Diversified Gas and Oil: Analysis of TCF Production Database Raises Questions Surrounding Certain Wells Brought Back to Production and Company’s Consent Order with Pennsylvania

Published on Apr 21, 2021

In Pennsylvania, Diversified Gas and Oil (LON: DGOC) brought 482 non-producing wells online in 2019, 268 of which reported exactly the threshold level of production that exempts the company from a tighter retirement schedule—100 thousand cubic feet (mcf) of natural gas—pursuant to its 2019 Consent Order and Agreement with the Pennsylvania Department of Environmental Protection (PA DEP).

In response to questions about the high number of wells reporting 100 mcf of production in 2019, PA DEP wrote “The 100 mcf is related to home use [i.e., ‘house gas’] wells that are not metered. DEP has provided clarification to operators for these types of wells that requests that they submit 100 mcf with their production report,” according to the agency’s emailed statement to The Capitol Forum.

Wells that provide house gas—the direct supply of natural gas to a landowner for heating or cooking—also avoid the 2019 Consent Order’s stricter retirement schedule.

But the location and characteristics of some of those wells raises questions about whether they are, in fact, connected to a landowner’s structure, according to a Capitol Forum investigation.

For example, at least 17 of the wells do not appear to have a structure nearby and two of the wells are in locations where the neighborhood is under construction, according to The Capitol Forum’s production database (images below).

All map and imagery data are from 2021. Well icon coordinates are not always exact.

In five other cases where wells were close to certain structures, The Capitol Forum spoke with representatives of the nearby properties who said they paid a utility bill and were otherwise unfamiliar with Diversified or any connection to a locally producing gas well.

Diversified successfully brought another 214 non-producing wells back online in 2019 which reported production greater than 100 mcf for the year. Diversified’s 268 wells that reported exactly 100 mcf of production in 2019 represent 86% of such occurrences when compared to all other operators in Pennsylvania. 2020 production data for the wells at issue has yet to be released.

When pressed, the agency acknowledged that it lacks the bandwidth and processes to be able to confirm each individual wells’ performance or whether the wells are actually supplying house gas to a property owner, writing: “Given time and resource constraints, [PA] DEP has not conducted inspections of all Diversified wells. [PA] DEP has not observed any discrepancies between what Diversified reported and what was observed on-site for the inspections that have been conducted. We cannot independently confirm production numbers based off of an inspection of the well, just signs that the well is producing (hooked up for production, chart moving, etc.) … We do not have a specific process to confirm that house gas wells are supplying house gas to a landowner.”

Diversified did not respond to requests for comment.

Returning a non-producing well to production allows Diversified to defer plugging costs which the company anticipates to range from $20,000 to $30,000 per well, according to the company’s most recent asset retirement presentation (though past experience has shown some high-end exceptions, as The Capitol Forum reported here).

The Capitol Forum has written extensively on the company’s asset retirement obligations, regulatory compliance, and production performance. More about the Consent Order here and here.