Oil + Gas Update - Happy Thanksgiving to Everyone!
The rig count declined again by several units since our last report while oil and natural gas prices remained relatively flat. In pipeline news, the NC Governor faces accusations of improper meddling with ACP permit applications, ETP faces a shareholder suit, and the public gets a crack at a settlement between regulators and MVP. In Appalachia court news, a targeted-formation trespass claims survived a preliminary motion to dismiss, Ohio regulators have the final word over well-plugging complaints, a federal court won't touch an arbitration award that denied royalty claims, and the Third Circuit says no to a landowner that demanded a new farm tap from a new pipeline. In other regions, California courts addressed challenges to local ordinances and oil and gas rights following a tax sale while Texas courts decided mineral lien claims and groundwater royalty payments.
Have a great Thanksgiving. We'll be back in December. Here's your week in review...
Rig Counts, Spot Prices + Oil Prices
Rigs: National (-803); Marcellus (-36); Utica/Point Pleasant (13)
Brent Crude: -$62.37/bbl
West Texas Intermediate: +$57.77/bbl
NYMEX: December 2019 @ -$2.559/MMBtu.
Spot Prices: Henry Hub (-$2.47/MMBtu); Dominion South (+$2.15/MMBtu); Tenn. Zone 4 (+$2.07/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): An independent investigation started by the Republican General Assembly leaders into the state’s approvals for the Atlantic Coast Pipeline found that Democratic Gov. Roy Cooper “improperly used the authority and influence of his office” but did not personally benefit from those decisions. .
Atlantic Sunrise (Northeastern PA to SE Pennsylvania): .
Constitution (Northeastern PA to NY):
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): People living near the Mariner East Pipeline reported that a sinkhole opened up in Delaware County. On November 21, 2019, a law firm announced it has filed a lawsuit on behalf of shareholders of Energy Transfer LP alleging the company and certain executives violated the federal securities laws by misleading its investors about its business, operational and compliance policies.
Mountaineer XPress (WV): Nothing new to report.
Mountain Valley Pipeline (Northern WV to Southern Va. and NC): The public has the opportunity to comment on a proposed settlement with Va. regulators addressing MVP environmental issues along the pipeline route.
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
Contract, Trespass Claims Against Joint Operators for Targeting Utica and Point Pleasant in Ohio Survive Motion to Dismiss. A federal court in Ohio denied motions to dismiss several claims against joint operators that targeted the Point Pleasant formation for production when the leases allegedly restrict operations targeting the Utica. Tera II, LLC v. Rice Drilling D, LLC, --- F. Supp. 3d ---, No. 2:19-CV-2221, 2019 WL 6051115 (S.D. Ohio, Nov. 15, 2019); J&R Passmore, LLC v. Rice Drilling D, LLC, --- F. Supp. 3d ---, No. 2:18-CV-1587, 2019 WL 6051112 (S.D. Ohio, Nov. 15, 2019).
Ohio Court Defers to Agency Chief on Well-Plugging Claim. A court of appeals in Ohio denied requests by landowners that a drilling company had the obligation to plug an abandoned well, holding instead that the chief of Ohio’s oil and gas regulatory agency as the sole initial decider of all issues related to the plugging of Ohio wells such that a trial court lacked jurisdiction to order the well plugged. Head v. Victor McKenzie Drilling, Inc., --- N.E.3d ---, No. 2019 Ohio 4728 (Ohio Ct. App., Nov. 16, 2019).
Fed. Court in PA Declines to Upend Arbitration Award Denying Royalty Claims. A federal court in Pennsylvania declined to overturn an arbitration award that denied claims that a company improperly allocated the royalty owners’ share of post-production costs charged by affiliates, holding that the court’s review of arbitration awards is extremely narrow and the record supported the award. Ostroski v. Chesapeake Appalachia, L.L.C., --- F. Supp. 3d ---, No. 2:18CV947, 2019 WL 6118353 (W.D. Pa., Nov. 18, 2019).
Third Circuit Rejects Claims that Easement Agreement Requires Farm Tap from New Pipeline. The Third Circuit rejected claims by landowners that a pipeline company had the obligation to install a new farm tap from a new pipeline on the landowners’ property, holding that the 1946 easement did not prohibit the company from abandoning the original line and only obligated the company to install a farm tap from the original pipeline, not any new or relocated ones. In re: Columbia Gas Transmission, --- F.3d ---, No. 18-2276, 2019 WL 6245410 (3d Cir., Nov. 22, 2019).
Headlines & Holdings - Beyond Appalachia
CA Court Upholds O+G Ordinance that Requires Surface Owner Approval for Fast-Tracked Permits. A court of appeals in California upheld a local ordinance imposing a variety of requirements on local oil and gas development, including a process by which applicants need surface-owner approval in split estate situations to take advantage of a fast-track application process, holding that the new ordinance does not violate the company's right due process rights as an unconstitutional delegation of government authority to private parties (surface owners) because the County has the final say and the owner of the surface rights does not have final control over how mineral owner exercises its rights. Vaquero Energy, Inc. v. Cty. of Kern, --- P.3d ---, No. F079719, 2019 WL 6124767 (Cal. Ct. App., Nov. 19, 2019).
CA Court Holds that Tax Sale of Surface Does Not Include Mineral Rights But Includes Reversionary Rights. A court of appeals in California held that although a tax sale of of surface rights does not include oil and gas rights or rights to royalties on pre-existing leases, the new surface owner has a reversionary interest once a pre-existing lease expires. Leiper v. Gallegos, --- P.3d ---, No. 2D CIV. B292905, 2019 WL 6166276 (Cal. Ct. App., Nov. 20, 2019).
Tex. Appellate Court Upholds Denial of Mineral Lien Claims. A court of appeals in Texas concluded that an oilfield service company waived its lien rights against the parent of a bankrupt operating company because the MSA provided that the lien-holder could only look to the operating company, not its parent, for payment of debts. Mesa Southern CWS Acquisition, LP v. Deep Energy Exploration Partners, LLC, --- S.W.3d ---, No. 14-18-00708-CV, 2019 WL 6210213 (Tex. Ct. App., Nov. 21, 2019).
Tex. Court Says Groundwater Lessee on the Hook for Failure to Make Timely Royalty Payments by Mail. A Texas appellate court upheld an award of contract damages, attorneys' fees, and costs after holding that a groundwater lessee failed to make timely royalty payments because (a) the lessee paid by mail, (b) the payment arrived after the due date, and (c) the lease did not provide for payment by mail as a customary form of dealing between the parties that may've excused the late payment. Metro. Water Co. v. Ausley, --- S.W.3d ---, No. 13-18-00039-CV, 2019 WL 6205468 (Tex. App., Nov. 21, 2019).
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