Oil + Gas Update - Royalties, Affiliate Transactions, and O+G Lease Ratifications.
The national rig count dropped by 21 units since our last report while natural gas prices continued their downward trend alongside steady oil prices. In pipeline news, SCOTUS passed on an appeal challenging federal court jurisdiction over PA state water quality certifications, the PA PUC is investigating a sinkhole near the Mariner East "Bypass," line, and MVP's project sponsor reported that the pipeline might not be complete this year. In Appalachia court news, a federal court in Ohio upheld an arbitration award dismissing claims by royalty owners that arms-length affiliate gas sales resulted in lower royalties. In other regions, the Eighth Circuit likewise upheld a verdict rejecting claims that a lessee engaged in improper transactions with affiliates that resulted in lower royalties, and a Texas appellate court said fact issues precluded summary judgment in favor of a lessee claiming that the lessor's acceptance of royalty payments ratified the lessee's pooled units.
Here's your week in review...
Rig Counts, Spot Prices + Oil Prices
Rigs: National (-991); Marcellus (62); Utica/Point Pleasant (-17)
Brent Crude: +$72.52/bbl
West Texas Intermediate: +$64.55/bbl
NYMEX: May 2019 Contract @ -$2.462/MMBtu.
Spot Prices: Henry Hub (-$2.50/MMBtu); Dominion South (-$2.13/MMBtu); Tenn. Zone 4 (-$1.92/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): A municipality filed an amicus brief in the DC Circuit appeal challenging FERC's approvals for the pipeline project.
Atlantic Sunrise (Northeastern PA to SE Pennsylvania): SCOTUS denied cert in the Atlantic Sunrise appeal challenging federal court to review PADEP's decision to grant a CWA water quality certification.
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): The PUC is investigating a sinkhole near the ME2 “Bypass” line. In other news, the PUC won’t lift an injunction pending appeal as Sunoco requested so it could resume construction of ME2. Finally, several lawmakers say the DEP Secretary's renomination should wait until Mariner East investigations conclude.
Mountaineer XPress (WV): Nothing new to report.
Mountain Valley Pipeline (Northern WV to Southern Va. and NC): MVP's project sponsor reported that the project may not be complete by the end of 2019. Meanwhile, MVP protesters continue plans for demonstrations against MVP while one demonstrator faces felony charges after attaching himself to equipment at a pipeline construction site.
NEXUS (Ohio to Michigan): Nothing new to report.
NFG FM100 Project (NC PA to Transco): Nothing new to report.
Northern Access (NW PA to Western NY): Nothing new to report.
PennEast (PA to Central Jersey): The DEP’s Historic Preservation Office identified nine properties in the PennEast Pipeline path that may be eligible for historic preservation instead of the three sites reported by the company.
Regional Energy Access (NE PA to PA/NJ): 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 Federal Court Affirms Arbitration’s Order Denying Royalty Claims. A federal court in Ohio upheld an arbitration award that dismissed claims alleging the lessee improperly deducted the lessors’ share of post-production costs from royalty payments after concluding that the lessors provided no evidence that the lessee’s affiliated buyer paid a price to that was less than that which the lessee would receive from a sale to an unaffiliated third party in an arms-length transaction. Hale v. Chesapeake Exploration, L.L.C., --- F. Supp. 3d ---, No. 4:18CV2217, 2019 WL 1863670 (N.D. Ohio Apr. 25, 2019).
Headlines & Holdings - Beyond Appalachia
EPA Says States can Handle Oil and Gas Waste. The EPA says states can handle oil and gas waste issues without new federal regulations.
SWN Prevails on Appeal from Favorable Royalty Verdict. The Eighth Circuit affirmed a jury's verdict in favor of SWN in a case alleging the company's affiliate transactions shorted landowners on royalty payments. Smith v. SEECO Inc., --- F.3d ---, No. 17-3636, 2019 WL 1770020 (8th Cir., April 23, 2019).
Texas Appellate Court Sends Back Summary Judgment in Ratification Case. A court of appeals in Texas concluded that fact issues precluded summary judgment in a case in which the lessee alleged a royalty owner ratified pooled units by accepting royalty payments. Strickhausen v. Petrohawk Operating Company, --- S.W.3d ---, No. 04-18-00636-CV, 2019 WL 1779925 (Tex. Ct. App., April 24, 2019).
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