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Abandoned gas and oil wells can leak toxic chemicals into the air and groundwater and release methane, a potent greenhouse gas that drives more extreme weather patterns and threatens food and water security.
There are thousands of such wells in West Virginia that don’t have a solvent owner of record, leaving taxpayers on the hook for properly closing them.
“The industry that created the program should be paying for the solutions,” Alex Cole, a Sierra Club West Virginia senior organizer, said to widespread applause at a May 15 community meeting in Charleston on feared health impacts from gas wells, many orphaned, in the Crouch Hollow area. “It shouldn’t be on us.”
The federal Infrastructure Investment and Jobs Act allocated $4.7 billion in taxpayer dollars to plug orphaned wells nationwide, including an initial $25 million for West Virginia. The Department of Environmental Protection plans to use that funding to have roughly 200 wells plugged.
That’s just over 1% of the more than 15,000 orphaned wells in West Virginia estimated in a 2021 Interstate Oil & Gas Compact Commission report on orphaned wells.
But it’s a start — and one that environmental advocates say the DEP is mishandling.
The DEP is outsourcing well-plugging under the Infrastructure Investment and Jobs Act to contractors. Only a quarter of all wells selected for plugging by contractors per geographic region must be Class I wells. The agency awarded separate contracts for geographic regions.
Class I wells are those the agency has determined pose an immediate threat to human health or the environment, or impede mineral resource development enough to require immediate plugging.
The DEP typically selects what wells to plug.
But DEP spokesperson Terry Fletcher said time constraints coming with the initial grant phase requiring the agency to obligate 90% of the $25 million within 90 days of the grant award last year prompted the agency to transfer well selection responsibility to contractors.
Fletcher said the DEP overlooks orphaned wells that are sometimes on the same property as Class I wells that are being plugged due to a requirement to plug Class I wells before all others when using state funding. Fletcher indicated the federal well-plugging funding allowed an opportunity to take advantage of cost savings from minimized mobilization and reclamation in having orphaned wells addressed.
Last year, the Biden administration estimated West Virginia would receive $141.9 million in funding through the Infrastructure Investment and Jobs Act to plug wells, including $25 million in initial grant eligibility and over $30 million more in the first phase of formula grant funding. Allocations were determined by job losses in each state from March 2020 through November 2021, the number of documented orphaned oil and gas wells and the estimated cleanup cost.
West Virginia’s phase one formula grant funding was sixth-highest in the country.
Ted Boettner, senior researcher with the Ohio River Valley Institute, a pro-renewable energy think tank, suggested pressuring the DEP to plug wells that are leaking during another community meeting focused on Crouch Hollow area gas well concerns in March.
Fletcher said $159,000 in state funds was used to plug an orphaned gas well in the Crouch Hollow area earlier this year after a 2021 complaint from a resident who lived roughly 800 feet away from the well.
Peter Morgan, senior attorney for the Sierra Club, said West Virginia outsourcing well-plugging selection to contractors incentivizes them to plug whatever orphaned wells are cheapest and most convenient to plug.
West Virginia has required contractors to research wells for potential ownership — another move concerning environmental groups.
The Sierra Club and the Ohio River Valley Institute were two of eight environmental groups nationwide joining together to submit comments to the Department of the Interior this year on its state formula well-plugging grant guidance that singled out West Virginia’s oversight.
Well-pluggers getting paid for plugging wells shouldn’t be responsible for determining if a well they’ve been hired to plug is actually ineligible for the plugging program, the groups argued.
West Virginia “created a powerful disincentive for actually identifying wells that have a financially responsible owner,” the groups said.
Morgan said that’s especially true in the case of the nation’s largest gas and oil well owner, Diversified Energy Company, since its subsidiary is one of the contractors West Virginia has chosen to plug dozens of orphaned wells with federal funding.
Fletcher said Next LVL Energy LLC, a Diversified subsidiary, met all requirements under state purchasing regulations to be awarded plugging contracts under the Infrastructure Investment and Jobs Act.
The state contracted with Next LVL Energy to plug 100 orphaned wells for over $12.5 million, Fletcher noted.
“Diversified would be in a position to say, let’s say, we could get the state to pay us to plug this well or we could say, oh no, this appears to be one of our wells, we’re responsible for plugging it out of our own pocket,” Morgan said.
Fletcher said Next LVL can’t use any Infrastructure Investment and Jobs Act funding to plug wells owned by Diversified or any existing responsible party.
