At the Well Weekly (v.3.27.2020)


Oil + Gas Update - Courts Slowing Down but Still Grappling with O+G, Pipeline Cases Amidst COVID-19.


Oil prices fell again since our last report amidst the turmoil caused by the COVID-19 pandemic while natural gas spot prices hover around an average of $1.50/MMBtu in Appalachia. In pipeline news, Mariner East construction resumed after the company sought and received a waiver from the Governor's order to shut down non-life-sustaining businesses in the Commonwealth. In Appalachia, courts addressed royalty claims, lease expiration claims, and disputes over mineral rights while courts in other regions tackled bans on frac sand mining, consent-to-assign provisions in oil and gas leases, bonus payments, and surface rights.


Here's a review of the past several weeks...


Rig Counts, Spot Prices + Oil Prices


  • Rigs: National (-728); Marcellus (39); Utica/Point Pleasant (9)


  • Brent Crude: -$27.95/bbl


  • West Texas Intermediate: -$21.51/bbl


  • NYMEX: April 2020 @ +$1.659/MMBtu.


  • Spot Prices: Henry Hub (+$1.71/MMBtu); Dominion South (+$1.31/MMBtu); Tenn. Zone 4 (+$1.32/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): DEP issued a Clean Water Act Section 401 Water Quality Certification for the Adelphia Gateway Natural Gas Pipeline Project.


  • Atlantic Coast (W. Va. to Va. and NC):


  • 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): Gov. Wolf issued an executive order shutting down all business that are not “life-sustaining,” including Mariner East construction. The pipeline operator however requested and obtained waivers to resume construction. In other news, a pipeline worker from Westmoreland County is expected to plead guilty to a felony for forging documents that said a weld on the Mariner East pipeline was properly X-rayed.


  • Mountaineer XPress (WV): Nothing new to report.


  • Mountain Valley Pipeline (Northern WV to Southern Va. and NC): The Fish and Wildlife Service and Mountain Valley Pipeline agreed to additional time for FWS to conduct review before FERC decides a reconsideration request.


  • 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): PennEast Pipeline’s pitch to split the project into two phases has drawn a flood of objections at FERC. Meanwhile, industry groups backed PennEast's cert petition before the Supreme Court.


  • 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


  • Federal Law Preempts Va. Attempts to Regulate Atlantic Coast Pipeline. A federal court in Virginia held that federal law preempts a county’s attempt to enforce local floodplain regulations and variance requirements that would stymie the pipeline project in derogation of the Natural Gas Act. Atlantic Coast Pipeline, LLC v. Nelson Cty., --- F. Supp. 3d ---, No. 3:18-CV-00115, 2020 WL 1151073 (W.D. Va. Mar. 9, 2020).


  • Federal Court in Ohio Denies Reconsideration Bid in Royalty Row. A federal court in Ohio denied a bid by royalty owners to reconsider the court’s prior decision that dismissed their claim that their oil and gas lease prohibited post-production cost deductions from royalty payments. Cunningham Property Management Trust v. Ascent Resources-Utica, LLC, --- F. Supp. 3d. ---, No. 2:16-CV-957, 2020 WL 1227207 (S.D. Ohio Mar. 13, 2020).


  • FERC Approves PennEast Reroute. FERC approved several route realignments and workspace modifications to address landowner requests and construction concerns subject to certain conditions. PennEast Pipeline Co., LLC, 170 FERC ¶ 61198, 2020 WL 1314427 (Mar. 19, 2020).


  • Federal Court in WV Certifies Royalty Class Action. A federal court in West Virginia certified a class of royalty owners alleging their lessee breached its obligations under the royalty provisions of two types of lease agreements by improperly deducting post-production costs and failing to pay royalties based upon the price received at the point of sale. Romeo v. Antero Resources Corp., --- F. Supp. 3d ---, No. 1:17CV88, 2020 WL 1430468 (N.D.W. Va. Mar. 23, 2020).


  • Lease-Busting Claim Survives in Ohio Federal Court. A federal court in Ohio denied a motion to dismiss a complaint alleging lease expiration and other claims, rejecting the lessee’s arguments that the formation of the lessee’s unit satisfied the relevant terms of the lease without the need to pay additional bonus and concluding instead that the plaintiff sufficiently alleged the lessee untimely created and operated the unit. Scenicview Estates v. Eclipse Resources I, LP, --- F. Supp. ---, No. 2:19-CV-39, 2020 WL 1469470 (S.D. Ohio Mar. 26, 2020).


