- Committee led by Democrats says company underestimating clean-up costs
- Shares down by 15 per cent
Members of the US Congress have called for Diversified Energy (DEC) to outline how it is stopping methane leaks from its tens of thousands of mature gas wells.
Four Democratic members of the House Committee on Energy and Commerce wrote to Diversified boss Rusty Hutson Jr on Monday.
“As the largest owner and purchaser of oil and gas wells in the United States, Diversified Energy is responsible for remediating a substantial share of the country’s ageing oil and gas wells, but we are concerned that your company may be vastly underestimating well cleanup costs,” wrote the members.
The company was built on buying up older wells for cheap and running them until dry. Various reports have alleged a lax approach to plugging leaking wells given the sheer scale of Diversified’s portfolio, including a Bloomberg investigation in 2021 that the House committee quotes from extensively.
The letter included detailed questions for Hutson, asking for the full plan for well remediation and how the company monitors methane emissions with such a large portfolio. The company’s share price fell 15 per cent on Tuesday morning, taking its year-to-date drop to over 50 per cent.
"The company is reviewing the letter and intends to engage in a positive and open manner, as it has continuously done, by providing information regarding the company's peer-leading environmental and operational actions that underpin its responsible asset stewardship approach," Diversified said in a statement.
The company has previously denied being negligent with methane emissions and said in its most recent trading statement it had retired 200 wells this year.
In the first half, the average cost per retirement was around $22,000 (£17,300). The committee quoted from a report by the Ohio River Valley Institute that in some cases plugging a well could cost over $100,000.
In 2021, the Bloomberg investigation saw reporters visit various wells and measure methane escaping. At the time, Diversified said it had a “well-established, highly successful and well-funded program to systematically retire wells that have reached the end of their economic lives”, and added that the identified leaking wells were quickly fixed.
The committee members also raised the total asset retirement obligations listed on Diversified’s balance sheet.
“Researchers examining Diversified Energy’s accounting practices found that agreements with states would allow the company to defer environmental liabilities that they estimated at more than $2bn,” the committee letter said. As at 30 June, total asset retirement obligations were $452mn, with $4.5mn listed as a current liability.
