The nation’s largest owner of natural gas wells will have to more than quadruple the number of nonproducing wells it cleans up over the next decade as part of the multimillion-dollar settlement secured by West Virginia landowners.
Last month, a federal judge gave preliminary approval to the $6.5 million agreement to settle the class-action lawsuit with Diversified Energy Corporation and EQT Corporation over unplugged and abandoned wells.
Under the settlement, Diversified is required to increase the number of wells it plugs across West Virginia, Ohio, Kentucky, Pennsylvania, Virginia and Tennessee over the next 10 years. The company will now be responsible for cleaning up 2,600 wells across the six states by 2034 instead of just the 580 dictated by the company’s agreements with various state agencies.
Two years ago, West Virginia landowners sued Diversified and its affiliates to force the companies to comply with state law and “promptly” clean up the abandoned wells left on their properties. In the initial complaint, the landowners alleged that the unplugged wells interfered with their enjoyment of their property and lowered its value as well as posing health and environmental risks.
Under West Virginia law, any well that hasn’t been in production for 12 consecutive months is considered abandoned and must be promptly plugged by its operator. Of the more than 23,000 wells Diversified owns in West Virginia, roughly 2,200 of them are abandoned.
The cleanup of abandoned wells has been a growing liability for the state as operators have walked away from their nonproducing wells, leaving them unplugged. And if the operator of an abandoned well is unknown or files for bankruptcy, it becomes “orphaned” and the cleanup falls to state regulators.
Currently, regulators are responsible for cleaning up more than 6,000 orphaned wells scattered throughout the state. However, that number is considered to be an underestimate as there are tens of thousands more that aren’t documented. Unplugged, nonproducing wells can pose significant health and environmental threats, including contaminating groundwater and emitting methane and other air pollutants.
Alabama-based Diversified moved to dismiss the lawsuit last year, arguing that a previously negotiated agreement with the state Department of Environmental Protection superseded West Virginia’s well-plugging regulations and protected them from lawsuits. However, the judge disagreed.
In 2018, the West Virginia DEP granted Diversified a cleanup timeline slower than what is required under state law. Rather than having to promptly remediate all their abandoned wells, the agreement only requires Diversified to remediate 50 of their abandoned wells each year for 15 years.
In their motion to dismiss the lawsuit, Diversified argued that because of their agreement with the state agency, they had no “existing duty” to plug the wells on the landowners’ property and that the lawsuit seeks to “undermine West Virginia’s regulatory framework.”
In his April 2023 denial, federal Judge John Bailey wrote that the agreement between DEP and Diversified was “simply an exercise” of the state agency’s authority and “has no effect” on the landowners’ property rights.
The settlement reflects Diversified’s focus on “the care and ultimate retirement of existing Appalachia wells” as a “responsible operator,” said Doug Kris, senior vice president of investor relations and corporate communications, in an email statement.
“We look forward to continuing our mission and focusing on being good asset stewards,” he added.
During this year’s legislative session, lawmakers considered a bill that would exempt companies that have an agreement with the state from the state law requiring them to “promptly” plug their wells. The measure also would exclude companies from lawsuits for failing to plug their abandoned wells, limiting surface owners’ legal recourse against operators. The bill failed to make it out of the House.
In recent years, Diversified has cleaned up more wells than required under its agreements with state agencies, according to a November company presentation.
The landowners also sued EQT Corporation, accusing the natural gas producer of fraudulently transferring ownership of several hundreds of nonproducing wells in West Virginia to Diversified in July 2018 and May 2020, according to the initial complaint.
Both the Pittsburgh-based company as well as Diversified agreed to pay up to $3.25 million each into a settlement account, which will go toward funding the class notice, attorney fees and costs and awards to the named landowners in the case.
While Diversified retains the right to choose what wells to plug under the settlement, class members with a “bona fide human health, safety, or environmental concern” will be able to apply for an expedited cleanup process for up to 10 wells per year. Class members will also be barred from suing Diversified for the following ten years. However, they will retain their rights to individually request their wells be plugged by applicable state environmental agencies.
The settlement class includes all people who own or lease land in any of the six states that have had a well owned or operated by Diversified on their property between July 8, 2022, and Nov. 4, 2024.
In August, the judge overseeing the case threw out part of the lawsuit, saying he believed it would be impossible to identify all affected landowners without extensive research.
People looking to opt out of the settlement must mail in their request to court-appointed settlement administration firm Kroll by February 18, 2025, and those looking to object to the settlement must do so by March 17, 2025. The final approval hearing of the class action is set to take place in April 2025.
Disclosure: The law firm of Bailey & Glasser represents landowners in their lawsuit against Diversified. One of the firm’s co-founders, Ben Bailey, is chairman of Mountain State Spotlight’s board of directors.
Clarification, Dec. 9, 2024: This story has been updated to clarify EQT Corporation’s involvement in the settlement.