Oil + Gas Update - The Year Ends with the PA Supremes' Decision on Stripper Wells, Mariner East 2 Operations, and Colo. Surface Use Disputes.
Happy new year to everyone. As the year ended, the rig count spiked a bit since our last report alongside falling oil and natural gas prices. On the pipeline scene, Mariner East 2 is now online and in operation in Pennsylvania. In Appalachia court news, the Pennsylvania Supreme Court held that certain marginal well operators previously exempt from the state's impact fee are now on the hook for the fee if production exceeds a certain daily threshold for any given month during the year, reversing a prior order of the Commonwealth Court that interpreted the statute differently. In other news, the Tenth Circuit addressed Colorado's version of the accommodation doctrine when the mineral deed expressly states that the mineral owner has surface rights that are "necessary or convenient" for mineral extraction.
Best wishes to everyone for a happy and healthy 2019. Here's your week in review...
Rig Counts, Spot Prices + Oil Prices
Rigs: National (+1083); Marcellus (+57); Utica/Point Pleasant (17)
Brent Crude: -$53.76/bbl
West Texas Intermediate: -$49.29/bbl
NYMEX: January 2019 Contract @ -$3.726/MMBtu.
Spot Prices: Henry Hub (-$3.56/MMBtu); Dominion South (-$3.22/MMBtu); Tenn. Zone 4 (-$3.28/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): The Nansemond Indian Nation expressed environmental and archeological concerns with the ACP's planned path through parts of Suffolk and Chesapeake. The State Air Pollution Control Board delayed a vote on the permit for an air compressor station for the Atlantic Coast Pipeline pending additional public comments on new information the Board received regarding site suitability and demographics. The Board will meet next Tuesday.
Atlantic Sunrise (Northeastern PA to SE Pennsylvania): Nothing new to report.
Constitution (Northeastern PA to NY). Nothing new to report.
Leidy South - Benton Loop Expansion (PA): Nothing new to report.
Mariner East (Western PA to Eastern PA): ETP announced that Mariner East 2 is online for service as of December 29, 2018. Before that, the PUC Bureau of Investigation & Enforcement filed a complaint against Sunoco amidst corrosion concerns along the Mariner East line. The Chester County District Attorney Tom Hogan opened a criminal investigation into construction of the pipelines through Chester County. The PUC extended the period during which it must rule on an ALJ's recommended decision denying a petition for emergency relief filed by opponents who want to shut down the pipeline operation for safety reasons.
Mountain Valley Pipeline (Northern WV to Southern Va. and NC): Protesters took to the trees to block the pipeline's path as a gesture of opposition. In turn, a federal judge in Roanoke will decide whether or not to order the protesters down from their tree stands. Meanwhile, briefing on a petition for a writ of certiorari filed in the US Supreme Court has closed. The petition alleges that the eminent domain powers bestowed on natural gas pipeline companies under the Natural Gas Act are unconstitutional.
NEXUS (Ohio to Michigan): Nothing new to report.
PennEast (PA to Central Jersey): Nothing new to report.
Rover (OH, WV, PA to Michigan): In a pending condemnation proceeding in which fair market value is the only remaining issue, a federal court in Ohio precluded landowners from introducing the testimony of a soil expert (since it wouldn't inform the court on fair market value) and testimony of the landowner (since she lacked the qualifications to offer an income approach to valuation of the property). Rover Pipeline, LLC v. 10.055 Acres of Land, More or Less, in Ashland Cty., --- F. Supp. 3d ---, No. 5:17-CV-239, 2018 WL 6833399 (N.D. Ohio, Dec. 28, 2018).
Headlines & Holdings - Appalachia
Pennsylvania Supreme Court Imposes Impact Fee on Stripper Wells. The Pennsylvania Supreme Court concluded that the state’s impact fee applies to certain marginal or “stripper” wells if their production exceeds 90,000 cubic feet of natural gas per day for even one month of the year, reversing a prior order of the Commonwealth Court that read the statute differently and exempted stripper wells from the impact fee if production dipped below 90,000 cubic feet per day in any one month of the year. Snyder Bros., Inc. v. Pa. Pub. Util. Comm’n, --- A.3d ---, No. 47 WAP 2017, 2018 WL 6817092 (Pa., Dec. 28, 2018).
