Pennsylvania has a Methane Problem


In the big push by GOP candidates in the US Senate and Pennsylvania gubernatorial races for an accelerated amount of drilling and fracking in our Keystone state, these candidates are ignoring an existing problem with fugitive methane emissions from existing and abandoned wells.

Former CONSOL ENERGY wells in Washington County, Pennsylvania now operating as DIVERSIFIED GAS AND OIL LLC
Tomorrow, Tuesday April 12th at 11:00 AM EDT, the Ohio River Valley Institute will be hosting a free webinar:
“New Report Shows Diversified Energy’s Financial Success Founded on Dubious Business Tactics: “Legal Ponzi Scheme” Could Leave Appalachia with Billions in Public Oil and Gas Liabilities, Rampant Methane Emissions.”

Contact: Ben Hunkler
Communications Lead
(740) 963-4458
New Report Shows Diversified Energy’s Financial Success Founded on Dubious Business Tactics
“Legal Ponzi Scheme” Could Leave Appalachia with Billions in Public Oil and Gas Liabilities, Rampant Methane Emissions
JOHNSTOWN, Pennsylvania —— Diversified Energy used dubious financial practices and extreme decommissioning assumptions to become the nation’s largest owner of oil and gas wells, a new report from the Ohio River Valley Institute shows. The company’s opportunistic business model could leave the public with billions in oil and gas well clean-up costs and an unforeseen amount of climate-warming methane emissions.
Since 2017, Diversified has amassed tens of thousands of aging, low-producing oil and gas wells, earning revenue by eking out the little fuel that remains. States require the company to plug and abandon wells that no longer produce oil or gas. But Diversified has delayed its decommissioning obligations and skirted plugging costs by employing questionable accounting practices, ORVI research finds. Register here for a press release and Q&A on the new report, “Diversified Energy: A Business Model Built to Fail”, to be held on Tuesday, April 12 at 11 AM ET.
“Diversified claims it can plug wells at a cost less than half the industry average. They claim their dying wells will continue producing at an economic rate for decades.” said report author and ORVI Research Fellow Kathy Hipple. “These dubious 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.”
ORVI analysis of Diversified’s financial statements and natural gas price projections shows that the company does not have enough funds to plug its entire catalog of wells. If Diversified, or other companies that own low-producing wells in the region, were to go out of business, states could be on the hook for billions in plugging costs since operators are not required to set aside sufficient funding for well decommissioning upfront.
“Diversified’s portfolio of low-producing wells, along with the 100,000 or more additional marginal wells in the region, represents a huge and looming financial threat,” according to report author and ORVI Senior Researcher Ted Boettner. “There’s an oncoming wave of soon-to-be-orphaned wells that could be offloaded onto the public, becoming costly wards of the state.”
Diversified has also used a variety of tactics to circumvent reporting requirements and under-represent total emissions of methane, a potent greenhouse gas. “Our investigation shows a pattern of startling drops in company-reported emissions after Diversified buys leaking wells from other owners. In Pennsylvania, wells purchased by Diversified log about 90% fewer emissions than the same wells under previous ownership. The company has flouted the regulatory system by publishing aberrant reports, exploiting legal loopholes, and skirting testing responsibilities,” said report author Dr. Anthony Ingraffea, Dwight C. Baum Professor of Engineering Emeritus at Cornell University.
To help finance its business model, Diversified has capitalized on public subsidies, exploited tax loopholes, and lobbied state and local officials. The company has received more than $250 million in Marginal Well Tax Credit funds since 2020, and evasive accounting practices have helped the company avoid standard industry taxes on most acquisitions. In 2021, Diversified paid lobbyist Steve Puccio, a close friend and trusted political ally of Joe Manchin, to urge the Senate to remove the methane fee from the Build Back Better Act. The fee would have levied hefty taxes on Diversified’s many aging, high-emitting wells. Now, the company is applying for Bipartisan Infrastructure Law funding to cover the plugging expenditures of thousands of dying wells.
With billions of dollars in well cleanup costs hanging in the balance, financial and environmental regulators, investors, and the public would do well to examine Diversified’s fiscal success, the report concludes.

April 12, 2022 UPDATES:

Diversified Energy: A Business Model Built to Fail Appalachia (Full Report – 50 page PDF)

Appendices for Report (37 page PDF)

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