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At the Well Weekly (v.11.30.2018)

Oil + Gas Update - A Push for Cap and Trade in PA, MVP Suffers Setback, and More Challenges to Mariner East.

Natural gas prices held at more than $4/MMBtu since our last report despite a generally flat rig count and underwhelming oil prices. On the pipeline scene, Mountain Valley suffered a setback after the Fourth Circuit held that the Army Corps improperly issued a nationwide water and crossings permit while residents in PA seek an order from the state public utility commission to shut down Mariner East. In Appalachia news, a variety of petitioners asked the state's Environmental Quality Board for a new regulation establishing a cap-and-trade program to reduce greenhouse gas emissions. In other news, a Texas appellate court enforced an arbitration provision in a PSA against a successor in interest to one of the original parties despite not having signed or agreed to the arbitration clause.

Here's your week in review...

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (-1076); Marcellus (-56); Utica/Point Pleasant (17)

  • Brent Crude: -$59.27/bbl

  • West Texas Intermediate: -$50.74/bbl

  • NYMEX: December 2018 Contract expired at +$4.720/MMBtu. The January 2019 Contract opened -$4.70/MMBtu.

  • Spot Prices: Henry Hub (+$4.44/MMBtu); Dominion South (+$4.21/MMBtu); Tenn. Zone 4 (+$4.27/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:

  • Atlantic Coast (W. Va. to Va. and NC): Nothing new to report.

  • Atlantic Sunrise (Northeastern PA to SE Pennsylvania): Atlantic Sunrise has had a strong impact on Appalachian natural gas prices this year and is expected to continue continue contributing to sustained prices for 2019. Meanwhile, an order of religious sisters in Pennsylvania has petitioned the U.S. Supreme Court to stop the pipeline project as a violation of the Religious Freedom Restoration Act (RFRA).

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

  • Mariner East 2 (Western PA to Eastern PA): The PA PUC held hearings on a petition for emergency relief brought by local residents alleging the pipeline company did not adequately inform the public about safety risks associated with the operation. Meanwhile, the pipeline launched a binding open season to solicit shipper commitments for transportation service from the Marcellus/Utica play in Pennsylvania to destination facilities in Claymont, Delaware and Marcus Hook, Pennsylvania, through the Mariner East pipeline system.

  • Mountain Valley Pipeline (Northern WV to Southern Va.): The Fourth Circuit held that the Army Corp exceeded its authority certifying the pipeline under the NWP 12 permit program (see below for more). Meanwhile, protests continue with residents sending water cooler jugs filled with murky water allegedly from MVP construction activities to Roanoke officials.

  • NEXUS (Ohio to Michigan): NEXUS will wait until next year to fully restore all of the land along its pipeline route.

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

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

Headlines & Holdings - Appalachia

  • PA Cap and Trade Petition. More than 60 parties filed a petition with the Environmental Quality Board requesting a cap-and-trade regulation modeled after California’s to establish a limit on GHG emissions. The petition may be accessed here. Industry groups questioned the legal underpinnings of the petition and the method chosen by the petitioners to request a new, sweeping regulation rather than involving the state's legislature in the process.

  • PA Supreme Court Quashed PADEP Chapter 78a Litigation Appeal Pending Outcome of the Remainder of the Case. The PA Supreme Court quashed an appeal without prejudice pending disposition of the rest of the case pending before Commonwealth Court challenging various provisions of Pennsylvania's Chapter 78a oil and natural gas regulations. MSC v. PADEP, No. 54 MAP 2018 (Pa., Nov. 28, 2018).

  • Ohio Appellate Court Denies Relief under DMA. A court of appeals in Ohio rejected a claim by landowners that that the current record owner of the mineral estate abandoned their rights under the Dormant Minerals Act and common law given that the landowners were on notice of the current mineral owners’ rights and that an oil and gas lease by the landowners (who had no rights to the minerals) did not constitute a savings event to keep their purported mineral interests alive. Sharp v. Miller, 2018 Ohio 4740 (Ohio Ct. App., Nov. 26, 2018).

  • Fourth Circuit Holds Army Corps Exceeded Authority Issuing NWP 12 to MVP. The Fourth Circuit held that the Army Corp exceeded its authority certifying the Mountain Valley Pipeline under the NWP 12 permit, holding that the corps substituted its own special condition “in lieu of” a different special condition imposed by West Virginia as part of its certification and, absent completion of the notice-and-comment procedures required by the Clean Water Act, a state cannot waive a special condition previously imposed as part of its certification of a nationwide permit. Because West Virginia did not follow its federally mandated notice-and-comment procedures in waiving another special condition the state imposed as part of its certification of NWP 12, that condition remains a required—but unsatisfied—condition of the nationwide permit. Sierra Club v. United States Army Corps of Engineers, --- F.3d ---, No. 18-1173, 2018 WL 6175671 (4th Cir., Nov. 27, 2018).

  • EQT Settles WV Royalty Class Action. EQT and landowners alleging the company improperly shared post-production costs with royalty owners reached a tentative settlement of a longstanding royalty class action. The details are not public.

Headlines & Holdings - Beyond Appalachia

  • Climate Change Torts Don't Belong in State Court. Energy companies told the Ninth Circuit that federal court is the proper setting for suits lodged by California cities and counties seeking to hold them liable for climate change-related infrastructure damage. County of San Mateo v. Chevron et al., No. 18-15499 (9th Cir., Nov. 26, 2018) (pending).

  • California Appellate Court Holds that Private Commercial Sand Mining on Sovereign Lands is not a Public Trust Use. A court of appeals in California concluded that private commercial sand mining/dredging under the bay does not constitute a public trust use of sovereign lands for which the state has discretion to approve or promote, but the evidence supported the trial court's finding that the project will not impair the public trust. San Francisco Baykeeper v. State Lands Commission, A151821 (Cal. Ct. App., Oct. 31, 2018; published Nov. 27, 2018).

  • TX Court of Appeals Enforces Arbitration Provision Against Non-Signatories to PSA. A court of appeals in Texas recently enforced an arbitration provision in a PSA against an assignee of certain rights under the PSA, concluding that non-signatories may be bound by an arbitration provision if the original contract intended that successors to the contracting parties be bound by its provisions and that the claims in the case fell within the scope of the arbitration provision. Apache Corp. v. Wagner, --- S.W.3d ---, Nos. 2-18-132 and 2-18-135, 2018 WL 6215739 (Tex. App. Ct., Nov. 29, 2018).


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