and regulations governing ground water (SDCL Chapter 46-6).
Respectfully submitted,
Mark V. Meierhenry
Attorney General