Oil + Gas Update - Transco Breaks Records while other Pipeline Projects are Plagued by Delays, Increased Costs, and Permit-Review Suspensions.
Natural gas prices dropped again since our last report while rig counts and oil prices remained relatively flat. In pipeline news, Dominion expects additional delays and costs for ACP, PADEP suspended permit reviews for Mariner East, and Transco is breaking gas transportation records due in large part to Atlantic Sunrise. In Appalachia court news, the Second Circuit sent back a 401 water quality certification denial by the NYDEC for lack of a reasoned decision, the Superior Court sided with Chevron in a surface access spat with one of its lessors, and the Fourth Circuit confirmed MVP's authority to take immediate possession of property along its pipeline route subject to payment of just compensation at a later time. In other regions, a Florida court ordered the state's environmental agency to issue an exploratory well permit and a Louisiana court invoked state law to deny an insurance claim for defense costs resulting from a pipeline explosion.
Here's your week in review...
Rig Counts, Spot Prices + Oil Prices
Rigs: National (+1049); Marcellus (63); Utica/Point Pleasant (19)
Brent Crude: -$61.78/bbl
West Texas Intermediate: -$52.56/bbl
NYMEX: February 2019 Contract @ -$2.662/MMBtu.
Spot Prices: Henry Hub (-$2.56/MMBtu); Dominion South (-$2.36/MMBtu); Tenn. Zone 4 (-$2.37/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:
Adelphia Project (Greater Philadelphia Region): Nothing to report.
Atlantic Coast (W. Va. to Va. and NC): Dominion reports that ACP's target date is now 2021 and the project will incur an additional $3 billion in costs resulting in large part from litigation and regulatory challenges.
Atlantic Sunrise (Northeastern PA to SE Pennsylvania): Thanks to additional lines, including Atlantic Sunrise, Transco delivered a record-breaking 15.68 million dekatherms (MMdt) on Jan. 21, 2019, and established a new three-day market area delivery record, averaging 15.30 MMdt from Jan. 30 to Feb. 1, 2019.
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): DEP suspended permit reviews for ETP's Mariner East and Revolution pipeline projects, until further notice, reportedly due to non-compliance.
Mountain Valley Pipeline (Northern WV to Southern Va. and NC): Fire department officials and others are investigating whether a fire that caused $500,000 in damages to equipment at the MVP site is the result of arson.
NEXUS (Ohio to Michigan): Nothing new to report.
Northern Access (NW PA to Western NY): The Second Circuit vacated and remanded the NYDEC's denial of state water quality certifications for lack of a reasoned decision (see below for more details).
PennEast (PA to Central Jersey): 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
Fourth Circuit Authorizes Quick Take for MVP. A federal court confirmed MVP’s authority to take immediate possession of private property along the approved pipeline route with payment of just compensation to follow later, rejecting landowner claims that MVP had no such authority. Mountain Valley Pipeline, LLC v. 6.56 Acres of Land, Owned by Powell, --- F.3d ---, No. 18-1159, 2019 WL 439002 (4th Cir., Feb. 5, 2019).
Second Circuit Sends Back NYDEC Denial of Water Quality Certification for Pipeline. The Second Circuit Court of Appeals rejected the NYDEC’s decision to deny Section 401 water quality certifications for NFG’s Northern Access project, concluding that environmental regulators failed to provide a reasoned decision and remanding with instructions to clearly articulate the agency's basis for the denial and how that basis is connected to information in the existing administrative record. National Fuel Gas Supply Corp. v. NYSDEC, --- F.3d ---, No. 17-1164, 2019 WL 446990 (2d Cir., Feb. 5, 2019).
Superior Court Sides with Chevron in Surface Access Dispute. The Superior Court of Pennsylvania concluded that Chevron would suffer irreparable harm without an order enjoining lessors from granting access to the leased premises to prepare for well-drilling activities, reasoning that Chevron had access rights under the oil and gas lease it acquired from its predecessor-in-interest, the lessors deprived Chevron of those contract rights by blocking access, and the delay-related costs resulting from the lessor's actions would be impossible to quantify. Porter v. Chevron Appalachia, LLC, --- A.3d ---, 2019 PA Super 31, 2019 WL 493216 (Pa. Super., Feb. 8, 2019).
Headlines & Holdings - Beyond Appalachia
Florida Court Orders Agency to Issue Oil + Gas Exploratory Permit. A Florida appellate court ordered that the state's environmental agency should issue an oil and gas permit for an exploratory well on 20,000 acres of "environmentally degraded" land within the Everglades, concluding that the permit applicant met the minimum design standards for a permit, did not violate statutory setback requirements for the well, and the statutory criteria for issuing permits weighed in favor of of the applicant despite the agency's contention that the land's location in the Everglades and the permittee's delay in pursuing oil and gas rights rendered the applicant disqualified from ever drilling on the property. Kanter Real Estate, LLC v. Department of Environmental Protection, --- So.3d ---, No. 1D17-5096, 2019 WL 436613 (Fla. Ct. App., February 05, 2019).
Louisiana Court Says Anti-Indemnity Statute Precludes Claim for Pipeline Explosion Defense Costs. A federal court in Louisiana held that the state's anti-indemnity statute precluded a claim for defense costs under an MSA with knock-for-knock indemnity obligations between Phillips 66 and its contractor (Blanchard) because Phillips did not pay extra premiums to be named as additional insured under the contractor's policy and therefore did not satisfy an exception to the statute's anti-indemnity provisions. Atlantic Specialty Insurance Co. v. Phillips 66 Co., --- F. Supp. 3d ---, No. CV 17-9318, 2019 WL 446584 (E.D. La., Feb. 5, 2019).