  • PA Superior Court Holds that Lease Expired. The Pennsylvania Superior Court held that a lease expired for lack of any production since 1993 or operations since 2008 despite the lessee’s delivery of delay rentals for the period of non-production which the lessor rejected and did not cash. Barton v. Graham, --- A.3d ---, No. 1704 WDA 2018, 2020 WL 1488440 (Pa. Super. Mar. 26, 2020).


  • Ohio Court Holds that MTA Extinguished A Mineral Interest Exception. A court of appeals in Ohio affirmed a trial court’s decision that a mineral interest exception in a 1921 warranty deed was extinguished by operation of the state’s Marketable Title Act such that the surface owners now have title to the underlying mineral estate. McLellan v. McGary, --- N.E.3d ---, No. 2020-Ohio-1109, 2020 WL 1488727 (March 28, 2020).


Headlines & Holdings - Beyond Appalachia


  • Minnesota Supreme Court Rejects Challenge to Local Ordinance that Bans Frac Sand Mining. The Supreme Court of Minnesota rejected takings and dormant-commerce-clause challenges brought by Minnesota Sands regarding a local ordinance that purported to ban frac sand mining, holding that although Minnesota Sands had standing to bring this case, its claims failed because the ordinance did not violate the dormant Commerce Clause on its face, in purpose or in effect; and the mineral leases gave Minnesota Sands only a speculative, contingent right to possess and use the land, not a compensable property interest under state law for the purposes of a takings claim under the Minnesota and United States Constitutions. Minnesota Sands, LLC, v. Cty. of Winona, Minnesota, --- N.W.3d ---, No. A18-0090, 2020 WL 1164185 (Minn. Mar. 11, 2020).


  • Honolulu Latest City to Sue Majors for Climate Change, Public Nuisance, and Failure to Warn. The city and county of Honolulu claim that Sunoco, ConocoPhillips, Exxon, Shell, Chevron, BHP, BP and Marathon Petroleum Corp. knew for more than 50 years that unrestricted use of their fossil fuel products would create greenhouse gases that would warm the planet and undertook a coordinated effort to hide those impacts from the general public.


  • Federal Court Remands Mass. Climate Change Suit Against Exxon. The climate change action brought by the attorney general will proceed in state court after a federal court rejected Exxon’s removal bid.


  • Rhode Island and California Municipalities Lean on Fourth Circuit Remand Decision in their Climate Change Cases While Chevron Downplays the Decision. Rhode Island and municipalities from California filed Rule 28(j) letters following the Fourth Circuit’s decision that Baltimore’s climate change lawsuit belongs in state court. Chevron filed Rule 28(j) letters in the various circuit courts of appeal urging them to reject the recent Fourth Circuit decision that Baltimore City’s climate change case belongs in state court, not federal court.


  • Enviros and Law Professors Back Kids’ Climate Change Reargument Bid; Government Fires Back. Public health orgs, law professors, and green groups are supporting reargument in the Juliana case in the Ninth Circuit after the court dismissed their lawsuit claiming that the federal government is endangering their futures by not acting to curb climate change. The United States responded that the court properly threw out the kids’ climate change case.


  • Challenge to PHMSA Disclosure Regs Fall Short. The D.C. Circuit denied Union Pacific's petition for review challenging PHMSA's regulation promulgated under the Fixing America's Surface Transportation Act ("FAST Act") for failing to protect the security and confidentiality of required disclosures made by railroads transporting hazardous materials, reasoning that the application of different protections for highly sensitive information as compared to less sensitive aggregated data did not violate the requirement to establish security and confidentiality protections to prevent inadvertent access to that information by unauthorized parties. Union Pac. R.R. Co. v. Pipeline & Hazardous Materials Safety Admin., --- F.3d ---, No. 19-1075, 2020 WL 1264220 (D.C. Cir. Mar. 17, 2020).


  • Tenth Circuit Confirms Colorado Royalty Class Action Settlement. The Tenth Circuit upheld an approval of a Colorado royalty class action settlement agreement among royalty owners and their lessee involving post-production costs despite the objections of four class members, reasoning that (1) the district court did not exceed its discretion in deeming the settlement fair; (2) the objectors did not preserve their challenge to the adequacy of subclass representatives; (3) notice of the proposed settlement was adequate; and (4) the released claims share a factual predicate with the claims asserted in the complaint. Sefcovic v. TEP Rocky Mountain, LLC, --- F.3d ---, No. 19-1120, 2020 WL 1285849 (10th Cir. Mar. 18, 2020).


