As we open 2018, oil prices slipped a bit after hitting a three-year high at the end of the year while natural gas spot prices got a jolt from extreme weather conditions in the northeast. In Appalachia, the Ohio Supreme Court rejected the notion that oil and gas leases held by production from shallow formations contain an implied covenant to further explore and develop deeper strata. In other news, the Tenth Circuit rejected the “marketable product” rule for calculating royalty clauses in New Mexico oil and gas leases. Here’s the week in review: Read more ›
As 2017 comes to a close, the rig count is relatively strong and oil prices hover around $60/bbl while natural gas spot prices continue to underwhelm. In Appalachia, the Delaware River Basin Commission proposed its controversial regulatory ban on hydraulic fracturing while the Pennsylvania Department is close to finalizing new general permits for methane emissions from oil and gas sources. Wishing our readers a happy holiday season, here’s your final review for 2017:
The Rig Count
- The national rig count is up at 930 (Source: BakerHughes).
- The rig count in the Marcellus is up at 47. (Source: BakerHughes).
- The rig count in the Utica is down at 27. (Source: BakerHughes).
- The Henry Hub natural gas spot price is down at $2.67/MMBtu as of 12/15/2017. (Source: EIA).
- In the Marcellus and Utica region, spot prices are down as of 12/15/2017. At Dominion South in northwest Pennsylvania, spot prices are down at $2.12/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are down at $2.01/MMBtu. (Source: EIA).
- Oil prices are up at $63.33/bbl as of 12/15/2017. (Source: WSJ).
Developments in Appalachia
- PADEP Poised to Issue Final General Permits for Methane Emissions from Oil and Gas Sources. The Pennsylvania Department of Environmental plans to issue final versions of general permits for methane emissions from oil and gas sources, including a revised GP-5 for pipeline and compressor operations and a new GP-5A for oil and gas well sites. PADEP reports that the permits will be published in the first quarter of 2018 and effective upon publication with a 30 or 60 day transition period for the pipeline and oil/gas permits respectively.
- DRBC Issues Notice of Proposed Rulemaking for Regulations Banning Hydraulic Fracturing in the Basin. DRBC published its notice of proposed rulemaking banning hydraulic fracturing in the basin along with limited authorizations to transfer water outside the basin and dispose of treated water within the basin. A copy of the draft regulations may be accessed here.
- Court Declines Landowner Request to Revive Claims that EQT Paid Royalties in Violation of MRA or Kilmer. The Superior Court denied claims that EQT’s leases violated the Minimum Royalty Act or the Supreme Court’s Kilmer decision on post-production costs, concluding that the landowners never offered evidence that their royalties ever fell below the statutory minimum even if the lease authorized deductions for post-production costs. Niverth v. Equitrans, L.P., — A.3d —, No. 400 WDA 2017, 2017 WL 6163013 (Pa. Super., Dec. 8, 2017).
- WV Supreme Court Confirms Reservation of Royalty Interest Only. The Supreme Court of West Virginia concluded that a deed reserving the right to royalties on production and marketing after drilling without any language regarding control over drilling or marketing conveyed a royalty interest only as opposed to a mineral interest given the lack of any language retaining executive rights held by a mineral owner. Kidder v. Montani Energy, LLC et al., — S.W.3d —, No. 16-1109, 2017 WL 5509927 (W. Va. Nov. 17, 2017).
- PA Supremes Deny Rex Energy’s Appeal to Dismiss Class Complaint. The Pennsylvania Supreme Court denied a petition for allowance of appeal filed by Rex Energy in which Rex lost its bid to dismiss a class action brought by landowners claiming that Rex failed to pay them bonuses of $2,500/acre despite the fact that the leases remained contingent upon clear title evaluations and executing orders for payment because Rex didn’t exercise its right to terminate in a timely fashion. Cardinale v. R.E. Gas Development, LLC, No. 150 WAL 2016 and 151 WAL 2017.
