DEP reaches agreement over company’s 17,000 aging wells

CHARLESTON, W.Va. — A company that has bought up 17,000 aging oil and gas wells in West Virginia has reached an agreement with a state agency to monitor and plug many of them.

The big question is whether that’s enough.

Diversified Gas & Oil Corporation has received scrutiny in Appalachia’s gas-rich states for its business strategy of buying hundreds of aging wells from other companies.

The concern has been that the many aging wells could strain Diversified, leaving it with enormous liabilities and, possibly, resulting in abandoned wells across the region.

Pennsylvania regulators ordered three companies selling wells to Diversified to plug more than 1,000 of them.

In West Virginia, Diversified announced a consent order with the Department of Environmental Protection on Tuesday.

The state and the company agreed that of the wells Diversified has taken over, many are already considered non-producing and abandoned.

But those wells haven’t yet been identified.

The consent agreement concludes it’s in the best interest of the state to identify them and either placed back into production or plugged.

“West Virginia has fostered a healthy environment for both Diversified and the natural gas industry,” stated the company’s chief executive officer, Rusty Hutson.

West Virginia’s Surface Owners Rights Organization says the agreement doesn’t go far enough.

David McMahon

“I have never been so disappointed in the DEP,” stated lawyer David McMahon, representing the organization.

“Weak laws and unsuccessful enforcement policies have already led to 4,000 orphaned wells on farmers and surface owners across the state because the drillers of those wells have gone out of business.

“Diversified is taking the same problems that lead to those 4,000 orphaned wells to another level.”

McMahon had asked for a hearing at DEP to oppose the transfer of more than 3,000 wells to the company from the natural gas giant EQT.

The organization made the request “because it believes that EQT, which can afford to plug the wells when the time comes using its new Marcellus well production proceeds, is shedding its plugging responsibility to Diversified, and that Diversified will not in the long run have the funds to plug most of the thousands of those wells.”

Bray Cary, senior adviser for Gov. Jim Justice, is a board member for EQT. Cary has said he keeps his EQT association separate from his role as the governor’s right hand.

McMahon contends the agency should be more aggressive and that the Legislature should get involved.

“I think DEP should fight back harder,” he said, “and the Legislature needs to do something about it, too.”

The agreement between Diversified and the West Virginia Department of Environmental Protection extends over 15 years.

For the duration of the agreement, Diversified has agreed to put up a $3 million bond.

By this coming June 30, Diversified is supposed to complete an assessment of its gas and oil wells in West Virginia, emphasizing non-producing wells.

Over the course of 2019, the company is to plug 30 oil and gas wells.

From 2020 to 2034, Diversified is to deal with at least 50 wells a year, either by plugging, returning to production or disposing of them somehow.

McMahon contends the math doesn’t add up.

He says the 310 wells that would be plugged over the next 15 years represents less than 2 percent of the company’s 17,460 wells.

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