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At the Well Weekly (v.5.3.2019)

Oil + Gas Update - PA Superior Court Says No Additional Payments in Lieu of Free Gas Unless a Well is "on" (not under) the Surface.

Natural gas prices crept upward since our last report while the rig counts and oil prices remained essentially flat. In pipeline news, ACP construction might start in the third quarter but the project won't be complete until at least 2021; MVP faces allegations that the pipeline will harm fish and bats; a PA lawmaker drew criticism for a tweet about Mariner East workers; FERC approved Williams' Northeast Supply Enhancement Project; and environmental groups urged DRBC to reject the PennEast pipeline. In Appalachia news, the Superior Court held that a lessor can't get payments in lieu of free gas unless there's a well "on" the surface of the leased premises even if there's a portion of a lateral underneath it. In other regions, the Tenth Circuit upheld a class action alleging the lessee improperly deducted a portion of gas gathering costs from royalty in violation of Oklahoma's "marketable product" rule that says lessees are wholly responsible for bearing costs of rendering gas marketable for sale.

Here's your week in review...

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (-990); Marcellus (62); Utica/Point Pleasant (+18)

  • Brent Crude: -$70.85/bbl

  • West Texas Intermediate: -$62.94/bbl

  • NYMEX: The May 2019 Contract expired Friday @ ­+$2.566/MMBtu. The June 2019 Contract opened @ +­$2.620/MMBtu.

  • Spot Prices: Henry Hub (+$2.62/MMBtu); Dominion South (+$2.20/MMBtu); Tenn. Zone 4 (+$2.11/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): Although ACP pipeline project sponsors stated that the pipeline won’t be online until 2021, construction on the project will begin again in the third quarter of 2019.

  • Atlantic Sunrise (Northeastern PA to SE Pennsylvania): The U.S. Supreme Court denied certiorari in a Third Circuit appeal by environmental groups claiming that the Third Circuit lacks jurisdiction to review a Pennsylvania water quality permit for the Atlantic Sunrise gas pipeline expansion project.

  • 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): ETP signed a two-year project labor agreement to expand its Marcus Hook shale liquids hub outside Philadelphia, Pennsylvania. Meanwhile, a lawmaker in PA opposed to the pipeline received much criticism for tweeting that Mariner East workers are the same as Nazis who claimed that they were just doing their job.

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

  • Mountain Valley Pipeline (Northern WV to Southern Va. and NC): A protester accused of terroristic threats was released from prison on bail. A circuit court judge ruled against a Roanoke County landowner who accused the company of trespassing when crews surveyed his property. In a letter to the U.S. Fish and Wildlife Service, the Sierra Club said that “ample” new information about the project’s effect on fish and bats has come to light since the agency determined in 2017 that endangered species would not be significantly harmed.

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

  • NFG FM100 Project (NC PA to Transco): Nothing new to report.

  • Northeast Supply Enhancement Project (NY): Williams reported that the FERC issued a certificate of public convenience and necessity authorizing the Northeast Supply Enhancement project – an expansion of the existing Transco natural gas pipeline designed to serve New York markets – in time for the 2020/2021 winter heating season.

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

  • PennEast (PA to Central Jersey): Led by the Delaware Riverkeeper, 111 organizations and 1,600 individuals submitted a letter to the governors of New Jersey, New York, Delaware, and Pennsylvania urging them to exercise their full authority against approval of the PennEast pipeline.

  • 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 Federal Judge Denies Judgment NOV in O+G MSA Dispute. A federal judge in Pennsylvania upheld the jury’s finding that an operator improperly withheld $1.6 million in payments to the contractor for pump down services in violation of the PA Contractor and Subcontractor Payment Act. Stingray Pressure Pumping, LLC v. EQT Prod. Co., --- F. Supp. ---, No. 2:16-CV-00279-BRW, 2019 WL 1880034 (W.D. Pa., Apr. 26, 2019).

  • PA Appellate Court Holds that O+G Well must be on the Surface of the Leased Premises to Receive Payment in lieu of Free Gas. The Superior Court of Pennsylvania held that a lessor is not entitled to payment in lieu of free gas unless a vertical well originates “on” the surface of the leased premises as stated in the lease, reasoning that the portion of the horizontal well under the leased premises is not the same as a vertical well because there are no surface disturbances that would justify additional payments from the lessee. Mitch v. XTO Energy, Inc., --- A.3d ---, No. 2096 WDA 2018, 2019 WL 1873161 (Pa. Super., Apr. 26, 2019).

  • Commonwealth Court Clarifies Appellate Standing in Zoning Cases. Overruling two prior decisions, the Commonwealth Court held that an objector who merely submits a letter during a zoning case challenging a project does not have standing to appeal an decision of the zoning board unless the letter is submitted to the zoning board such that other parties have the opportunity to respond and the board has an opportunity to consider it properly; otherwise, the letter is not part of the record and its author thereby cannot preserve any appellate issues. Coppola v. Smith Twp. Bd. of Supervisors, --- A.3d ---, No. 930 C.D. 2018, 2019 WL 1940357 (Pa. Cmwlth., May 2, 2019).

  • PA Superior Court Upholds Fee Award in Favor of O+G Company. The Pennsylvania Superior Court upheld $50,000 in attorneys’ fees awarded to an oil and gas company accused (unsuccessfully) of conversion of plaintiffs’ property and of defamation Kelly v. Repsol Oil & Gas USA, LLC, --- A.3d ---, No. 420 MDA 2018, 2019 WL 1965648 (Pa. Super., May 1, 2019).

Headlines & Holdings - Beyond Appalachia

  • Tenth Circuit Upholds Royalty Class Certification. The Tenth Circuit upheld an order certifying a class of royalty owners under FRCP 23 who claim that their lessee improperly deducted their share of gas treatment costs from payments when, under Oklahoma law, the lessee bears all costs of marketability. Naylor Farms, Inc. v. Chaparral Energy, LLC, --- F.3d ---, No. 17-6146, 2019 WL 1967101 (10th Cir., May 3, 2019).


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