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At the Well Weekly (v.1.18.2019)

Oil + Gas Update - Colorado Supremes Reject Proposal to Impose Climate Change Conditions on New Oil + Gas Permits.

Since our last report, the national rig count dropped amidst rising natural gas and oil prices. In the pipeline world, several operators had some ups and some downs, but it's been relatively quiet as pipeline news goes. In Appalachia court news, a state board remanded an air permit issued for Sunoco's Marcus Hook facilities for an "aggregation" analysis, the Pennsylvania PUC rejected the request for an emergency shut down of the Mariner East lines, and Governor Wolf issued his executive order on reducing GHG. In other news, Colorado's Supreme Court issued an important decision denying a request to pass regulations that would impose a climate-change analysis on every oil and gas permit issued by the state conservation commission while North Dakota's Supreme Court tackles mineral rights and federal courts separately address BLM actions on leases and inspections.

Here's your (two-week) review...

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (-1050); Marcellus (+62); Utica/Point Pleasant (+18)

  • Brent Crude: +$61.68/bbl

  • West Texas Intermediate: +$52.57/bbl

  • NYMEX: February 2019 Contract @ +$3.384/MMBtu.

  • Spot Prices: Henry Hub (+$3.61/MMBtu); Dominion South (+$4.42/MMBtu); Tenn. Zone 4 (+$3.43/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 pipeline projects in Appalachia:

  • Adelphia Project (Greater Philadelphia Region): Nothing to report.

  • Atlantic Coast (W. Va. to Va. and NC): Following months of headlines, an environmental board in Virginia unanimously approved an air permit for a compressor station for ACP. The pipeline company also received an order from a federal court in Virginia authorizing its access rights under the Natural Gas Act upon payment of just compensation to landowners (see case squib below for more details). The Fourth Circuit denied the company's motion to clarify the order that stopped the pipeline's construction but (in a separate case) denied an appeal brought by environmental groups challenging ACP's Section 401 certification (see case squib below for more details). Earlier this week, the company reported that it won’t be in a position to restart construction efforts anytime before March.

  • Atlantic Sunrise (Northeastern PA to SE Pennsylvania): A federal court confirmed the pipeline operator's easements for site restoration activities now that the line is operational while the Delaware Riverkeeper Network and Lancaster Against Pipelines have asked the US Supreme Court to hear their challenges to the pipeline (see case squibs below for more details).

  • Constitution (Northeastern PA to NY). Nothing new to report.

  • Leidy South - Benton Loop Expansion (PA): Nothing new to report.

  • Mariner East (Western PA to Eastern PA): The PA Environmental Hearing Board reversed a permit approval for Mariner East facilities and remanded to the PA DEP for consideration of whether segments of the facilities should be aggregated for purposes of air permitting (see case squib for more). The DEP is considering an appeal. The PUC, meanwhile, addressed sink holes recently reported by the company that are associated with the Mariner East 1 pipeline.

  • Mountain Valley Pipeline (Northern WV to Southern Va. and NC): The company responded to a lawsuit brought by environmental regulators by explaining that extraordinary rainfall and other uncontrollable weather events contributed to the erosion and sedimentation issues highlighted in the government's complaint.

  • NEXUS (Ohio to Michigan): Nothing new to report.

  • PennEast (PA to Central Jersey): The Attorney General of New Jersey appealed to the Third Circuit challenging a federal judge’s ruling that PennEast can immediately seize more than 100 state-owned properties along the pipeline route.

  • Rover (OH, WV, PA to Michigan): Nothing new to report.

  • TransCanada Eastern Panhandle Project (PA to WV): Nothing new to report.

Headlines & Holdings - Appalachia

  • EHB Sends Sunoco’s Air Permit Back to DEP for Aggregation Analysis. The PA Environmental Hearing Board reversed an air permit approval for Mariner East facilities and remanded to the PADEP for consideration of whether segments of the facilities should be aggregated for purposes of New Source Review and/or Prevention of Significant Deterioration under Title V of the Clean Air Act, including parts of the facilities for which DEP issued unchallenged permits both before and after the environmental organizations challenged the permit at issue in the case. Clean Air Council v. DEP, No. 2016-73-7 (EHB 2019).

