MORGANTOWN – West Virginia has 15,655 total abandoned wells – about 6,300 considered orphaned. That doesn’t include wells at or near the end of the useful lives on land leased by operators.
The Infrastructure Investment and Jobs Act is bringing $212 million to West Virginia to plug as many of those orphaned wells as possible.
Diversified Energy is one of the companies working with the state to get wells plugged. We talked with Diversified about its operations and visited a plugging site run by Diversified’s plugging subsidiary, Pittsburgh-based Next LVL Energy, to see a job in action.
As it happened, this was not an orphaned well but a well at the end of its life on one of Diversified’s leaseholds. But the operation is the same whatever the well status.
It was a cold day with snow flurries. A horizontal well drilling operation occupies acres. Dozens of trucks and trailers and piles of equipment surround the giant drilling rig.
This site – the DeMurray pad in Wayne Township, just across the Pennsylvania border – was tiny, a few truck widths wide and smaller than manypeople’s driveways. We squelched through deep mud from the recent rains up to a dry shelf.
There was a single rig with just four men working it – one more than usual because one was a new hire, an experienced rig operator getting oriented to Next LVL before moving to lead his own crew.
The conventional horizontal well was drilled in 1928 and was 3,559 feet deep.
Diversified
Brad Gray is Diversified’s chief operating officer. Diversified operates in the Appalachian Basin from Tennessee to Pennsylvania in the Gulf area of Texas, Oklahoma and Louisiana. Gray said its business model is to acquire mature assets, invest in them, optimize them and make them safer and improve the environmental footprint.
“Its a stewardship model,” he said. That includes taking the responsibility for plugging wells in its portfolio. While this work has historically been an afterthought, “We view plugging wells as a part of our business. … The best way for us to be good at our plugging business was to own and operate it.”
Plugging became a strategic focus in 2021 as they developed their internal crews, he said, and continued into this year as they acquired several plugging firms, including Next LVL in February, which became the umbrella for all their internal and third-party contract work. The plugging workforce has grown from less than 10 last year to more than 100, with more hires planned.
Diversified’s corporate goal, he said, is to plug 200 of its own wells per year. On top of that, they’ll do contract work for other operators, and are bidding contracts for IIJA-funded projects in West Virginia, Ohio and Pennsylvania. Diversified has won three bids to cap a total 100 wells in West Virginia in 2023.
“We’re extremely excited about this business,” Gray said. Next LVL offers experience and expertise, and well plugging is environmentally and economically responsible – important because Diversified employees live in the communities they work in.
IIJA funding
The state Department of Environmental Protection oversees well plugging and explained how IIJA money will be used. IIJA money is separate from the more modest state Abandoned Well Plugging Fund – about $6 million – established in 2020 and supplied through severance taxes.
IIJA money is solely for orphaned wells. DEP explained that any well not in use for 12 consecutive months is considered to be abandoned, but the subset of abandoned wells that have no known responsible party or which are registered to a known, but defunct responsible party are orphaned.
DEP will receive money in three phases. As part of the initial grant phase, West Virginia will receive $25 million as a one-year grant.
This grant was effective Oct. 1, 2022. Under the next phase, the formula grant phase, West Virginia will receive $117 million over five years. “We have no information on when this grant will be made available to states.” And third is the performance grant period, with a maximum total eligibility of $70 million. “The U.S. Department of the Interior has not yet provided any guidance for this grant phase.”
Under the initial phase, DEP said, West Virginia has entered into six competitively bid regional contracts to plug 160 orphaned wells. DEP is also pursuing two additional contracts that will add about 40 more wells to the total.
At the site
Greg Hoyer, Diversified’s vice president of Government Affairs, and Greg Maddox, Next LVL co-founder and general manager, explained the operation.
A capping job, Maddox said, takes up to a week in most cases. This was a single well, perched on the edge of a wooded hill. They cut a road to it. They cap the well, restore the site to natural contours, and seed and mulch it. “We leave it in most cases better than we show up. Next spring when you come back here you won’t even know there’s a well here.”
Except for a small monument indicating there’s a capped well below, he said.
When Diversified works with its own well portfolio, Hoyer said, they figure out what wells they want to plug. Environmental and safety issues come first and get highest priority. Identified wells go onto schedule. The land team works on permitting and title work.
Meanwhile, they put together detailed plugging procedures. They evaluate the site and the well, to learn the lay of the land and see what’s down the hole that might provide any challenges. Knowing what’s there ahead of time, Maddox said, allows them to have all the right equipment and personnel on site before they begin.
Next LVL is vertically integrated, Maddox said, to make everything operate quickly and efficiently. “When we can control it all, it helps us control our expenses and our costs. We can control the whole process from start to finish. … We want to bring efficiencies to this space that this space as never seen before.”
A construction crew preps the pad, and returns to reclaim it once the well is capped.
While we were there, the capping crew was pulling “work string” from the hole. Work string is piping used to pump cement down the hole. They work in sections, sending down cement to seal off gas and ground water zones, capping each section and pulling out production casing as they come up the hole.
As each section of work string comes up, it’s lowered onto a “pipe tub,” a long trailer with a sloped storage area the company designed to make it easier to load the pipes.
The capping crew was operating one of Next LVL’s 12 smaller rigs, Hoyer and Maddox said, They also have three derrick rigs for deeper wells – such as a 15,000-foot vertical well in Virginia getting capped by another crew.
Why cap?
We’ve reported many times why well-capping is important. Among the reasons are environmental concerns – gas leakage into ground water and methane leakage into the air, among them. And it restores the land.
Gray noted that Diversified has a proactive program to detect fugitive emissions from its conventional wells – producing or not. They surveyed more than 60,000 wells in their Appalachian footprint and found that 90% or more had no fugitive emissions.
“We have always had a zero-tolerance policy for leaks,”he said. When they find a leak they immediately repair it. “That’s always been our policy and our practice.”
Charlie Burd, executive director of GO-WV, the oil and gas association, provided some background on the state capping program and agreed on the benefits of getting wells capped. “Getting these wells plugged and those physical assets out of harm’s way to the public is a good thing.”
Tweet David Beard @dbeardtdp Email dbeard@dominionpost.com
