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At the Well Weekly (v.10.26.2018)

Oil and Gas Update - Commonwealth Court rejects challenge to local ordinance under the ERA; PA Supreme Court hears oral argument on controversial zoning decision; climate change lawsuits heat up.

Welcome back to At the Well Weekly, the oil and gas blog for busy industry professionals and lawyers, published by GA BIBIKOS LLC. New law firm. New design. New content. Same simple format: quick-hitting information on the latest market conditions (rigs and prices) and the key headlines and holdings of significant cases from the past week that affect your business. So here we go...

Natural gas spot prices in Appalachia climbed this week alongside a steady rig count and stable oil prices, due also in part to capacity on Atlantic Sunrise. Other pipeline projects in the northeast still face regulatory and litigation challenges. In Appalachia court news, the Commonwealth Court of Pennsylvania rejected claims from opposition parties that a local ordinance authorizing oil and gas wells within the municipality did not go "far enough" to protect environmental rights under Pennsylvania's constitution. The Pennsylvania Supreme Court also heard argument on whether parties challenging local zoning approvals In other regions, climate change lawsuits continue to make headlines, as even SCOTUS Chief John Roberts got involved on a procedural matter, while a Texas appellate court addressed how lessees may (or may not) use accumulated unused days towards as a credit for additional drilling periods under a continuous-development clause.

Here's your week in review...

Rig Counts, Spot Prices & Oil Prices

  • Rigs: National (+1068); Marcellus (+56); Utica/Point Pleasant (19)

  • Brent Crude: -$76.06/bbl

  • West Texas Intermediate: -$66.06/bbl

  • NYMEX: November 2018 Contract @ ­-$3.166/MMBtu

  • Spot Prices: Henry Hub (+$3.36/MMBtu); Dominion South (+$3.17/MMBtu); Tenn. Zone 4 (+$3.21/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 key pipeline projects in Appalachia:

  • Atlantic Coast (W. Va. to Va. and NC): The Virginia Department of Environmental Quality approved environmental permits for erosion and sediment and stormwater management along with measures to limit damage in certain mountainous areas while blasting and digging commences.

  • Atlantic Sunrise (NE to SE Pennsylvania): Atlantic Sunrise is up and running reportedly with 100% capacity allocated to northeastern Pennsylvania producers.

  • Constitution (NE PA to NY): The pipeline project has stalled and finds itself at the center of controversial decisions by states with authority to issue water quality certifications for federal projects under the Clean Water Act.

  • Mariner East II (Western PA to Eastern PA): FERC tariff filings indicate an anticipated start date of November 1, 2018, or thereabouts for moving the "anes" (ethane, butane, etc.) across Pennsylvania.

  • Mountain Valley Pipeline (Northern WV to Southern Va.): The Army Corps of Engineers suspended authorizations for water crossings for the first leg originating in Wetzel County, WV following similar actions resulting from litigation challenging the projects permit approvals.

  • PennEast (PA to Central Jersey): Nothing new to report.

Headlines & Holdings - Appalachia

  • PA Commonwealth Court Rejects "Environmental Rights" Challenge to Local Ordinance. The Commonwealth Court of Pennsylvania concluded that a local ordinance authorizing oil and gas wells within a municipality does not violate Article I, sec. 27 of the Pennsylvania Constitution for failing to go "far enough" to protect so-called "environmental rights," reasoning that the local government's enactment of the measure accounted for environmental protections consistent with its statutory authority and that, as creatures of statute, municipalities have no authority to go beyond their enabling legislation to impose additional requirements on permit applicants to further protect the environment. Frederick v. Allegheny Township, --- A.3d ---, No. 2295 C.D. 2015 (Pa. Cmwlth., October 26, 2018).

  • PA Supreme Court Hears Argument on Proper Evidence to Challenge Oil & Gas Zoning Permits. The Pennsylvania Supreme Court heard oral argument in a controversial case involving the burden of proof in a zoning case. A well operator applied for conditional use approval for a well site, but local township denied that use based on the testimony of objectors who testified about their experiences with oil and gas wells outside of the township (which under current law is insufficient to meet the burden on objectors to deny zoning approvals). The township argued that out-of-township evidence about experiences with oil and gas wells is enough to meet the burden of proof to challenge a specific well site within the township if there are enough similarities. The well operator argued that the out-of-township people can testify, but without a link between the specific well site and the testimony, the evidence is insufficient to sustain the burden of proof. The justices reportedly expressed concerns about the Township allowing oil and gas wells as a conditional use and then denying the permit based on this out-of-township evidence when the permit application and well site otherwise met the requirements of the zoning ordinance. EQT Production Co. et al. v. Borough of Jefferson Hills, No. 4 WAP 2018 (Pa., pending).

  • Temperatures Rising in Climate Change Lawsuits. In a series of cases, climate change is at the fore. The federal government filed a mandamus petition and urged the U.S. Supreme Court to stay the trial of an Oregon-based lawsuit brought by children for failure to protect future generations from climate change. Chief Justice John Roberts stayed the case temporarily. In re: U.S. No. 18-505 (mandamus) and No. 18-18A410 (petition to stay), (U.S., Oct. 18 and 25 2018). In a separate case, the New York Attorney General sued ExxonMobil for fraud, alleging that the company failed to disclose business risks associated with climate change to investors (followed swiftly by the AG’s motion to recuse the sitting judge based on her ownership of stocks in Exxon). People of the State of New York v. ExxonMobil Corp. (pending).

Headlines & Holdings - Beyond Appalachia

  • Lessee in TX Can't Bank Unused Days for Entire Duration of Continuous Development Program. A court of appeals in Texas concluded that a five-year continuous development provision that authorized the lessee to accumulate unused days during a 150-day development cycle in order to maintain the lease can only use those unused days towards the drilling of the ensuing well (as opposed to using those days any time during the five-year continuous development period). Energy Resources LP v. Energen Resources Corp. --- S.W.3d ---, No. 11-17-00028 (Tex. App., October 25, 2018).


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