The Henry Hub dipped below $3 for the first time in several months alongside a rig count that climbed 10 more units nationwide since our last report, despite a fragile but steady oil price hovering at around $55/bbl. In Appalachia, PADEP issued several key permit authorizations for the Marine East 2 and PennEast pipeline projects and has its eyes set on low-level microseismic activities attributed to zipper frac jobs in the Utica. In other news, Trump’s controversial pick for EPA chief survives a bumpy nomination process amidst rollbacks of energy-related regulations by Congress and the President under the infrequently invoked Congressional Review Act. Here’s your week in review:
The Rig Count
- The national rig count is up at 751. (Source: BakerHughes).
- The rig count in the Marcellus is flat at 42. (Source: BakerHughes).
- The rig count in the Utica is flat at 21. (Source: BakerHughes).
- The Henry Hub natural gas spot price is down at $2.92/MMBtu as of 2/17/2017. (Source: EIA).
- In the Marcellus and Utica region, spot prices are down as of 2/17/2017. At Dominion South in northwest Pennsylvania, spot prices are down at $2.64/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are down at $2.46/MMBtu. (Source: EIA).
- Oil prices are down at $55.40/bbl as of 2/17/2017. (Source: WSJ).
Developments in Appalachia
- Pipeline Project Approvals from PADEP. On the heels of FERC approvals for interstate lines sponsored by Rover Pipeline and Transcontinental, the Pennsylvania’s Department of Environmental Protection issued authorizations under state environmental laws for the Mariner East 2 Pipeline sponsored by Sunoco Logistics and the PennEast Pipeline sponsored by a joint venture featuring UGI and South Jersey Gas, granting Chapter 102 E&S permits and Chapter 105 dam safety permits to Sunoco for stream crossings while separately granting water quality certifications to PennEast as it awaits final FERC approvals.
- PADEP Blames Zipper Frac for Quake Readings. The Pennsylvania Department of Environmental Protection issued a press release and report indicating that a production company’s zipper frac technique in the Utica (fracturing parallel/adjacent wells in sequence, enabling one well to hold pressure while frac’ing the other well) caused four low-magnitude, microseismic earthquakes. The company ceased operations voluntarily and is working with PADEP on seismic monitoring operations in the area of the wells.
- PA Court Awards Refund of Oil and Gas Bonus Payments for Bad Title. The Superior Court of Pennsylvania held that a landowner had to pay back $238,500 in bonus payments following a determination that he had bad title to the oil and gas he leased to a production company despite the landowner’s curious claims that (a) the lessee “voluntarily” paid him that money before checking title, (b) it’s the lessee’s fault for paying without checking title first, and therefore (c) the landowner should be entitled to keep the bonus cash. Pennsylvania General Energy Company, L.L.C. v. Hershey, — A.3d —, No. 908 WDA 2016, 2017 WL 568885 (Pa. Super., Feb. 13, 2017).
Developments Beyond Appalachia
- Tracking the Trump Effect – No More SEC Reporting Rules for Oil and Gas Companies; Goodbye to Stream Protection Rule for Coal Mining; Pruitt Confirmed as EPA Head. Invoking the Congressional Review Act, Congress and the President abolished a regulation that required oil and gas companies to disclose payments to foreign governments while rolling back a separate regulation that imposed requirements on coal companies to protect streams and water quality. Meanwhile, the Senate narrowly approved Trump’s controversial pick for EPA chief Scott Pruitt.
- Mountain States Intervene in Enviro Group’s NEPA Challenge to Oil and Gas Leases Approved by BLM. The federal court for the District of Columbia gave the green light to Colorado, Utah, and Wyoming to intervene in an action challenging oil and gas leases on public lands in those states and rejected a plea by environmental groups that Colorado and Utah be precluded from briefing arguments in the Wyoming phase of the litigation, reasoning that all the claims are substantially related such that the Mountain States each should have full participation rights in the case. Wildearth Guardians v. Jewell, — F. Supp. 3d —, No. CV 16-1724 (RC), 2017 WL 598477 (D.D.C. Feb. 14, 2017).
- Louisiana Appellate Court Denies Surface Owner’s Bid to Bust a Mineral Servitude Based on Nonuse. An appellate court in Louisiana denied a surface owner’s bid to bust a mineral servitude held by heirs of the original owner, reasoning that evidence of production and operations during the prescription period sufficed to maintain the rights despite periods of nonuse. Smith v. Andrews, — So.3d —, No. 51,186–CA, 2017 WL 60399251, 186 (La. App., February 15, 2017).
- North Dakota Landowner on the Hook for Production Taxes. The Supreme Court of North Dakota held that a landowner’s settlement agreement with the state in which he acquired a portion of the mineral interest and corresponding rights to royalty payments never gave him a right to a tax-free royalty (even though the state itself would be entitled to royalties tax free) despite claims that the parties agreed that the landowner would get 50% “of what the State is entitled to” get (i.e., a tax-free royalty). Burk v. North Dakota, — N.W.2d —, No. 20160108, 2017 WL 632887, 2017 ND 25 (N.D., February 16, 2017).
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