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At the Well Weekly (v.4.5.2019)

Oil + Gas Update - Royalty and Bonus Disputes in PA, Trump's Bid to Undo Ban on Arctic Drilling, and O+G Regulatory Changes in Colorado.

The national rig count spiked alongside climbing oil and natural gas spot prices while the NYMEX remained relatively flat. In pipeline news, the FERC, federal courts, and even President Trump seem ready to limit state water quality certifications that have held up FERC-approved pipeline projects. In Appalachia court news, a federal judge decertified a class action dispute over bonus payments, a dispute over post-production-cost sharing survived summary judgment, and a local government got hit with an order to pay attorneys' fees after a company successfully challenged an ill-fated local ordinance regulating oil + gas activities. In other regions, Colorado revamped its oil + gas regulatory regime despite strong industry opposition, Trump can't undo Obama's ban on Arctic and Atlantic drilling, and ONRR gets another chance after botching royalty payment calculations for federal leases.

Here's your week in review...

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (+1021); Marcellus (+68); Utica/Point Pleasant (15)

  • Brent Crude: +$70.34 /bbl

  • West Texas Intermediate: +$63.08 /bbl

  • NYMEX: May 2019 Contract @ -$2.677/MMBtu.

  • Spot Prices: Henry Hub (+$2.67/MMBtu); Dominion South (+$2.46/MMBtu); Tenn. Zone 4 (-$2.45/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): Atlantic Coast Pipeline received approval to conduct slip remediation along portions of the pipeline route.

  • Atlantic Sunrise (Northeastern PA to SE Pennsylvania): The D.C. Circuit held that New York and North Carolina regulators lacked standing to challenge FERC approvals for three Transco gas pipeline projects, including Atlantic Sunrise.

  • Constitution (Northeastern PA to NY): Trump plans to issue an executive order curtailing state review of state water quality certifications for interstate pipeline projects.

  • 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): Three Chester County residents who sued Sunoco over its construction of the Mariner East pipelines have agreed to settle on undisclosed terms. In a separate regulatory matter, Sunoco will pay a $200,000 fine and conduct more frequent and rigorous safety inspections of the Mariner East 1 pipeline as part of a settlement with the PUC’s pipeline safety division.

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

  • Mountain Valley Pipeline (Northern WV to Southern Va. and NC): Mountain Valley Pipeline representatives will have access to two properties with the owners’ consent, settling a dispute over access, while a hearing to get onto a third property has been postponed. Meanwhile, a 69-year-old man joined another protester who has been living in a tree along the MVP pipeline route since October.

  • 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): FERC upheld its conclusion that New York state environmental regulators waived their authority to deny a Clean Water Act permit for Northern Access after blowing a one-year deadline.

  • PennEast (PA to Central Jersey): PennEast lawyers urged the DC Circuit to reject the Delaware Riverkeeper's previously rejected arguments challenging FERC approvals for the project.

  • 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

  • PA Water Authority Survives Summary Judgment in Royalty Dispute Involving Gathering Fees. A federal court in Pennsylvania concluded that a municipal authority’s evidence created a genuine dispute of fact sufficient to survive summary judgment on the question of whether CNX’s blended gathering fee assessed the royalty owner for wet gas processing that the company did not “actually incur” as required by the royalty clause in the oil and gas lease before assessing the fee. Municipal Authority of Westmoreland County v. CNX Gas Company, L.L.C., --- F. Supp. 3d ---, No. 2:16-CV-422, 2019 WL 1427155 (W.D. Pa., Mar. 29, 2019).

  • Federal Judge in PA Decertifies Class Action Dispute Over Bonus Payments. A federal judge in Pennsylvania granted a motion to decertify a class action dispute over the failure to pay bonuses for oil and gas leases given that class-wide resolution could not account for differences among the lease agreements with individual class plaintiffs. Walney v. SWEPI LP, --- F. Supp. 3d ---, No. CV 13-102, 2019 WL 1436938 (W.D. Pa., Mar. 31, 2019).

  • Federal Judge Says Municipality Must Pay $100K to PGE After Successful Challenge to Local Frac Waste Ban. A federal judge in Pennsylvania ordered Franklin Township to pay PGE more than $100,000 in attorneys’ fees after PGE successfully challenged a frac waste ban under Section 1983. Pennsylvania General Energy Co. LLC v. Grant Township, --- F. Supp. 3d ---, No. 1:14-cv-00209 (W.D. Pa., April 1, 2019).

