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How Dying Gas Wells Are Making One Company Rich - YouTube
Channel: Bloomberg Quicktake: Originals
[6]
When people think about Appalachia,
[7]
they probably think about
forests and mountains,
[10]
and maybe they also
think about coal mines.
[14]
But when you go there, you
see that there's actually also
[16]
gas wells all over the place,
[19]
the whole region is covered in gas wells.
[24]
In many cases, these marginal wells,
[27]
they're actually a lot dirtier than coal
[29]
because so much of the methane that
[31]
comes out of these wells is
actually escaping into the air
[34]
rather than going into a pipeline.
[38]
And so, we kind of got interested
in asking the question,
[41]
well, who owns these wells?
[44]
We realized this company,
Diversified Energy,
[47]
owns far more wells than
anyone else in Appalachia.
[51]
Diversified says it
owns over 60,000 wells.
[55]
That makes it the biggest
well owner in America,
[58]
beating out Exxon, beating out Chevron.
[62]
The fact that this one
company was buying up
[65]
so many of these wells across Appalachia
[67]
kind of piqued our curiosity.
[69]
And so, we decided to go
out into the mountains
[72]
and see for ourselves what was
going on in all these wells.
[86]
So, as an energy reporter,
[88]
when we think of methane emissions,
[90]
a lot of times we think
about what's going on
[92]
in the Permian Basin in West Texas,
[94]
which is where we have a
lot of this new production
[97]
where you see a lot of
the new methane emissions.
[102]
Methane is a greenhouse gas,
[105]
and it's also the main
component of natural gas.
[109]
And it's a particular problem because
[111]
if you have the same amount of methane
[113]
and the same amount of carbon dioxide,
[115]
when both rise up into the atmosphere,
[118]
methane has a far greater
warming potential.
[122]
And scientists think that
[124]
about a quarter of all
the human-caused warming
[127]
that we've experienced to date is
[129]
because of methane emissions by humans.
[131]
If you think of the U.S. as having
[134]
somewhere around 1 million
active oil and gas wells today,
[138]
about three quarters of them are marginal
[141]
or stripper wells, these tiny producers.
[144]
In many cases, they're just kind of like
[146]
these old rusted pieces of equipment.
[149]
And what the research shows is that
[151]
these types of wells are
actually a pretty big contributor
[155]
to the methane problem,
[157]
because they're far more
likely to have leaks,
[160]
they're not super well-maintained.
[163]
Most of the big companies you've heard of
[165]
in the oil business, Exxon and Chevron,
[168]
they don't want to be
owning a bunch of old wells
[170]
in the middle of nowhere that
were drilled in the 1960s.
[174]
But it turns out, that
there's this one company
[176]
that has the exact opposite approach.
[179]
They've bought up, essentially,
[181]
all the old wells they can get.
[184]
Diversified Energy, they just
became a huge, huge player.
[189]
And it's a company that
[190]
not only most Americans haven't heard of,
[192]
but even people who are in
the oil and gas industry
[194]
in Houston have not heard of before.
[199]
We'd read all this research
[201]
that shows these marginal wells
[202]
can actually be major
contributors to climate change.
[206]
And so, we were curious about
[208]
whether Diversified Energy's
wells were among those
[211]
that might have leaks in them.
[217]
So, we decided to go to
Appalachia and see for ourselves.
[231]
We didn't have permission from the company
[233]
to visit any of their
sites on private land
[236]
so we focused on sites
that were on public land,
[239]
so, state game lands, national
forests, places like that.
[243]
It required a lot of hiking.
[245]
A lot of the places the
weeds were, you know,
[249]
up to our waist or higher,
[251]
you were just kind of hoping
[252]
you were going in the right direction.
[254]
Definitely should have brought a machete.
[257]
We are not a professional methane hunters.
[260]
And so, Rachel actually took a course
[264]
and got certified as an Optical
Gas Imaging Thermographer.
[269]
Methane emissions are
invisible to the human eye,
[272]
it's not something that
you can go out and see.
[274]
And there are these cameras that
[277]
allow the operator to see methane.
[281]
We can go into the high sensitivity mode
[283]
then you can really see it.
[286]
And then, we also got a sniffer device
[288]
that can actually test the
air and identify methane.
[297]
So, the first day, we
started in Pennsylvania
[301]
and we drove as close as we could
[304]
to the lat and long of the first well.
[308]
We hiked probably about 20 minutes
[311]
until we came to the well.
[316]
You can see here that there is
a leak that we're looking at.
[322]
So, the very first well
that we went to was leaking.
