As 2017 comes to a close, the rig count is relatively strong and oil prices hover around $60/bbl while natural gas spot prices continue to underwhelm. In Appalachia, the Delaware River Basin Commission proposed its controversial regulatory ban on hydraulic fracturing while the Pennsylvania Department is close to finalizing new general permits for methane emissions from oil and gas sources. Wishing our readers a happy holiday season, here’s your final review for 2017:
The Rig Count
- The national rig count is up at 930 (Source: BakerHughes).
- The rig count in the Marcellus is up at 47. (Source: BakerHughes).
- The rig count in the Utica is down at 27. (Source: BakerHughes).
- The Henry Hub natural gas spot price is down at $2.67/MMBtu as of 12/15/2017. (Source: EIA).
- In the Marcellus and Utica region, spot prices are down as of 12/15/2017. At Dominion South in northwest Pennsylvania, spot prices are down at $2.12/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are down at $2.01/MMBtu. (Source: EIA).
- Oil prices are up at $63.33/bbl as of 12/15/2017. (Source: WSJ).
Developments in Appalachia
- PADEP Poised to Issue Final General Permits for Methane Emissions from Oil and Gas Sources. The Pennsylvania Department of Environmental plans to issue final versions of general permits for methane emissions from oil and gas sources, including a revised GP-5 for pipeline and compressor operations and a new GP-5A for oil and gas well sites. PADEP reports that the permits will be published in the first quarter of 2018 and effective upon publication with a 30 or 60 day transition period for the pipeline and oil/gas permits respectively.
- DRBC Issues Notice of Proposed Rulemaking for Regulations Banning Hydraulic Fracturing in the Basin. DRBC published its notice of proposed rulemaking banning hydraulic fracturing in the basin along with limited authorizations to transfer water outside the basin and dispose of treated water within the basin. A copy of the draft regulations may be accessed here.
- Court Declines Landowner Request to Revive Claims that EQT Paid Royalties in Violation of MRA or Kilmer. The Superior Court denied claims that EQT’s leases violated the Minimum Royalty Act or the Supreme Court’s Kilmer decision on post-production costs, concluding that the landowners never offered evidence that their royalties ever fell below the statutory minimum even if the lease authorized deductions for post-production costs. Niverth v. Equitrans, L.P., — A.3d —, No. 400 WDA 2017, 2017 WL 6163013 (Pa. Super., Dec. 8, 2017).
- WV Supreme Court Confirms Reservation of Royalty Interest Only. The Supreme Court of West Virginia concluded that a deed reserving the right to royalties on production and marketing after drilling without any language regarding control over drilling or marketing conveyed a royalty interest only as opposed to a mineral interest given the lack of any language retaining executive rights held by a mineral owner. Kidder v. Montani Energy, LLC et al., — S.W.3d —, No. 16-1109, 2017 WL 5509927 (W. Va. Nov. 17, 2017).
- PA Supremes Deny Rex Energy’s Appeal to Dismiss Class Complaint. The Pennsylvania Supreme Court denied a petition for allowance of appeal filed by Rex Energy in which Rex lost its bid to dismiss a class action brought by landowners claiming that Rex failed to pay them bonuses of $2,500/acre despite the fact that the leases remained contingent upon clear title evaluations and executing orders for payment because Rex didn’t exercise its right to terminate in a timely fashion. Cardinale v. R.E. Gas Development, LLC, No. 150 WAL 2016 and 151 WAL 2017.
- Sixth Circuit Says No Need for Subsurface Agreement When Oil and Gas Lease Authorizes Transportation of Product from “Other Lands.” The Sixth Circuit recently concluded an oil and gas lease authorizing the transportation of oil and gas from “other lands” gave the lessee a right to drill wells through the lessor’s property without the need for a subsurface easement agreement and rejected landowner claims that a faulty affidavit submitted with permit applications constituted a breach of the “compliance with all laws” provision of the lease. Eclipse Res.-Ohio, LLC v. Madzia, — F.3d —, No. 17-3145, 2017 WL 5903351 (6th Cir., Nov. 30, 2017).
- VA Federal Court Dismisses Landowner Complaint Against FERC, MVP, for Lack of Jurisdiction. The Northern District of Virginia dismissed a complaint against Mountain Valley Pipeline and FERC raising constitutional challenges to FERC decisions issuing certificates of public to the pipeline operator under the Natural Gas Act, concluding that plaintiffs’ challenges can be raised in the appropriate court of appeals reviewing the FERC order and that the exclusive remedies available to plaintiffs are to ask for a rehearing before FERC and then file in the appropriate court of appeals. Berkley v. Mountain Valley Pipeline, LLC, — F. Supp. 3d —, 7:17-CV-00357, 2017 WL 6327829 (W.D. Va., Dec. 11, 2017).
- PA Superior Court Says Four-Year Statute Applies to Dec Action Challenging Validity of Oil and Gas Deed. The Pennsylvania Superior Court recently held that a plaintiff challenging the validity of a voidable oil and gas deed had four years to bring a declaratory judgment action but failed to do so. Ford v. Oliver, — A.3d —, No. 670 WDA 2016, 2017 WL 6378647 (Pa. Super., Dec. 14, 2017).
- Eastern District of PA Says Claims against Law Firm for Title Opinion Work Sound in Tort, not Contract. A federal court in Pennsylvania recently concluded that a production company procuring title opinions from a law firm that did not properly identify title holders to the property in question and represented both sides to the oil and gas deal stated a cause of action in tort rather than contract but did not state a claim for “conflict of interest” under the Pennsylvania Rules of Professional Responsibility given that those rules do not create a private cause of action. Brenco Oil, Inc. v. Blaney, — F. Supp. 3d —, No. CV 17-3938, 2017 WL 6367893 (E.D. Pa., Dec. 13, 2017).
Developments beyond Appalachia
- TX Appellate Court Says Statute Authorized Withholding of Royalties. A court of appeals in Texas concluded that the parties to an oil and gas lease had a dispute over title as contemplated by Texas Natural Resources Code § 91.402(b)(1), given a claim by the holder of an NPRI in a 38-acre tract, such that the lessee had the authority to withhold payment of royalties to the plaintiff/trust until that dispute was resolved. Leavitt v. Ballard Expl. Co., Inc., — S.W.3d —, No. 01-16-00536-CV, 2017 WL 6043695 (Tex. App., Dec. 7, 2017).
- Ninth Circuit Says AMI Agreement Compelled Payment for Acquisition of Oil and Gas Interests. In a case involving a dispute over payments for lease acquisitions within an AMI, the Ninth Circuit concluded that the acquiring company had the obligation to pay a prospect fee of $50 per net mineral acres for any acquisition within the AMI for the duration of the agreement even though the non-acquiring company did not contribute to the acquisition. Energy Investments, Inc. v. Greehey & Company, Ltd., — F.3d —, No. 16-35245, 2017 WL 6154074 (9th Cir., Dec. 8, 2017).