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CHARLESTON - West Virginia and Diversified Energy (NYSE & LSE:DEC) announced Thursday the creation of the Mountain State Plugging Fund, a $70 million commitment over 20 years to ensure the proper retirement of oil and gas wells in the state.
The public-private partnership, described as the first of its kind in the nation, aims to guarantee that Diversified’s wells will be safely retired without taxpayer expense. The fund is expected to grow to approximately $650 million of financial protection for West Virginia over time.
Under the agreement, Diversified will retire at least 1,500 wells during the initial 20-year period, with a goal of increasing to 250 wells annually. The company’s subsidiary, Next LVL Energy, headquartered in Bridgeport, West Virginia, will lead the retirement operations.
"The Mountain State Plugging Fund is a bold step forward — delivering high-paying jobs as well as environmental and economic benefits for our communities," said Governor Patrick Morrisey in the press release.
The $70 million principal contributed by Diversified will be guaranteed by OneNexus, an insurance provider of financial assurance for asset retirement obligations. The state is designated as a third-party beneficiary to ensure all Diversified wells are properly plugged and retired.
Next LVL Energy, which operates more than 20 rigs and plans expansion over the next 12 months, is projected to have plugged 1,335 wells in the Appalachian Basin by the end of 2025, including an anticipated 360 wells this year.
The agreement also allows other oil and gas operators to establish similar funds for non-producing or orphan wells, potentially creating a model for other energy-producing states.
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