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At the Well Weekly (v.12.7.2018)

Oil + Gas Update - Natural Gas Prices Stay Strong Amidst Pipeline Battles.

Since our last report, natural gas prices held firm above $4/MMBtu alongside a flat rig count while oil continues to struggle. On the pipeline scene, Williams announced a significant expansion in Appalachia while Sunoco awaits a decision from the state public utility commission on a request to shut down Mariner East lines for public safety reasons. Mountain Valley Pipeline faces a new lawsuit by the Virginia AG as opposition groups in New Jersey seek to curtail fossil-fuel projects, including PennEast Pipeline, until the state passes rules to achieve 100% clean energy. In Appalachia court news, the Pennsylvania Supreme Court declined to hear an appeal regarding Sunoco's status as a public utility, a federal judge confirms PennEast's condemnation powers, and Ohio landowners filed a class action challenging drilling activities that target formations below the Utica. In other regions, underpaid royalties owed to the feds draws a statutory penalty, the ND Supreme Court addresses the powers of trustees to convey mineral rights, and the Eleventh Circuit confirms Transco's right to condemn easements for interstate lines, including portions intended to take gas from Appalachia to southern markets.

Here's your week in review...

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (-1075); Marcellus (+57); Utica/Point Pleasant (-16)

  • Brent Crude: -$58.91/bbl

  • West Texas Intermediate: -$50.60/bbl

  • NYMEX: January 2019 Contract @ -$4.469/MMBtu.

  • Spot Prices: Henry Hub (+$4.62/MMBtu); Dominion South (+$4.29/MMBtu); Tenn. Zone 4 (+$4.43/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): Amidst more protests last week, the Fourth Circuit issued another order staying authorizations from the U.S. Fish & Wildlife based on transgressions from the Biological Opinion and Incidental Take Statement along 100 miles of the Atlantic Coast Pipeline in West Virginia and Virginia. Meanwhile, Congress is considering legislation that would give the National Park Service authority to allow construction of the pipeline beneath the Appalachian Trail and Blue Ridge Parkway.

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

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

  • Leidy South Expansion (PA): Williams announced an expansion project for the Appalachia region. Williams made its FERC pre-filing last week.

  • Mariner East (Western PA to Eastern PA): The parties await a decision from an administrative law judge of the Pennsylvania Public Utility Commission (see below).

  • Mountain Valley Pipeline (Northern WV to Southern Va.): Landowners have asked the US Supreme Court to weigh in on challenges to the MVP. Meanwhile, the Virginia Attorney General filed a new lawsuit against MVP alleging the company violated environmental regulations more than 300 times. MVP is facing “the maximum allowable civil penalties and a court order to force MVP to comply with environmental laws and regulations,” according to a statement from AG Mark Herring.

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

  • PennEast (PA to Central Jersey): A federal court in PA confirmed the pipeline company's condemnation authority (see below for more) while more than 50 environmental, citizen, faith, and progressive groups in New Jersey are calling on Gov. Phil Murphy to enact a moratorium on all new fossil fuel projects in New Jersey including the pipeline until there are rules in place to achieve our 100% clean energy goals.

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

Headlines & Holdings - Appalachia

  • Mariner East Emergency Petition Remains Pending. The parties await a decision from an administrative law judge of the Pennsylvania Public Utility Commission addressing an emergency petition to halt the operation of Sunoco’s Mariner East pipelines based on allegations that the company did not adequately inform the public about safety risks. Flynn et al. v. Sunoco Pipeline, C-2018-3006116 (Pa. PUC) (pending).

  • PA Supremes Deny Allowance of Appeal Challenging Sunoco Condemnation Authority for Mariner East Pipelines. The Pennsylvania Supreme Court denied allowance of appeal challenging Sunoco’s public utility status and eminent domain authority. Clean Air Council v. Sunoco, No. 231 EAL 2018 (Pa. Dec., 5, 2018).

  • PA Federal Court Denies Challenge to Condemnation Authority of Pipelines with FERC-Issued Certificates. A federal judge in Pennsylvania held that the National Gas Act does not require that the holder of a FERC certificate satisfy conditions on that certificate (such as securing other authorizations) before exercising eminent domain authority. In re: PennEast Pipeline Co. --- F. Supp. 3d ---, No. CV 3:18-281, 2018 WL 6304192 (M.D. Pa., Dec. 3, 2018).

  • Ohio Oil and Gas Owners File Class Action for Drilling Below Utica. A group of owners of oil and gas rights sued various companies for improperly drilling and producing gas from formations below the Utica formation, alleging the lease agreements restricted drilling and production rights to the Utica but not below. J&R Passmore LLC et al v. Rice Drilling D LLC et al., No. 2:18-cv-01587 (S.D. Ohio.) (pending).

  • Ohio Bills. The Ohio Senate proposed SB 250 to criminalize damage to critical infrastructure such as pipelines and related facilities. SB 263 would modernize the notary act to include provisions governing landmen.

Headlines & Holdings - Beyond Appalachia

  • TX Federal Court Confirms Statutory Penalty for Underpaid Royalties Owed to the Government. A federal court in Texas concluded that an operator owed penalties under Section 1719(d)(1) of the Federal Oil and Gas Royalty Management Act for underpaid royalties that the operator knew were delinquent and did not pay upon notice from the ONRR. Statoil v. US Department of Interior, --- F. Supp. 3d ---, No. 4:17-CV-3664, 2018 WL 6266962 (S.D. Tex., Nov. 30, 2018).

  • Eleventh Circuit OK’s Order on Transco Pipeline Eminent Domain Authority. The Eleventh Circuit Court of Appeals affirmed a district court order granting Transco summary judgment in favor of Transco’s right to obtain easements for the construction of pipelines, including parts accepting gas from Appalachia. In re: Transcon. Gas Pipe Line Co., LLC , --- F.3d ---, No. 16-17503, 2018 WL 6367239 (11th Cir., Dec. 6, 2018).

  • North Dakota Supreme Court Holds that Trustee should be Compelled to Transfer Trust-Owned Mineral Estate. In a case of first impression, the Supreme Court of North Dakota held that a mineral deed signed by the settlor (who is also trustee and beneficiary) of a trust that owns mineral rights is enforceable to convey property held by the trust itself and therefore requires conveyance of the mineral rights to the buyer. Dale Exploration, LLC v. Hiepler, --- N.W.2d ---, No. 2018 ND 271, 2018 WL 6381396 (N.D., Dec. 6, 2018).


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