Most of WV's independent oil and gas producers have been put out of business by major national/multiple national corporations.

By Lucas Manfield September 21st, 2020/Mt. State Spotlight

Rocky Shamblin knows the gas lines snaking up his hollow better than anyone. Fifty years ago, he laid them.

Now he’s retired and on disability after decades of manual labor on the gas fields left him with an injured back. And the industry that he gave his working years to is, literally, abandoning him.

Mountaineer Gas is shutting off service to at least 75 households in Roane and Clay counties. It’s the largest such abandonment in recent memory. And it’s a sign of decay – of both the pipes, and most worryingly, the health of the state’s natural gas industry as a whole.

Skyrocketing production has sent gas prices spiralling to record lows, squeezing producers and distributors who can no longer afford to upgrade aging infrastructure. As a result, no one wants to pay to replace the pipes leading to Ovapa – a small rural community an hour north of Charleston – and its neighboring hollows.

The problem is bigger than just Ovapa. Over 25,000 gas customers in West Virginia receive their gas directly from local wells through what are known as field taps. “The continued provision of natural gas utility service to field tap customers… is at a critical point,” staff at the state regulator warned last year.

The worst case scenario is abandonment – a legal term originating from an esoteric regulation that allowed railway lines to close a station if it was “necessary and convenient.”

But for Shamblin, there’s a better word: betrayal.

“All these years you work for these companies,” said Shamblin. “But when you get the job done, they’re done with you.”

Oil and gas have been a part of Shamblin’s life for as long as he can remember. When his dad bought the family farm, Shamblin helped him lay pipe hundreds of feet up a neighboring mountain to bring in gas to heat their house. It would become his career – working the pipelines and repairing the rigs for decades until his injuries forced him to retire in 2012.

He knows there’s still gas buried in the mountains around his house. On some days, the valley air reeks of it. Recently, a local company drilled a new well using high-pressure fracking techniques. Just 10 miles to the south, it spits out millions of cubic feet of gas every month.

So Shamblin was surprised when servicemen from Mountaineer came around and went house to house, bearing bad news. He and his neighbors were losing their gas.

The news was accompanied by a letter, explaining that “service to your address can no longer be provided” because of an “anticipated cessation of service” by Ground Resources, a local gas producer that owned the well above Shamblin’s house and dozens of others in the area.

“Ground Resources has advised Mountaineer that the supply of gas from these wells will soon decrease to the point where service to your address can no longer be provided,” the letter went on. It was signed by Todd Hughart, an operation coordinator at the company.

“Which we found out was a lie,” explained Amanda Adkins, who works at the local auto body shop and has devoted much of the last year to fighting to save her neighborhood’s gas.

Like coal once before it, West Virginia’s gas industry has boomed in recent years. Thanks to the development of new extraction technologies and favorable conditions on the global market, production has jumped eightfold in the last decade.

But the technological shift – from vertical “traditional wells” to hydraulically-fractured, horizontally-drilled “mega wells” – has been devastating for some.

The production spike has been accompanied by a dizzying drop in the price of gas. It’s fallen to its lowest level in 20 years. There’s still over a hundred years of gas under West Virginia soil, but for many smaller companies, it’s no longer profitable to drill for it. Wells across the state – and the miles and miles of pipelines that connect them – are being abandoned.

This is particularly worrisome for West Virginians who rely on gas from these wells to heat their homes and power their stoves. Rather than being hooked up to a municipal network owned by a utility company, these customers are connected to “gathering systems” – patchworks of privately-owned pipelines that collect gas as it comes out of the ground and prepare it for distribution.

Over 11,000 Mountaineer customers are connected directly to these gathering systems through what are known as field taps. An executive for the company testified that it is considering the possibility of one day having to abandon a majority of them.

When Adkins received the cessation letter from Mountaineer, she was incensed. It was July, but winter was just a few months away, and like many in her hollow, she relies on natural gas to heat her home during the harsh winters.

Her neighbors were equally mad. Mountaineer was cutting off their church.

The utility offered to pay for the equipment to switch families over to propane, but not the ongoing cost. Propane isn’t cheap – nearly $2,000 a year more than natural gas, according to the Independent Oil and Gas Association of West Virginia, a small fortune for many families in the area who live under the poverty line.

