GOOD NEWS, KINDA, ON THE DIVERSIFIED LAW SUIT TO GET IT (AND EQT) TO PLUG MORE WELLS.

In our last newsletter we pointed out how Diversified has been buying up wells from EQT and others — wells that we know, based on calculations from its public disclosures, Diversified will not end up having the money to eventually plug.  Diversified is milking the last gas and oil out of the declining wells and selling it to pay to itself and stockholders (and sponsor WVU sports) instead of using or banking the money to plug more of its wells.  WVSORO co-founder Dave McMahon had suggested a class action law suit to Appalachian Mountain Advocates to force Diversified to plug wells, and a law suit was filed by them with a lot of help from Bailey & Glasser law firm. 

Diversified moved to dismiss the suit saying that it had entered into an agreement with the State DEP to plug a certain number of wells, so a class of surface owners should not themselves be able to sue to get more wells on their land plugged.  But the judge noted that under the agreement with the State it would take 400 years for Diversified to plug them all; and the Judge said the surface owners could sue no matter what the State said that Diversified could get away with.  That was an important ruling for us that can be used by surface owners in other suits they bring on their own!  Read more about that ruling here.

Our cofounder has been occasionally assisting that lawsuit in the background.  He even got an abusive subpoena served on him for all of his records and emails regarding Diversified since July 1, 2016!  The judge “quashed” the subpoena.  Dave had fought off the subpoena saying, among other objections, that what he told someone about Diversified was not relevant – that what was relevant was the number of marginal and unplugged idle wells Diversified had told the State it had, plus Diversified’s financial inability to plug them– those were the only necessary facts.  Plus the facts that EQT should have paid Diversified money to take over the dying wells from EQT so Diversified would have had money to plug the wells; EQT should not have taken money from Diversified to take over its dying wells.

The “kinda” good news is that the lawsuit has settled.  The bad news is that it is not all we had hoped for.  The suit was on sound legal ground, but the judge was indicating that he might deny class action status because of the complications in identifying the wells because Diversified puts some wells in and out of production — too small a number to matter we thought.  Also the judge, unjustifiably we think, was worried about whether identifying surface owners from tax tickets was reliable enough.  So the settlement is not really what surface owner’s deserve or what should have happened.  However, it is a substantial improvement.  Bailey and Glasser and Appalachian Mountain Advocates deserve great praise for their efforts.  It will even take a little more of their time before the settlement is finally approved by the judge. 

Under the settlement, Diversified and EQT first have to pay $6.5 Million into a fund just to kind of finance the settlement mechanics.  That is the number you have been hearing maybe.  However, more importantly and in addition to that money, Diversified must plug 2600 wells in the next 10 years — by 2034.  The settlement agreement lasts for ten years.  That’s lots more well plugging than the state consent order which only required 20 a year to be plugged, but still far from ideal. There will still be lots of unplugged wells after the ten years.  Assuming Diversified’s public statements that it costs $25,000 to plug a well, that is another $65 Million — and we are pretty sure its costs them more than that $25,000 to plug a well if the cost accounting is done right.

If you have a Diversified well that is on your property what does this settlement mean for you?  You may get a notice or see one in the paper which will give you the option to opt out of the class.  Should you do so? 

If you do nothing, you will be included in the class of surface owners with Diversified wells on them, and there is a higher likelihood that your well will be plugged in ten years than there was before the lawsuit was brought and settled.  So generally it is a good idea NOT to opt out of the class.  However, Diversified gets to choose which of their many wells on many surface owners they will plug and they do not have to plug them all.  And they will probably plug wells that are close together for logistical reasons.  And there is not much you can do to get on the plugging list or to get higher on their list — with one exception.  Individuals who do not opt out can ask the class administrator to put their well higher on the list for a “bona fide human health, safety or environmental concern”.  So if you have a Diversified well sitting on your property and if it is causing one of those problems, do NOT opt out of the class and get hold of us.  We will work with you and find out how this can work.  In addition, even if you do not opt out of the class, you can complain to the DEP about the well being a safety or environmental problem if it is violating a state or federal law.  DEP might do something about that.  If you stay in the class, even if it is just unplugged on your land after it has not produced for 12 months you can also complain to DEP even if it is not causing problems.  That is because all non-producing wells are required by law to be plugged after 12 months unless they have a bona fide future use.  However, we do not have confidence that DEP will do much if that is the only violation of law unless there is a leak or other violation of environmental law.

About the only reason to opt out of the class settlement is if there is a well on your surface that has not produced for 12 months, and if it is a well that is NOT a bona fide human health, safety or environmental concern, and if you want in the next 10 years to bring a personal law suit to make Diversified plug it.  If that is your plan, then you SHOULD opt out of the lawsuit when you get the notice and the right to do so.  Otherwise, if you stay in the class, that lawsuit would be blocked by the settlement.  (If you are reading this after the time to opt out has passed, and if you want to bring a personal lawsuit, contact us.  We might have a way to get you out of the class to still bring your own lawsuit.)

You can find out more at the settlement website.

After 10 years the settlement agreement expires, and not only will you be able to bring a new law suit, you can bring a new class action, because we are very confident that Diversified will still be shirking its plugging obligations.