Oil and Gas Update for 4/7/2017 – MD Bans Hydraulic Fracturing, OH DMA Cases Keep Trickling In, and Spot Prices Pull a Hat Trick in Appalachia.

All three benchmarks for natural gas spot prices in Appalachia hit $3/MMBtu or more since our last report (and did so for the first time in a long time), trending alongside a spike in oil prices following the Syrian airstrike and a rising rig count. In Appalachia, the Ohio courts addressed several issues under the state’s Dormant Mineral Act while a federal court in Pennsylvania scrapped a township’s curious constitutional claims against a private oil and gas company that challenged the local government’s bid to ban UIC wells by local ordinance. Meanwhile, the Governor of Maryland signed a bill banning hydraulic fracturing within the state’s borders in anticipation of a multi-year moratorium that is set to expire in October. In other regions, royalty class actions and surface rights disputes took center stage. Here’s your week in review:

The Rig Count  oil
  • The national rig count is up at 839. (Source: BakerHughes).
  • The rig count in the Marcellus is up at 45. (Source: BakerHughes).
  • The rig count in the Utica is flat at 22. (Source: BakerHughes).
Commodity Prices oil-prices
  • The Henry Hub natural gas spot price is up at $3.21/MMBtu as of 4/7/2017. (Source: EIA).
  • In the Marcellus and Utica region, spot prices are up as of 4/7/2017. At Dominion South in northwest Pennsylvania, spot prices are up at $3.00/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are up at $3.00/MMBtu.  (Source: EIA).
  • Oil prices are up at $55.25/bbl as of 4/7/2017. (Source: WSJ).
Developments in Appalachia mountains      
  • “Mineral Interests” Under OH Dormant Mineral Act Include Royalty Interests that can be Abandoned. A court of appeals in Ohio concluded in a case of first impression that the term “mineral interests” as used in Ohio’s Dormant Mineral Act include “royalty interests” such that royalty interests may be abandoned under the provisions of the statute.  Devitis v. Draper, — N.E.3d —, No. 13-MO-0017 (Ohio Ct. App., Mar. 20, 2017).
  • Township “Community Bill of Rights” Banning Disposal Wells Shut Down by Federal Court. A federal court in Pennsylvania granted summary judgment in favor of a well operator that obtained a UIC disposal well permit purportedly banned by a local township, concluding that the well operator established various constitutional violations and dismissing the township’s constitutional claims.  Pennsylvania Gen. Energy Co., LLC v. Grant Twp., No. CV 14-209-ERIE, 2017 WL 1215444 (W.D. Pa., Mar. 31, 2017).
  • OH Mineral Owner Preserved Oil and Gas Rights Under Dormant Mineral Act. A court of appeals in Ohio concluded that a mineral owner preserved oil and gas rights by filing detailed affidavits as notice of the challenge to a surface owner’s attempt to reunite the surface estate and the severed minerals pursuant to the state’s Dormant Mineral Act, concluding that while the trial court incorrectly held that the surface owner botched the notice-of-abandonment procedure, the error didn’t matter because the surface owner’s notice of intent to maintain the mineral rights satisfied the statute. Paul v. Hannon, — N.E.3d —, No. 2017-Ohio-1261, 2017 WL 1231743 (Ohio Ct. App., March 31, 2017).
Developments Beyond Appalachia us-map
  • Maryland Bans Fracking. Staring down a moratorium set to expire in October, Maryland has imposed an outright ban on all hydraulic fracturing activities within the state.  The Governor, a republican, signed the initiative largely supported by the democratically controlled state legislature.  A copy of the bill may be accessed here.
  • Assignee of Oil and Gas Lease in OK is Indispensable Party Despite Recording Assignment after Litigation Ensued. A federal court in Oklahoma concluded that a company that took an assignment from a defendant in a lawsuit and recorded it after the lawsuit ensued is an indispensable party in a dispute challenging the validity of the oil and gas lease and then dismissed the action because  joinder of the assignee destroyed federal diversity jurisdiction.  Newfield Exploration Mid-Continent, Inc., Core Resources, LLC, — F. Supp. 3d —, No. CIV-16-1080-M, 2017 WL 1194710 (W.D. Okla., Mar. 30, 2017).
  • Royalty Class Action Gets Go-Ahead from Colorado Federal Magistrate Judge. A federal magistrate judge in Colorado certified a class action seeking damages for underpaid royalties based on improper deductions of post-production costs, reasoning that the royalty owners had sufficiently similar claims even though the class members’ oil and gas leases and respective royalty clauses varied widely.  Chrichton v. Augustus Energy Resources, LLC, — F. Supp. —, No. 15-cv-00835-KLM (D. Colo., March 31, 2017).
  • BLM Fends Off NEPA Challenges to Sale of Oil and Gas Leases and Well Pad Project in Utah. A federal court in Utah concluded that the Bureau of Land Management properly sold leases to XTO and approved a seven-well-pad project for development in the West Tavaputs Plateau above the confluence of the Green River and Nine Mile Creek near Utah’s eastern border with Colorado, concluding that BLM met NEPA’s alternative-analysis requirements and that the NEPA challenge to the well pad is moot because the BLM has suspended the project for the moment.  Utah Wilderness Alliance v. U.S. Dep’t of Interior, — F. Supp. 3d —, No. 215-CV-00194-JNPEJF, 2017 WL 1207519 (D. Utah Mar. 31, 2017).
  • KY Federal Court Upholds Surface Uses. A federal court in Kentucky concluded that the lessee of a mineral owner had the right to install gates, access points, access roads, and electric lines and poles on the surface estate for purposes of exploring for and developing oil and natural gas by virtue of express language in the original conveyance and pursuant to settled rules regarding implied rights of mineral owners vis-a-vis the surface estate, rejecting the surface owner’s claims to damages and rental payments for unreasonable or excessive use of the property that allegedly caused harm to crops and other surface areas and posed an unreasonable danger to the surface owner’s use of the property for farming.  Bickett v. Countrymark Energy Res., LLC, — F. Supp. 3d —, No. 415-CV-00093-GNSHBB, 2017 WL 1228418 (W.D. Ky., Mar. 31, 2017).

Questions about this week’s update? Email gbibikos@cozen.com 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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