At the Well Weekly (v.2.26.2021)


Oil + Gas Update | Gas Prices Return to Earth.

Gas prices returned to Earth after unprecedented spikes caused by the cold snap that ravaged the midwest while. The rig count gained four units while oil prices stood relatively firm. In pipeline news, an appellate court denied a bid to stop the MVP project pending an appeal, and Sunoco paid civil penalties for alleged violations along the Mariner East 2 route. In Appalachia, the Commonwealth Court addressed when permittees are on the hook for paying fees to groups challenging (and later settling) DEP permit decisions. In other news, a Texas appeals court addressed a continuous development provision, a federal court in Colorado deferred to the state's conservation commission for oil and gas payment disputes, and a North Dakota federal judge confirmed that surface owners own the empty pore space in the subsurface, not mineral owners.

Here's your week in review:

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (402); Marcellus (31); Utica/Point Pleasant (7)

  • Brent Crude: $65.48/bbl

  • West Texas Intermediate: $62.49/bbl

  • NYMEX: April 2021 @ $2.795/MMBtu

  • Spot Prices: Henry Hub ($2.75/MMBtu); Dominion South ($2.39/MMBtu); Tenn. Zone 4 ($2.31/MMBtu)

WOPL - Appalachia

  • Mountain Valley Pipeline. The D.C. Circuit declined to stop work on the Mountain Valley Pipeline pending an appeal by environmental groups that said there's no public need for the project. The appeal is pending.

  • Mariner East. DEP levied almost $500,000 in penalties against Sunoco for violations along the Mariner East route. In addition to the $497,000 in penalties paid to DEP, Sunoco also paid $25,855 to the Pennsylvania Fish and Boat Commission. From the $497,000, a portion, $490,200 went to the Clean Water Fund, and $6,800 went to the Dams and Encroachments Fund.Sunoco’s infractions include unauthorized discharges of drilling fluids consisting of bentonite clay and water, also known as inadvertent returns into Snitz Creek and failure to notify DEP of multiple losses of circulation.

Headlines & Holdings - Appalachia

  • Commonwealth Court Says no Fee Award Absent Bad Faith in EHB Appeal of DEP Permit Settlement. The Commonwealth Court of Pennsylvania upheld the EHB’s use of the “bad faith” test for imposing attorneys' fees on permittees and affirmed its decision to deny the fee petition of the environmental group that settled its appeal with DEP. Clean Air Council v. PADEP, --- A.3d ---, No. 309 C.D. 2019, 2021 WL 560349 (Pa. Cmwlth. Feb. 16, 2021); PADEP v. Gerhart, --- A.3d ---, No. 107 C.D. 2020, 2021 WL 563313 (Pa. Cmwlth. Feb. 16, 2021).

Headlines & Holdings - Beyond Appalachia

  • TX Appellate Court Says O+G Lease Partially Expired under Continuous Development Clause. A court of appeals in Texas concluded that a lease partially terminated except for 160 acres held by a reclassified well that allowed the lessor to claim interests in the remaining 480 acres, reasoning that the courts should be careful to find lease expiration under a continuous development clause unless they are certain it operates as a special limitation. PPC Acquisition Co. LLC v. Delaware Basin Resources, LLC, --- S.W.3d ---, No. 08-19-00143-CV, 2021 WL 651666 (Tex. App. Feb. 19, 2021).

  • CO O+G Commission First Crack at Dispute. A federal court dismissed a case for lack of jurisdiction, holding that a Colorado statute expressly grants jurisdiction to the Colorado Oil and Gas Conservation Commission to determine “[t]he amount of the proceeds plus interest, if any, due a payee by a payer” from the sale of oil and gas from Colorado wells. Boulter v. Noble Energy, Inc., --- F. Supp. 3d ---, No. 20-CV-861-WJM-KLM, 2021 WL 615413 (D. Colo. Feb. 17, 2021).

  • Surface Owner in N.D. Owns the Pore Space. A federal court in North Dakota concluded that the surface owner, not the mineral owner, owns the pore space as part of the surface estate Cont'l Res., Inc., v. Fisher, --- F. Supp. 3d ---, No. 1:18-CV-181, 2021 WL 665102 (D.N.D. Feb. 19, 2021).

  • Eighth Circuit Says No Royalties on Non-Producing Formation. The Eighth Circuit held a landowner is not entitled to royalties on alleged production from a watered-out formation without contradicting the lessee's evidence that formation hadn't produced gas since 1982. Turner v. XTO Energy, Inc., --- F.3d ---, No. 19-2867, 2021 WL 726566 (8th Cir. Feb. 25, 2021).

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