WV Supreme Court Reverses Itself, Post-Production Deductions OK

In a decision that will thrill drillers, but anger landowners, the West Virginia Supreme Court decided last week to overturn its own previous decision (from just last December) and allow driller EQT to deduct post-production expenses from royalty payments. Last December MDN reported on the huge West Virginia Supreme Court decision against driller EQT that disallows EQT from deducting post-production expenses from royalty checks, even with signed contracts in place (see WV Supreme Court Rules EQT Can’t Deduct P-P Costs from Royalties). The justices, in their ruling, said that drillers can “not deduct from that (royalty) amount any expenses that have been incurred in gathering, transporting or treating the oil or gas after it has been initially extracted, any sums attributable to a loss or beneficial use of volume beyond that initially measured or any other costs that may be characterized as post-production.” A really big deal. Then in February, with a brand new justice on the bench, the WV Supreme Court agreed to rehear the case after an appeal filed by EQT–a rare and unusual step (see EQT Catches Big Break in WV Supreme Court re Royalty Deductions). Those who won the case say newly elected Supreme Court Justice Elizabeth D. Walker has conflicts of interest and should not have been allowed to vote to rehear the case in the first place (which she did). On that basis, they tried to avoid the rehearing altogether, but that failed, and lawyers were in court arguing the case earlier this month. As it turns out, the lawyers mainly argued over the meaning of three short words: “at the wellhead” (see WV Supreme Court Post-Production Royalty Case Hinges on 3 Words). On Friday, the justices reversed their earlier decision, voting 4-1 in favor of allowing EQT to deduct “reasonable” post-production expenses (copy of the decision below). Newly elected Justice Beth Walker, with (according to the other side) conflicts of interest, voted in favor of EQT. This has BIG implications for landowners and drillers in the Mountain State…Continue reading

FERC Responds to Rover Request to Begin Drilling in 2 Locations: NO

It was full speed ahead for Energy Transfer’s Rover Pipeline construction project in Ohio–until a series of drilling mud spills hit, including one that dumped some 2 million gallons of bentonite mud into a wetland near the Tuscarawas River in Stark County, OH (see Rover Pipeline Accident Spills ~2M Gal. Drilling Mud in OH Swamp). Not long after the Federal Energy Regulatory Commission (FERC) slapped Rover with a “stop horizontal drilling” order (see FERC Slaps Rover Pipeline with Stop Drilling Order). Let’s put that into context. Most of the pipeline getting laid for Rover is in trenches–not from underground horizontal drilling. There are some places along the route when you can’t dig a trench–like crossing a creek or river, or major highway. In those cases, you drill horizontally underground, underneath the object. When drilling, bentonite mud is used to keep the drill bit cool. Sometimes the mud pumped underground finds its way back out again via cracks in the rock. It is those accidents that FERC (and the Ohio EPA) find a little too frequent and voluminous for their liking. So FERC told ET to stop any new underground drilling. Less than a week after FERC ordered ET to stop drilling, ET filed a request with FERC to begin drilling in two locations key to finishing the first leg of the pipeline–locations where the equipment is already in place, and the erosion controls already set up: Captina Creek in Belmont County, OH, where Rover wants to complete the Clarington lateral, and Middle Island Creek in Tyler County, WV, where Rover wants to complete the Sherwood lateral (see Rover Gets Serious About Mud Spills, Asks FERC for OK to Drill). FERC responded to ET’s request to drill in those locations last Thursday: NO…
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Peters Township Votes to Allow Fracking Under Town Property

Peters Township, the most populous township in Washington County, PA, is one of the seven selfish towns that sued the state in 2012 over the zoning provisions in the then-new Act 13 law, eventually winning at the PA Supreme Court level (see PA Supreme Court Rules Against State/Drillers in Act 13 Case). The Act 13 victory gave townships like Peters the right to pass local zoning ordinances that restrict, but don’t outright ban, Marcellus/Utica drilling. Peters has been adept at using the victory to keep a defacto ban in place by “studying” the issue to death (see Peters Twp, PA Pretends to Debate Ordinance to Allow Drilling and Peters Twp, PA Continues to Delay Drilling by “Studying” It). Sooner or later you have to come down on one side or the other, and last September Peters decided to screw Marcellus drillers. Town council passed a new drilling ordinance (4-2) that says drilling is ONLY allowed in areas zoned for industrial uses, which rules out areas zoned for agricultural uses, where most drilling happens (see Peters Twp Gives the Middle Finger to Drillers One Final Time). Even the theoretical drilling that would happen in industrial areas, a grand total of 138 acres in the township, will have to be a “conditional use” with loads of permits and reviews. So we found it quite ironic that Peters Township Council threw their lordly “principles” right out the window last Tuesday when they voted (5-2) to give EQT a five-year lease on some of the township’s own land–for a signing bonus of $4,750 per acre, with 18% royalties–something they’ve denied every other landowner in the township…
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PA DEP to Hold 4 Public Hearings for Atlantic Sunrise Pipe in June

