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At the Well Weekly (v.1.25.2019)

Oil + Gas Update - SCOTUS Passes on Pipeline Condemnation Issues, ME1 Sink Hole Concerns Halt Pipeline Flow, and TX Supremes Address Deepwater Horizon Insurance Coverage.

Natural gas prices dropped since our last report amid flat oil prices and a slight increase in the rig count. In pipeline news, SCOTUS declined to enter the fray, having denied a bid to challenge pipeline condemnation procedures at FERC, while Mariner East shut down its ME1 pipeline for sink hole concerns. In Appalachia, the Superior Court of PA separately addressed gas purchase agreements and royalty interest reservations in deeds. In other regions, the Texas Supreme Court revived Anadarko's coverage claim for defense costs associated with the Deepwater Horizon spill.

Here's your week in review...

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (+1059); Marcellus (+63); Utica/Point Pleasant (+19)

  • Brent Crude: -$61.17/bbl

  • West Texas Intermediate: +$53.39/bbl

  • NYMEX: February 2019 Contract @ -$2.98/MMBtu.

  • Spot Prices: Henry Hub (+$3.10/MMBtu); Dominion South (-$2.72/MMBtu); Tenn. Zone 4 (-$2.76/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): The National Park Service asked a federal court in a pending case to vacate permits it had issued to ACP to cross forest lands; meanwhile, the Trump administration is also seeking to pull back Army Corps authorizations governing water crossings in parts of West Virginia.

  • Atlantic Sunrise (Northeastern PA to SE Pennsylvania): Nothing new to report.

  • Constitution (Northeastern PA to NY). The White House is considering taking steps to limit states' ability to stop interstate pipelines using water certifications, such as the Constitution Pipeline in NY, possibly through executive orders.

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

  • Mariner East (Western PA to Eastern PA): Following discussions with the PUC’s I&E, the remainder of ME1 has been shut down by Sunoco (since Jan. 21) due to sinkhole concerns.

  • Mountain Valley Pipeline (Northern WV to Southern Va. and NC): The U.S. Supreme Court denied certiorari in a case challenging FERC procedures for authorizing Mountain Valley's condemnation of land for the pipeline route. In other news, attorneys called for a criminal investigation into MVP's ongoing construction activities affecting streams and wetlands without permits.

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

  • PennEast (PA to Central Jersey): A New Jersey federal judge rejected the state AG’s request to reconsider a ruling that allows PennEast to condemn state property.

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

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

Headlines & Holdings - Appalachia

  • WV Federal Judge Limits Royalty Dispute. A federal court in West Virginia trimmed down a multi-count complaint against EQT alleging improper deductions from royalty payments in connection with affiliate sales, leaving only alter-ego, contract, and attorneys-fees claims while dismissing fraud and related claims. Wetzel Land, Inc. v. EQT Production Company, --- F. Supp. ---, No. 5:18CV23, 2019 WL 286748 (N.D.W. Va., Jan. 22, 2019).

  • PA Superior Court Sends Gas Purchase Case Back for Damages Determination. The Pennsylvania Superior Court concluded that a gas purchaser breached its agreement with individual oil and gas well owners by paying below-market rates and remanded for damage calculations. Meanor v. Peoples Natural Gas Co., No. 1757 WDA 2017, 2019 WL 291284 (Pa. Super., Jan. 23, 2019).

  • PA Superior Court Addresses Royalty Interest Reservation in Deed. The Superior Court of Pennsylvania held that a deed clause stating that the grantor expressly reserves for himself and his heirs “one half of any and all royalties and income or return from any oil or gas which may be produced on or from the premises hereby conveyed” unambiguously reserved a one-half royalty interest and income on any oil or gas from the property without limiting the interests to any particular lease in place. Julia v. Huntley, --- A.3d ---, No. 632 MDA 2018, 2019 WL 311121 (Pa. Super., Jan. 24, 2019).

Headlines & Holdings - Beyond Appalachia

  • Texas Supreme Court Says Insured is Entitled to Deepwater Defense Costs. The Supreme Court of Texas held that Anadarko's insurance policy with Lloyds compels the insurer to cover costs of defense, interpreting the contract to include defense costs in addition to liability, and concluding that defense costs are not limited to the amount Lloyds already paid reflecting the percentage share Anadarko owned in the well. Anadarko Petroleum Corp. v. Houston Casualty Co., --- S.W.3d ---, No. 16-1013, 2019 WL 321921 (Tex., Jan. 25, 2019).


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