Old gas wells in West Virginia and other states often leaking
From an Article by Zachary R. Mider and Rachel Adams-Heard for Bloomberg Green, October 12, 2021
Old oil and gas sites are a climate menace! — Meet the company that owns more of America’s decaying wells than any other.
Outside of hunting season, few people visit the Tri-Valley Wildlife Area in the rolling hills of southeast Ohio. When a couple of Bloomberg Green reporters showed up on a muggy June morning, the only sounds were birdsongs and the whirring of our infrared camera. We set out on foot and soon spotted the first of several rusty natural gas wells scattered across a broad meadow. Their storage tanks, half-covered with vines and brush, looked like the forgotten monuments of some lost civilization.
There are hundreds of thousands of such decrepit oil and gas wells across the U.S., and for a long time few people paid them much mind. That changed over the past decade as scientists discovered the surprisingly large role they play in the climate crisis. Old wells tend to leak, and raw natural gas consists mostly of methane, which has far more planet-warming power than carbon dioxide. That morning in Ohio we pointed our camera at busted pipes, rusted joints, and broken valves, and we saw the otherwise invisible greenhouse gas jetting out. A sour smell lingered in the air.
To Rusty Hutson, it smells like money.
Hutson is the founder and chief executive officer of one of the strangest companies ever to hit the American oil patch and the reason for our four-day visit to the Appalachian region. While other oilmen focus on drilling the next gusher, Hutson buys used wells that generate just a trickle or nothing at all. Over the past four years his Diversified Energy Co. has amassed about 69,000 wells, eclipsing Exxon Mobil Corp. to become the largest well owner in the country. Investors love him. Since listing shares in 2017, Hutson’s company has outperformed almost every other U.S. oil and gas stock, swelling his personal stake to more than $30 million.
U.S. Onshore Well Count
But Diversified’s breakneck growth has alarmed some regulators, landowner groups, and industry insiders, not to mention environmental advocates. State laws require that every well be plugged with cement after it runs dry, an expensive and complicated chore. At the rate Diversified is paying dividends to shareholders, some worry there will be nothing left when the bills come due. If a company can’t meet its plugging obligations, that burden falls to the state, which means Ohio, Pennsylvania, and West Virginia could be stuck with a billion-dollar mess. “The model seems like it’s built on abandoning those assets,” says Ted Boettner, who’s studied abandoned wells at the Ohio River Valley Institute, a regional research organization. “It looks like a liability bomb that’s destined to explode.”
How Dying Gas Wells Are Making One Company Rich
Hutson says there’s no cause for worry. He claims to be able to squeeze more gas out of old wells than other companies can and keep them going longer. On average, he figures his wells have an additional 50 years in them, which means there’s no hurry to start socking away money to plug them. It also means they could be spouting pollution long past 2050, the target date set by President Joe Biden for zeroing out emissions across the economy.
State regulators say Diversified hasn’t broken any rules by building an empire of dying wells. Nor has it violated any restrictions on methane emissions, because none apply. Indeed, state and federal policies—from plugging regulations to tax subsidies—encourage companies to do exactly what Diversified is doing: Keep almost dead assets on life support as long as possible, no matter how much they may damage the planet.
We decided to see for ourselves what Hutson’s plans might mean for the climate by visiting 44 well sites owned by Diversified. We used state databases to find accessible wells on public land in three states. Then we borrowed a $100,000 industry standard GF320 camera—designed to spot methane—from its manufacturer, Teledyne FLIR. One of us got trained and certified to use it, and the other operated a handheld gas detector.
The results were worrisome. We found methane leaks at most of the places we visited. Some sites showed signs of maintenance in recent months, but others looked more or less abandoned. We saw access roads choked by vegetation, machinery buried under vines and weeds, oil dripping onto the ground, and steel doors rusted off their hinges. That’s not to say the wells were unattended. Mud wasps, spiders, mice, snails, and bees made their homes in them, and a porcupine napped under a brine tank.
A Trip Through Appalachia on the Trail of Leaky Wells
Advocates for natural gas call it a cleaner fossil fuel because it releases about half the carbon dioxide as coal when burned. But there’s a catch: Left unburned, natural gas consists mostly of methane, which is much better at trapping heat. Released into the air, a ton of methane will cause at least 80 times more warming over the next 20 years than a ton of carbon dioxide. That’s one reason controlling methane is among the cheapest and quickest ways to slow climate change and limit the wildfires, heat waves, rising seas, and droughts it’s unleashing. According to one recent estimate, putting a lid on human-caused methane emissions could prevent as much as one-third of the warming expected in the next few decades.
Researchers around the world are racing to reexamine the world’s energy supply chain, finding where gas is leaking and showing what can be done about it. Scientists are training infrared cameras on methane emissions in Texas oil fields, using satellites to spot them in Turkmenistan, and driving sensor-laden vehicles around city streets in the Netherlands. One problem area they’ve identified: old wells that produce little or no salable gas.