Seems like forever we’ve been waiting for the Pennsylvania Dept. of Environmental Protection (DEP) to issue the final permits needed for the Williams Atlantic Sunrise Pipeline project to begin construction. Atlantic Sunrise is a $3 billion, 198-mile pipeline project running through 10 Pennsylvania counties to connect Marcellus Shale natural gas from northeastern PA with the Williams’ Transco pipeline in southern Lancaster County. The Federal Energy Regulatory Commission (FERC) gave its final seal of approval for the project in February (see Atlantic Sunrise Pipeline Gets Final Approval by FERC). But like NY, PA is holding up the project. The DEP has not, so far, granted necessary permits to allow construction to begin–those permits being Chapter 102 (earth disturbance) and Chapter 105 (waterway and wetland encroachment). Williams embarked on a public relations campaign to enlist support across the state to pressure PA Gov. Tom Wolf and the DEP to grant the permits so construction can (finally) begin. The Wolf DEP is holding up this project and the 8,000 jobs it will create during construction. Williams delivered a petition to Gov. Wolf with the signatures of 3,000 people supporting the project earlier this month (see PA Roars Its Approval of Atlantic Sunrise Pipeline with Petition, Comments). Perhaps that did the trick. Last Thursday the DEP announced four public hearings in June (otherwise known as circus freak shows, where antis parade in front of microphones and behave like asses). The DEP will also accept public comments until June 26. After that, we will hopefully get a swift round of issued permits and the backhoes will start digging…Continue reading

NGI’s “Forward Look” Price Curves Now Cover 79 Key Markets

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NGI asked their analysts why you should care about Forward Look now more than ever. They’ve answered, and answered with vigor…
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Chesapeake Scores Court Victory to Prevent PA Royalty Class Action

Sometimes we wish we had gone to law school–to better understand some of the cases involved with oil and gas. This is one of those times. When you read words like “arbitrability,” the eyes start to glaze over. We’ll do our best to summarize some important news for landowners who want to sue Chesapeake over shorted royalty checks. Starting in 2008, Chesapeake Energy, under then-CEO Aubrey McClendon, began leasing acreage in northeastern Pennsylvania for shale drilling. Said drilling happened and in 2013, Scout Petroleum purchased royalty rights from some NEPA landowners. That is, Scout took over receiving the royalty payments in return for giving those landowners an up front, lump sum. In 2014, when it became obvious Chesapeake was using aggressive deductions from royalty payments (i.e. landowners were getting hosed), Scout filed a lawsuit against Chesapeake, requesting (under the lease language) that their grievances against Chessy be arbitrated AND (not specifically under the lease language) that Scout and thousands of other landowners be lumped together into class action arbitration (see Bad to Worse: PA Royalty Owner Asks Court for Chessy Class Action). Scout lost the case over class action and appealed. In late April, an appeals judge found that class action arbitration is not part of the original lease language, express or implied, and therefore is not allowed. Scout is appealing the decision once again. This is far from over, but for now, Chesapeake has a small victory in forcing landowners to file individual lawsuits…
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NJ DEP Keeps Badmouthing PennEast Pipeline

