Oil and Gas Update for Week Ending 7/28/2017 – PA Senate Floats Severance Tax, Permit Reforms, as Part of Ongoing PA Budget Negotiations.

Natural gas spot prices in Appalachia took a nose dive since our last report despite the rig-count rebound and rising oil prices.  In Pennsylvania, the Senate Republicans introduced a severance tax to raise approximately $100 million in revenue in order to close budget gaps in exchange for regulatory reforms designed to hasten actions on permit applications submitted to the Pennsylvania Department of Environmental Protection for approval. In other news, a court of appeals in Texas busted a Permian Basin lease in part based on a retained-acreage provision that didn’t cover non-operational areas on the leased premises while a federal judge in Kansas kept a royalty class action in federal court under the Class Action Fairness Act. Here’s your weekly roundup:

The Rig Count  oil
  • The national rig count is up at (Source: BakerHughes).
  • The rig count in the Marcellus is up at 46. (Source: BakerHughes).
  • The rig count in the Utica is up at 26. (Source: BakerHughes).
Commodity Prices oil-prices
  • The Henry Hub natural gas spot price is down at $2.92/MMBtu as of 7/28/2017. (Source: EIA).
  • In the Marcellus and Utica region, spot prices are down as of 7/28/2017. At Dominion South in northwest Pennsylvania, spot prices are down at $1.64/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are down at $1.65/MMBtu.  (Source: EIA).
  • Oil prices are up at $51.55/bbl as of 7/28/2017. (Source: WSJ).
Developments in Appalachia mountains
  • PA Severance Tax. The Pennsylvania Senate proposed an average $0.02/mcf severance tax designed to raise $100 million to close budget holes on top of the impact fee. In exchange, the Senate proposed several permitting reforms, including “deemed-approvals” for certain permit applications if PADEP does not act within specified time frames. An article describing the measures may be accessed here.

Developments Beyond Appalachia us-map
  • TX Appellate Court Busts Part of Permian Basin Lease. A court of appeals in Texas has concluded that a well operator only retained a 40-acre portion around each of several producing wells and disposal wells and lost the rest of the acreage for lack of producing wells, noting that the well operator never established that it engaged in any other activities on the leased premises to qualify as a substitute for actual production and that the retained acreage only saved small portions of the acreage around the extant wells.  Hardin-Simmons Univ. v. Hunt Cimarron Ltd. P’ship, — S.W.3d —, No. 07-15-00303-CV, 2017 WL 3197920 (Tex. App., July 25, 2017).
  • Federal Court in Kansas Says Oil and Gas Royalty Dispute Stays in Federal Court Under CAFA. A federal court in Kansas denied a motion to remand a class action back to state court under the Class Action Fairness Act after finding that the oil and gas lessee demonstrated a “plausible” basis for claiming that the amount in controversy exceeded $5 million in a case in which the plaintiffs allege that the lessee paid royalty fees at a price lower than the commercial price and improperly deducted from royalties a “Conservation Fee” owed to the Kansas Corporation Commission that lessors and lessees aren’t supposed to share.  Stoddard v. Oxy USA Inc., — F. Supp. 3d —, No. 17-1067-EFM-GLR, 2017 WL 3190354 (D. Kan., July 27, 2017).
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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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