George A. BibikosAt the Well Weekly (v.1.24.2020)
Oil + Gas Update - PA Supremes Reinstate Rule of Capture.
The slide continues as oil and natural gas prices dropped again since our last report with the rig count losing several units nationwide. In pipeline news, Sunoco dodged a bid by local government officials seeking to stop construction of Mariner East 2. In Appalachia court news, the Pennsylvania Supreme Court issued its long-awaited decision in Briggs v. SWN, vacating a hideously troublesome Superior Court opinion and reinstating the rule of capture as the law in Pennsylvania even when hydraulic fracturing operations are involved. In other regions, the Texas Supreme Court concluded that a deed referring to a ranch by its well-known name only conveyed the surface estate, not the minerals.
Here's the week in review...
Rig Counts, Spot Prices + Oil Prices
Rigs: National (-794); Marcellus (-40); Utica/Point Pleasant (-11)
Brent Crude: -$59.89/bbl
West Texas Intermediate: -$54.19/bbl
NYMEX: February 2020 @ -$1.905/MMBtu.
Spot Prices: Henry Hub (-$1.89/MMBtu); Dominion South (-$1.54/MMBtu); Tenn. Zone 4 (-$1.56/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): A group of states filed an amicus brief supporting the appellate court’s decision that the Forest Service lacked authority to grant ACP an easement over the Appalachian Trail to build its pipeline.
Atlantic Sunrise (Northeastern PA to SE Pennsylvania): Nothing new to report.
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): A Chester County judge denied the county’s request for an injunction against Sunoco Pipeline to halt construction on the Mariner East 2 project on two county-owned properties after deciding he did not have subject matter jurisdiction to decide the case.
Mountaineer XPress (WV): Nothing new to report.
Mountain Valley Pipeline (Northern WV to Southern Va. and NC): Nothing new to report.
NEXUS (Ohio to Michigan): Nothing new to report.
NFG FM100 Project (NC PA to Transco): Nothing new to report.
Northeast Supply Enhancement Project (NJ/NY): Nothing new to report.
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.
Revolution Pipeline (PA): 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
Pennsylvania Supreme Court Reinstates Rule of Capture for Frac Ops. The Supreme Court vacated a Superior Court opinion that abrogated the rule of capture whenever hydraulic fracture stimulation activities are involved in the development of oil or natural gas. The court held that the rule of capture immunizes an energy developer from liability in trespass where the developer uses hydraulic fracturing on the property it owns or leases and such activities allow it to obtain oil or gas that migrates from beneath the surface of another person’s land, at least where no physical intrusion is involved. The court acknowledged that plaintiffs will have difficulty pleading particular facts demonstrating an actual physical incursion in the subsurface sufficient to state a claim and, if so, to later prove that claim with expert testimony. The court left open the possibility that a subsurface incursion into boundary lines miles beneath the surface can never be an actionable trespass, just like airlines flying planes over air space miles above the earth cannot commit actionable trespasses. The court also acknowledged the traditional "self-help" remedy of drilling offset wells or leasing property to achieve the same result that a damage award would yield, noting that the judiciary is not well-equipped to investigate the continued feasibility of that remedy and deferring to the legislature if it elects to modify it. Briggs v. Southwestern Energy Company, --- A.3d ---, No. 63 MAP 2018, 2020 WL 355911 (Pa. Jan. 22, 2020).
Federal Court in PA Says PA Workers’ Comp Laws Apply Despite Choice of Law Provision. A federal judge held that Pennsylvania workers’ compensation laws apply in a wrongful-death lawsuit alleging that a falling piece of the defendant’s equipment killed a worker, reasoning that the law of the state in which the worker died applied and PA has a strong public interest in applying PA law that immunized employers from tort suits for workplace injuries that trumped the parties’ choice of TX law to govern their affairs. Jones v. SWEPI LP, No. 2:19-cv-00050 (W.D. Pa. Jan. 16, 2020).
Headlines & Holdings - Beyond Appalachia
TX Supremes Says Grant of Ranch by Name Conveys Surface Estate Only. The Texas Supreme Court held that a devise of "all ... right, title and interest in and to Ranch 'Las Piedras'" refers only to a surface estate by that name as understood by the testatrix and beneficiaries at the time the will was made such that the grantor conveyed the surface estate only and not the mineral estate. ConocoPhillips Co. v. Ramirez, --- S.W.3d ---, No. 17-0822, 2020 WL 399313, at *1 (Tex. Jan. 24, 2020).
Chevron/Shell Fight for Federal Court Jurisdiction in Climate Change Case. Chevron and other companies argued to the First Circuit that Rhode Island’s lawsuit alleging that the companies’ operations contribute to climate change that causes damage to the state’s infrastructure belongs in federal court.
WY O+G Commission Erred When it Denied Horizontal Drilling Permit Application. The Wyoming Supreme Court reversed the Wyoming Oil and Gas Conservation Commission's decision approving only one out of two applications filed by Exaro Energy III, LLC seeking the approval of adjacent drilling and spacing units in the Jonah Field, holding that the Commission's denial of the company's other application was arbitrary and capricious because the commission relied on the same agreed-upon evidence to grant one application and deny the other. Exaro Energy III, LLC v. Wyoming Oil & Gas Conservation Comm'n, --- P.3d ---, No. 2020 WY 8, 2020 WL 255777 (Wyo. Jan. 17, 2020).
TX Appellate Court Confronts Executive Rights Reservation. A court of appeals in Texas concluded that a deed excepting and reserving a one-half mineral interest and related executive rights while giving the grantee "provisional authority" to exercise the grantor's executive rights (subject to revenue sharing) did not actually convey the grantor's mineral interest or the executive rights themselves such that the grantee's successor had no executive rights under the original deed and owed no corresponding duty to the grantor with regard to leasing of its mineral interests and sharing of revenues. Geary v. Two Bow Ranch L.P., --- S.W.3d ---, No. 04-18-00610-CV, 2020 WL 354763 (Tex. App. Jan. 22, 2020).
TX Appellate Court Orders Specific Performance of Agreement to Convey 25% Interest in O+G Lease. A court of appeals in Texas ordered specific performance of an agreement giving the grantee a 25% interest in oil and gas leases and ordered an accounting of revenue and out-of-pocket expenses. Great Western Drilling, Ltd. v. Pathfinder Oil & Gas, Inc. --- S.W.3d ---, No. 11-14-00206-CV, 2020 WL 373096 (Tex. App. Jan. 23, 2020).
Tenth Circuit Rejects EPA's Attempt to Exempt Small Refineries of Renewables. The Tenth Circuit held that EPA exceeded its authority by granting extensions of exemptions for small refineries from certain Clean Air Act requirements (aimed at lowering regulatory costs and forcing the market to accept escalating amounts of renewable fuels over time), holding that none of the small refineries consistently had any exemptions before such that there was nothing to "extend" and concluding that EPA's rationale for granting the exemptions had nothing to do with reducing regulatory costs. Renewable Fuels Ass'n v. U.S. EPA, --- F.3d ---, No. 18-9533, 2020 WL 401800 (10th Cir. Jan. 24, 2020).
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