A Birmingham-based oil and gas producer called Diversified Energy has built its business model on buying up old, low-producing gas wells which are spewing out methane, reporting from Bloomberg shows. The wells are largely not very productive—thousands of them were producing no usable gas at all at the time of purchase. But thanks to subsidies, tax incentives, legal loopholes, and an overall lack of regulation, the company has managed to beat out almost every other fossil fuel company stock in the U.S. The very existence of this company is a sign of the market’s complete inability to usher in meaningful climate action.
It’s never been clearer that the world must stop coal, oil, and gas production. Even the International Energy Agency—which was founded by Henry Kissinger, not hippie climate activists—is calling for the end of fossil fuels. Free market believers, from those at the World Economic Forum to those in the White House, say that companies can lead this transition.
Yet for now, dirty energy still largely powers our world, so it’s still profitable, and it’s also heavily subsidized and poorly regulated by the U.S. and most other countries. It should be no surprise that corporations are still making a killing, but Diversified Energy is a particularly shocking example of how to legally game the system.
The Bloomberg report found the company has amassed some 69,000 wells, more than name-brand companies like Exxon and Chevron, and what amounts to “about 1 in 5 wells across Ohio, Pennsylvania, and West Virginia.” Research shows that aging and abandoned oil and gas wells are among the dirtiest ones in the nation. Methane is 80 times more potent than carbon dioxide in terms of how much it heats up the planet. The Intergovernmental Panel on Climate Change found methane levels in the atmosphere haven’t been this high in at least 800,000 years and sounded the alarm about the risks it poses.
The new Bloomberg report suggests that Diversified’s wells aren’t an exception to the old and abandoned well rule. “At 59% of the sites we visited, emissions were significant enough to cause our detector to sound a safety alarm, indicating that the concentration of methane near the instrument’s sensor exceeded 5,000 parts per million,” the authors wrote. “Normal air contains about 2 parts.”
Diversified acknowledged that some of its wells are useless and will never produce fuel again. Bloomberg notes that one of its Pennsylvania wells, bought up from the energy giant Chevron, hasn’t extracted anything since 1998. But thanks to a lack of regulation, it doesn’t have to plug them up, even as they pollute. The company has a deal with Pennsylvania, for example, requiring it to plug up only 20 wells per year. Meanwhile, the Environmental Protection Agency currently has no methane regulations for the hundreds of thousands of aging gas wells across the U.S., allowing Diversified and other companies to save a few bucks while externalizing the damage to the climate.
The fact that Diversified owns so many wells also creates a very dangerous situation. Should the company go under or otherwise not meet the obligations to plug the wells it owns, the states where it operates would be on the hook. Diversified claims it has cheap techniques to revive wells and plug them. But if it fails, it would leave states with a very costly project to clean up the mess.
“The model seems like it’s built on abandoning those assets,” Ted Boettner, a researcher at the Ohio River Valley Institute who has looked at abandoned wells, told Bloomberg. “It looks like a liability bomb that’s destined to explode.”
In a world that prioritized the health of the planet and sustainable business practices, this company wouldn’t be allowed to operate (at least, as it currently does). But it’s not the job of private companies to protect people or the planet. Rather, their function is to make money for their shareholders. As long as owning dying wells and drilling new ones lets them do that, firms will continue to take those opportunities.
As problematic as Diversified is, it’s not solely responsible for this mess. If the producers from whom it bought its old wells, including energy giants like Chevron and Exxon, simply plugged up their own wells, Diversified’s business model would vanish. If regulators enforced pollution rules or had passed more stringent methane measures during the fracking revolution of the late 2000s, this mess may not even exist in the first place. But now, there’s not a lot of money to be made in well-plugging or a lot of regulation in place to force companies to undertake it. Instead, countless wells are allowed to sit idle and fall into disrepair.
Both the infrastructure and reconciliation bills that Congress is currently negotiating would allocate funding to states to help plug up some of these wells. But without more drastic measures, companies will still be allowed to leave wells idle and spewing climate pollution. The government could go further by crafting serious regulations for the sector to mandate that companies plug old wells, and removing the subsidies and tax breaks for fossil fuel producers that make it profitable to keep wells online. Federal officials could even buy up aging assets from oil companies and then hire people to wind them down. Better still, it could buy up the sector as a whole, because as economist Mark Paul told Earther last year, “we know capitalism is bad at managed declines.” This would allow the government to go beyond regulation and directly govern the industry that’s done so much to damage the planet. With no profit motive, public health and the climate could be its operative concerns.
Diversified may be a particularly gross example of what happens when companies are allowed to ignore toxic and climate-heating impacts, but it’s not an aberration. As long as we leave the energy transition up to companies, businesses like it will continue to exist.