Oil + Gas Update - PA Supreme Court Argument on the Rule of Capture; Third Circuit Denies PennEast's Condemnation Authority Over State-Owned Properties; Commonwealth Court Rejects Standing of State Senator.
Oil and natural gas prices increased slightly since our last report alongside a steadily falling rig count. In pipeline news, NJ gave PennEast a mulligan to correct its application for permits, the PUC and DEP responded to sinkholes near Mariner East lines, and NC regulators challenged Transco's Leidy expansion. In Appalachia court news, the Pennsylvania Supreme Court heard oral argument from the parties in the Briggs case on the rule of capture vs. trespass by hydraulic fracturing activities; the Third Circuit held that pipeline companies certified under the NGA can't condemn state-owned property in New Jersey; and the Commonwealth Court rejected an attempt by a state senator to ask the PUC to stop Mariner East construction activities for lack of standing. In other news, another federal court remanded a removed a climate-change case in Colorado back to state court.
Here's your week in review...
Rig Counts, Spot Prices + Oil Prices
Rigs: National (-886); Marcellus (-50); Utica/Point Pleasant (-12)
Brent Crude: +$60.82/bbl
West Texas Intermediate: +$54.85/bbl
NYMEX: October 2019 @ +$2.552/MMBtu
Spot Prices: Henry Hub (+$2.59/MMBtu); Dominion South (+$2.00/MMBtu); Tenn. Zone 4 (+$1.99/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): .
Atlantic Sunrise (Northeastern PA to SE Pennsylvania): .
Constitution (Northeastern PA to NY): NY Governor vows to fight the Constitution Pipeline project any way he can after FERC concluded that the state waived its right to deny the project a section 401 permit.
Empire Pipeline (NY to PA): Nothing new to report.
Leidy South - Benton Loop Expansion (PA): The North Carolina Utilities Commission is protesting Transcontinental Gas Pipeline’s proposed Leidy South expansion project, contending that Transco has not shown that existing shippers, including those in North Carolina, would not be harmed, nor that proposed rates follow FERC policy and precedent. .
Mariner East (Western PA to Eastern PA): A swimming sinkhole developed along the construction route of the Mariner East pipeline in Delaware County. The DEP said heavy rain caused the hole and that there was no contamination or environmental impact.
Mountaineer XPress (WV): Nothing new to report.
Mountain Valley Pipeline (Northern WV to Southern Va. and NC): More protests along MVP's route.
NEXUS (Ohio to Michigan): The D.C. Circuit remanded FERC's approval of the project for additional market demand analysis (see below for more details).
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 NJ DEP asked PennEast to rectify omissions in its applications for a series of wetlands and flood hazard permits. The Third Circuit concluded that pipeline companies can't condemn state-owned property under the Natural Gas Act (see below for more details).
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
PA Justices Hear from Parties in Rule of Capture/Hydraulic Fracturing Case. On September 12, 2019, the Pennsylvania Supreme Court held oral argument in Briggs v. Southwestern Energy Production Company, a case in which the plaintiffs' claims that hydraulic fractures and fluids/proppants that cross subsurface boundaries constitute a trespass that entitles the unleased plaintiffs to damages for the value of drainage. The company and its amici claim that the rule of capture precludes the plaintiffs' cause of action for such damages.
Third Circuit Says PennEast Lacks Authority to Condemn State-Owned Property for Pipeline Route. The Third Circuit held that PennEast could not condemn land owned by New Jersey under the condemnation authority bestowed to pipeline companies in the Natural Gas Act, holding that the NGA did not abrogate the state’s 11th Amendment immunity from suit in federal court and that the NGA did not delegate the federal government’s exemption from sovereign immunity defenses by the states. In re PennEast Pipeline Co., LLC, --- F.3d ---, No. 19-1191, 2019 WL 4265190 (3d Cir., Sept. 10, 2019).
State Senator Lacks Standing to Stop Sunoco from Constructing Mariner East Pipelines. The Commonwealth Court of Pennsylvania concluded that a Pennsylvania senator lacked legislative standing and personal standing to file a complaint with the Public Utilities Commission for emergency interim relief against Sunoco to hault the construction of Mariner East pipelines and reversed the PUC’s contrary order, remanding with instructions to dissolve the PUC’s interim emergency order and dismiss the senator’s complaint. Sunoco Pipeline L.P. v. Dinniman, --- A.3d ---, No. 1169 C.D. 2018, 2019 WL 4248071 (Pa. Cmwlth., Sept. 9, 2019).
Federal Court in PA Says Range Can’t Dodge Royalty Claim. A federal court in Pennsylvania denied a motion to dismiss a claim that Range Resources improperly applied a negotiated cap on its lessor’s share of post-production costs for wet gas vs. a lower cap on such costs for dry gas, reasoning that the issues are too complex for disposition on preliminary motions without developing a factual record. Pflasterer v. Range Resources – Appalachia, LLC, --- F. Supp. 3d ---, No. 2:18-CV-1437-SPB, 2019 WL 4242057 (W.D. Pa., Sept. 6, 2019).
Kansas Court Confirms that Storage Gas is not Subject to the Rule of Capture. The Kansas Supreme Court held that once the Kansas Corporation Commission or FERC approves a public utility’s certification to engage in storage operations for natural gas, the utility’s identifiable, non-native storage gas lying underneath a natural gas storage facility’s certificated boundaries is no longer subject to the common-law rule of capture even if the utility has not yet acquired storage rights through eminent domain or contract. Northern Nat. Gas Co. v. ONEOK Field Services Co., --- P.3d ---, No. 118239, 2019 WL 4230519 (Kan., Sept. 6, 2019).
DC Circuit Remands Nexus Pipeline Approval to FERC for Additional Market Demand Analysis. The D.C. Circuit rejected most of the arguments asserted by landowners and a city in Ohio challenging FERC’s approval of the Nexus Pipeline but held that FERC failed to adequately justify its determination that it is lawful to credit Nexus’s contracts with foreign shippers serving foreign customers as evidence of market demand for the interstate pipeline and remanded for further explanation of this determination. City of Oberlin, Ohio v. FERC, --- F.3d ---, No. 18-1248, 2019 WL 4229074 (D.C. Cir., Sept. 6, 2019).
Ohio State Court Says Six-Year-Old Well Failed to Produce in Paying Quantities. A state court in Ohio concluded that an oil and gas lease expired for lack of production in paying quantities based on undisputed evidence that the only well holding the lease failed to produce any oil or gas for six years. Nau v. Stonebridge Operating Co., --- N.E.3d ---, No. 2019 Ohio 3647 (Ohio Ct. App., Sept. 10, 2019).
Headlines & Holdings - Beyond Appalachia
Another Federal Court Remands Climate Change Case to State Court. A federal judge in Colorado remanded to state court a case in which local governments in Colorado brought common law and statutory claims for injuries to their property and to their citizens caused by energy companies “for the substantial role they played and continue to play in causing, contributing to and exacerbating climate change,” rejecting contentions that climate change issues belong in federal court. Board of County Commissioners of Boulder County v. Suncor Energy (U.S.A.) Inc., --- F. Supp. 3d ---, No. 18-CV-01672-WJM-SKC, 2019 WL 4200398 (D. Colo., Sept. 5, 2019).
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