Oil and Gas Update for 12/12/2016 – Oil and Natural Gas Prices, Rig Count Trend Upward as 2016 Winds Down.

As we inch toward the end of this up-and-down year, commodity prices soared (relatively speaking) since our last report with the Henry Hub closing in on $4/MMBtu and oil prices climbing above $50/bbl alongside a consistently rising national rig count. In other developments, federal and state courts in Appalachia and elsewhere managed to issue a few final yet interesting decisions as they attempt to clear their dockets before year end.  With our sincere thanks for tuning in this year and our best wishes for a happy holiday season, here’s your final roundup of the past several weeks as we close out 2016:

The Rig Count  oil
  • The national rig count is up at 624.  (Source: BakerHughes).
  • The rig count in the Marcellus is up at 40.  (Source: BakerHughes).
  • The rig count in the Utica is up at 19.  (Source: BakerHughes).
 Commodity Prices oil-prices
  • The Henry Hub natural gas spot price is up at $3.76/MMBtu as of 12/12/2016. (Source: EIA).
  • In the Marcellus and Utica region, spot prices are up as of 12/12/2016. At Dominion South in northwest Pennsylvania, spot prices are up at $3.40/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are up at $3.30/MMBtu.  (Source: EIA).
  • Oil prices are up at $ $52.62/bbl as of 12/12/2016. (Source: WSJ).
Developments in Appalachia mountains
  • WV Supremes Address Mineral Interest vs. Royalty Interest Distinctions. The Supreme Court of West Virginia concluded that a deed granting the “exclusive right to make and execute and deliver all such oil and gas leases … and to receive all rentals and bonuses” (i.e., language which tends to create a mineral interest) conveyed title to the oil and gas in place while the same deed conveying to another grantee a one-eighth royalty on any oil or gas “found and produced in paying quantities” created a royalty interest. Anderson v. Jones, — S.E.3d —, No. 15-0460, 2016 WL 6756803 (W. Va., Nov. 15, 2016).
  • Surveying Private Property for Pipeline Project not a “Public Use,” WV Supreme Court Holds. The West Virginia Supreme Court held that a proposed pipeline for transporting gas produced in West Virginia to other state markets tentatively approved by FERC did not satisfy the state’s “public use” test before pipeline companies can exercise eminent domain power and therefore the operator could not rely on eminent domain authority to justify the use of private property to survey the pipeline route. Mountain Valley Pipeline v. McCurdy, — S.E.3d —, No. 15-0909 (W. Va., Nov. 16, 2016).
  • WV Supremes Deny Surface Owners’ Bid to Assume Rights to Severed Oil and Gas Following Failed Tax Sale. The Supreme Court of West Virginia denied an attempt by surface owners to acquire title to oil and gas underlying their property by paying taxes assessed on the oil and gas, concluding that the true owners properly paid taxes on the oil and gas and they were not required to pay duplicate taxes on their related royalty interests. Hill v. Lone Pine Operating, — S.E.3d —, No. 16-0219, 2016 WL 6819787 (W. Va., Nov. 18, 2016).
  • PA Superior Court Cuts Off Attempt to Claim Perpetual Royalty Interest in Oil and Gas Lease. Relying on the opinion of the trial court, the Pennsylvania Superior Court concluded that a 1954 assignment of a one-half interest in a 1949 oil and gas lease and any future leases of the same property created within the lease’s original primary term transferred a 1/16th royalty interest to the assignee, but the assignee could not claim any future royalty interests for leases covering the same property executed after the expiration of the original 10-year primary term. Rohe v. Meehan, — A.3d —, No. 344 MDA 2016, 2016 WL 6840304 (Pa. Super. Ct., Nov. 21, 2016).
