At the Well Weekly (v.4.9.2021)

Oil + Gas Update | Second Circuit Rejects NYC's Climate Change Tort Claims.

Natural gas spot prices at two locations in Appalachia dipped below $2/MMBtu while the NYMEX and Henry Hub held above that benchmark. The rig count gained a few units and oil prices hovered around $60/bbl. In pipeline news, parties to the PennEast Pipeline case in the U.S. Supreme Court stake out their positions while the Commonwealth of Virginia asked for more time for water quality reviews associated with the Mountain Valley Pipeline project. In Appalachia, the Second Circuit killed NYC's bid to use state tort law to regulate climate change as so many other municipalities around the nation have attempted. In other regions, the Texas Supreme Court addressed a lease-busting bid based on a continuous-development provision and, in another case, whether an arbitration agreement applies to claims involving third-parties. In Arkansas, a federal court certified a question to the state supreme court about the applicability of a statute of limitations to underpaid royalty claims.

Here's your week in review:

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (432); Marcellus (30); Utica/Point Pleasant (10)

  • Brent Crude: $63.73/bbl

  • West Texas Intermediate: $60.01/bbl

  • NYMEX: May 2021 @ $2.520/MMBtu

  • Spot Prices: Henry Hub ($2.38/MMBtu); Dominion South ($1.80/MMBtu); Tenn. Zone 4 ($1.74/MMBtu)

WOPL - Appalachia

  • PennEast Pipeline. The State of New Jersey and its amici both urged the Supreme Court to rule that certificated pipelines don’t have the authority to condemn property in which the state holds an interest. A number of other states (not including PA) also filed a brief in favor of New Jersey, arguing that pipeline companies can’t exercise eminent domain over property in which states have interests.

  • Mountain Valley Pipeline. Virginia’s DEQ told federal officials that it won’t be able to issue a new water quality permit for the project’s stream crossings before December.

  • Dakota Access. Government lawyers told a federal court that the Biden Administration hasn’t yet taken a position on whether to back the shutdown of Dakota Access pending environmental reviews despite being given a 60-day extension to tell the court if it planned to deviate from the previous administration’s stance.

Headlines & Holdings - Appalachia

  • Second Circuit Kills NYC Climate Change Case. The Second Circuit rejected NYC’s attempt to use state tort law to hold energy companies liable for damages allegedly caused by greenhouse gas emissions, stating that global warming presents a uniquely international problem of national concern governed by a "complex web" of federal and international laws and regulations and reasoning that "[t]he City of New York has sidestepped those procedures and instead instituted a state-law tort suit against five oil companies to recover damages caused by those companies’ admittedly legal commercial conduct in producing and selling fossil fuels around the world." City of New York v. Chevron Corp., --- F.3d ---, No. 18-2188, 2021 WL 1216541 (2d Cir. Apr. 1, 2021).

Headlines & Holdings - Beyond Appalachia

  • Federal Court in Ark. Asks State Supreme Court for Guidance on Statute of Limitations for O+G Royalty Claim. A federal court in Arkansas addressed whether the state's statute of limitations precludes a claim for underpaid royalties if filed after the limitations period or if the limitations period restarts every month as a new claim for underpaid royalties, but the court passed on resolving the question and instead certified the question to the Arkansas Supreme Court for resolution. Pennington v. BHP Billiton Petroleum (Fayetteville) LLC, --- F. Supp. 3d ---, No. 4:20-CV-00178-LPR, 2021 WL 1230455 (E.D. Ark. Mar. 31, 2021).

  • TX Supreme Court Rejects Bid to Bust Lease for Lack of Continuous Development. The Supreme Court of Texas rejected claims by a lessor that a continuous development provision operated as a special limitation that terminated the lease as to non-producing tracts when the lessee failed to timely spud-in new wells, holding instead that the lease defined "drilling operations" as activities other than spudding-in a well and those are sufficient to maintain the lease as to non-producing tracts. Sundown Energy v. HJSA No. 3, --- S.W.3d ---, No. 19-1054, 2021 WL 1323406 (Tex. Apr. 9, 2021).

  • Alaska Supreme Court Says Owner of ORRI has Standing to Challenge Unit Order. The Supreme Court of Alaska held that an owner of an overriding royalty interest in a lease with the state has a financial stake in the state agency's decision on an application to expand a unit that originally included the lease burdened by the ORRI and, therefore, its owner had standing to challenge the order that omitted the lease/ORRI from the final application. PLC, LLC v. STATE OF ALASKA, DEPARTMENT OF NATURAL RESOURCES, --- P.3d ---, No. S-17500, 2021 WL 1325534 (Alaska Apr. 9, 2021).

  • Arbitration Clause in O+G Asset Purchase Agreement Applies to Resolve Claims Involving Non-Signatory Third Parties. The Texas Supreme Court held that claims for indemnity and attorneys' fees involving third-party non-signatories to an agreement did not fall within an exception to the arbitration clause and that non-signatory assignees are bound by the agreement to arbitrate under a theory of assumption. Wagner v. Apache Corp., --- S.W.3d ---, No. 19-0243, 2021 WL 1323413 (Tex. Apr. 9, 2021).

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