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A view of the "Margaret Hamilton 4 Well" near a field of corn in this view Thursday Aug. 2, 2018 in Plum. The largest operator of oil and gas wells in Appalachia — Diversified Energy Co. — announced that it is buying a Pittsburgh-based well plugging company and intends to offer its services to others who need to clean up old wells.
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For Diversified, well plugging goes from liability to moneymaker

Darrell Sapp / Post-Gazette

For Diversified, well plugging goes from liability to moneymaker

The largest operator of oil and gas wells in Appalachia, Diversified Energy Co., announced that it is buying a Pittsburgh-based well plugging company and intends to offer its services to others who need to clean up old wells.

Diversified said it has previously used NextLVL Energy as a contractor. With the acquisition, the financial terms of which were not disclosed, it will have six in-house plugging crews.

Based in Alabama and traded on the London Stock Exchange, Diversified is an aggregator of assets — wells and pipelines — developed by other companies. It owns tens of thousands of wells across Appalachia, with more than 24,000 in Pennsylvania alone.

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Along with the wells comes an obligation to plug and abandon them once they stop producing. Diversified signed agreements with environmental regulators in Pennsylvania, West Virginia, Ohio, Kentucky and Tennessee stipulating the minimum number of wells that must be plugged annually. The agreements shift the bulk of the plugging work to later years.

NextLVL Energy, a Pittsburgh-based oil and gas well plugging firm, operates three rigs including this one.
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According to a 2019 agreement with the Pennsylvania Department of Environmental Protection, Diversified has to plug at least 20 wells a year for the next 15 years.

In 2021, Diversified told investors it was obligated to plug 80 wells but exceeded that floor by 70% and plugged 136. By next year, the company said it will be plugging 200 wells a year. In a presentation last year, the company indicated that it plans to begin generating carbon offsets by plugging more wells than it is required to.

NextLVL Energy, founded in 2020 by former EQT Corp. executives, has been paying attention to the carbon market as well by partnering with a Texas-based gas detection company to quantify gas leaks at wells that need to be plugged.

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The company’s CEO, Brad Maddox, has said he envisioned the company as a one-stop shop for large operators with plugging liabilities and state environmental regulators charged with plugging orphaned wells. In Pennsylvania, those regulators are expecting a large influx of federal funds to clean up old wells. The state is eligible for $104 million in just the first phase of the infrastructure bill that passed last year.

In a statement on Wednesday, Diversified said it plans “market its excess service capacity to provide plugging services to others, including to the states receiving a portion of the $4.7 billion federal orphan wells clean-up program under the recent Bipartisan Infrastructure Law.”

The company said it “sees tremendous potential” in growing its plugging services for hire by other clients.

Anya Litvak: alitvak@post-gazette.com

First Published: February 10, 2022, 11:00 a.m.
Updated: February 10, 2022, 11:42 a.m.

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A view of the "Margaret Hamilton 4 Well" near a field of corn in this view Thursday Aug. 2, 2018 in Plum. The largest operator of oil and gas wells in Appalachia — Diversified Energy Co. — announced that it is buying a Pittsburgh-based well plugging company and intends to offer its services to others who need to clean up old wells.  (Darrell Sapp / Post-Gazette)
Darrell Sapp / Post-Gazette
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