[329]
And then, we went to our second well,
[331]
which was on the same patch of game land,
[333]
that one was also emitting methane.
[337]
Right about here.
[340]
I think we went to six or seven wells
[342]
before we found one that
[343]
didn't have a emissions significant enough
[345]
to set off the gas detector.
[349]
In a few of the cases
where we found emissions,
[352]
those emissions may have been part of
[353]
the normal operating of the
well, rather than a leak.
[357]
But in the vast majority
of cases we found,
[359]
it was unintentional leaking.
[364]
Day two was Ohio.
[366]
It was pretty wild.
[367]
It was kind of like one of those movies
[369]
where the adventurers are
going through a jungle
[371]
and suddenly they
uncover some kind of like
[374]
evidence of a lost civilization.
[377]
There was just vines and
growth covering everything.
[381]
In Ohio, we also saw
wells that were leaking
[384]
probably the same rate as the ones
[386]
that were leaking in Pennsylvania.
[388]
You can see at this joint, just moisture
[391]
from the dew this morning
is bubbling for some reason.
[399]
That alarm means that we've
reached the point of 10% of
[403]
the amount of methane it would
take to be able to ignite.
[406]
So, clearly there's a leak here.
[410]
And then, the third day
we went to West Virginia
[414]
West Virginia is very
difficult topography.
[417]
We'd get out there and we
would walk for like two hours,
[420]
trying to figure out where the trail is
[422]
and losing it, and then finding it again.
[425]
Zach?
[428]
Zach?
[429]
I'm up here,
[430]
up this way, guys.
Oh, that's really back here.
[438]
So, the air right down there is
[440]
almost enough to light on fire.
[444]
I was pretty surprised.
[445]
I guess I was anticipating that
[447]
maybe fewer were emitting than weren't.
[450]
And what we found was
that, that wasn't the case.
[454]
In all, about 60% of
the 44 wells we visited
[458]
did have methane emissions
significant enough
[461]
to set off the gas detector.
[464]
So, after our trip, we told
Diversified what we'd found.
[467]
They said that you couldn't
draw many conclusions
[470]
from visits to just 44
wells, considering all of
[473]
the thousands and thousands
of wells that they own.
[477]
And they also said that, in some cases,
[479]
the problems we were seeing
were because of previous owners
[482]
that had been neglecting the wells,
[484]
and that they had acquired
these wells only recently.
[487]
Diversified said it
actually sent people out
[489]
to all the wells that we told them about.
[491]
And they were able to find all the leaks
[493]
and fix them relatively
quickly and cheaply
[496]
for about 90 bucks on average.
[499]
And, Diversified says a lot of the leaks
[501]
they found were pretty small.
[503]
And it's true, you can't
tell from the camera,
[505]
or the gas detector, how
much methane is leaking out.
[508]
You can just tell that some is.
[512]
So, while we were in Appalachia,
we tried to figure out
[515]
how much methane was
leaking out of a few wells.
[519]
We were able to go out in the
field with Amy Townsend-Small,
[522]
who's a professor at the
University of Cincinnati,
[525]
and she has a device that can actually
[526]
quantify methane emissions.
[529]
The first step is to
find if there are leaks
[533]
at a marginal well,
[536]
and then, if there's a
certain level of methane,
[539]
we can measure the emission
rate with a Hi-Flow Sampler.
[544]
In my head, I thought of
this like big, fancy machine.
[549]
It's this weird, like
kind of metal contraption
[551]
with these tubes coming out of it.
[552]
Like, one of the main parts is just like
[555]
the same kind of hose that you
have on your vacuum cleaner.
[559]
Now what does it say?
[561]
3.4.
[562]
Okay.
[564]
We take her to three of the wells
[565]
we had been to the previous day.
[568]
There's another big leak
right there, you're right.
[570]
Wow.
[571]
Good job, you guys.
[573]
It was interesting after three days of
[576]
seeing these leaks to
have some sort of context
[578]
as to how big they were.
[580]
One of the wells we went to,
[581]
it was barely producing any gas at all.
[585]
Last year, it produced 8,000
cubic feet for the entire year,
[588]
which is nothing.
[590]
The leak rate that she
calculated there was actually
[592]
600% of that 8,000 cubic feet.
[598]
The wells that we measured
today are representative of
[601]
most of the wells in America.
[604]
They're not just a problem
for greenhouse gas emissions,
[607]
they're a potential health
hazard and a explosion hazard.
[613]
If they're leaking more
than they're producing,
[614]
especially, they need to be plugged.
