More Orphaned Oil Wells on the Way?

January 25, 2023

Above, report from WFAA Dallas on “orphaned” oil wells in Texas. Big problem, as smaller oil companies have left hundreds of thousands of inactive wells behind without proper plugging – a burden for taxpayers.

New report below of potential new problem in Appalachia.

Environmental Health News:

PITTSBURGH — Diversified Energy Company, the largest owner of oil and gas wells in the country, might abandon up to 70,000 oil and gas wells throughout Appalachia without plugging them, according to a new report.

The company, headquartered in Birmingham, Alabama, spent the last five years acquiring tens of thousands of aging, low-producing conventional oil and gas wells and some fracking wells primarily in Pennsylvania, Ohio, West Virginia and Kentucky. Conventional oil and gas wells are traditional wells where fossil fuels are extracted through vertical boreholes.

A new report, published by the Ohio River Valley Institute, a progressive think tank, finds that the company’s financial liabilities exceeded its assets by more than $300 million in June

2022. According to the report’s authors, it’s rare for an oil and gas company’s liabilities to exceed its assets to this extent, prompting concerns that Diversified Energy will go bankrupt without plugging its wells.

“We don’t want to see citizens and taxpayers have to pay for plugging these well after this company is gone,” Ted Boettner, author of the report and a senior researcher with the Ohio River Valley Institute, told EHN. “The way Diversified’s business model is set up, this is a distinct possibility.”

Boettner’s report expands on a previous report on Diversified Energy published by the same organization in April 2022 that found the company did not have enough funds on hand to plug its rapidly growing inventory of wells. That report also found that the company claims it can plug wells at a cost less than half the industry average, claims dying wells will continue producing for decades longer than can be reasonably anticipated, and misrepresents methane emissions.

“These unusual assumptions — as well as accounting practices that function to punt cleanup costs down the line — are not used by any other company in the industry,” Kathy Hipple, report coauthor and research fellow at the Ohio River Valley Institute, said in a statement at the time.

The new report finds that those practices have continued, with the company acquiring additional wells while lowering the amount it expects to pay to decommission them.

A spokesperson for Diversified Energy declined to comment on the specific financial concerns outlined in the report, but told EHN, “like other publicly traded peers, we’re held to strict financial reporting standards, including third-party auditing, and we’re measurably reducing emissions by deploying hand-held methane detectors, eliminating or replacing pneumatics, and upgrading equipment.”

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One Response to “More Orphaned Oil Wells on the Way?”

  1. rhymeswithgoalie Says:

    As some have pointed out, much of the cost of nuclear power plants in the Western democracies is ensuring that there is a funded account for end-of-life cleanup. If cleanup costs had been factored in to oil&gas operations, many of these wham, bam, thank-you-ma’am projects would never have been started to make a quick buck from the market.

    Of course, asking bidnizes not to externalize costs is capitalism blasphemy.


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