  • Oil + Gas Company Settles FLSA Misclassification Suit. A federal judge approved a settlement of $3.56 million to end an overtime class action alleging an oil and gas operator misclassified employees as independent contractors to avoid overtime payments. Conley v. Cabot Oil and Gas Corp., No. 2:17-cv-01391 (W.D. Pa., April 2, 2019).

Headlines & Holdings - Beyond Appalachia

  • N.M. Federal Court Dismisses Claim against Bona Fide Purchaser of Oil and Gas Lease. A federal court in New Mexico dismissed a claim against a bona fide purchaser of an oil and gas lease, reasoning that the prior owner attempted to record the lease with a defective notary page, the recording official rejected it, and the subsequent purchaser acquired the lease a few months later without actual or constructive knowledge of the prior owner's acquisition. Marathon Oil Permian, LLC, v. Ozark Royalty Co., --- F. Supp. 3d ---, No. 118CV00548JCHSCY, 2019 WL 1433363, at *1 (D.N.M., Mar. 29, 2019).

  • Alaska Federal Court Rejects Trump's Bid to Open Oil and Gas Drilling in Parts of the Arctic and Atlantic. A federal judge in Alaska denied the President's bid to the Obama Administration's prior ban and open up drilling in the Arctic and Atlantic Oceans via executive order, holding that Section 12(a) of the Outer Continental Shelf Lands Act gives the President the power to withdraw certain areas from drilling but does not expressly authorize the President to revoke prior withdrawals. League of Conservation Voters v. Trump, --- F. Supp. 3d ---, No. 3:17-CV-00101-SLG, 2019 WL 1431217 (D. Alaska, Mar. 29, 2019).

  • Louisiana Federal Court Absolves Insurer from Pollution Coverage. A federal judge in Louisiana held that an insurer did not owe a duty to defend or indemnify a drilling company insured for long-term environmental pollution damage claimed by plaintiffs in a lawsuit, reasoning that the policy exclusion apply to those claims, the litigation didn't trigger the limited coverage for pollution-related physical or property damage, and there is no coverage in the policy for property leased by the insured. Evanston Ins. Co. v. Riceland Petroleum Co., --- F. Supp. 3d ---, No. 2:17-CV-01031, 2019 WL 14288811 (W.D. La., Mar. 28, 2019).

  • Federal Court in Texas Dismisses Non-Payment Claim for Oil + Gas Proceeds. A federal court in Texas dismissed a claim for nonpayment of oil and gas proceeds pursuant to Texas Natural Resources Code § 91.404(c), concluding that the royalty owner's claim is premature given a "dispute concerning title" and "a reasonable doubt" that the royalty owner has an interest in the proceeds such that the lessee can withhold payments under an exception to the statute. Verde Minerals LLC v. Koerner, --- F. Supp. 3d ---, No. 2:16-CV-199, 2019 WL 1429789 (S.D. Tex., Mar. 29, 2019).

  • D.C. District Court Sends Royalty Calculation Dispute Back to ONRR. The D.C. District Court held that ONRR's calculation of royalty payments on unprocessed gas production from a lessee of federal lands conflicted with regulations governing the calculation of non-arms-length transactions and deductions for transportation costs and did not comply with the reasoned-decision requirements of the Administrative Procedure Act. Continental Resources, Inc. v. Gould, --- F. Supp. 3d ---, No. CV 14-65 (RDM), 2019 WL 1440111 (D.D.C., Mar. 30, 2019).

  • N.M. Federal Court Green Lights Expert Testimony in Royalty Class Action. A federal court in New Mexico concluded that (a) defendants in a royalty class action could propose expert testimony on how natural gas products are processed, transported, and sold after extraction from specific wells; and (b) plaintiffs could offer a chain-of-title expert testimony, all of which the court concluded is relevant to the question of whether class-wide treatment of the plaintiffs' claims is proper. Ulibarri & White River Royalties, LLC v. Southland Royalty Co., LLC, --- F. Supp. 3d ---, No. 1:16-CV-215-RB-JHR, 2019 WL 1459052 (D.N.M., Apr. 2, 2019).

  • Colorado Passes Oil + Gas Regulation Overhaul. The Governor of Colorado is expected to sign legislation passed by lawmakers overhauling oil and gas regulation in the state, which sends a great deal of regulatory responsibility on surface impacts to local governments, calls for the conservation commission to take a more balanced approached to issuing permits by focusing on environmental impact, and changes pooling provisions to make it harder to integrate interest holders within proposed units.


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