CHARLESTON, W.Va. — A lawyer representing surface owners is drawing attention to the issue of gas wells that are transferred to new ownership as they near the end of their use.
“There’s all these things that can go wrong if a well isn’t plugged and plugged properly,” said David McMahon, who represents the Surface Owners’ Rights Organization.
“The problem is that in West Virginia, weak or vague statutes and practices have left the drillers avoiding the plugging requirements by producing only a few hundred dollars worth of gas each year.”
During a presentation to reporters on Tuesday, McMahon cited about 12,000 wells presumed abandoned because the owners haven’t produced any gas for a year.
Of those, there are about 4,000 where the owner has gone out of business.
“There’s nobody to plug them, except for the state,” he said. “The state has enough money to plug maybe 10 wells a year out of the 4,000.”
McMahon is particularly concerned about wells changing hands toward the end of their use.
“There’s been a practice in the industry for years for this to happen, for the drillers to drill the wells, to milk them, to not plug them and to go out of business,” he said.
“Or even to drill the wells, milk them for what they can get and sell them to another company that will maybe milk the last out of it and then disappear and leave these wells orphaned with no one to plug them.”
McMahon became alarmed by recent news reports about a company called Diversified Gas & Oil buying 5,000 older wells in the Appalachian region.
The company has pursued a strategy of buying older wells over nearly two decades, amassing about 60,000 wells across the region.
“We love it. We love the fact that no one is paying attention to what we’re doing, or cares about what we’re doing,” CEO Rusty Hutson told the Natural Gas Intelligence publication.
“But at the end of the day, we’re producing natural gas and oil just like everyone else is doing, and it’s being sold at the same prices.”
A few months ago, Diversified completed a $575 million purchase from the region’s biggest natural gas company, EQT. The package includes 12,000 wells, representing some of EQT’s earliest assets.
McMahon’s worry is financially-healthy companies with the means to plug older wells passing them on to companies with a questionable future.
He is asking for a public hearing before the West Virginia Department of Environmental Protection to address the issue.
“We’re hoping the state gives us the opportunity to have a hearing,” McMahon said.
One of the Justice administration’s highest ranking officials, senior adviser Bray Cary, continues to serve as an EQT board member with millions of dollars of stock in the company.
Cary has said he steers clear of state government discussions involving the company.
McMahon, in his news release, took direct aim at EQT.
“EQT and other major Marcellus Shale drillers are trying to dump their responsibility to plug 17,000 outmoded, vertical oil and gas wells located on surface and mineral owners across the West Virginia,” he stated.
EQT issued a short statement in response to McMahon’s concerns:
“EQT is fully cooperating with the WV DEP on its requirements for approval of any well transfers, including plugging requirements.”
The West Virginia Oil and Natural Gas Association issued a statement, acknowledging concern over orphaned wells.
“The members of the West Virginia Oil & Natural Gas Association strive to operate in a responsible fashion with all stakeholders in mind and have been working on ways in which to reduce the number of abandoned and orphaned wells in the state,” stated the group’s director, Anne Blankenship.
But the association went on to say it’s too soon to judge McMahon’s specific concerns about what could happen with Diversified and the wells it would take over.
“While we certainly appreciate concerns regarding the number of abandoned and orphaned wells, today’s efforts by the WV Surface Owners’ Rights Organization are not based upon facts, but premature fears regarding the ability of the cited companies to meet regulatory obligations,” Blankenship stated.
“The ultimate decision to allow the well transfers is up to our state’s regulatory bodies. These transactions must comply with the requirements and obligations that are set forth by those state regulatory authorities.”
McMahon wants the public hearing to talk about DEP’s potential approval of transferring the plugging responsibility. His request for a public hearing applies to the first 3,865 wells for which approval has already been sought.
“Approval of these transfers will pave the way for one of the most, if not the most, widespread environmental and property rights disasters ever in West Virginia,” he said, “and it is preventable by not approving the transfers and leaving the cost of plugging with the companies that can afford to do so.”