  • PA Governor Issues Executive Order Aimed to Reduce GHG Emissions. Governor Wolf ordered the state government to reduce greenhouse gas emissions by 26 percent from 2005 levels by 2025 in line with the Paris Agreement’s goals.

  • Superior Court Confirms Sunoco's Easement for Mariner East. The Superior Court denied a request to enjoin Sunoco from using easements as temporary workspaces along the line, concluding that the company held permanent easements and the rights to use the ground for temporary activities for construction activities. Simon v. Sunoco Pipeline, L.P., --- A.3d ---, No. 771 WDA 2017, 2019 WL 123425 (Pa. Super. Ct., Jan. 7, 2019).

  • Federal Court Enjoins Crossing that Interferes with Gas Line. A federal court in Virginia granted Columbia's request for a declaration that a proposed crossing of an existing pipeline route would violate Columbia's rights under right-of-way agreements given that, among other things, the plans for the crossing did not include mitigation measures such as flowable fill to ensure that vehicular weight would not damage the buried pipeline. Columbia Gas Transmission, LLC v. Grove Avenue Developers, Inc., --- F. Supp. 3d ---, No. 2:17CV483, 2019 WL 130168 (E.D. Va., Jan. 8, 2019).

  • Environmental Groups Petition SCOTUS for Cert in Atlantic Sunrise Pipeline Case. The Delaware Riverkeeper Network and Lancaster Against Pipelines petitioned the high court for certiorari to the Third Circuit, arguing that the court erred in holding that it could decide an appeal of a permit approval for the Atlantic Sunrise project without the state environmental hearing board considering a related challenge.

  • Federal Court in Va. Confirms ACP Access Rights after Payment of Just Compensation. A federal judge in Virginia entered judgment in favor of Atlantic Coast Pipeline against landowners who did not respond to the case and confirmed access rights after payment of just compensation as determined by the court. Atl. Coast Pipeline, LLC v. 1.52 Acres, More or Less, in Nottoway Cty., Virginia, --- F. Supp. 3d ---, No. 2:18-CV-00106-JAG, 2019 WL 148402 (E.D. Va., Jan. 9, 2019).

  • Atlantic Sunrise Claims Parcels for Site Restoration Activities. A federal court confirmed the pipeline company’s rights on a half-acre parcel necessary for site restoration activities that the company mistakenly omitted from the previous condemnation order. Transcontinental Gas Pipe Line v. Certain Easements, --- F. Supp. 3d. ---, No. 4:18-CV-02096, 2019 WL 144927 (M.D. Pa., Jan. 9, 2019).

  • Fourth Circuit Denies Challenge to Section 401 Certification for Atlantic Coast Pipeline. The Fourth Circuit denied an appeal by environmental groups challenging ACP's Section 401 certification, reasoning that the Virginia State Water Control Board had reasonable assurance that activities related to the construction of a natural gas pipeline would not degrade the state’s water resources. Appalachian Voices v. State Water Control Bd., --- F.3d ---, No. 18-1077, 2019 WL 177928 (4th Cir., Jan. 14, 2019).

  • Federal Judge in PA Denies Bid to Dismiss O+G Lease Dispute over Pooling and Royalties. The Middle District of Pennsylvania denied a motion to dismiss a claim alleging that two lessees breached the pooling clause and royalty clause by (a) drilling only one well on a 300-acre unit when the pooling clause requires at least one well per every 160 acres and (b) circumventing the no-deducts clause for royalty payments by selling gas at the well to affiliates, reasoning that the clauses are ambiguous and require full discovery and possible a trial to determine their meaning. Chambers v. Chesapeake Appalachia, L.L.C., --- F. Supp. 3d ---, No. 3:18-CV-00437, 2019 WL 183854 (M.D. Pa., Jan. 14, 2019).

  • PUC Confirms ALJ’s Order Denying Emergency Relief. The PA PUC confirmed an order of an administrative law judge denying bids by residents to stop the Mariner East lines from construction and operation for safety reasons, noting that the residents did not meet their heavy burden of proving an imminent risk of harm to the public. The PUC remanded the case to the ALJ to decide the issues raised in the formal complaint. Flynn et al. v. Sunoco Pipeline, C-2018-3006116 (Pa. PUC) (pending).

