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At the Well Weekly (v.7.26.2019)

Oil + Gas Update - Commonwealth Court Issues Decisions on Chapter 78a O+G Regs and Use of State Funds Under Environmental Rights Amendment.

Since our last report, gas prices continued to slide alongside declining rig counts despite a slight rise in oil prices. In pipeline news, Atlantic Sunrise settled lien disputes, Mountain Valley received a positive environmental review from FERC for its Southgate expansion project, the Fourth Circuit struck an FWS opinion that would've green-lighted Atlantic Coast's construction efforts, and PADEP started the public review process for permits and water quality certification for NFG's FM100 expansion project. In Appalachia court news, the Commonwealth Court issued its decision on challenges to Pennsylvania's Chapter 78a oil and gas regulations and ruled in another case that portions of bonuses and royalties payable to the Commonwealth from oil and gas leases are not part of the "trust" created by Article I, sec. 27 of the Pennsylvania Constitution. Nothing much outside of Appalachia to report except for a couple of updates on climate change lawsuits.

Here's your week in review...

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (-946); Marcellus (-56); Utica/Point Pleasant (-15)

  • Brent Crude: +$64.21/bbl

  • West Texas Intermediate: +$57.35/bbl

  • NYMEX: August 2019 Contract @ ­-$2.220/MMBtu.

  • Spot Prices: Henry Hub (-$2.20/MMBtu); Dominion South (-$1.92/MMBtu); Tenn. Zone 4 (-$1.95/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): The Fourth Circuit tossed a bio/take opinion issued by FWS for the project, concluding that the agency's decision was arbitrary (see below for more details).

  • Atlantic Sunrise (Northeastern PA to SE Pennsylvania): Atlantic Sunrise settled its case with contractors to remove all liens along the pipeline.

  • 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): A Berks County homeowner alleges that Mariner East pipelines affected his water supply and made him sick.

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

  • Mountain Valley Pipeline (Northern WV to Southern Va. and NC): EQT reported that it is considering a divestiture of its stake in the MVP project. FERC issued a draft impact assessment for MVP’s expansion of its line to add compressor stations and related facilities, finding that the project may result in some adverse environmental impacts that would be reduced to "less-than-significant levels" with certain recommended adjustments.

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

  • NFG FM100 Project (NC PA to Transco): PADEP published notices of the project's permit applications along with the Section 401 Water Quality Certification.

  • 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): Nothing new to report.

  • Regional Energy Access (NE PA to PA/NJ): Nothing new to report.

  • Revolution Pipeline (PA): 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

  • Commonwealth Court's Decision on Chapter 78a (Oil + Gas Regs). The Commonwealth Court issued a decision enjoining some but not all of the provisions that the Marcellus Shale Coalition challenged in its lawsuit against DEP following the agency’s promulgation of "Chapter 78a" governing unconventional natural gas development in the Commonwealth. The court concluded that the Department of Environmental Protection had authority to (a) require operators to identify abandoned wells within certain areas near their proposed wells, (b) impose some additional site restoration requirements, (c) regulate certain impoundments, and (d) require additional reporting for some waste activities, but the court struck down regulations requiring well operators to (a) plug and abandon wells that don't belong to them and (b) restore sites to original contours within 9 months of completing certain drilling activities even if operators receive a two-year extension to do so. The court deferred ruling on other challenges to regulations involving freshwater impoundments and spill remediation. MSC v. DEP, --- A.3d ---, No. 573 M.D. 2016, 2019 WL 3268820 (Pa. Cmwlth., July 22, 2019).

  • Commonwealth Court Says Some Oil + Gas Lease Funds Aren't Part of the Trust Created by Article I sec. 27. The Commonwealth Court rejected a challenge under Article I, sec. 27 (the so-called “Environmental Rights Amendment”) to the Commonwealth’s use of bonus and royalty payments from the state’s Oil and Gas Lease Fund for non-conservation purposes, holding that (by statute) one-third of the proceeds constituting bonuses and rental payments are not part of the corpus of the trust created by Article I, sec. 27 and concluding that the challenged fiscal enactments transferring lease funds to the general fund are facially constitutional subject to an accounting. Pennsylvania Envtl. Def. Found. v. Commonwealth, --- A.3d ---, No. 228 M.D. 2012, 2019 WL 3402922 (Pa. Cmwlth., July 29, 2019).

  • Oil + Gas Rights in Bankruptcy Require an Adversary Proceeding. A federal court in Pennsylvania concluded that the parties’ rights to oil proceeds in bankruptcy must be decided through an adversary proceeding. PAPCO, Inc. v. Oleum Exploration, LLC, --- F. Supp. 3d ---, No. 3:19-CV-00589, 2019 WL 3252416 (M.D. Pa., July 19, 2019).

  • Third Circuit Says State Substantive Law Applies in Condemnation Actions Brought by Private Entities under the Natural Gas Act. The Third Circuit concluded that state substantive law on just compensation applies in condemnation actions under the Natural Gas Act when companies acquire private property by eminent domain to construct, operate, and maintain natural gas pipelines. In re Tennessee Gas Pipeline Co., LLC, --- F.3d ---, No. 17-3700, 2019 WL 3296581 (3d Cir., July 23, 2019).

  • Fourth Circuit Strikes Down FWS Opinion for ACP Project. The Fourth Circuit concluded that FWS arbitrarily reached a no-jeopardy conclusion in its bio opinion and take statement that allowed Atlantic Coast to construct its pipeline without determining that the project affected four endangered and threatened species, including the rusty patched bumble bee, the clubshell, the Indiana bat, and the Madison Cave isopod. Defenders of Wildlife v. DOI, --- F.3d ---, No. 18-2090, 2019 WL 3366598 (4th Cir., July 26, 2019).

Headlines & Holdings - Beyond Appalachia

  • Federal Judge in Rhode Island Remands Climate Change Suit. A Rhode Island federal judge granted a motion by the state to remand a case alleging that energy companies cause climate change that damages the states infrastructure. State of Rhode Island v. Chevron Corp., --- F. Supp. 3d ---, No. 1:18-cv-00395 (D. R.I., July 22, 2019).

  • West Coast Cities Urge Ninth Circuit to Follow Rhode Island Court’s Lead. Cities of Oakland, San Francisco, and San Mateo sent Rule 28(j) letters to the Ninth Circuit informing the court of Rhode Island's recent decision remanding its climate change lawsuit to state court and urged the Ninth Circuit to do the same. City of Oakland v. BP PLC, No. 18-16663 (pending); County of San Mateo v. Chevron Corp., No. 18-15499 (pending).


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