Diversified spokesperson John Sutter said the company doesn’t seek or use federal dollars to retire its own assets. Sutter said Diversified, an Alabama-headquartered company, competes through Next LVL for contracts to help states plug wells with no identified owner.
Diversified has resisted plugging some of its own wells in West Virginia.
More than two dozen West Virginia landowners filed a federal class-action lawsuit last year alleging Diversified and EQT struck transfer deals in recent years for many more wells than Diversified can afford to plug and decommission.
Industry experts have made similar observations, saying the company’s business model is based on acquiring a high number of low-producing wells that yield short-term dividends but present long-term liabilities mounting as the company puts off well decommissioning obligations.
“If Diversified goes bankrupt tomorrow, do you know who has to plug [its wells]? Us. The DEP, and we know how well they’re doing at the current clip,” Cole said.
Most of Diversified’s roughly 70,000 wells are in Appalachia, acquired since 2018 from EQT and Canonsburg, Pennsylvania-based CNX Resources. Diversified acquired more than 12,000 gas wells from EQT in deals in 2018 and 2020 for roughly $700 million.
Diversified has argued in the case filed by West Virginia landowners it has no duty to plug wells unless it identifies them as candidates for plugging in annual reports it is required to file with the DEP’s Office of Oil and Gas through 2034. A 2018 agreement between the company and the agency requires Diversified to summarize actions taken to plug oil and gas wells or place them into production during the past year.
A March report by the Capitol Forum, a corporate news analysis service, found that in West Virginia, 184 wells identified as eligible for plugging appeared to be owned by an active operator.
The report found cracks in Appalachian states’ ability to accurately track well ownership, citing conflicting ownership between state records and bidding documents and duplicate wells across different contracts.
Diversified was among the active operators owning wells identified for plugging in bidding documents during the first stages of states’ efforts to plug wells with federal funds, the report found.
“Any Diversified-owned wells included on state orphan well plugging contract bid lists are in error,” Sutter said in an email.
Fletcher said no well owned by an existing responsible party would be plugged under the federal program, touting research for potential ownership required by the DEP. Fletcher said courthouse research is performed to identify any oil and gas leases attached to property when no ownership transfer records exist. Any operator names are to be researched through the West Virginia Secretary of State’s business entity search, Fletcher said.
Contractors are required to perform this research and provide those results as part of their well investigation reports, Fletcher said.
“It is a perverse and unworkable solution to … pass the responsibility to a private well-plugger to figure out which of these wells are truly orphaned and which might have an active operator,” Morgan said.
West Virginia has relied on Next LVL to plug more wells than any other contractor in the state’s $25 million initial federal grant phase. The state also awarded contracts totaling more than $5.1 million to Pennsylvania-based Coastal Drilling East LLC, over $4.7 million to Alum Creek-based WPS Environmental LLC and Idaho-based Northwind Site Services, according to Fletcher.
The number of orphaned wells being plugged in West Virginia has soared due to the Infrastructure Investment and Jobs Act.
West Virginia plugged just three orphaned wells from 2018 through 2020.
The DEP accounted for 48 wells plugged with Infrastructure Investment and Jobs Act funding as of Tuesday, Fletcher said. Of those, 20 were in Lincoln County, nine were in Ritchie County and eight were in Doddridge County, according to Fletcher. Kanawha County had one well plugged with that federal funding.
The DEP has required contractors to hire compliance officers that must “maintain a regular presence” at well reclamation sites and ensure that contract requirements are met.
“[T]he people who are doing the plugging hire their own inspectors. I’m not making this up,” West Virginia Surface Owners’ Rights Organization co-founder David McMahon complained at the March meeting.
Fletcher has said the DEP expects to inspect every well that is plugged during and after plugging operations.
The Legislature earlier this year passed House Bill 3110, a measure the DEP estimated would allow it to hire at least 10 inspectors for its Office of Oil and Gas, bringing the office total to 20 in charge of inspecting 75,000 wells and other gas and oil infrastructure.
But McMahon said at the meeting he doesn’t count HB 3110 as a major victory, suggesting the state still has a long way to go to get to the inspector staffing level it needs.
“If you take a car that needs four wheels and you’ve only got one wheel and you put one more wheel on it, you’re still a couple of wheels short of what’s needed to do the job,” McMahon said.
With more well-plugging on the way, environmental advocates want more hands-on DEP plugging oversight to trust taxpayers are getting more bang for the buck that industry passed to them.
“Every dollar that goes to clean up an abandoned well that has an active operator is a dollar that’s no longer available to clean up a truly orphaned well,” Morgan said.