- Sixth Circuit Says No Need for Subsurface Agreement When Oil and Gas Lease Authorizes Transportation of Product from “Other Lands.” The Sixth Circuit recently concluded an oil and gas lease authorizing the transportation of oil and gas from “other lands” gave the lessee a right to drill wells through the lessor’s property without the need for a subsurface easement agreement and rejected landowner claims that a faulty affidavit submitted with permit applications constituted a breach of the “compliance with all laws” provision of the lease. Eclipse Res.-Ohio, LLC v. Madzia, — F.3d —, No. 17-3145, 2017 WL 5903351 (6th Cir., Nov. 30, 2017).
- VA Federal Court Dismisses Landowner Complaint Against FERC, MVP, for Lack of Jurisdiction. The Northern District of Virginia dismissed a complaint against Mountain Valley Pipeline and FERC raising constitutional challenges to FERC decisions issuing certificates of public to the pipeline operator under the Natural Gas Act, concluding that plaintiffs’ challenges can be raised in the appropriate court of appeals reviewing the FERC order and that the exclusive remedies available to plaintiffs are to ask for a rehearing before FERC and then file in the appropriate court of appeals. Berkley v. Mountain Valley Pipeline, LLC, — F. Supp. 3d —, 7:17-CV-00357, 2017 WL 6327829 (W.D. Va., Dec. 11, 2017).
- PA Superior Court Says Four-Year Statute Applies to Dec Action Challenging Validity of Oil and Gas Deed. The Pennsylvania Superior Court recently held that a plaintiff challenging the validity of a voidable oil and gas deed had four years to bring a declaratory judgment action but failed to do so. Ford v. Oliver, — A.3d —, No. 670 WDA 2016, 2017 WL 6378647 (Pa. Super., Dec. 14, 2017).
- Eastern District of PA Says Claims against Law Firm for Title Opinion Work Sound in Tort, not Contract. A federal court in Pennsylvania recently concluded that a production company procuring title opinions from a law firm that did not properly identify title holders to the property in question and represented both sides to the oil and gas deal stated a cause of action in tort rather than contract but did not state a claim for “conflict of interest” under the Pennsylvania Rules of Professional Responsibility given that those rules do not create a private cause of action. Brenco Oil, Inc. v. Blaney, — F. Supp. 3d —, No. CV 17-3938, 2017 WL 6367893 (E.D. Pa., Dec. 13, 2017).
Developments beyond Appalachia
- TX Appellate Court Says Statute Authorized Withholding of Royalties. A court of appeals in Texas concluded that the parties to an oil and gas lease had a dispute over title as contemplated by Texas Natural Resources Code § 91.402(b)(1), given a claim by the holder of an NPRI in a 38-acre tract, such that the lessee had the authority to withhold payment of royalties to the plaintiff/trust until that dispute was resolved. Leavitt v. Ballard Expl. Co., Inc., — S.W.3d —, No. 01-16-00536-CV, 2017 WL 6043695 (Tex. App., Dec. 7, 2017).
- Ninth Circuit Says AMI Agreement Compelled Payment for Acquisition of Oil and Gas Interests. In a case involving a dispute over payments for lease acquisitions within an AMI, the Ninth Circuit concluded that the acquiring company had the obligation to pay a prospect fee of $50 per net mineral acres for any acquisition within the AMI for the duration of the agreement even though the non-acquiring company did not contribute to the acquisition. Energy Investments, Inc. v. Greehey & Company, Ltd., — F.3d —, No. 16-35245, 2017 WL 6154074 (9th Cir., Dec. 8, 2017).
