Oil + Gas Update - WV Supreme Court Issues Another Surface Use Decision, Commonwealth Court Denies Fees in DEP Permit Dispute, and Fifth Circuit Tackles AMI Dispute.
Oil prices spiked and then dropped since our last report following the tanker attacks while natural gas prices and the national rig count continued to decline. In pipeline news, the ACP project sponsor is optimistic about resuming construction, MVP needs a permit redo for its Southgate expansion project, the NJ AG argued its case to the Third Circuit challenging PennEast's condemnation authority, the PA PUC plans on enhancing safety regulations for intrastate pipelines such as Sunoco (operator of Mariner East), and ETC fought back by appealing a DEP enforcement order for the Revolution Pipeline. In Appalachia court news, the WV Supremes issued another surface-use decision (this time with a different result), Commonwealth Court denied a bid by the Sierra Club for attorneys fees in a permit dispute, and an Ohio court addressed prescriptive easements for accessing well sites and equipment. In other regions, the Fifth Circuit addressed an AMI dispute over dedicated lease interests, the D.C. Circuit called FERC to the carpet for departing from its index-based pricing for oil pipeline rate increases, and a California appellate court blessed a statewide Environmental Impact Report issued to evaluate the effects of well-stimulation techniques like hydraulic fracturing.
Here's your week in review...
Rig Counts, Spot Prices + Oil Prices
Rigs: National (-969); Marcellus (58); Utica/Point Pleasant (18)
Brent Crude: -$62.01/bbl
West Texas Intermediate: -$52.81/bbl
NYMEX: June 2019 Contract @ -$2.324/MMBtu.
Spot Prices: Henry Hub (-$2.34/MMBtu); Dominion South (-$2.02/MMBtu); Tenn. Zone 4 (-$2.00/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): Dominion Energy, sponsor of the ACP project, says it expects to win legal challenges and thereafter resume pipeline construction operations.
Atlantic Sunrise (Northeastern PA to SE Pennsylvania): Nothing new to report.
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 will engage in a rulemaking on additional pipeline safety measures and financial reporting requirements for intrastate pipeline public utilities.
Mountaineer XPress (WV): Nothing new to report.
Mountain Valley Pipeline (Northern WV to Southern Va. and NC): Protesters gathered at a local courthouse to express their concerns about the Mountain Valley Pipeline project. In other news, NC regulators asked for more information for pipeline permit applications after denying MVP’s application, saying that the company can reapply once an EIS is prepared and FERC identifies a preferred route.
NEXUS (Ohio to Michigan): Nothing new to report.
NFG FM100 Project (NC PA to Transco): Nothing new to report.
Northeast Supply Enhancement Project (NJ/NY): Nothing new to report.
Northern Access (NW PA to Western NY): Nothing new to report.
PennEast (PA to Central Jersey): The Third Circuit heard oral argument from the parties in New Jersey's challenge to the PennEast pipeline. The state argued, among other things, that the pipeline company has no right to condemn state-owned property for the pipeline route.
Regional Energy Access (NE PA to PA/NJ): Nothing new to report.
Revolution Pipeline (PA): ETC appealed the May 2019 DEP order requiring restoration of waters/wetlands affected by Revolution Pipeline.
Rover (OH, WV, PA to Michigan): Nothing new to report.
TransCanada Eastern Panhandle Project (PA to WV): Nothing new to report.
Headlines & Holdings - Appalachia
Sierra Club Loses Bid for Attorneys’ Fees. The Commonwealth Court upheld the Environmental Hearing Board’s denial of Sierra Club’s fee petition following settlement/discontinuance of Sierra Club’s appeal challenging certain permitted discharges, holding that the Sierra Club’s appeal did not cause the permittee to revise its plans (the permittee would have taken alternative measures based on cost, not because of the appeal) such that the organization is not entitled to fees. Sierra Club v. DEP, --- A.3d ---, No. 563 CD 2018 (Pa. Cmwlth., June 12, 2019).
WV Supreme Court Confirms Surface Rights for O+G Operators. Following last week’s decision that limited the ability of oil and gas companies to use a severed surface estate to develop off-premises oil and gas, the West Virginia Supreme Court this week confirmed the implied right to use the surface estate to develop severed mineral estates despite objections from various surface-owner plaintiffs, holding that horizontal drilling activities are within the implied easement acquired by virtue of the relevant severance deeds and the activities did not impose a substantial burden on the surface owners. Andrews v. Antero Resources, --- S.E.3d ---, No. 17-0126 (W.V., June 10, 2019).
Ohio Court Upholds Prescriptive Easement to Access O+G Wells. A court of appeals in Ohio held that an operator of oil and gas wells that could only access the well site and other equipment/facilities on property owned by a church had standing to raise prescriptive easement as a defense to a trespass claim and confirmed the trial court’s ruling on the scope of the easement but remanded to determine the apportionment of future expenses incurred for repair and maintenance to prevent easement from becoming a nuisance to the church. Shiloh Ministries, Inc. v. Simco Exploration Corp., --- N.E.3d ---, No. 2018-T-0057, 2019 WL 2424076 (Ohio Ct. App., June 10, 2019).
Headlines & Holdings - Beyond Appalachia
Fifth Circuit Says No Breach of AMI for Failure to Offer Interests in Leases. In a case alleging breach of an AMI for failure to offer interests in leases acquired after the AMI's effective date, the Fifth Circuit concluded that the AMI exempted pre-owned interests in leases owned by "any" party to the contract such that the defendant had no obligation to contribute interests in a lease it acquired after the AMI's effective date when another party to the AMI also already owned interests in the same lease. Glassell Non-Operated Interests, Ltd. v. Enerquest Oil & Gas, L.L.C., --- F.3d ---, No. 18-20125, 2019 WL 2442745 (5th Cir., June 12, 2019).
California Appellate Court Upholds EIR for Oil + Gas Well Stimulation Techniques. A court of appeals in California denied a petition challenging an Environmental Impact Report to address the need for additional information about the environmental effects of well stimulation treatments such as hydraulic fracturing and acid well stimulation, concluding that the agency provided the public with detailed information regarding any potential environmental impacts of these activities in the state as required by the CEQA and "Senate Bill No. 4." Center for Biological Diversity v. California Dept. of Conservation, --- P.3d ---, No.C083913 (Cal. Ct. App., June 14, 2019).
DC Circuit Says FERC Departed from Indexing Method for Pipeline Rates Without Explanation. In a case involving a challenge to oil pipeline rates, the D.C. Circuit held that FERC improperly departed from its index-based rate-increase policy when the agency relied on data generated after an oil pipeline's rates took effect, concluding that the agency's longstanding policy called for increasing rates based on a prior two-year historic average and holding that the agency failed to provide sufficient reasons for departing from its longstanding policy. Southwestern Airlines v. FERC, --- F.3d ---, No. 18-1134, 2019 WL 2479451 (D.C. Cir., June 14, 2019).
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