Oil + Gas Update - OH Supreme Court Says Plaintiffs Get 21 Years to Assert O+G Lease Expiration Claims.
Since our last report, the rig count dropped below 800, down 276 units since December 2018, while gas prices declined alongside a slight increase in oil prices. In pipeline news, a local DA brought charges against ETP and security company employees for bribery, the Trump Administration weighed in at the Supreme Court regarding ACP's easement through the Appalachian Trail for the pipeline project, FERC pushed back MVP's project review, and NJ's DEP denied permits based on the Third Circuit's decision that PennEast lacks condemnation authority over state-owned certain lands along the pipeline route. In Appalachia court news, the Ohio Supreme Court weighed in on the statute of limitations that applies to oil and gas lease expiration claims while the Superior Court of Pennsylvania denied another attempt to invalidate a tax sale of lands in 1908 that merged oil and gas rights with the surface estate. In other regions, courts addressed FERC's tolling practice, royalties, class actions challenging post-production costs, royalty accounting obligations, and the timing of challenges to oil and gas emission regulations.
This'll be the last installment of At the Well Weekly until after the new year. Enjoy the holiday season. Here's your week in review...
Rig Counts, Spot Prices + Oil Prices
Rigs: National (-799); Marcellus (+37); Utica/Point Pleasant (13)
Brent Crude: +$64.39/bbl
West Texas Intermediate: +$59.20/bbl
NYMEX: January 2020 @ -$2.399/MMBtu.
Spot Prices: Henry Hub (-$2.37/MMBtu); Dominion South (-$1.80/MMBtu); Tenn. Zone 4 (-$1.79/MMBtu)
("+" or "-" or blank denotes increase, decrease, or flat. )
WOPL - Appalachia
In our new section, WOPL ("waiting on pipelines"), we provide the latest news on the status of various pipeline projects in Appalachia:
Adelphia Project (Greater Philadelphia Region): Nothing new to report.
Atlantic Coast (W. Va. to Va. and NC): The Trump Administration argued in briefs before the Supreme Court that the Forest Service has the right to grant easements for natural gas pipelines through the Appalachian Trail (see below for more details).
Atlantic Sunrise (Northeastern PA to SE Pennsylvania): Nothing new to report.
Constitution (Northeastern PA to NY): Nothing new to report.
Empire Pipeline (NY to PA): Nothing new to report.
Leidy South - Benton Loop Expansion (PA): Nothing new to report.
Mariner East (Western PA to Eastern PA): The Chester County DA filed criminal charges against employees of Energy Transfer and contracted security firms for bribery, conspiracy, and related offenses regarding the Mariner East Pipeline
Mountaineer XPress (WV): Nothing new to report.
Mountain Valley Pipeline (Northern WV to Southern Va. and NC): FERC pushed back the environmental review schedule for the MVP Southgate project due to recently proposed route changes. A coalition of groups that oppose the Mountain Valley Pipeline are asking a court to reject an agreement between the pipeline company and the Virginia Attorney General’s Office.
NEXUS (Ohio to Michigan): Nothing new to report.
NFG FM100 Project (NC PA to Transco): Nothing new to report.
Northeast Supply Enhancement Project (NJ/NY): Nothing new to report.
Northern Access (NW PA to Western NY): Nothing new to report.
PennEast (PA to Central Jersey): The NJDEP denied PennEast’s application for multiple permits and water quality certifications based on the Third Circuit’s decision that the company lacks authority to condemn multiple properties along the route.
Regional Energy Access (NE PA to PA/NJ): Nothing new to report.
Revolution Pipeline (PA): Nothing new to report.
Rover (OH, WV, PA to Michigan): Nothing new to report.
TransCanada Eastern Panhandle Project (PA to WV): Nothing new to report.
Headlines & Holdings - Appalachia
Ohio Supreme Court Says 21-Year Statute of Limitations Applies to O+G Lease Expiration Case. The Ohio Supreme Court held that an action to recover title to or possession of real property following the expiration of an oil and gas lease for lack of production must be brought within 21 years after the cause of action accrues; the state’s fifteen-year statute of limitations does not apply; and evidence of non-production from a well before 1999 to support a claim that the lease expired is relevant. Browne v. Artex Oil Co., --- N.E.3d ---, No. 2019-Ohio-4809, 2019 WL 6313553 (Ohio Nov. 29, 2019).
Attorneys General from 16 States Object to EPA’s Rollback of Regulating Emissions from New and Modified Oil and Gas Sources. Attorneys general from 16 states, including Pennsylvania, commented unfavorably on EPA’s proposal to roll back Obama-era rules that strengthened methane emissions standards for new and modified oil and gas infrastructure.
Second Circuit Judges Reluctant to Revive NYC Climate Change Case Against Majors. During oral argument, two circuit judges seemed skeptical about revising New York City’s case against major oil companies seeking compensation for damage to government-owned infrastructure caused by climate change, questioning counsel over whether the case really just involves air pollution claims governed (and preempted by) the federal Clean Air Act.
MVP Secures Win in Dispute over Just Compensation for Condemned Property. Mountain Valley Pipeline secured a win in a dispute over just compensation for property condemned in West Virginia to construct the pipeline after complaining landowners failed to produce any evidence on the difference in the market value of property before and after the taking. In re: Mountain Valley Pipeline, LLC --- F. Supp. 3d ---, No. 7:19-CV-00078, 2019 WL 6467833 (W.D. Va. Dec. 2, 2019).