Shamblin, who pays his bills using his monthly disability check, said he can’t afford it.

He grows silent when asked what he’ll do next winter.

“I’ll burn wood, I’ll burn tar, I’ll burn anything I can get,” he said.

“Anything Mountaineer’s got, I’ll burn it too. I’ll ask them to send me all their books and all their extra paperwork to help keep my family warm.”

Many of his neighbors – scared of having their service cut off in the middle of winter – agreed to voluntarily disconnect their service in exchange for a lump sum payment. Adkins didn’t think they had to.

She decided to fight.

“They are trying to get us to convert as quickly as possible so that they can wash their hands of us,” said Adkins. In June 2019, she submitted a formal complaint with the state’s utility regulator, the Public Service Commission.

The commission is structured like a court. A judge hears arguments from each side and then recommends a decision to a trio of governor-appointed commissioners.

Mountaineer was represented by a lawyer from one of the nation’s top oil and gas law firms. Adkins had no idea how to even file a motion.

She realized she needed help. She called around, but the price for legal representation for the entire neighborhood was exorbitant. By then, Mountaineer had filed individual cases to abandon service at each household, and she was told there would be separate legal fees for each one.

But Adkins felt that she had a strong case. Steve Bowers, a representative for Ground Resources, had filed paperwork disputing Mountaineer’s claims. The company’s wells were “sufficiently productive to provide gas to the farm tap customers in Clay County on a regular basis,” Bowers wrote, using another term for field taps.

So Adkins learned to represent herself, and in turn, her entire neighborhood. Her office was flooded with stacks of paperwork. “It looks like my desk blew up,” she said.

When neighbors drive by her house and honk, she runs out with documents for them to sign and words of advice about what to expect at their next hearing. She spends her days at work reading through filings and calling local politicians, and spends her nights brainstorming new people to call for help – local politicians, the attorney general, the governor.

“If I wasn’t working for family, I’d probably be fired,” she said.

Ground Resource’s claim turned out to be – at least, partially – true. There was plenty of gas. When Ground’s wells couldn’t provide it, Mountaineer just “backfilled” the system using another supplier. That’s why everyone’s stoves still worked.

The real problem was that 80% of that gas was disappearing into thin air. The gathering system leaked “like a screen door,” said Bowers.

Mountaineer was sick of paying for gas that never showed up at the meter. For three years, it had been paying Ground an $8,000 monthly “demand surcharge” and Mountaineer expected that money to go to fixing the pipes. So far, it hadn’t.

But Ground – a small oil and gas producer based in Roane County – had just bought the system after its previous owners declared bankruptcy in 2015. For over a half a century before Ground came along, no one had been paying for any maintenance at all.

Ground claimed that Mountaineer was refusing to sign a long-term contract that would have made the significant investment needed to replace the system financially feasible.

Negotiations on a new contract fell apart. By the middle of 2019, Mountaineer had decided to walk away.

So far, the Public Service Commission has sided with Mountaineer. It’s lawyers dismissed Ground’s demands as “unreasonable” and expressed doubt that the company could even continue operation. “Ground Resources’ wells are producing no gas, or very little gas,” the PSC said in a statement.

Commission staff calculated that it would cost upwards of $30,000 per household to connect them to Mountaineer’s own distribution system, a number they acknowledged was “prohibitively expensive.”

In July, the judge concluded that abandonment was “reasonable and prudent.”

Adkins felt wronged. Mountaineer was investing millions to build pipelines to other towns across the state. Not hers.

In recent years, that investment has accelerated. Between 2015 and 2018, the utility’s capital expenditures tripled, according to an analysis by researchers at West Virginia University.

“But, they’ve never done anything for any of us other than connect a meter,” Adkins said.

In 2018, Mountaineer built a new gas line up Paxton Road, a hollow one valley over from Adkins’ house. A state engineer testified that the cost of running a line to Adkins could be “similar” to the cost per customer of the Paxton Road project.

It was only fair, Adkins felt, for Mountaineer to replace her pipes too.

The Independent Oil and Gas Association agreed.

For decades, a lawyer for the association argued, Mountaineer was happily billing full price for gas delivered on pipes it didn’t own or maintain. Adkins and her neighbors had “been paying for years for the capital costs of Mountaineer’s distribution system, while imposing no capital costs on Mountaineer for distribution facilities serving them,” reads its brief.

But the association – which represents companies, not consumers – eventually withdrew, citing the mounting legal expense.

One of Adkins’ neighbors is Debbie Fisher, a retired engineer who’s losing her gas as well. Since her husband died, Fisher has been raising her two grandkids in a mountainside cabin up the road from Shamblin. She’s never missed a gas bill.

She distilled the issue into two words: “Who’s next?”

Neither Mountaineer nor its attorney responded to repeated requests for comment.

In a written statement in response to questions about Adkins’ case, Public Service Commission spokeswoman Susan Small downplayed the risk of widespread abandonments. Adkins and her neighbors, Small wrote, are “extreme outliers” because of the high cost of continuing service and the poor condition of Ground’s gathering system.

But a Mountaineer executive admitted in testimony before the Public Service Commission that the company is considering exactly such a worst-case scenario.

At a hearing in July, Adkins asked Thomas Westfall, a Mountaineer vice president, if it was possible that the company would abandon a majority of its field tap customers in the future. Westfall’s response concluded: “I think it’s something we have to consider in the long term as far as the potential cost related to continuing service to those customers.”

Understandably, the commission is growing increasingly concerned.

Four years ago, it warned in a report of “local pockets of field-line customers being abandoned” because of the decline in traditional vertical oil and gas drilling techniques. Money that would have once gone to drilling new vertical wells and laying new pipes has been diverted to “higher value Marcellus production.”

That gas comes out of the ground at high pressure and is shipped out of state on industrial transmission lines. These pipelines, which run to coast ports where the gas is liquified and sold on global commodity markets, are prohibitively expensive to tap into. In one case, Public Service Commission staff noted, a utility spent $2 million for a single tap into a high-pressure line.

Last year, commissioners launched an investigation into the problem and concluded that it required a “targeted case-by-case” solution. Utilities are now required to file annual reports detailing proposed abandonments.

Meanwhile, state lawmakers have made it a priority to expand natural gas service in rural areas of the state. In 2015, they passed legislation designed to encourage infrastructure development in “areas unserved or underserved by natural gas utilities.” The law allowed utilities to file annual rate increase requests to fund new infrastructure.

But the results – for field tap customers, at least – have been mixed.

In 2018, the commission approved a plan for a public utility, Hope Gas, to purchase a gathering system that a subsidiary of its parent company, Dominion Energy, was threatening to abandon.

The deal – which will cost ratepayers an additional $10 a month – “offers reassurance, but not a guarantee, of continued service for 9,800 farm tap customers,” they wrote.

But when Mountaineer asked for approval that same year to pass $4.1 million in field tap upgrades onto ratepayers, its request was denied. The commissioners were unconvinced that the “the requirement that all other Mountaineer customers contribute to upgrade farm taps” was justified.

The commission will soon consider the fates of thousands more field tap customers. This year, another major oil and gas company announced it was abandoning its gathering system.

Equitrans filed notice with the Federal Energy Regulatory Commission that it planned to abandon 877 miles of gas lines – threatening the future of over 6,000 West Virginia field taps. Peoples Gas, one of three local utilities that uses the gathering system, may seek approval to take it over – passing the costs to ratepayers.

But, so far, no solution has been found to save the gas lines in Ovapa.

The experience has left Adkins embittered. “I thought the Public Service Commission served the public – and I was wrong,” she said, after getting off the phone with yet another lawyer who’d declined to help.

Her tires are rubbing the fenders of her car because of all the paperwork in her trunk, she jokes.

Mountaineer has now filed 78 abandonment cases in Clay and Roane Counties. Adkins keeps a list of every one, with the names of each family neatly written alongside. When they settle, she crosses them off.

Her name – alongside dozens of others – is still unmarked.

“I’m still fighting,” she said.

Adkins felt wronged. Mountaineer was investing millions to build pipelines to other towns across the state. Not hers.