Fracking-Powered Crypto Mine in Pennsylvania Shuts Down Without Word to Regulators

Just beyond a fenced-off access road in fields of tall grass on public land in Pennsylvania’s northwest sits a natural gas well pad that sat idle for close to a decade. The old fracking site suddenly roared back to life in 2022, spewing noise and pollution and rattling residents who were used to hunting pheasant on the quiet, bucolic terrain.

Diversified Energy turned on the well pad, known as Longhorn Pad A, to funnel the natural gas into on-site generators powering cryptocurrency-mining supercomputers that churn away at numbers at all hours . The company set up and started the mine without securing a required air quality permit from state regulators, Capital & Main reported last year.

Now, after a little more than two years, the company has packed up and left, abandoning the wells and associated crypto infrastructure in violation of state law, according to state regulators.

Diversified Energy, which disputes the state’s finding that it abandoned the wells, has billed itself as innovative, giving new life to aging, low-producing gas wells that would otherwise be uneconomical to operate. Cryptocurrency aids that goal: It allows the company to monetize wells that lack pipeline infrastructure that is typically crucial to selling gas.
 

Pennsylvania has an estimated 350,000 orphaned and abandoned oil and gas wells, more than any other state.

 
The company has, in just a few years, amassed a portfolio of wells bigger than that of any of its peers in the U.S., many of those wells low-producing, despite evidence that Diversified may not have adequate resources to plug them all at the end of their lives. This has stoked concerns among environmentalists about who will be on the hook for cleanup should the company abandon them. When a wellhead crypto mine suddenly shuts down it raises a host of new concerns, chief among them: What happens when operators decide it’s time to move on without plugging the wells?

Worries about the long-term environmental costs have mounted in Appalachian and other oil and gas-producing communities across the country. Diversified appears eager to try to squeeze a few more years’ profits out of old wells by burning the remaining gas to power energy-hungry computers. But they have shown less zeal when it comes to safely closing them, often shirking their obligations to plug them to prevent the ongoing release of greenhouse gas pollution.

Companies abandon wells when they walk away from them without plugging them after they are no longer lucrative, increasing the likelihood that they will be left to leak planet-warming methane gas into the atmosphere for years to come. Abandoning wells violates the Pennsylvania Oil and Gas Act and saddles states with the cost and responsibility of plugging them. Pennsylvania, the birthplace of the U.S. oil industry, has an estimated 350,000 orphaned and abandoned oil and gas wells, more than any other state and responsible for close to 8% of the state’s methane emissions.

The wells, which sit atop a pad called Longhorn A on state game lands in rural Horton township, were drilled under the ownership of another natural gas company, EQT, in 2011, but sat inactive for all those years, considered abandoned by regulators. Diversified Energy brought them back to life in December 2022. The company applied for a permit for generators to power cryptocurrency mining equipment atop the pad but didn’t wait to receive them from state regulators before firing up the loud and polluting equipment. 

Capital & Main reported last year that the firm was unresponsive to questions from state agencies about its plans with the well pad, even as residents raised concerns about noise and its threat to neighbors and wildlife. The company received its permit to add crypto-mining equipment to the well pad in December 2023.

A Pennsylvania Department of Environmental Protection inspector visited the well pad earlier this year to find the cryptocurrency mining equipment gone. Inspection reports from a March 4 visit show metallic sheds sitting empty on the gravel well pad.

The department issued Diversified a notice of violation for abandoning the well on March 10, requesting a response from the company within two weeks. 

Daniel O. Frick, a director in the Environmental Health, Safety Regulatory Department at Diversified Energy, told regulators in a March 18 email that “technically the site isn’t abandoned,” and that the company plans to resume pulling gas from the well.
 

Plugging an oil well can cost more than $100,000, so it’s common for operators to try to avoid those obligations.

 
Regulators have also accused the Birmingham, Alabama-based company of violating a consent order and agreement when it abandoned Longhorn A. In the 2021 agreement that company representatives signed when it acquired the wells from fracking company EQT, Diversified agreed to plug them and 13 others at the end of their lives.

Diversified Energy did not respond to Capital & Main’s requests for comment. 

State officials aren’t the only ones concerned. Environmental advocates have warned for years about the environmental risks of Diversified Energy’s large portfolio of low-producing wells across Pennsylvania, West Virginia, Kentucky and Ohio. They now fear abandonment of wells snatched up by the company across Appalachia for short-term windfalls will leave the public with the long-term costs of closure and cleanup.

“Diversified must not be allowed to walk away and leave others to clean up its mess,” said Charles McPhedran, senior attorney at Earthjustice, an environmental law nonprofit. McPhedran has previously urged regulators not to issue Diversified a permit for crypto mining at the site, citing noise concerns and the company’s unaddressed environmental violations.

Dave Gustafson, deputy executive director of the Pennsylvania Game Commission, which regulates and leases out the state game lands on which Longhorn A sits, said the agency “wouldn’t consider these wells ‘abandoned’” and that the company had “not expressed their plans to move forward with production nor have they indicated they intend to plug the well.” 

The Pennsylvania Department of Environmental Protection disagrees.

“The wells are not equipped for production,” Tom Decker, a department spokesperson, told Capital & Main in an email. “Diversified’s claim that the wells are still equipped is contrary to the Department’s observations during the recent inspection and has not been further verified by Diversified.”

The department has given the company until September to plug the wells. 

