Oil + Gas Update - Third Circuit Throws Out Speculative Valuation Testimony in Eminent Domain Case.
Natural gas prices inched up a few cents since our last report alongside a small spike in oil prices and a steady rig count. The pipeline scene is relatively quiet. In Appalachia court news, the Third Circuit addressed proper expert testimony in condemnation cases under the Natural Gas Act and separately denied a bid to force class arbitration in a royalty dispute; the Ohio Supreme Court held that tax exemptions did not apply to receipts for the intrastate portion of natural gas transportation on an interstate line; and DRBC must turn over some docs in the ongoing battle over the agency's jurisdiction to regulate (or prevent) oil and gas projects in the basin. In other news, the Fifth Circuit addressed royalty payments, pipeline trespass damages, and FLSA requirements for gas lawyers/consultants; a Montana federal court addressed obligations to pay well costs over and above AFE estimates; North Dakota's Supreme Court tackled the open-mines doctrine; and a federal court in Texas said no to a TRO request to block an assignment of an oil and gas lease.
Here's the week in review...
Rig Counts, Spot Prices + Oil Prices
Rigs: National (790); Marcellus (-38); Utica/Point Pleasant (11)
Brent Crude: +$56.42/bbl
West Texas Intermediate: +$51.06/bbl
NYMEX: March 2020 @ -$1.844/MMBtu.
Spot Prices: Henry Hub (+$1.87/MMBtu); Dominion South (+$1.62/MMBtu); Tenn. Zone 4 (+$1.59/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): Southern Company is out as an equity partner in the Atlantic Coast Pipeline after majority owner Dominion Energy agreed to buy its stake amid ballooning costs and legal challenges that have stalled the 1.5 Bcf/d US Northeast natural gas project. The FERC asked the U.S. Fish and Wildlife Service to reinitiate formal consultation so the proposed Atlantic Coast Pipeline project can resume construction.
Atlantic Sunrise (Northeastern PA to SE Pennsylvania): Nothing new to report.
Constitution (Northeastern PA to NY): Nothing new to report.
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): Nothing new to report.
Mountaineer XPress (WV): Nothing new to report.
Mountain Valley Pipeline (Northern WV to Southern Va. and NC): The FERC green-lighted MVP’s Southgate Extension despite conclusions that although there would be some environmental damage caused by building the so-called MVP Southgate, it could be minimized to “less than significant levels.”
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
Ohio Supreme Court Says Fees for Intrastate Transportation on Interstate Line Not Exempt from Tax. The Supreme Court of Ohio concluded that the state’s tax exemption for “all receipts derived wholly from interstate business” did not apply to receipts for the intrastate portion of natural gas transportation on an interstate line. Rockies Express Pipeline, L.L.C. v. McClain, --- N.E.3d ---, No. 2020-Ohio-410, 2020 WL 625430 (Ohio Feb. 11, 2020).
Third Circuit Throws Out Speculative Valuation Testimony in Eminent Domain Case. The Third Circuit addressed the standard for the admissibility of expert testimony in a condemnation proceeding under the Natural Gas Act and held that Rule 702 requires reliable expert testimony free of speculation and conjecture that fits the proceedings. UGI Sunbury LLC v. A Permanent Easement for 1.7575 Acres, --- F.3d ---, No. 18-3126, 2020 WL 628540 (3d Cir. Feb. 11, 2020).
Third Circuit Rejects Bid for Class Arbitration in Oil and Gas Royalty Row. In a royalty dispute, the Third Circuit interpreted arbitration clauses in oil and gas leases and held that the parties did not consent to class arbitration, reasoning that the leases are silent on class arbitration. Marbaker v. Statoil USA Onshore Properties, Inc., --- F.3d ---, No. No. 18-3067, 2020 WL 733049 (3d Cir. Feb. 13, 2020).
Federal Judge Tells DRBC to Turn Over Additional Documents Over Privilege, Deliberative Process Objections. Following a similar ruling in the case brought by oil and gas developers against DRBC for preventing oil and gas projects, a federal court in Pennsylvania ordered the agency to turn over documents reflecting interpretation and course of dealings of the agency’s federal compact/enabling document, reasoning in part that attorney-client privilege does not apply to some of the documents despite the agency’s claims and that, although the deliberative process privilege might bar discovery of some documents, the benefit to the parties outweighs any harm associated with the disclosure. Wayne Land and Mineral Group, LLC v. Delaware River Basin Commission, --- F. Supp. 3d ---, No. 3:16-CV-00897, 2020 WL 762835 (M.D. Pa. Feb. 14, 2020).