DC Circ. Grants Reargument En Banc to Evaluate FERC’s Tolling-Order Practice. In the context of challenges to the Atlantic Coast Pipeline, the D.C. Circuit will re-hear challenges to FERC’s practice of issuing tolling orders to extend the Natural Gas Act’s 30-day deadline to address objections to final FERC orders, a practice objectors say delays resolution of objections until after projects are already up and running and essentially render the challenge a non-event.
Gov. Lawyers Tell SCOTUS that Forest Service can Authorize Pipelines through the Appalachian Trail. In its briefing, the U.S. Government argued that appellate court got it wrong when it held that the Atlantic Coast Pipeline could not cross the Appalachian Trail because the U.S. Forest service has full authority to grant rights of way for that purpose under its enabling legislation.
PA Superior Court Declines to Upend 1908 Tax Sale of Unseated Land that Merged O+G Rights with Surface. Relying on the Herder Springs case, the Pennsylvania Superior Court held that a 1908 tax sale extinguished subsurface rights and merged them with the surface such that the purchaser acquired both the surface and oil and gas estate previously reserved by the grantor, rejecting various arguments that in 1908 the assessor mischaracterized the land as unseated, the 1908 tax sale rested on mistaken facts, and that the sale violated due process rights to notice of the tax sale. Keta Gas & Oil Co. v. Proctor, --- A.3d ---, No. 1975 MDA 2018, 2019 WL 6652174 (Pa. Super. Ct. Dec. 6, 2019).
Headlines & Holdings - Beyond Appalachia
Rover Pipeline Owes the IRS After Condemnation. A federal court in Michigan concluded that Rover's condemnation of an easement burdened by an IRS pipeline lien and a settlement over the disputed amount with the landowner did not extinguish the government's lien and therefore owed just compensation to the IRS. In re: Rover Pipeline LLC, --- F. Supp. 3d ---, No. 17-10365, 2019 WL 6522238 (E.D. Mich. Dec. 4, 2019).
CA Federal Court Declines to Significantly Reduce Multi-Million-Dollar Trespass Benefits Award. A federal court in California declined to up-end an award of damages for trespass and resulting trespass benefits against a pipeline operator totaling nearly $40 million and awarded $860K in attorneys' fees, rejecting arguments that the judge and/or jury got it wrong by rejecting defenses of good-faith and mutual mistake. C&C Properties v. Shell Pipeline Co., --- F. Supp. 3d ---, No. 114CV01889DADJLT, 2019 WL 6341047 (E.D. Cal. Nov. 27, 2019).
Tex. Court Rejects Competitor's Challenge to UIC Permit Issued by RRC. A court of appeals in Texas held that one saltwater disposal injection well operator lacked party status to challenge a Railroad Commission order granting an application to another operator of a saltwater disposal injection well, agreeing with the trial court that the competitor did not present evidence sufficient to demonstrate that it would suffer actual injury or economic damage other than that of the general public or as a competitor. NGL Water Sols. Eagle Ford, LLC, v. R.R. Comm'n of Texas & Blue Water Disposal, --- S.W.3d ---, No. 03-17-00808-CV, 2019 WL 6336178 (Tex. App. Nov. 27, 2019).
N.D. Supreme Court Punts on Oil + Gas Operator's Dec Action re: Emissions. The Supreme Court of North Dakota concluded that an oil and gas operator did not exhaust administrative remedies before filing an action for declaratory relief that certain emissions don't qualify as state law violations and held that where a party seeks to modify an existing statute or agency rule, the “purely legal question” exception to the exhaustion doctrine does not apply. Cont'l Res., Inc. v. N. Dakota Dep't of Envtl. Quality, --- P.3d ---, No. 2019 ND 280, 2019 WL 6317332 (N.D. Nov. 26, 2019).
Federal Court in TX Says Royalty Owner Entitled to Inspection of Records, not Accounting. A federal court in Texas concluded that royalty owners failed to establish breach of an oil and gas lease for the lessee's failure to open its books for inspection, concluding instead that although the oil and gas lease at issue gave royalty owners the ability to inspect records, their breach-of-contract claim was premised on its duty to provide an "accounting," and the lessee had no such duty under the lease. L.B. Hailey Family L.P. v. Encana Oil &* Gas (USA) Inc., --- S.W.3d ---, No. 5:17-CV-149-RCL, 2019 WL 6465323 (W.D. Tex. Dec. 2, 2019).
Federal Court in TX Says Grantors on the Hook to Pay Grantees' Royalties. In a dispute involving a deed in which the grantors agreed to "pay and deliver to [grantees] ... such proportion of all moneys that may be received by them for one-half of all oil, gas or minerals that may be found," a federal court in Texas re-affirmed that the deed created a floating royalty interest and that the grantors, not the operator-lessee of the oil and gas interests at issue, retained the obligation to pay royalties. Verde Minerals, LLC v. Koerner, --- F. Supp. 3d ---, No. 2:16-CV-199, 2019 WL 6496639 (S.D. Tex. Dec. 3, 2019).
NM Federal Court Blesses Royalty Class Action. A federal court in New Mexico granted a motion to certify a class of royalty owners for breach of royalty obligations under oil and gas leases, concluding that the class plaintiffs met the standard for certification and that class resolution of royalty payments is superior to calculating damages based on individual royalties paid to each owner by each month for each well involved. The Anderson Living Trust v. Energen Resources Corp., --- F. Supp. 3d ---, No. 13-CV-00909 WJ/CG, 2019 WL 6618168 (D.N.M. Dec. 5, 2019).
Exxon Removes Massachusetts State Consumer Protection/Climate Change Action to Federal Court. Exxon filed a notice of removal of a climate change case wrapped up in a state consumer protection law action brought by the attorney general of Massachusetts, arguing that the lawsuit raises federal questions regarding climate change.
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