Plugging a well can cost more than $100,000, so it’s common for operators to try to avoid those obligations, said Ted Boettner, senior researcher at the nonprofit think tank Ohio River Valley Institute.

They “lift the well and get it to produce some puffs of gas and say, ‘We’re back in our active status,’ and they won’t check for another 10 years,” Boettner said.
 

Diversified one of many natural gas companies throwing its weight behind the coming AI boom.

 
A 2022 report by the Ohio River Valley Institute argued Diversified Energy was operating with “a business model built to fail Appalachia” because it relied on obtaining aging wells from other operators and squeezing the value out of them before the end of their useful lives, all without having “enough funds to plug its entire inventory of assets.” 

In doing so, Diversified has acquired the largest portfolio of low-producing wells in Appalachia, which the Institute researchers wrote could become a “wave of soon-to-be-orphaned wells that could be offloaded onto the public.” 

In recent months there have been new doubts raised about the company’s commitment to well-plugging. In December, Diversified reached a settlement in a class-action lawsuit brought by West Virginia landowners who argued the company had abandoned wells on their properties; it agreed to plug nearly 3,000 wells across Appalachia by 2034. Within the first two weeks of January, the Department of Environmental Protection slapped Diversified with 11 notices of violation for abandoning shale gas wells in Pennsylvania. 

Boettner said the state should do more to penalize the practice of abandoning wells. Without strong enforcement, he said, “We’re going to end up left with all of these wells to plug. There’s nothing stopping them.” 

Meanwhile, even as it is walking away from well pads, Diversified is expanding its offerings. Just days after inspectors visited Longhorn A, Diversified announced a large-scale partnership with fuel cell company FuelCell Energy and energy infrastructure company TESIAC to power a growing industry of off-grid data centers using natural gas from fracking wells and coal mines. It’s one of many natural gas companies throwing its weight behind the coming AI boom, threatening to prolong the life of polluting industries.

But the Longhorn A well abandonments raise questions about the company’s ability to care for such projects at the end of their lives, as a broader data boom raises concerns among environmentalists about air pollution. The company has also applied for state grants for well-plugging elsewhere in Pennsylvania, according to records Capital & Main obtained under Pennsylvania’s Right-to-Know Law.

Diversified CEO Rusty Hutson Jr. bought his first set of oil and gas wells in 2001 as a personal investment, taking out a home equity loan to afford a package of 35 wells that his father, a third-generation oil and gas worker, found in a deal, he said in a 2023 interview with Mountaineer Media. 

“We’d go out in cold, heat, fix leaks, work on wells together,” Hutson said. “And I did that for two or three years before we started really growing the company.” 

As it has added new wells to its portfolio, Diversified has written into its balance sheets lower-than-industry-standard asset retirement obligations — or estimates for the cost of plugging and closing off wells at the end of their lives.

The strategy has alarmed environmentalists, who fear the company is, at best, giving a lifeline to wells in need of decommissioning and, at worst, creating a massive taxpayer liability should it go under.
 

“The only thing they can do is keep buying wells, and as long as they don’t have to be accountable for those liabilities, it works.” 

~ Ted Boettner, senior researcher, Ohio River Valley Institute

 
But Hutson is proud of his firm’s unique strategy. While most oil and gas companies focus on drilling new assets, Diversified keeps its eyes on their leftovers. 

“Our game is acquiring existing mature production, operating it more efficiently than everyone else would, driving costs down, enhancing production on wells that hadn’t been given much time, or attention, or capital, driving margins and then paying dividends to our shareholders,” he told Mountaineer Media.

The company was listed only on the London Stock Exchange until December 2023, when it went public in the U.S. on the New York Stock Exchange.

That same day, House Democrats opened a probe into the firm’s practices and emissions. 

“Diversified Energy is responsible for remediating a substantial share of the country’s aging oil and gas wells, but we are concerned that your company may be vastly underestimating well cleanup costs,” members of the House Committee on Energy and Commerce wrote in a letter to Hutson. The company responded at the time, saying its business model is based on “stewardship” that includes “delivering well retirement and reclamation efforts.” 

Boettner estimates that all but a small fraction of the vast trove of old wells Diversified has acquired in recent years are “totally uneconomical,” and one of his reports found that more than half could, by some definitions, be classified as “inactive.” In 2022, the company offloaded a set of 2,500 of them in Ohio. In January 2024, the company sold another part of its stake in Appalachia. 

“They’re able to squeeze out this money in these assets because of economies of scale,” Boettner said. “The only thing they can do is keep buying wells, and as long as they don’t have to be accountable for those liabilities, it works.” 

On the ground in Horton township, home to Longhorn A, local supervisor PJ Piccirillo said he’s heard nothing from Diversified staff about their plans to abandon the wells and remove the associated crypto mine. He believes the company stopped running the well pad after the township issued an ordinance setting noise and light pollution limits on Bitcoin mines in 2023, shortly before the state issued Longhorn A its permit.

“The generators had been pulled and those big tanks had been pulled out,” he said.

Without any communication from the company, Piccirillo is concerned about future industrial development. He runs into abandoned wells in his corner of Elk County often that, he said, “I don’t know if anybody knows about.” The township lacks jurisdiction over well abandonment, so there’s nothing he can do about them from his position as a supervisor. 

“All we know is that that property seems to have been abandoned,” he said of Longhorn A. “What might be next?”

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