WV Hydrogen Project to Generate Rev. of $105M/Yr, Incl. Pore Rights
Yesterday we told you about a new $2 billion hydrogen project coming to West Virginia (see $2B Hydrogen Project Announces for WV – FidelisH2 in Mason Co.). Fidelis New Energy announced it had selected Mason County for a “net-zero” hydrogen production facility and low carbon microgrid, which it has dubbed The Mountaineer GigaSystem. The Fidelis plan includes building data centers powered by net-zero hydrogen. Fidelis will produce hydrogen with “zero lifecycle carbon emissions” from a combination of Marcellus/Utica gas, renewable energy, and CCUS (carbon capture, utilization, and sequestration). Today we pull back the curtain on how the deal came together and the state’s upcoming use of “pore rights.”
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Last week MDN told you that WhiteHawk Energy, headquartered in Philadelphia with ownership of mineral and royalty interests for 850,000 gross unit acres and over 2,500 producing horizontal shale wells between the Marcellus and the Haynesville, had proposed marriage to PHX Minerals, based in Fort Worth, Texas, owner of 75,000 leased mineral acres principally located in the SCOOP and Haynesville plays (see 
At the end of May, WhiteHawk Energy, headquartered in Philadelphia with ownership of mineral and royalty interests for 850,000 gross unit acres and over 2,500 producing horizontal shale wells between the Marcellus and the Haynesville, sent a letter to the board and management of PHX Minerals, based in Fort Worth, Texas, owner of 75,000 leased mineral acres principally located in the SCOOP and Haynesville plays. The letter proposes marriage–a combination of the two companies. WhiteHawk received no response and tried again about three weeks later. Still nothing. So WhiteHawk has gone public to catch the attention of PHX shareholders, hoping to convince them to pressure PHX’s board–the M&A equivalent of a shotgun wedding.
Headquartered in Philadelphia, PA, WhiteHawk Energy was founded in 2021 to acquire mineral rights and royalty interests in U.S. shale plays. The management team of WhiteHawk has deep roots in the Marcellus, having founded Atlas Energy (a Marcellus driller) that was later sold to Chevron for $4.3 billion. In March 2022, MDN told you that WhiteHawk had purchased mineral and royalty rights in southwestern Pennsylvania, primarily in Washington and Green counties, for $52.5 million, covering 475,000 gross acres (see 
We spotted an in-depth article by RBN Energy about mineral rights, royalties, and working interests. Private investors and companies have sprung up to buy such rights. RBN says competition to buy these rights has heated up in recent years. The article gives us a better understanding of the scope, size, and inner workings of the royalty and rights marketplace.
For years we’ve railed against what we consider the theft of royalties and bonus payments by the state of Pennsylvania from landowners with creeks and rivers running through their leased (for shale drilling) property. The Pennsylvania Dept. of Conservation and Natural Resources (DCNR) claims that under a centuries-old law, the state of PA “owns” the property under “navigable” waterways–including rivers and streams (see 
In 2021, U.S. District Judge Lee H. Rosenthal, Chief Judge for the Southern District of Texas, approved deals for Chesapeake Energy to pay $6.25 million to class members of the three royalty lawsuits brought by Pennsylvania landowners (roughly 15,000 class members) and another $2.9 million to the lawyers involved (see 
Yeah, you read the headline correctly. Encino Energy offered the State of Ohio $1.8 BILLION (estimated) to drill for natural gas and oil under Salt Fork State Park, located in Guernsey County, OH. The park includes 17,229 acres of land and 2,952 acres of water. In December, Encino made an offer to the state immediately after House Bill (HB) 507 passed. The offer includes a payment of $5,500 per acre as a signing bonus and 20% royalties. No drilling would be done inside the park. All drilling would be done on land surrounding (on the outside of) the park.
The Pennsylvania Game Commission (PGC) owns and manages more than 1.5 million acres of state game lands throughout the Commonwealth. The primary purpose of these lands is the management of habitat for wildlife and providing opportunities for lawful hunting and trapping. You might think PGC gets most of its revenue from hunting and trapping licenses and fees. You would be wrong. PGC allows shale drilling on some of its vast holdings, and leases and royalties generate about 7X the income for PGC than all other sources combined.
In a case initially filed last summer in Ohio, a Belmont County mineral rights owner alleges that Rice Drilling (now owned by EQT) drained natural gas from a rock layer it did not have the right to access according to the signed lease. Golden Eagle Resources says the lease allowed Rice to drill down only as far as the Utica Shale layer, which Rice did. However, Golden Eagle says fractures from Rice’s fracking of the Utica layer reached down into the adjacent Point Pleasant layer and drained some of the gas from the Point Pleasant too–and that’s a no-no according to the lease.
CNX has reached a settlement with the Municipal Authority of Westmoreland County (MAWC) in a lawsuit brought by MAWC in 2016 claiming that CNX (and partner Noble Energy) claimed post-production deductions from royalties that should have been paid to MAWC. The original lawsuit sought combined damages of $3.6 million. The final number to be paid by CNX, according to reports, is $600,000.
On February 15, 2023, the Supreme Court of Pennsylvania agreed to hear the case Dressler Family, LP v. PennEnergy Resources, LLC, a case addressing the question of whether Pennsylvania is an “at-the-well” jurisdiction, or a “first-marketable product” jurisdiction. The case may have profound implications for Pennsylvania landowners and drillers. The issue in this case revolves around whether or not a driller is allowed to deduct expenses from royalty payments for transporting and cleaning up natural gas between the well and the point of sale. Can a driller claim post-production deductions even if there are clauses that prohibit them?
We have a second article today dealing with post-production deductions in Pennsylvania oil and gas leases. Although this is an “in the weeds” legal article, it’s worth your time and attention (if you are a PA landowner or driller) to read it and understand it. The lawyers at Houston Harbaugh, P.C. have discovered an ingenious way of exposing “net back pricing” and claiming post-production deductions under market enhancement royalty clauses as being hypocritical–by using a clause found in some leases that allows “free gas.”
Have you ever heard of reviving an expired lease through retroactive pooling and unitization? We sure hadn’t. But apparently, it’s a thing in the Marcellus region. According to the legal beagles at Pittsburgh energy law firm Houston Harbaugh, in some cases, landowners with leases that were expired are being notified those leases are now part of an amended (back-dated) declaration of pooling, which shows a date prior to the lease expiring.
Last April, MDN introduced readers to the developing issue of landowners being approached to lease “pore space” rights (see