Only about 3% of gas needs to escape on its journey from wellhead to power plant to make it worse for the planet than coal. If a well is producing next to nothing, even a small leak can put it over that threshold. “Marginal wells are emitting a very large proportion of the natural gas that they produce,” says Amy Townsend-Small, an associate professor of environmental science at the University of Cincinnati. “Some marginal wells are emitting more natural gas than they produce.”
Townsend-Small is a co-author of a 2020 study that examined old, low-producing oil and gas wells in Ohio, not far from Tri-Valley. She found their emissions amounted to 21% of gas production. Two other peer-reviewed studies, using different measurement techniques and examining gas wells in West Virginia and Pennsylvania, found loss rates of 9% and 18%. None of the papers identified the well owners. Taken together, the research suggests that gas from old wells in Appalachia is one of the dirtiest components of the U.S. energy system.
The damage doesn’t end when these wells stop producing. Some continue to leak methane for years if they’re not properly plugged. Another paper estimated that as much as 8% of Pennsylvania’s human-caused methane emissions was coming from these inactive wells.
Our own survey wasn’t scientific. But it provided some hints that problems noted by academic researchers, such as poor maintenance and frequent leaks, were also present at Diversified’s operations. At 59% of the sites we visited, emissions were significant enough to cause our detector to sound a safety alarm, indicating that the concentration of methane near the instrument’s sensor exceeded 5,000 parts per million. Normal air contains about 2 parts. In a few cases the source appeared to be a pneumatic controller designed to release gas, but the vast majority were leaks.
In a statement to Bloomberg Green, Diversified said that the wells we visited were “not representative of our entire portfolio” and that many had been neglected by previous owners and acquired only recently. Some of the leaks we found were tiny, the company added, and all of them were repaired within a few weeks of our inquiries. The cost for quickly fixing these wells, according to Diversified, was less than $90 on average. The company also said it fixed a leak in an underground pipeline in West Virginia after we reported finding a high concentration of gas nearby.
Diversified said that it’s committed to reducing methane emissions across its operations and that it’s investing in training and equipment to help field personnel find leaks. As for the academic studies showing high emissions rates in the region’s old wells, Diversified questioned their accuracy and said its own wells are better maintained than those of other companies, with staff visiting wells once a month on average. “We firmly believe that we are the best custodian of these wells,” the company said.
No one, including Diversified executives, knows how much methane is actually leaking. Unlike carbon emissions, which are usually a function of intentional fuel use, methane emissions are often inadvertent and intermittent. That makes them almost impossible to measure comprehensively across thousands of locations. Like most oil and gas producers, Diversified estimates emissions using formulas, most of them developed by the U.S. Environmental Protection Agency, that assign a theoretical leak rate to each valve, connector, and tank. For 2020, Diversified told investors those numbers added up to about 38,000 tons of methane, or less than 1% of its gas production. The formulas don’t take into account the age or condition of hardware or whether any efforts were made to fix leaks.
Researchers say the actual measurements they get in the field are often wildly different from those predicted by formulas. The study of wells in West Virginia found emissions rates more than seven times EPA numbers. In February, Diversified told Pennsylvania regulators it had self-inspected 1,412 of its least productive wells in the state and reported that none was leaking gas. We visited three of those wells in June. Two were leaking.
Hutson, 52, grew up in the tiny West Virginia river town of Lumberport, where his great-grandfather, grandfather, and father, Rusty Sr., all worked for the local gas company. “There were two kinds of people—you either worked in coal, or you worked in oil and gas,” Hutson, who declined to be interviewed for this story, told BBC News last year, recounting his company’s origins. “It was a generational thing. If your dad and grandfather did it for a living, then you did it.” Instead, Hutson became the first in his family to graduate from college, earning an accounting degree and pursuing a finance career out of state.
By his early 30s, while working at a bank in Birmingham, Ala., Hutson turned back to the family business. He borrowed against his house to buy a few old gas wells near where he grew up. Then he bought several more. Within a few years he quit finance to focus on gas full time. He set up company headquarters near his home in Birmingham while working closely with his father in Lumberport.
The fracking revolution in the early 2000s created opportunity. Companies were pouring money into new drilling techniques to unlock vast amounts of oil and gas from shale fields. When they lost interest in their older, less productive conventional wells, Hutson was there to buy. By 2017 he’d amassed 7,500 wells. That February he floated the company’s shares on AIM, a lightly regulated arm of the London Stock Exchange for small companies.
>>> “The model seems like it’s built on abandoning those assets. It looks like a liability bomb that’s destined to explode” >>>
§ — The second half of this Article from Bloomberg Green can be found HERE.
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