What happens when oil and gas wells die? West Virginia has a new plan for that

The Mountain State Plugging Fund is designed to retire roughly 20,000 wells in the coming decades at no cost to taxpayers, limiting the chances that old infrastructure will contaminate groundwater or leak planet-warming methane into the air.

Diversified Energy, one of America’s largest owners of natural-gas wells, said it would plow $70 million into the fund over the next 20 years in the hope that those holdings grow to as much as $650 million through compounding interest and returns. The company agreed to retire at least 1,500 wells while it establishes the fund, and at least 250 annually after that.

The goal is to continue capping and plugging old oil and gas wells even if Diversified goes out of business.

“This is born from an effort to facilitate economic growth, find high-paying jobs and make sure we’re not just leaving a problem to future generations," Gov. Patrick Morrisey said.

State governments have increasingly thrown money into retiring old wells, while West Virginia and others in recent years have drawn massive federal funding to help. But Morrissey believes this is the first time a business is setting up a financial-assurance fund for long-term cleanup efforts.

“We believe it can set up a precedent for other companies to follow," he said.

America is pockmarked by millions of oil and gas wells that petered out over decades. But scattershot record-keeping has made precise estimates difficult. Analysts believe a big chunk of that infrastructure is still polluting nearby areas, while at least tens of thousands of wells have been “orphaned" by companies that changed ownership or disappeared.

Major producers have increasingly faced public pushback and regulatory action in response, with Diversified often near the center of criticism because of its business model.

The boom that transformed America into an energy superpower owes to drillers boring through shale rock that yields prodigious spurts of gas. Alabama-based Diversified, on the other hand, snaps up old, conventional wells that can slowly produce the heating and power-generation fuel for decades.

The company has retired about 200 wells across Appalachia annually in recent years, according to its 2024 sustainability report, most of them through a subsidiary that focuses on cleanup.

The third-party company that will manage Diversified’s fund for West Virginia, OneNexus, has likened its offerings to life-insurance policies for aging wells.

“If Diversified sells out in the future, that money stays with the state," Diversified Chief Executive Rusty Hutson Jr. said.

Retirement costs can range from about $25,000 a well to more than $50,000, Hutson said. Tough terrain and remote locations can push prices far higher.

Diversified operates just a fraction of the wells speckling Appalachia, home to two of America’s most prolific shale formations. Even if companies like his had the money in hand to retire all of them, Hutson said, there isn’t enough capacity to keep up.

“We’re talking 100 years no matter what," he said.

Write to David Uberti at david.uberti@wsj.com