Oil + Gas Update - PA Supremes Veer from Precedent to Let Local Authorities Rely on Non-Residents' Complaints about Gas Wells in other Municipalities to Deny Zoning Applications.
Natural gas prices are still relatively flat alongside a drop in oil prices since our last report by several dollars/bbl. In pipeline news, Atlantic Coast may get some help in the U.S. Supreme Court from the Solicitor General, SCOTUS denied an attempt to appeal an order confirming the eminent domain authority of Atlantic Sunrise's project sponsor, and New York regulators strike again by denying a state water quality certification for a Transco expansion project (this time, because the pipeline operator allegedly did not consider air emissions and climate change impacts associated with the project). In Appalachia court news, the Pennsylvania Supreme Court veered from established case law by letting local authorities deny zoning approvals for oil and gas wells based on non-residents testifying generally (without expert testimony in support) about their negative experiences with gas wells in other places. In another case, the PA Supremes denied an appeal in which challengers claimed produced water at well sites is toxic and therefore banned by local laws. In other plays, the Texas courts grappled with injection wells and jury verdicts, the Ninth Circuit resurrected a question about whether dinosaur fossils are part of the mineral estate in Montana, the Wyoming Supreme Court invoked the accommodation doctrine to resolve disputes over overlapping coal and gas interests, and the Iowa Supreme Court green-lighted the Dakota Access route through the state over the objections of environmental groups and landowners.
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Rig Counts, Spot Prices + Oil Prices
Rigs: National (+984); Marcellus (-61); Utica/Point Pleasant (-18)
Brent Crude: -$61.99/bbl
West Texas Intermediate: -$53.50/bbl
NYMEX: The June 2019 contract expired @ $2.633/MMBtu. The July 2019 contract @ -$2.624/MMBtu.
Spot Prices: Henry Hub (-$2.63/MMBtu); Dominion South (+$2.22/MMBtu); Tenn. Zone 4 (+$2.19/MMBtu)
("+" or "-" or blank denotes increase, decrease, or flat. )
WOPL - Appalachia
In our new section, WOPL ("waiting on pipelines"), we provide the latest news on the status of various pipeline projects in Appalachia:
Adelphia Project (Greater Philadelphia Region): Nothing new to report.
Atlantic Coast (W. Va. to Va. and NC): The U.S. Solicitor General asked the Supreme Court to extend the time the government has to file a petition in an appeal of a circuit court decision preventing Dominion Energy, Inc., the project sponsor of the Atlantic Coast Pipeline project, from building the pipeline across the Appalachian Trail in Virginia.
Atlantic Sunrise (Northeastern PA to SE Pennsylvania): The U.S. Supreme Court denied a petition for a writ of certiorari filed by landowners who challenged the ability of pipeline companies (including the operator of Atlantic Sunrise) to access condemned pipeline rights-of-way before paying just compensation.
Constitution (Northeastern PA to NY): Nothing new to report.
Empire Pipeline (NY to PA): Nothing new to report.
Leidy South - Benton Loop Expansion (PA): Nothing new to report.
Mariner East (Western PA to Eastern PA): Nothing new to report.
Mountaineer XPress (WV): Nothing new to report.
Mountain Valley Pipeline (Northern WV to Southern Va. and NC): A 44-year-old mother of two and grandmother of one took to the trees to protest Mountain Valley Pipeline. MVP lawyers asked a judge to order tree-sitters to leave. Meanwhile, a group of 21 Virginia legislators sent a letter to the state’s environmental agency calling for an immediate order of compliance with E&S controls for Mountain Valley Pipeline.
NEXUS (Ohio to Michigan): Nothing new to report.
NFG FM100 Project (NC PA to Transco): Nothing new to report.
Northeast Supply Enhancement Project (NY): New York regulators denied a state water quality certification under Section 401 of the Clean Water Act for the pipeline company's alleged failure to address climate change impacts.
Northern Access (NW PA to Western NY): Nothing new to report.