PA Federal Court Says ETP/Sunoco is not a “State Actor” for Section 1983 Constitutional Claims. The Middle District of Pennsylvania dismissed ETP/Sunoco as a defendant in a case alleging constitutional violations against the pipeline company following the plaintiffs’ anti-pipeline demonstrations that led to their arrest, concluding that the company is not a state actor for purposes of Section 1983 and did not engage in any conspiracy with law enforcement to violate the plaintiffs’ constitutional rights. Gerhart v. Energy Transfer Partners, L.P., --- F. Supp. 3d ---, No. 1:17-CV-01726, 2018 WL 6589586 (M.D. Pa., Dec. 14, 2018).
Ohio Federal Court Rejects PPC Claims. A federal court in Ohio rejected a landowner’s claim that a lease providing for royalties based on “gross proceeds” precluded the lessee from paying royalties based on net proceeds when the lease expressly provided for royalties based on net proceeds for processed gas sold off the lease. Shanesville Investments, LLC v. Eclipse Resources I, LP, --- F. Supp. 3d ---, No. 2:18-CV-237, 2018 WL 6592687 (S.D. Ohio, Dec. 14, 2018).
PA Federal Court Holds that O+G Nuisance Claim is Time-Barred. A federal court in Pennsylvania dismissed a nuisance claim against a well operator alleging that oil and gas operations created excessive noise, traffic, dust, light, air pollution, and affected water supplies, holding that the plaintiffs alleged a permanent nuisance (not a continuing nuisance) that accrued more than two years before filing their complaint such that the state statute of limitations for tort claims (two years) barred the action. Russel v. Chesapeake Appalachia, L.L.C., --- F. Supp. 3d ---, No. 4:14-CV-00148, 2018 WL 6804764 (M.D. Pa., Dec. 27, 2018).
Federal Court in Ohio Upholds Arbitration Award in Royalty PPC Dispute. A federal court in Ohio rejected a bid by landowners to overturn an arbitration award despite their allegations that the arbitrators “exceeded their powers” and “effectively dispensed their own brand of justice,” concluding instead that the landowners did not demonstrate fraud, evident bias, misbehavior, or abuse of power when the arbitrators upheld the lessee's arm's length transaction with midstream affiliates for the sale of natural gas and payment of royalties that accounted for the parties' proportionate share of those costs. Hale v. Chesapeake Exploration, L.L.C., --- F. Supp. ---, No. 4:18CV2217, 2018 WL 6725384 (N.D. Ohio, Dec. 20, 2018).
Headlines & Holdings - Beyond Appalachia
Federal Court in NM Orders Disclosure of Landowner Contact Info in Royalty Class Action. A federal court in New Mexico agreed with landowners that a defendant in a class action should hand over royalty owner contact information to counsel representing the class in a case challenging royalty payments, reasoning that addresses and telephone numbers of the royalty owners are relevant to issues of class certification, including numerosity, and to ascertaining which royalty owners are members of the proposed class. Ulibarri v. Energen Resources, --- F. Supp. 3d ---, No. CV 18-294 RB/SCY, 2018 WL 6653344 (D.N.M., Dec. 19, 2018).
TX Appellate Court Rejects Correction Mineral Deed. An appellate court in Texas concluded that an amended correction deed did not comply with the requirements of a statute governing material corrections to instruments, holding that a party's heirs, successors, or assigns must sign the correction instrument as opposed to the original parties of the recorded instrument if the property interest conveyed in the original instrument has been assigned or conveyed by an original party to that party's heirs, successors, or assigns. Yates Energy Corp. v. Broadway National Bank, --- S.W.3d ---, No. 04-17-00310-CV, 2018 WL 6626605 (Tex. Ct. App., December 19, 2018).
Tenth Circuit Tackles Surface Use Standard. The Tenth Circuit recently concluded that, under Colorado law, a deed reserving mineral rights with the specific right to use the surface as "convenient or necessary" to access the mineral estate does not give the mineral owner or the lessee any greater rights than the common law "due regard" or "accommodation doctrine" standards. Bay v. Anadarko E&P Onshore LLC, --- F.3d ---, No. 17-1374, 2018 WL 6778017 (10th Cir., Dec. 26, 2018).