Oil and Gas Update for Week Ending 4/28/2017 – CPP Litigation on Hold, “Fraction Of” Royalty Interests in North Dakota, and a Challenge to PADEP Permit Conditions for Injection Wells.

After a few weeks off, we are back at the well.  Natural gas and oil prices are down since our last report and the rig count in the Marcellus/Utica regions remains flat despite the increase in rig activity nationwide.  In Appalachia, a well operator challenged PADEP’s permit conditions purportedly designed to address possible seismic activities in connection with injection wells, and the Superior Court rejects the “stranger rule” for interpreting deeds reserving oil and gas interests for a husband and wife.  Elsewhere, the D.C. Circuit put the Clean Power Plan litigation on hold given the Trump Administration’s commitment to review and possibly rescind regulations, and the North Dakota Supreme Court addresses “fraction of” royalty interest disputes. Here’s your week in review:

The Rig Count  oil
  • The national rig count is up at 870. (Source: BakerHughes).
  • The rig count in the Marcellus is flat at 46. (Source: BakerHughes).
  • The rig count in the Utica is flat at 23. (Source: BakerHughes).
Commodity Prices oil-prices
  • The Henry Hub natural gas spot price is down at $3.02/MMBtu as of 4/28/2017. (Source: EIA).
  • In the Marcellus and Utica region, spot prices are down as of 4/28/2017. At Dominion South in northwest Pennsylvania, spot prices are down at $2.47/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are down at $2.42/MMBtu.  (Source: EIA).
  • Oil prices are down at $51.53/bbl as of 4/28/2017. (Source: WSJ).
Developments in Appalachia mountains
  • UIC Well Operator Fights Back on Seismic Permit Conditions. An injection well operator appealed a permit issued by PADEP that imposes a number of conditions for monitoring and abating possible seismic activity resulting from its operations, alleging that PADEP lacks statutory authority to impose the conditions based on concerns about seismic activity connected to underground injection wells in other states that PADEP cited to justify the permit conditions for installing seismic monitoring equipment at the well.
  • PA Superior Court Says Wife Not a “Stranger” to Reserved Oil and Gas Rights. The Superior Court of Pennsylvania upheld oil and gas rights previously reserved by a husband and wife, rejecting the idea that the wife was a “stranger” to the interests reserved by the previous grant and opted instead to construe the plain language of the deed as a whole to determine the parties’ original intent.  Murphy v. Karnek, — A.3d —, Nos. 438 and 550 WDA 2016, 2017 WL 1422899, 2017 PA Super 120 (Apr. 21, 2017).
Developments Beyond Appalachia us-map
  • DC Circuit Puts Clean Power Plan Litigation on Hold. The D.C. Circuit granted EPA’s request to stay litigation over the Obama Administration’s Clean Power Plan for 60 days and invited briefing from the parties by mid-May on whether the court should remand the matter to the agency given the switch in administrations and new the EPA’s current outlook on carbon emissions from existing power plants expressed by the President in a recent executive order calling for a review of the plan and decisions on whether to modify or rescind it.
  • EPA Reconsidering Rule Regarding Methane Emissions from New and Modified Oil and Gas Sources. The EPA announced that it will reconsider part of the Obama Administration’s methane reduction rule for new and modified oil and gas sources in response to concerns from API and a number of other industry groups.  The EPA will also be issuing a 90-day stay of monitoring requirements for fugitive emissions pending reconsideration.
  • No Personal Jurisdiction over Lessee = No Claim for Unpaid Royalties, Kansas Federal Court Holds. A federal court in Kansas dismissed a pro se plaintiff’s claim against Devon Energy for unpaid royalties, concluding that the federal courts lacked personal jurisdiction over Devon and therefore could not let the action proceed. Love v. Devon Energy Company, — F. Supp. 3d —, 16-2595-CM, 2017 WL 1302297 (D. Kan. Apr. 7, 2017).
  • Fifth Circuit Tosses Decades-Old Contamination Claims under Subsequent Purchaser Rule. The Fifth Circuit Court of Appeals held that a landowner who acquired property in 2007 could not assert contamination claims against an oil and gas well operator that ceased production in the early 1970s, concluding that the sale to the new owner in 2007 did not give him rights to sue for pre-purchase damages and that the “subsequent purchaser” rule barred the landowner’s untimely claims. Guilbeau v. Hess Corp., — F.3d —, No. 16-30971, 2017 WL 1393709 (5th Cir., Apr. 18, 2017).
  • ND Supremes Confirm “Fraction Of” Royalty Interest. The North Dakota Supreme Court recently held that a 1958 assignment designed to convey interests “so that each assignee receives an undivided one-eighth share of the total royalty” unambiguously conveyed a “fraction of” a total royalty interest to be shared seven different ways rather than a fixed percentage share of the actual oil and gas production. Ogren v. Sandaker, — N.W.2d —, No. 20160279, 2017 WL 146313, 2017 ND 105 (N.D., April 25, 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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