PennEast (PA to Central Jersey): Nothing new to report.
Regional Energy Access (NE PA to PA/NJ): Nothing new to report.
Rover (OH, WV, PA to Michigan): Nothing new to report.
TransCanada Eastern Panhandle Project (PA to WV): Nothing new to report.
Headlines & Holdings - Appalachia
EPA Rollbacks on Federal Emissions Standards for O+G. The EPA will assess whether the oil and gas sector should continue to be regulated as a single pollution source or whether to split the industry up into parts in an effort to rollback regulations targeting the industry as a whole under the CAA.
PHMSA Warning About Pipeline Subsidence in Northeast. PHMSA issued a bulletin regarding increased cases of pipeline subsidence in the northeast in light of record rainfall and resulting erosion over the past year.
PA Supreme Court Denies Allowance of Appeal in Dispute Challenging Ordinance Authorizing Storage of Produced Water at Well Sites. The PA Supreme Court denied allowance of appeal from a Commonwealth Court decision holding that (a) produced water is not “toxic” and therefore could be stored on site in a municipality under its ordinance; and (b) the municipality’s decision to grant a zoning permit did not violate Article I, sec. 27 of the PA Constitution regarding environmental rights. Protect PT v. Penn Township, No. 470-473 WAL 2019 (Pa. 2019).
PA Supreme Court Holds that Residents of one Municipality can object to Zoning Approvals for O+G Wells Based on their General Experience with Well Sites in other Municipalities. The Pennsylvania Supreme Court held that a municipality, in addressing an applicant's zoning application for a well site, may consider as evidence the general observations of residents of another municipality regarding the impacts to their health, quality of life, and property which they attribute to a similar facility constructed and operated by the same company in their municipality. Justice Mundy offered a strong dissent, stating that "[t]he objectors presented no evidence that [the applicant's] oil and gas operations at the ... well site would have any effect on the community other than those normally associated with such activities. Instead, they presented speculative objections of a kind that courts have deemed insufficient to grant relief." EQT Production Company v. Borough of Jefferson Hills, --- A.3d ---, No. 4 WAP 2018, 2019 WL 2313377 (Pa., May 31, 2019).
Fourth Circuit Sends Back Dispute Over Deep Rights. The Fourth Circuit vacated a summary judgment and remanded so the district court could evaluate whether or not a company acquired deep rights in a lease to develop the Marcellus, rejecting contentions that bona fide purchaser status helped the subsequent buyer. Mountaineer Minerals, LLC v. Antero Resources, --- F. Appx. ---, No. 17-2058, 2019 WL 2289398 (4th Cir., May 29, 2019).
Sixth Circuit Says Royalty Statements and Signed Checks Satisfy Statute of Frauds. The Sixth Circuit reversed an order dismissing a claim that a lessee improperly deducted a landowner’s proportionate share of post-production costs before paying royalties, rejecting the lessee’s claim that the statute of frauds barred the current landowner from claiming anything more than a flat-rate royalty pursuant to the original 1940 lease and holding instead that (a) the successor lessees (including the defendant) voluntarily paid the current landowner a 12.5% production royalty and (b) royalty statements, coupled with a signed check, demonstrate all the requisites for satisfying Kentucky’s statute of frauds such as the names of the parties, the property, and the royalty amount. Back v. Chesapeake Appalachia, L.L.C., --- F. Appx. ---, No. 18-5975, 2019 WL 2289410 (6th Cir., May 29, 2019).
Headlines & Holdings - Beyond Appalachia
TX Legislature Makes Pipeline Damage a Felony. The Texas legislature passed a bill that would impose felony penalties on those who damage oil and gas pipeline and other critical infrastructure.
