PA Supreme Crt: No Production, No Payments…Doesn’t Cancel Lease
Here’s an interesting lawsuit in Pennsylvania with potential ramifications for both landowners and drillers. In 2013 a landowner in Warren County, PA filed a lawsuit against Mitch-Well Energy claiming the company had abandoned its leases (and its rights) by not producing marketable quantities of natural gas from several conventional wells. The company had also not paid a required annual fee in lieu of production royalties. For 18 years! Several lower courts ruled in favor of the landowner. Last week the PA “Supreme” Court (we use that term loosely) reversed the lower court rulings and said in this case, not producing gas for 18 years and not making any payments to the landowners during that time is not (yet) enough to claim the energy company has abandoned its lease rights.
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According to an extensive article appearing in the Pipeline & Gas Journal, “the oil and gas industry [in the Marcellus/Utica] is ready to pick up where it left off in 2019.” The Ohio Oil & Gas Association (OOGA) says “2021 is looking up.” However, nobody in the midstream is planning to build new pipelines anytime soon. That spells trouble ahead for prices. Increasing production without new pipeline capacity to transport the increased production to other markets equals stagnant (or even falling) prices.
While the Philadelphia Inquirer has at least one reliable and objective reporter working in its ranks–Andrew Maykuth–the same can’t be said for the lefties who populate the editorial board at the newspaper. Yesterday’s unsigned editorial declares that “Fracking jobs will disappear. Pennsylvania has to manage the decline.” Like he!!. The lefties on the editorial board base their brazen (and false) statements on Joe Biden’s plan to decimate the fossil fuel industry with his warmed-over Green New Deal vomit. The editorial board presumes Biden’s attempts will be successful. They will not.
Here’s a new truism of life you may not have heard before: Be careful that the corporation you climb into bed with actually has a spine. Interestingly, U.S. Steel in East Pittsburgh, whom you would assume has a steel spine, doesn’t have a spine at all! Merrion Oil & Gas found that out the hard way. Merrion, a privately-owned oil and gas company headquartered in New Mexico, signed a lease with U.S. Steel to drill a series of up to 18 shale wells on the Edgar Thomson Works property in Allegheny County. Following blowback from loud-mouth anti-fossil fuel nutters, U.S. Steel decided the project isn’t worth the negative press. So they caved and canceled the lease with Merrion. Shame on U.S. Steel.
It’s nice to see Pennsylvania’s Republican legislators playing hardball with the out-of-control governor of Pennsylvania, Tom Wolf. Yesterday PA Senate Republicans wrote a letter to Gov. Wolf to advise him they will reject all future nominees to the state Public Utility Commission (PUC) until he withdraws his executive order joining the so-called Regional Greenhouse Gas Initiative (RGGI), a carbon tax scheme aimed at shutting down coal and natural gas-fired power plants in the state.
The Chester County, PA District Attorney, Democrat Deb Ryan, has pressured and bullied Energy Transfer (ET) and its Sunoco Pipeline subsidiary into signing a “consent decree” that guarantees if ET spills one cup of drilling mud or creates any kind of “public nuisance” in finishing up work on the Mariner East pipeline, the DA gets to haul the company into county court and charge it with a crime. The consent decree means in addition to the state Dept. of Environmental Protection (DEP) breathing down their necks, ET now gets a second master (AG Ryan) breathing down their necks too. Joy.
Pennsylvania’s Pipeline Investment Program (or PIPE) issues grants covering part of the cost for building new natural gas pipelines to connect homes and businesses, typically in rural parts of the state, to homegrown Marcellus Shale gas supplies. We’ve written about many of the PIPE grant projects in the past (
In September 2018, MDN brought you the news that six men had been charged with conspiring to illegally alter emissions systems on 30+ trucks with heavy-duty diesel engines, trucks used to haul water and wastewater to and from Marcellus Shale wells (see 
State legislators in Pennsylvania are attempting to restore some sanity to overregulation inflicted by unelected bureaucracies in the state, like the Dept. of Environmental Protection (DEP). Republicans have introduced and are pushing along a couple of bills that will reign in the DEP (and other overzealous agencies) in PA. One bill requires the legislature to approve any new regulation that impacts a regulated community by more than $1 million. Another bill allows third parties to assist the DEP in reviewing and approving certain permits. The DEP can’t seem to get its act together and there are always loooong delays in approving new permits.
All three M-U states received permits to drill new shale wells last week. Pennsylvania received a whopping 17 new permits spread across various counties and drillers. Ohio received just 2 new permits last week, both for Ascent Resources on the same pad. And West Virginia received a big 12 new permits split between two drillers: Antero Resources and Tug Hill Operating.
American Energy Partners, Inc. (AEPT), based in Allentown, PA, is a small but diversified company. They have their fingers in a number of different oil and gas pies, including subsidies in drilling, remediation, water, valuation services, and education. AEPT announced a new deal today to purchase three conventional oil and gas operators with assets in Western Pennsylvania and West Virginia for $10.8 million. The three operators (unnamed) come with a collective 467 conventional wells and 1,250 MMcfe/d of natural gas production.
Have you ever heard the trite but true phrase, “words mean things”? Never has that been more true than in Pennsylvania and the simple word called “royalty.” Somewhere along the way the word “royalty” got watered down and changed. A new bill being introduced by PA State Rep. Eric Davanzo (Republican from Westmoreland County) will clear up the confusion and bastardization of the term royalty, making it easy for everyone to know what can and cannot be deducted from royalties with respect to oil and gas leases.
In July 2020, PA Gov. Tom Wolf signed into law House Bill (HB) 732, a bill that grants tax breaks to companies willing to build brand new petrochemical plants in the Keystone State–plants that use huge quantities of Marcellus Shale gas (see