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At the Well Weekly (v.3.8.2019)

Oil + Gas Update - Pipeline Developments in Appalachia; Oil + Gas Reservations in PA; and JOA Obligations without the JOA.

Natural gas prices continued to climb since our last report despite a drop in the national rig count and a slight slide in oil prices. In pipeline news, FERC is conducting pre-filing reviews for a few projects in Appalachia, the Chester County DA empaneled a grand jury to investigate Mariner East construction activities, and Williams announced a new pipeline project. In Appalachia court news, the Commonwealth Court of Pennsylvania rejected an attempt by a grantor to reserve oil and gas rights without expressly saying so in the deed while the Fourth Circuit rejected a breach-of-contract claim for unpaid royalties under a PSA that didn't create the obligation to drill producing wells. In other regions, the Tenth Circuit held that a joint operator is on the hook for joint expenses even without a JOA in place.

Here's your week in review...

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (-1027); Marcellus (+65); Utica/Point Pleasant (-14)

  • Brent Crude: -$65.28/bbl

  • West Texas Intermediate: -$55.90/bbl

  • NYMEX: April 2019 Contract @ +$2.841/MMBtu.

  • Spot Prices: Henry Hub (+$2.94/MMBtu); Dominion South (+$2.86/MMBtu); Tenn. Zone 4 (+$2.89/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 new to report.

  • Atlantic Coast (W. Va. to Va. and NC): Dominion Energy (sponsor of Atlantic Coast Pipeline) reports that the project will not resume until September 2019.

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

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

  • Leidy South - Benton Loop Expansion (PA): FERC is conducting pre-filing environmental reviews for additional Leidy South lines that will expand Atlantic Sunrise.

  • Mariner East (Western PA to Eastern PA): A Chester County grand jury has been impaneled to look into construction of the Mariner East pipelines.

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

  • Mountain Valley Pipeline (Northern WV to Southern Va. and NC): A group of organic farmers say that pellets dropped during construction of the Mountain Valley Pipeline contain known carcinogens.

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

  • NFG FM100 Project (NC PA to Transco): NFG announced its FM100 Project in Northwestern Pennsylvania that will feed gas to the Transco line. FERC is conducting a pre-filing review. NFG predicts a 2021 start date.

  • Northern Access (NW PA to Western NY): Nothing new to report.

  • PennEast (PA to Central Jersey): The NJ Attorney General asked the Third Circuit to stay the district court's ruling that authorized PennEast to proceed with condemnation of state-owned property. The NJDEP is taking measures to protect 749 river miles t to preserve water quality, a move that some believe will give pipeline objectors more ammunition to oppose the PennEast project.

  • Regional Energy Access (NE PA to PA/NJ): Williams launched a binding open season through April 8, 2019, to secure shipper commitments for Regional Energy Access, a pipeline designed to move gas to Pennsylvania, New Jersey, and other markets in the region.

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

  • TransCanada Eastern Panhandle Project (PA to WV): Nothing new to report.

Headlines & Holdings - Appalachia

  • PA Commonwealth Court Rejects Claim that Grantor Reserved Oil + Gas Estate. The Commonwealth Court of Pennsylvania concluded that a grantor failed to reserve any part of the subsurface estate in a deed in lieu of condemnation granted to the state to build part of the PA Turnpike, concluding that the deed did not include any express reservation and rejecting the grantor’s arguments that (a) she believed she only conveyed the surface estate and (b) the state did not need the subsurface estate to construct a part of the turnpike. O'Layer McCready v. Dep't of Cmty. & Econ. Dev., --- A.3d ---, No. 778 C.D. 2018, 2019 WL 1028540 (Pa. Cmwlth., Mar. 5, 2019).

  • Fourth Circuit Says that PSA did not Require Production. The Fourth Circuit rejected a claim for damages for unpaid royalties on production from wells spud but not completed, interpreting the PSA as containing a requirement to spud a certain number of wells but containing no requirement that the spudded wells be producing or generating royalties. Equinor USA Onshore Properties Inc. v. Pine Res., LLC, --- F.3d ---, No. 18-1291, 2019 WL 1051968 (4th Cir., Mar. 6, 2019).

Headlines & Holdings - Beyond Appalachia

  • Joint Operator on the Hook for Joint Costs Despite Lack of JOA. The Tenth Circuit held that various proposal letters and an AFE for joint operation of two wells in Colorado, coupled with the parties' conduct, created an enforceable JOA that compelled both of the joint operators to share in the actual costs incurred, rejecting arguments advanced by one of the joint operators that AFEs can't be binding without the execution of an actual JOA. Bill Barrett Corp. v. YMC Royalty Co., LP, --- F.3d ---, No. 18-1067, 2019 WL 1065865 (10th Cir., Mar. 7, 2019).


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