A federal court has advanced a proposed class-action settlement poised to benefit owners of surface interest in land in West Virginia in recent years with a well controlled by the nation’s largest gas and oil well owner.
Pictured is a wellhead from a Diversified Energy Company-controlled gas well at Kanawha State Forest in this April 2022 photo.
Gazette-Mail file photo
The court on Wednesday preliminarily approved an up to $6.5 million settlement agreement West Virginia landowners secured from Alabama-based Diversified Energy Company, the country’s largest gas and oil well owner, and Pittsburgh-based gas producer EQT Corp.
The U.S. District Court for the Northern District of West Virginia set deadlines in a settlement action schedule culminating in a final approval hearing to be held in April 2025.
The settlement class includes all people and entities that own or lease any right, title or interest in the surface of any piece of land in West Virginia, Ohio, Kentucky, Pennsylvania, Virginia or Tennessee that have had a Diversified well between the filing of the complaint in the lawsuit (July 8, 2022) and the date of the signing of the settlement agreement (Nov. 4, 2024). The class includes heirs, tenants and successors of those interest owners.
The court preliminarily approved attorneys from Charleston-based Bailey & Glasser LLP and Lewisburg-based Appalachian Mountain Advocates as class counsel.
Per the settlement, Diversified has agreed to plug 2,600 wells in West Virginia and the other five states comprising the settlement class through 2034.
Under the settlement, class members don’t waive rights to individually apply to applicable state environmental regulators to request their wells be plugged or to assert any claims stemming from damage caused by the plugging of a well, or damage to people or property caused by well-plugging.
Diversified and EQT agreed in the settlement to each pay up to $3.25 million into a settlement account to fund:
A class notice consisting mainly of direct mail sent to people identified by Diversified
Proposed incentive awards to the named plaintiffs
Attorneys’ fees and costs
Class members would be generally barred from suing Diversified for 10 years, per a court filing.
A class member wishing to opt out from the settlement must mail the request by Feb. 18, 2025.
The court set settlement deadlines that include:
Class notice deadline: Dec. 19, 2024
Exclusions deadline: Feb. 18, 2025
Final approval hearing: April 11, 2025
Class members don’t need to appear at the final approval hearing or do anything else to indicate their approval.
Class members with “bona fide health, safety, or environmental concerns” will have an accelerated and streamlined process of applying for plugging up to 10 wells annually through a court-appointed settlement account administrator, with Diversified bearing the cost, per a court filing.
The class-action lawsuit was filed by landowners in Harrison, Nicholas, Preston and Wetzel counties. The landowners said they were left with unplugged, abandoned wells that pose health risks, degrade the environment and hurt property values.
The landowners contended that Diversified’s acquisition of thousands of wells from EQT was completed with intent to defraud creditors in a business model designed to push off decommissioning liabilities for decades.
Industry experts have said Diversified’s business model is based on acquiring a high number of low-producing wells that yield short-term dividends but present long-term liabilities mounting as the company puts off well decommissioning obligations.
Abandoned and orphaned wells threaten public health and safety by emitting climate-harming methane, polluting groundwater and dotting backyards and wildlife habitats with dangerous equipment that may create sinkholes and hurt wildlife.
Diversified and EQT deny any liability or wrongdoing associated with the claims.
Most of Diversified’s nearly 70,000 wells are in Appalachia, acquired since 2018 from regional producers such as EQT and Canonsburg, Pennsylvania-based CNX Resources.
Diversified acquired more than 12,000 gas wells from EQT in deals in 2018 and 2020 for roughly $700 million.
The lawsuit asked the court to make EQT liable for plugging and decommissioning the wells that Diversified took responsibility for in 2018 and 2020, contending that those transfers were fraudulent.
The allegation of fraudulent transfers is tossed under the agreement.
To the extent that Diversified plugs wells on the property of a class member, all claims the member may have against Diversified or EQT regarding well plugging or abandonment of the wells are to be “automatically and immediately released for all time.”
Surface owners with Diversified wells that remain unplugged and nonproducing on Jan. 1, 2035, reserve all rights to bring an action requiring Diversified to plug wells.
Diversified reported $85M in 2024 dividend payments
The Diversified and EQT commitment to funding the class settlement comes amid strong financial reports for both.
In a Tuesday earnings presentation, Diversified boasted reaching roughly $85 million in dividend distributions and retiring $154 million in debt principal in 2024.
“[We] believe we have put in place an operational infrastructure platform that has the ability to significantly expand our business within our core operating areas without any meaningful increase in corporate G&A [general and administrative] expenses,” Diversified CEO and Harrison County native Rusty Hutson Jr. said in a statement.
EQT was listed by the global economy news website Quartz as a stock “poised to thrive” during the upcoming Trump administration since it’s expected the new White House regime will favor policies that would benefit American oil companies. Nonrenewable energy stocks performed well after Trump’s general election win, Quartz noted.
Stock in EQT had climbed 13.7% since Trump’s victory as of Thursday morning. It was up 51.8% from its value in Jan. 2022.
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