Headlines & Holdings - Beyond Appalachia
NM Federal Court OK's Industry Groups' Interventions. A federal judge in New Mexico gave API and Western Energy Alliance the green light to intervene in WildEarth Guardians' lawsuit against the U.S. Secretary of the Interior David Bernhardt and the U.S. Bureau of Land Management for approving oil and gas leases on public land in New Mexico, reasoning that the two groups are aligned but represent different constituencies, each with their own interests in the litigation, sufficient to let them both intervene. WildEarth Guardians v. Bernhardt, --- F. Supp. 3d ---, No. 1:19-CV-00505-RB-SCY, 2020 WL 672836 (D.N.M. Feb. 11, 2020).
Fifth Circuit Rejects Bid to Review Royalty Payment Lawsuit. The Fifth Circuit upheld an order dismissing a claim brought by oil and gas owners that Shell owed them past-due royalties because the royalty owners never gave the lessee notice required by Louisiana law. Louisiana Oil & Gas Interests, L.L.C. v. Shell Trading U.S. Co., --- F.3d ---, No. 19-30396, 2020 WL 701066 (5th Cir. Feb. 12, 2020).
Fifth Circuit Reverses Course on Pipeline Trespass Case. The Fifth Circuit concluded that the district court in Louisiana applied the wrong standard when it concluded that plaintiffs couldn't prove bad-faith trespass by a pipeline company in order to recover damages and remanded the case to determine the amount. Mary v. QEP Energy Co., --- F.3d ---, No. 18-31107, 2020 WL 707600 (5th Cir. Feb. 7, 2020).
Fifth Circuit Denies Debtor's Bid to Recover Expenses and Loss of Future Profits from O+G Well Following Service Company's Alleged Breach. The Fifth Circuit adopted a district court opinion granting summary judgment in favor of a debtor's counter-party to a consulting contract and rejecting the debtor's claims for breach of contract and negligence in servicing its oil and gas well, holding instead that the debtor had no right to damages and that debtor's owner could not establish any contract on behalf of himself and other companies he owned to reimburse them for services rendered by the counter-party. Matter of Oracle Oil, L.L.C., --- F. Supp. 3d ---, No. 19-30519, 2020 WL 610723 (5th Cir. Feb. 7, 2020).
North Dakota Supremes Applies Open Mine Exception to Waste Doctrine in Favor of Life Tenant. The Supreme Court of North Dakota held that a life tenant had the right to minerals, royalties, and a bonus payment Cheryl after concluding that the open mines exception to the doctrine of waste applies to the holder of a life estate in the property such that the life tenant is entitled to the royalties and bonus payments resulting from the production of oil and gas from the property. Reese v. Young, --- P.3d ---, 2020 ND 35, 2020 WL 702508 (N.D. Feb 12, 2020).
Fifth Circuit Holds that FLSA Overtime Requirements Inapplicable to Lawyer/Consultant for Gas Company. The Fifth Circuit concluded that a FLSA plaintiff, a former practicing attorney, who took a consulting job at an oil and gas services company, is not entitled to recover unpaid overtime wages because he is an independent contractor. Faludi v. U.S. Shale Solutions, LLC, --- F.3d ---, No. 17-20808, 2020 WL 747225 (5th Cir. Feb. 14, 2020).
No TRO to Stop Assignment of O+G Rights. A federal court in Texas denied a request for a temporary restraining order seeking to enjoin the assignment of a 1994 oil and gas lease to Courson Oil & Gas, Inc. for failing to establish irreparable harm resulting from any transfer or assignment, even without notice or consent to transfer as alleged by the plaintiff. Mayo Foundation for Medical Education and Research v. BP North America Production Company, --- F.3d ---, No. 2:20-CV-34-Z, 2020 WL 759212 (N.D. Tex. Feb. 14, 2020).
Montana Federal Court Finds Disputed Fact Over Well-Cost Dispute. A federal court in Montana concluded that issues of fact precluded summary judgment in a dispute over well costs identified in an AFE, holding that the record is thin as to whether a non-operator consented to pay costs for wells over and above the amounts listed in the AFEs. Continental Resources, Inc. v. Wyotex Oil Co., --- F. Supp. 3d ---, No. CV 17-148-BLG-TJC, 2020 WL 759337 (D. Mont. Feb. 14, 2020).
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