Headlines & Holdings - Beyond Appalachia

  • Colorado Supreme Court Denies Bid to Compel Regulations that would Require Climate-Change Evaluation for Every O+G Well Permit. The Colorado Supreme Court concluded that the state’s oil and gas conservation commission properly declined to consider a proposed rule that, among other things, would have precluded the commission from issuing any permits for the drilling of an oil and gas well “unless the best available science demonstrates, and an independent, third-party organization confirms, that drilling can occur in a manner that does not cumulatively, with other actions, impair Colorado’s atmosphere, water, wildlife, and land resources, does not adversely impact human health, and does not contribute to climate change.” The court reasoned that (a) a court’s review of an administrative agency’s decision as to whether or not to engage in rulemaking is limited and highly deferential; (b) the enabling statute does not allow a new condition on all new oil and gas development based on a finding of no cumulative adverse impacts to public health and the environment and instead requires the orderly development of oil and gas to prevent waste of the resources; and (c) the commission is already considering environmental concerns. API v. v. Martinez, --- P. 3d ---, No. 17SC297, COGCC, 22019 CO 3 (Colo., Jan. 14, 2019).

  • Trump Formally Nominates Wheeler for EPA Secretary. As anticipated, President Trump formally nominated Andrew Wheeler as EPA Secretary following his tenure as acting secretary.

  • Texas Federal Court Sides with Royalty Owners in Class Action. A federal court in Texas concluded that defendants violated the obligations their predecessors assumed more than 100 years ago to pay a portion of oil and gas proceeds, deemed by the court to be floating royalty interests, from production on 2,000 acres of properties to the predecessors of the plaintiffs, rejecting defenses of adverse possession and violations of the rule against perpetuities. Verde Mineral, LLC v. Burlington Resources Oil & Gas Co., --- F. Supp. 3d ---, No. 2:16-CV-463, 2019 WL 145017 (S.D. Tex., Jan. 9, 2019).

  • Tenth Circuit Confirms Pipeline Trespass on Indian Lands. The Tenth Circuit recently concluded that a pipeline operator's 20-year easement expired and required removal of pipelines on tribal lands but reversed course on the injunction issued by the district court, concluding instead that the district court should balance the relative interests of the parties and the public on remand. Davilla v. Enable Midstream Partners L.P., --- F.3d ---, No. 17-6088, 2019 WL 150627 (10th Cir., Jan. 10, 2019).

  • ND Supreme Court Confirms Conviction for Meddling with Dakota Access Pipeline. The Supreme Court of North Dakota confirmed the conviction of a man charged with entering locked areas and shutting off oil flow for the Dakota Access Pipeline that caused the company to engage in an emergency shut down of operations, rejecting the defendant's claims that the state failed to prove he intentionally caused a financial loss greater than $10,000 to support the conviction. State v. Foster, --- N.W.2d ----, No. 20180098, 2019 ND 28, 2019 WL 192038 (N.D., Jan. 15, 2019).

  • North Dakota Supreme Court Denies Untimely Quiet Title Action in Mineral Ownership Dispute. The North Dakota Supreme Court confirmed that the state statute of limitations and laches barred an untimely quiet title action and awarded disputed mineral interests to landowners given that many transactions involving the property and mineral rights occurred in the decades since the warranty deed was executed and recorded. Western Energy Corporation v. Stauffer, --- N.W.2d ---, 2019 WL 191813 20180283 (N.D., Jan. 15, 2019).

  • Nevada Federal Judge Denies Challenge to BLM Environmental Review of Oil + Gas Permits. A federal judge in Nevada concluded that the BLM properly conducted an environmental review before offering oil and gas leases on 200,000 acres of federal land, concluding that BLM satisfied the so-called "hard look" standard for conducting environmental reviews before offering leases for sale. Center for Biological Diversity v. U.S. Bureau of Land Management, --- F. Supp. 3d ---, No. 3:17-CV-553-LRH-WGC, 2019 WL 236727 (D. Nev., Jan. 15, 2019).

  • Tenth Circuit Says BLM Can't Demand Keys to Access and Inspect Private Lands. The Tenth Circuit concluded that the BLM's broad inspection authority does not include demanding keys to unlock gates that provide access to private lands or allowing BLM to install its own locks, reasoning that these measures are not part of BLM's authority and at a minimum would require express congressional authorization. Maralex Resources v. Barnhardt, --- F.3d ---, No. 17-1421, 2019 WL 255009 (10th Cir., Jan. 18, 2019).


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