Texas Appellate Court Upholds Injection Well Permit Despite RRC's Late Flip-Flop on Issuing No-Harm Letter Regarding Nearby O+G Reserves. A court of appeals in Texas concluded that the state's environmental quality agency properly issued an injection well permit over the objections of owners of nearby oil and gas rights, reasoning that the RRC issued a "no harm" letter before the environmental agency issued the UIC well permit, the RRC's later decision to rescind that letter came after the TCEQ held hearings and closed the record, and deferred to the TCEQ's decision that the UIC well didn't pose risks of migration into and through nearby production wells. Dyer v. Texas Commission on Environmental Quality, --- S.W.3d ---, No. 03-17-00499-CV (Tex. Ct. App., May 22, 2019).
Ninth Circuit Asks Montana Supremes to Settle Dinosaur Fossil Dispute. The Ninth Circuit asked the Montana Supreme Court to certify the question of whether, under Montana law, dinosaur fossils constitute "minerals" for purpose of a mineral deed reservation following a district court's conclusion that fossils are part of the mineral estate. Murray v. BEJ Minerals, LLC, --- F.3d ---, No. 16-35506, 2019 WL 2218919 (9th Cir., May 20, 2019).
Environmental Group has Standing to Challenge PHMSA Order. A federal court in Montana concluded that an environmental group had standing to challenge PHMSA's alleged failure under the Mineral Leasing Act to conduct annual inspections of all pipelines on federal lands. Wildearth Guardians v. Chao, --- F. Supp. 3d ---, No. CV-18-110-GF-BMM, 2019 WL 2232371 (D. Mont., May 23, 2019).
Alaska Supreme Court Upholds Storage Rights of Utility that Acquired Oil and Gas Lease. The Supreme Court of Alaska concluded that a utility that owned an oil and gas lease and thereby held the rights to whatever gas remained in place in the formation in which the utility planned storage operations did not have to compensate the lessor under the lease for the value of any remaining gas, holding that the lessor's reversionary interest in the gas rights remained unaffected by the utility’s storage operations and rejecting the lessor's claim that the lease did not authorize storage rights. Kenai Landing, Inc. v. Cook Inlet Natural Gas Storage Alaska, LLC, --- P.3d ---, No. S-16737, 2019 WL 2237956 (Ala., May 24, 2019).
TX Supreme Court Says Buyer of Interests in Permian Leases Entitled to Specific Performance Without Condition Imposed by Appellate Court. The Texas Supreme Court concluded that an appellate court was wrong to reverse a jury's verdict in a dispute over the acquisition of a percentage interest in leases within the Permian for lack of any evidence that the buyer was "ready, willing, and able" to perform as a 25% interest holder in the leases, holding that the parties stipulated before trial that a ruling in favor of the buyer would result in specific performance of transferring the interests in the leases in lieu of damages without any "ready-willing-able" condition. Pathfinder Oil & Gas, Inc. v. Great Western Drilling, Ltd. --- S.W.3d ---, No. 18-0186, 2019 WL 2256658 (Tex., May 24, 2019).
Wyoming Supreme Court Invokes Accommodation Doctrine to Resolve Dispute Over Priority of Developing Coal and O+G Reserves in Powder River Basin. The Supreme Court of Wyoming concluded that the accommodation doctrine governed a dispute between an owner of federal and private oil and gas leases that overlapped with federal coal leases owned by another party and remanded for an evaluation of the parties' rights regarding the priority of development. BTU Western Resources, Inc. v. School Creek Coal Resources, LLC, --- P.3d ---, Nos. S-18-0203 and S-18-0204, 2019 WL 2265105 (Wyo., May 28, 2019).
IOWA Supreme Court Approves Order on Dakota Access Pipeline. The Iowa Supreme Court approved a decision by the state’s public utility commission confirming the eminent domain authority of Dakota Access to build its pipeline through Iowa to connections in Illinois, holding that the pipeline serves the public convenience and necessity, qualifies as a “common carrier” for state eminent domain purposes, and does not violate the state or federal constitutional ban on takings for public use without just compensation merely because the pipeline passes through the state without taking or letting off any oil. Puntenney v. Iowa Utilities Board, --- N.W.2d ---, No. 17-0423, 2019 WL 2306289 (Iowa, May 31, 2019).
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