[620]
When the well is no longer productive,
[622]
you need to plug it, you
need to pour some cement
[625]
down there to inactivate it.
[628]
And that can cost anywhere
from 10 to 25,000 to,
[632]
you know, upwards of a
hundred thousand dollars.
[635]
So, owning a bunch of old wells,
[637]
it looks like this huge
amount of liabilities.
[640]
But we realized doing research that
[643]
what this company Diversified did is
[645]
kind of turned that on its head.
[648]
Diversified Energy, they
promote this idea of
[651]
what they call Smarter Asset Management.
[653]
Basically, they say that they
can run these wells longer,
[657]
cheaper, and better than other companies.
[661]
Their whole business strategy
is essentially to say,
[664]
we're gonna be able to just kind of
[665]
keep pumping gas out of
these wells for a long time
[669]
before we ever have to
think about plugging them.
[671]
And the climate angle to that is that
[675]
the longer you wait before plugging wells
[677]
that really ought to be plugged,
[679]
the more methane is gonna
be escaping into the air.
[683]
Now, regulators have been pretty alarmed
[686]
to see this happening.
[688]
So, in 2018,
[690]
the Pennsylvania Department
of Environmental Protection
[692]
ordered a subsidiary of Diversified
[694]
called Alliance Petroleum to
plug several hundred wells.
[699]
A few weeks later,
Diversified appeals that order
[701]
and says that they disagree
with some of the conclusions
[704]
that the state had reached
surrounding well plugging.
[708]
They ended up kind of cutting
this deal with Diversified
[711]
that actually doesn't require them
[713]
to plug hardly any wells at all.
[715]
They only have to plug 20
a year in Pennsylvania,
[718]
for instance, even though
they own 20,000 wells,
[721]
so, do the math, it'll
take them a thousand years
[724]
to plug all these wells.
[728]
But the regulators are
in a very tough position.
[731]
It's almost like they made a
too big to fail oil company.
[736]
A failure of Diversified
would be a disaster
[739]
for the state budgets of Pennsylvania,
[742]
Ohio, and West Virginia because
[744]
all of a sudden they would inherit
[745]
this huge amount of liabilities of
[747]
all these old wells that they
don't have the money to plug.
[752]
Now, it's important to say that
[753]
Diversified has been very clear
[754]
that they don't think this is a problem.
[757]
They'll generate enough
profit from oil and gas
[759]
to eventually plug all these wells
[761]
and there's nothing to worry about.
[764]
At the end of the day,
[765]
what we're really focused on is
[767]
our commitment to our shareholders,
[769]
making sure that we're growing the company
[772]
in a very safe way.
[775]
What Diversified has told
its investors is that
[778]
the company is trying to replicate
[780]
what it's done in Appalachia
[782]
in Louisiana, perhaps in Texas.
[786]
I think it'll be interesting to see
[788]
whether the states down
here do anything differently
[792]
than the states in Appalachia,
[796]
where Diversified was able
[797]
to extend these plugging agreements.
[800]
To the extent that
lawmakers are thinking about
[802]
this stuff at all, they're thinking about,
[805]
what are we doing to
properly regulate frack wells
[807]
that are producing vast amounts of gas?
[812]
What they're not so much
thinking about is, you know,
[815]
there's this other problem
with all these wells
[817]
that have been around a long time.
[828]
There was one well that
we visited in Pennsylvania
[831]
that kind of sums up the
whole situation in a way.
[836]
We had kind of made it
through like the trees
[838]
into this little clearing,
but we couldn't see anything.
[840]
And we were getting ready to call it,
[842]
and we see just like the
bones of this really old well,
[847]
it was yellow, but pretty rusty.
[849]
This is a well that, as far as we know,
[852]
last produced any gas
for sale back in 1998.
[856]
It's not even hooked up
to a pipeline anymore,
[858]
it's just basically a pipe
sticking out of the ground.
[861]
I turned on the camera and booted it up,
[863]
and you could see that there was methane
[864]
coming out of that open pipe.
[866]
And it was strange 'cause
[868]
there were like these two hotspots inside.
[871]
After a while, we could see that
[873]
they were two bees inside the pipe.
[876]
Aw, a little bumblebee.
[883]
This is a well that even
Diversified doesn't think that
[886]
they can get it to produce.
[888]
So, it's on the list to be
plugged, but in Pennsylvania,
[891]
Diversified only has to
plug 20 wells per year.
[895]
And so, this well, like
thousands of others,
[897]
are just kind of waiting
around for their turn to come.
[901]
And this well's turn hasn't come yet.
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