  • PA Federal Judge Denies Landowners’ Attempt to Dismiss Well Operator’s Counterclaims in Dispute over Frac Pond Reclamation Obligations. A federal judge in Pennsylvania denied a bid by the plaintiff to dismiss its lessee’s counterclaim for a declaratory judgment that the terms of the parties’ oil and gas lease governed the lessee’s site restoration requirements rather than a separate easement agreement that has since expired, concluding over the objections of the lessor that the counterclaims based on those agreements have merit, are compulsory, and satisfied federal pleading standards. Red Bend Hunting & Fishing Club v. Range Resources – Appalachia, LLC, — F. Supp. 3d —, No. 4:16-CV-00864, 2016 WL 7034686 (M.D. Pa., Dec. 2, 2016).
  • In Pooling Dispute, Federal Judge in WV Tosses Everything Except Bad-Faith Pooling Claim. A West Virginia federal judge dismissed a landowner’s claim that an oil and gas lease did not expressly authorize his lessee to pool his property with other properties and pay him proportionate royalties on any production from the unit, but the lessor’s alternative claims that the lessee engaged in bad-faith pooling survived the motion with the judge reasoning that those claims raise different issues about a lessee’s implied obligations that may require some fact development and resolution at a later stage in the proceeding. Stern v. Columbia Gas Transmission, LLC, — F. Supp. 3d —, No. 5:15-CV-98, 2016 WL 7053702 (N.D.W. Va., Dec. 5, 2016).
  • Pennsylvania Federal Judge Tells Oil and Gas Business Partners to Go Figure it Out. In a complicated dispute involving competing claims to oil and gas rights, partition requests, disagreements over areas of mutual interest, billing and accounting discrepancies, operating obligations, and a host of other issues, a federal judge denied competing motions for summary judgment for various breach of contract and related claims and essentially told the parties that they know their business affairs better than the courts and are therefore better equipped than judges to resolve these sorts of disputes. Ohio Valley Energy Sys. Corp. v. DL Res., Inc., — F. Supp. 3d —, No. CV 15-29, 2016 WL 7107972 (W.D. Pa., Dec. 5, 2016).
Developments Beyond Appalachia us-map
  • Louisiana Court of Appeal Unwinds Overriding Royalty Interest. The Court of Appeal of Louisiana reversed a trial court’s prior order that an agent engaged to execute a lease on behalf of mineral owners could recover an agreed-upon cash bonus plus an overriding royalty for any percentage above a “standard” 1/8 royalty the agent negotiated with lessees, reasoning instead that the agreement between the parties entitled the agent to an override only if it secured one from the lessee; having failed to do so, the agent could not claim an overriding royalty carved out of the lessor’s royalty interest as the agent claimed. Encana Oil & Gas (USA) Inc. v. Brammer Eng’g, Inc., — So. 3d —, No. 51,045-CA, 2016 WL 6776075 (La. Ct. App., Nov. 16, 2016).
  • Colorado Appeals Court Says Non-Consenting Owner Must Exhaust Administrative Remedies in Dispute Over Unit Production Proceeds. Interpreting the state’s conservation law, an appellate court in Colorado concluded that in the absence of a payment agreement a non-consenting landowner force pooled into a unit who is entitled to production proceeds after payout must exhaust administrative remedies in the Colorado Oil and Gas Conservation Commission, particularly as to questions of whether and when payout occurred and the final amount owed. Grant Bros. Ranch, LLC v. Antero Res. Piceance Corp., — P.3d —, No. 15-CA-2063, 2016 WL 7009138 (Colo. Ct. App., Dec. 1, 2016).
  • Ark. Supreme Court Upholds Royalty Class Certification Order in Dispute over Post-Production Costs. The Supreme Court of Arkansas upheld an order certifying a class of royalty owners resident in Arkansas who alleged underpayment of royalties resulting from post-production cost deductions, concluding that the class plaintiffs met the test for certification and the order did not violate the state or federal constitutional due process rights of the class defendant. SEECO, Inc. v. Snow, — S.W.3d —, No. CV-15-197, 2016 Ark. 444 (Ark., Dec. 8, 2016).

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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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