Oil and Gas Update for 4/22/2016 – PA Regulatory Review Commission Narrowly Approves DEP’s Chapter 78 Overhaul, Mistake in DPU Recording Dooms Lease in Ohio, and the U.S. Senate Passes Energy Policy Reforms in a Bipartisan Vote

The national rig count slid another 9 units while the rig counts for the Marcellus and Utica remained relatively flat.  Oil prices based on the Brent Crude and West Texas Intermediate benchmarks posted gains while the Henry Hub surpassed $2 for the first time since February despite falling spot prices in the Marcellus.  In Appalachia, the Pennsylvania Independent Regulatory Review Commission approved DEP’s controversial “Chapter 78” oil and gas regulations in a 3-2 vote while the Sixth Circuit let a lease expire based on a faulty pooling designation.  Elsewhere, things were relatively quiet except for a rare bipartisan vote approving of energy policy reforms in the U.S. Senate.  Here’s your week in review:

The Rig Count  oil
  • The national rig count is down 9 units from last week to 431. (Source: BakerHughes).
  • The rig count in the Marcellus is flat at 28.  (Source: BakerHughes).
  • The rig count in the Utica is down at 11.  (Source: BakerHughes).
 Commodity Prices oil-prices
  • Natural gas spot prices at the Henry Hub are up from last week at $2.02/MMBtu as of 4/22/2016.  (Source: EIA).
  • In the Marcellus and Utica region, spot prices fell and trail the Henry Hub benchmark as of 4/22/2016.  At Dominion South in northwest Pennsylvania, spot prices are down at $1.36/MMBtu as of 4/22/2016. On Transco’s Leidy Line in northern Pennsylvania, prices are down at $1.28/MMBtu as of 4/22/2016.  (Source: EIA).
  • Oil prices are up from last week at $45.11/bbl as of 4/22/2016.  (Source: WSJ).
Developments in Appalachia mountains
  • PA Independent Regulatory Review Commission Narrowly Approves DEP’s Controversial Oil & Gas Regulations.  The Pennsylvania Independent Regulatory Review Commission narrowly approved changes to oil and gas regulations recently promulgated Pennsylvania’s Department of Environmental Protection. In a 3-2 vote that followed an extensive public hearing, the Commission concluded that the Department’s controversial regulations are consistent with DEP’s statutory authority and the intent of the General Assembly, two conclusions that IRRC must reach by law before authorizing any agency regulations.  Under Pennsylvania law, standing committees of the Pennsylvania House and Senate, already having expressed their disapproval of DEP’s action, may pass a resolution disapproving of the regulations, but that resolution must be approved by the Governor. The regulations are also subject to review by the Attorney General.  The Department’s regulatory initiative, which revised “Chapter 78” to govern conventional operations and created a new “Chapter 78a” to govern unconventional operations, has faced the ire of industry stakeholders and members of the legislature for a variety of reasons, and the Pennsylvania Supreme Court will soon weigh in given a recent appeal from an order denying an industry group’s request to enjoin the regulations.
  • Faulty Recording of Pooling Designation Dooms Ohio Oil & Gas Lease.  In a decision that might make lessees cringe, the U.S. Court of Appeals for the Sixth Circuit upheld a bid to bust a lease included in a drilling unit despite the lessee’s timely unit operations that would have maintained the lease, concluding that the lease could not be considered as part of the unit because the lessee did not comply with the pooling clause’s recording requirements for pooling designations even though the landowner had notice of the pooling and the lessee substantially complied with the pooling clause.  Filicky v. Am. Energy-Utica, LLC, — F.3d —-, No. 15-4061, 2016 WL 1445315 (6th Cir., Apr. 13, 2016).
Developments Beyond Appalachia us-map
  • Bipartisan Senate Bill Includes Reforms for LNG Exports and Federal Oil and Gas Permits.  In a bipartisan vote, the U.S. Senate passed a bill to enact the Energy Policy Modernization Act, the first significant energy initiative since the Bush Administration’s 2005 Energy Policy Act, that (among other things) is designed to foster LNG production and exports and streamline federal oil and gas permitting procedures. The U.S. House is expected to consider the bill in connection its own energy reform package. The full text of the senate bill may be accessed here.

Questions about this week’s update?  Email [email protected] or call (717) 703-5907.

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At the Well Weekly
Welcome to At the Well Weekly, a blog designed for busy folks in the oil and gas industry. If you haven’t read a thing during the week, our hope is that you can breeze through the update and be up to speed on the basics such as current rig counts, commodity prices, and case law updates on legal issues of interest in Appalachia and elsewhere.
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