  • Dept. of Interior Properly Reinstated Mining Lease for Ops in Minnesota's Superior National Forest. The federal court for D.C. held that DOI properly reinstated mining leases for operations in a national forest one year after it cancelled those leases, concluding that DOI has inherent authority to timely reconsider its prior decisions to correct errors. Voyageur Outward Bound School v. United States, --- F. Supp. 3d ---, No. 1:18-CV-01463 (TNM), 2020 WL 1275795 (D.D.C. Mar. 17, 2020).


  • Federal Court in Colorado Nixes Constitutional Challenges to Pooling Statute. A federal judge for the district of Colorado rejected numerous constitutional challenges to pooling and natural gas development provisions in Colorado's Oil and Gas Conservation Law, holding that various immunity and abstention principles barred the case. Wildgrass Oil & Gas Comm. v. Colorado, --- F. Supp. 3d ---, No. 19-CV-00190-RBJ, 2020 WL 1289559 (D. Colo. Mar. 18, 2020).


  • Federal Court in Texas Addresses Consent-to-Assign Provision in O+G Lease. A federal court in Texas concluded that (a) a consent-to-assign provision in an oil and gas lease may be valid despite the state's policy in favor of free alienation of property rights; (b) withholding consent still must be reasonable; and (c) it would be unreasonable to withhold consent to assign rights to an established and financially secure oil and gas operator. Mayo Foundation for Medical Education and Research v. BP America Production Company, --- F. Supp. 3d ---, No. 2:20-CV-34-Z, 2020 WL 1326314 (N.D. Tex. Mar. 20, 2020).


  • CO Federal Court Upholds Most of BLM's Response to FOIA for O+G Wells. A federal court in Colorado held that BLM properly responded to FOIA requests for information about certain parcels BLM planned to offer for lease, rejecting the requester's claim that FOIA cases create a general right to discovery, but remanded for an additional search for information about other parcels up for lease. Rocky Mountain Wild v. United States Bureau of Land Management, --- F. Supp. 3d ---, No. 18-CV-0314-WJM-STV, 2020 WL 1333087 (D. Colo. Mar. 23, 2020).


  • Statute of Frauds Bars Right to Receive Bonus Payments for O+G Leases. A court of appeals in Michigan rejected bids by a group of landowners to recover bonus payments from oil and gas companies who decided not to lease, holding that the landowners who actually signed leases had the right to claim payment but the statute of frauds precluded recovery for landowners who didn't sign. Murray v. Chesapeake Energy Corp., --- N.W.3d ---, No. 346062, 2020 WL 1333084 (Mich. Ct. App. Mar. 19, 2020).


  • Exxon Climate Change Suit on Hold Pending EPA Permit. A federal judge in Massachusetts temporarily stayed a case in which environmental groups sued Exxon over climate change risks at a storage facility pending EPA’s review of and action on a related permit. Cons. Law Foundation, Inc. v. ExxonMobil Corp., --- F. Supp. 3d ---, No. CV 16-11950-MLW, 2020 WL 1332949 (D. Mass. Mar. 21, 2020).


  • D.C. Federal Court Sends Dakota Access Permits Back for EIS. The federal court for the District of Columbia struck down Army Corps permits issued to Dakota Access, holding that the Corps should conduct an EIS for the portion of the project that underlies the Missouri River. Standing Rock Sioux Tribe v. U.S. Army Corps of Engineers, --- F. Supp. 3d ---, No. CV 16-1534 (JEB), 2020 WL 1441923 (D.D.C. Mar. 25, 2020).


  • Surface Rights Survive Lease Expiration. The Fifth Circuit confirmed an oil company's surface rights for ongoing operations following the expiration of a surface lease that required site restoration upon expiration, rejecting the surface owner's claim that the expiration of the lease compelled the well operator to remove all machinery, restore the surface to preexisting conditions, and vacate the premises. Petro Harvester Operating Company, L.L.C. v. Keith, --- F.3d ---, No. 19-60151, 2020 WL 1443532 (5th Cir. Mar. 25, 2020).


  • Oilfield Service Co. Can't Benefit from Employee's Arbitration Agreement with Third Party. The Fifth Circuit rejected an attempt by an oilfield service company to arbitrate claims brought by its employees based on an arbitration agreement between the employees and the hiring platform that they used to get the job, rejecting arguments that estoppel and/or third-party-beneficiary principles gave the employer the right to invoke the employee's arbitration agreement with a third party. Hiser v. NZone Guidance, L.L.C., --- F. 3d ---, No. 19-50353, 2020 WL 1487860 (5th Cir. Mar. 24, 2020).


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