PennEast Pipeline route through NJ

PennEast Pipeline is caught between a rock and a hard place in New Jersey, and the NJ Dept. of Environmental Protection (NJDEP) isn’t lifting a finger to help. In April, MDN told you NJDEP has temporarily rejected PennEast Pipeline’s Freshwater Wetlands Individual Permit and Water Quality Certificate application, submitted April 6 (see NJ DEP Temporarily Rejects PennEast Request for Wetland Permits). NJDEP said in their response that PennEast has not provided enough detail about the project–leaving out key pieces of information for two-thirds of the pipeline’s 37-mile trek through NJ. NJDEP says they want the application refiled within 30 days, and if PennEast doesn’t give them what they want within 60 days, the DEP will consider the application “withdrawn.” Here’s the Catch-22: In order to get the details needed via surveys, PennEast needs access to property. But many NJ landowners have been convinced by groups like the odious Sierra Club to deny permission. So PennEast can’t do their surveys to get the details needed for the the NJDEP. Since it’s a federally approved project, NJDEP certainly won’t issue eminent domain to allow PennEast access to survey. For that, PennEast must wait on FERC. It’s rumored that FERC will grant eminent domain sometime this summer for PennEast to allow them the right to access NJ (and PA) properties of holdout landowners. Antis are elated and breathlessly say PennEast will be delayed for months, maybe years (doing things like multi-year surveys on plants). PennEast continues to say the NJDEP’s responses are routine and being handled. Who’s right?…
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Fate of 2 Important Pipelines May Rest in Virginia Governor Race

Election matters, and elections for governor really matter–at least with respect to shale drilling and pipelines. Here in New York State, where MDN is written, we are ruled by a corrupt autocrat by the name of Andrew Cuomo. Single-handed Cuomo has decided to ban fracking and block new shale gas pipelines (see After 6+ Years, Andrew Cuomo Bans Fracking in New York; NY Gov. Cuomo Refuses to Grant Permits for Constitution Pipeline; and Cuomo’s Corrupt NY DEC Blocks NFG Northern Access Pipeline Permit). So when a Democrat candidate in Virginia to be the next governor vows to block pipelines there, we don’t take it as just electioneering. These people are serious–and dangerous. Our court systems have failed to reign in Democrat autocrats who rule by fiat. It’s up to the people to ensure they don’t get elected. On June 13 Virginia will hold a primary in their gubernatorial race. Since a Democrat has won the governor’s mansion in nine out of the last ten elections, it pays to pay attention to the two leading Dem candidates for governor in Virginia. One of them, former Congressman Tom Perriello, says he’ll block both the $5 billion Atlantic Coast Pipeline through his state, and the $3.5 billion Mountain Valley Pipeline. His opponent, the sitting Lieutenant Governor Ralph Northam, doesn’t outright oppose the projects but instead says they will be put under an extreme review by the Virginia Department of Environmental Quality (DEQ). Just one problem with that: The DEQ says FERC is the one who will monitor and review the project, not the DEQ. In other words, what Northam has been promising is just another empty political promise (surprised?). With a close race, will this late-breaking news from the DEQ tip the balance in favor of the radical Perriello?…Continue reading

5 Climate Jihadists Disrupt Senate FERC Nominee Hearing

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Last Thursday the U.S. Senate Energy and Natural Resources Committee held a confirmation hearing for two nominees for the Federal Energy Regulatory Commission (FERC). Neil Chatterjee, energy adviser to Senate Majority Leader Mitch McConnell and Robert Powelson, a Pennsylvania Public Utility Commission member and president of the National Association of Regulatory Utility Commissioners were put through their paces, questioned by Senators for two hours. Getting these men confirmed is a high priority–to restore a voting quorum. Right now there are only two (soon to be one) FERC commissioners. You need three minimum for a voting quorum. When filled, there are five FERC commissioners. During the hearing, extremists from Beyond Extreme Energy attempted to disrupt the hearing with yelling. They were taken out of the room and arrested. These are the same kinds of people Powelson previously called environmental jihadists–those who show up at FERC commissioners’ homes to intimidate them before votes (see Potential FERC Com. Powleson Calls Anti-Fossil Fuelers “Jihadists”). Powelson later walked back his “jihad” statement, sadly. By all accounts the disruptions by the jihadists at the hearing were minor and didn’t (as the nutters had hoped) slow down anything. One jerk handcuffed himself to a chair and the Capitol police whisked him out while the hearing continued, uninterrupted (see the image). Below are accounts of the hearing and what was said, along with a press release from Beyond Extreme Energy…
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Marcellus & Utica Shale Story Links: Tue, May 30, 2017

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Marcellus/Utica pipeline takeaway projects to the Gulf Coast; Fracking loses a friend, Edward Allees; Shell buys another 1.5 miles of leases for ethane pipe; PA legislators “demand” severance tax; Chemical Safety Board investigates Barbour County explosion at mercaptan facility; GOP Senators tell Trump to dump Paris climate deal; why consensus on energy policy IS possible; OPEC decides to extend production cuts into 2018; and more!Continue reading