Spot prices in Appalachia increased since our last report based largely on cold temperature forecasts while the rig count and oil prices maintained their positions. In Appalachia, West Virginia reports that it reached a memorandum of understanding with China for investments in natural gas development projects. Elsewhere, Texas courts tackle disputes over mineral interests, a royalty class action in Oklahoma survives preliminary motions to dismiss, and Colorado’s Supreme Court blesses a refund bid by a production company that mistakenly overpaid oil and gas production taxes. Here’s the week in review:
The Rig Count
- The national rig count is up at 915 (Source: BakerHughes).
- The rig count in the Marcellus is flat at 42. (Source: BakerHughes).
- The rig count in the Utica is flat at 30. (Source: BakerHughes).
- The Henry Hub natural gas spot price is up at $3.11/MMBtu as of 11/17/2017. (Source: EIA).
- In the Marcellus and Utica region, spot prices are up as of 11/17/2017. At Dominion South in northwest Pennsylvania, spot prices are up at $2.54/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are up at $2.48/MMBtu. (Source: EIA).
- Oil prices are up at $62.00/bbl as of 11/17/2017. (Source: WSJ).
Developments in Appalachia
- WV-China Memorandum of Understanding. West Virginia and China have entered into a memorandum of understanding regarding the possible investment of $84 billion for shale gas development, transportation, and chemical manufacturing projects. A copy of a WV Development Office’s press release may be accessed here.
- Shell Breaks Ground on Cracker Plant. Shell reports that it has started construction on its new $6 billion ethane cracker plant in Potter Township, PA, which is expected to produce 1.6 million metric tons of polyethylene each year when complete.
- Ohio AG Sues Rover Pipeline for Contamination. Ohio’s Attorney General sued ETP’s Rover Pipeline LLC for allegedly dumping millions of gallons of fluids and sediment into Ohio’s waters and failed to obtain water permits to control E&S. Ohio ex rel. v. Rover Pipeline LLC, No. 2017-CV-02216 (Stark County, OH) (pending).
- Ohio Supreme Court to Decide Landman Licensing Issue. The Supreme Court of Ohio has agreed to take an appeal regarding whether landmen must obtain real estate licenses like other real estate brokers. Dundics v. Eric Petroleum Corp., (Ohio) (pending).
- DC Circuit Rejects Sierra Club’s Challenges to DOE’s Approval of LNG Exports from Three Projects. The D.C. Circuit rejected The Sierra Club’s challenges to DOE’s approval of LNG exports from three projects (Dominion Energy Inc.’s Cove Point project on the Chesapeake Bay in Maryland and Cheniere Energy’s Sabine Pass project in Louisiana and its Corpus Christi, Texas, project on the Gulf Coast), relying heavily on DOE’s previous “Freeport Decision” on LNG exports that addressed the environmental group’s issues. Sierra Club v. DOE, Nos. 16-1186, 16-1252, 16-1253 (D.C. Cir., Nov. 1, 2017).
- Environmental Groups, Children Sue Trump on Climate Change. The Clean Air Council and unnamed children sued the Trump Administration in the Eastern District of Philadelphia challenging EPA’s “war on science” and rollback of regulations as violations of due-process guarantees to life, liberty, and property. Clean Air Council et al. v. U.S.A., No. 2:17-cv-04977 (E.D. Pa.) (pending).
- WV Federal Court Dismisses One Cotenants’ Challenge to Lease without First Obtaining Consent of Other Cotenants. A federal court in West Virginia concluded that a lessor cannot unilaterally terminate a lessee’s ability to develop acreage under a lease without the consent of all of the cotenants and dismissed the lawsuit without prejudice if the plaintiff refiles with the consent of other cotenants to challenge the lease. Bezilla v. Tug Hill Operating, LLC, — F. Supp. 3d —, No. 5:17CV123, 2017 WL 5297941 (N.D.W. Va. Nov. 13, 2017).
Developments beyond Appalachia
- Fuel Gas Royalty Class Action Survives in Oklahoma Federal Court. A federal court in Oklahoma denied a request to dismiss a royalty class action based on the failure to pay proper royalties (i.e., without deductions for post-production costs for fuel gas) under the express terms of the agreement, holding that the prior decision denying similar claims based on implied marketing covenants did not bar the plaintiffs here from suing based on the express terms of the lease. Chieftain Royalty Co. v. BP America Production Co., — F. Supp. 3d —, No. 16-CV-444-JHP, 2017 WL 5012586 (E.D. Ok., Nov. 2, 2017).
- ORRI in Louisiana Prevails on Appeal. An appellate court in Louisiana concluded that an overriding royalty interest carved out of an old lease ratified by an amendment in a subsequent settlement agreement maintained the ORRI in full force and effect and rejected a claim that the underlying lease expired and thereby extinguished the ORRI. Suire v. Oleum Operating Co., — So.3d —, 2017 WL 4987635, 2017-117 (La. Ct. App., November 2, 2017).
- Discovery Rule Bars Royalty Claims, Fifth Circuit Holds. The Fifth Circuit rejected a claim that a lessee failed to pay royalties to a plaintiffs’ deceased father pursuant to an oil and gas lease, concluding that the plaintiffs received the assistance of an attorney and had collected information “sufficient to excite attention and prompt further inquiry” as to the unpaid royalties allegedly owed to their father and therefore were subject to (and did not file suit in time to avoid) the ten-year period for liberative prescription. Griffin v. Hess Corporation, — F.3d —, No. 17-30165, 2017 WL 5125657 (5th Cir., Nov. 3, 2017).
- TX Court Holds Estoppel by Deed Prevents Plaintiffs from Claiming Title to Oil and Gas Estate. A court of appeals in Texas concluded that a deed conveying “all that certain parcel or tract of land” purported to convey a 100% interest in the property even though the plaintiffs’ predecessors conveyed one half of the interest to his wife; therefore, the deed purported to convey what the grantor did not own in violation of the warranty clause and thereby estopped him and his successors from claiming title to interests the grantor did not own. Dragon v. Trial, — S.W.3d —, No. 04-16-00758-CV, 2017 WL 5162180 (Tex. App., Nov. 8, 2017).
- TX Court Affirms Surface Owner’s Evidence that Well Operator Breached Accommodation Doctrine. A court of appeals in Texas concluded that a surface owner established a breach of the “accommodation doctrine” for proper surface uses when an oil and gas lessee proposed to install overhead power lines across the plaintiff’s ranch, finding that the evidence supported the trial court’s conclusions that (1) the proposed power lines would completely preclude or substantially impair the existing hunting and cattle operations; (2) there was no reasonable alternative method available by which the plaintiffs could continue their existing hunting and cattle operations; and (3) there was a reasonable, customary, and industry-accepted method available to the lessee by which it could recover the minerals. VirTex Operating Co. v. Bauerle, — S.W.3d —, No. 04-16-00549-CV, 2017 WL 5162546 (Tex. App., Nov. 8, 2017).
- Colorado Supreme Court Paves Way for Refund of Taxes Mistakenly Paid on Oil and Gas Production. The Supreme Court of Colorado concluded that a lessee mistakenly overpaid taxes on oil and gas production before taking certain deductions and could pursue a refund after the statutory protest period lapsed. OXY USA Inc. v. Mesa Cty. Bd. of Commissioners, — P.3d —, 2017 CO 104, 2017 WL 5248199, 2017 CO 104 (Colo., November 13, 2017).