Spot prices in Appalachia increased since our last report based largely on cold temperature forecasts while the rig count and oil prices maintained their positions. In Appalachia, West Virginia reports that it reached a memorandum of understanding with China for investments in natural gas development projects. Elsewhere, Texas courts tackle disputes over mineral interests, a royalty class action in Oklahoma survives preliminary motions to dismiss, and Colorado’s Supreme Court blesses a refund bid by a production company that mistakenly overpaid oil and gas production taxes. Here’s the week in review: Read more ›
Natural gas prices in Appalachia haven’t rebounded much since our last report, hovering around $1/MMBtu amidst a small decline in the rig count, but the good news is that the Brent Crude surpassed its $60/bbl benchmark earlier in the week. In Appalachia, a federal court in Ohio took a shot at predicting how the state supreme court would deal with oil and gas leases that provide for royalty payments based on the “market value at the well.” Here’s the week in review: Read more ›
Natural gas prices have fallen pretty harshly since our last report, particularly in Appalachia where prices dropped below $1/MMBtu, amidst a slightly sliding rig count. In Appalachia, the Pennsylvania Superior Court addressed the distinction between royalty vs. oil/gas interests in a deed reservation while courts in Ohio address whether an oil well is “capable of producing gas” for purposes of drawing up well drilling units. In other news, the North Dakota Supreme Court asked a trial court to review its determination of state ownership of minerals underlying streambeds in light of new state legislation allocating mineral ownership under the high-watermark of the Missouri River. Here’s the week in review: Read more ›
It’s been a relatively quiet week since our last report. Natural gas spot prices in Appalachia took a nose dive amidst only modest increases in the Henry Hub and the rig count. In Appalachia, a federal judge denied a bid to dismiss a class action brought by royalty owners alleging improper payments. The Pennsylvania Department of Environmental Protection and the FERC did their part moving various pipeline projects along, with DEP issuing an air permit for the Atlantic Sunrise project and FERC denying bids from environmentalists to halt construction of that pipeline and the Northern Access pipeline. Finally, the Delaware River Basin Commission plans to ban hydraulic fracturing operations within the basin. Here’s the week in review:
After a brief hiatus we are back at the well. Since our last report in early August, Hurricane Harvey ravaged southeastern Texas, affecting oil, natural gas, and gasoline prices all over the country. In Appalachia, the PADEP issued the 2015 numbers for methane and other emissions from oil and gas sources, pointing to a modest increase in methane emissions from oil and gas sources despite significant increases in operation and production alongside significant decreases of other emissions. In other news, pipeline project sponsors in Appalachia and elsewhere continue to face challenges in pursuit of their state and federal approvals, gaining ground with agencies on permit applications while facing challenges from environmental and other groups. The struggle may continue as a result of a recent D.C. Circuit ruling that chastised FERC for a faulty NEPA review of pipeline projects in the south and their potential for greenhouse gas emissions. Here’s a roundup of the last couple of weeks:
Natural gas spot prices in Appalachia took a nose dive since our last report despite the rig-count rebound and rising oil prices. In Pennsylvania, the Senate Republicans introduced a severance tax to raise approximately $100 million in revenue in order to close budget gaps in exchange for regulatory reforms designed to hasten actions on permit applications submitted to the Pennsylvania Department of Environmental Protection for approval. In other news, a court of appeals in Texas busted a Permian Basin lease in part based on a retained-acreage provision that didn’t cover non-operational areas on the leased premises while a federal judge in Kansas kept a royalty class action in federal court under the Class Action Fairness Act. Here’s your weekly roundup:
After a few weeks off we’re back at the well. The national rig count dipped two units last week for the first time in a long time while oil and natural gas prices increased slightly. Since our last report, the Pennsylvania Supreme Court issued its long-awaited decision in Pennsylvania Environmental Defense Fund v. Commonwealth in which the state’s highest court scrapped a longstanding test for determining violations under the state’s Environmental Rights Amendment. The Third Circuit was also busy issuing decisions on a wide range of topics while a federal court in Kentucky interpreted “oil and gas” as used in a farmout agreement as excluding NGLs for purposes of royalty payment obligations. In North Dakota, the state’s highest court held that a surface owner is the owner of the pore space beneath the land under the state’s surface owner protection act. Here’s the roundup:
Oil and natural gas spot prices continued their downward trend since our last report with the Henry Hub dipping below $3 for the second straight week, spot prices in Appalachia dipping below $2, and oil prices hovering around $44/bbl. In Appalachia, the Pennsylvania Public Utility Commission issued its annual report demonstrating that the state collected more than $173 million from impact fees from natural gas producers, although the total dropped about $15 million from 2015. In other news, a bankruptcy judge denied a claim to hundreds of millions of dollars in royalties based on a division order. Here’s a roundup of the past several weeks: