Based on the new estimates, MDC, the company that paid its C.E.O. the $8.5 million in consulting fees, could require more than $40 million to clean up its 140 wells if they are permanently closed, according to an analysis by Greg Rogers, a co-author of the report and a former adviser to BP and its auditors, Ernst & Young.
Extraction Oil & Gas’s cleanup costs for its 1,000 wells could exceed $200 million, in excess of its reported liabilities, Mr. Rogers estimates. “It may be the case that many of the U.S. frackers now heading for bankruptcy were insolvent before Covid-19” if environmental liabilities were properly accounted for, he said.
Workers Injured, Lawsuits On Hold
The bankruptcies have painful consequences for some employees as well.
This past January, a crew of engineers was upgrading a well head at a Chesapeake Energy site in east central Texas when leaking natural gas ignited. Three workers died; a fourth worker sustained “catastrophic and permanent” injuries, according to a lawsuit he later filed.
Chesapeake Energy, which declared bankruptcy last month after paying out executive bonuses, might also be environmentally insolvent, Mr. Rogers estimates, with potential cleanup costs of $1.4 billion, nearly as much as its year-end market value of $1.6 billion. Chesapeake’s filings show that it has set aside only $41 million in bonds to cover the cleanup of its 6,800 wells.
Now, however, all lawsuits against the company have been put on hold by the bankruptcy process. The families’ lawyers are pushing to resume their cases and argue that settlements should be resolved separate to creditors’ claims against the company. Chesapeake declined to comment.
“You have large corporations protecting and enriching their top executives, while they’re cutting corners and putting their companies in a death spiral,” said Ryan Zehl of Zehl Associates, who is representing Justin Cobb, who was severely injured, and the family of Wendell Beddingfield, who died in the explosion.
“Ordinary Americans, the people who need the money the most, are being left behind and neglected,” he said.