The United States District Court for the Western District of Pennsylvania has accepted in part the recommendations of a magistrate judge, and has granted the motion to certify two classes of plaintiffs in Pollock v. Energy Corp. of America. A third class was denied certification. In February, District Judge Joy Flowers Conti ruled on a summary judgment motion.
The plaintiffs, owners of various oil and gas interests under lease to Energy Corporation of America (ECA), brought suit for the alleged miscalculation of royalty payments by ECA. The classes, as certified, now encompass two groups: 1) “all Pennsylvania lessors holding an oil and gas lease with ECA for which interstate pipeline service charges were deducted prior to March 26, 2012;” and 2) “all Pennsylvania lessors holding an oil and gas lease with ECA for which marketing fees were deducted from royalties prior to March 26, 2012.” The third requested class, based on the failure to pay royalties on gas used as plant fuel, was denied.
Transcontinental Gas Pipe Line Company, LLC (“Transco”) recently filed an application with the Federal Energy Regulatory Commission (“FERC”) for authorization to construct and operate the Leidy Southeast Project. According to the application, the Leidy Southeast Project would involve the installation of approximately 30 miles of new 42-inch pipeline and associated facilities in Northeastern Pennsylvania and Northern New Jersey. The new pipelines, if approved by FERC, would be used to transport gas produced in North Central Pennsylvania. Transco asked FERC to issue a certificate of public convenience and necessity for the Project by August 1, 2014, so that the company could meet its targeted in-service date of December 1, 2015. The Times Tribune provides additional coverage here.
Penn State Marcellus Shale Law Blog reports that the U.S. District Court for the Western District of Pennsylvania recently granted in part and denied in part Texas Eastern Transmission, L.P.’s motion to dismiss and or strike a personal injury complaint by a neighboring land owner. In Koziel v. Texas Eastern Transmission, L.P., the land owner alleged that he suffered severe health problems related to his hearing and sleep after he heard a high pitched noise emanating from Texas Eastern’s nearby compressor station for nearly 15 minutes. He initially claimed that Texas Eastern was liable on the basis of negligence and strict liability, but conceded his strict liability claim following Texas Eastern’s motion to dismiss. As a result, the court granted Texas Eastern’s motion to dismis the strict liability claim. The court denied Texas Eastern’s motion to strike a particular paragraph of the plaintiff’s negligence claim as moot because the allegation related solely to the period of alleged action/inaction by the operator while the noise occurred, rather than any remedial or post-incident actions or inactions.
Steered by an executive of Philadelphia Energy Solutions, a group of business and political leaders is discussing the extent to which a natural gas pipeline can be constructed that would connect the natural gas fields of the Marcellus Shale to the City of Philadelphia. According to the group, “We’re trying to work on how to get that gas here to valorize it.” The group, however, recognizes that there will be challenges, including how to feed the pipeline through the city’s densely populated suburbs. The Philadelphia Inquirer has more here.
As we reported back in May of this year, a review team assembled by the State Review of Oil & Natural Gas Environmental Regulations (“STRONGER”) completed an in-state review of Pennsylvania’s Oil and Gas Regulatory Program. STRONGER’s review team recently published its final written report regarding its May 2013 review on its website that highlights the strengths of Pennsylvania’s program and identifies several recommendations for the program to consider moving forward. Some strenths of Pennsylvania’s program included its increase of “staff levels to address additional permitting, inspection, and enforcement activities related to increased unconventional well development,” as well as its initiation of a “comprehensive evaluation of radiation levels specificially associated with unconventional gas development” (generally referred to as the “TENORM Study”). In addition to recommending that Pennsylvania complete its TENORM Study, the STRONGER report also included a recommendation that Pennsylvania “maintain consistent standardized data for tracking vioaltions and enforcement actions.” According to the Pennsylvania Department of Environmental Protection’s press release, the Department will work to implement these recommendations in addition to other recommendations made in STRONGER’s final report.
The Pennsylvania Department of Environmental Protection will publish its final technical guidance document “Addressing Spills and Releases at Oil & Gas Well Sites or Access Roads” in the September 21, 2013 Pennsylvania Bulletin. The proposed Spill Policy was originally published in the April 14, 2012 Pennsylvania Bulletin for public comment, and the Department’s responses to the 67 comments from 12 commentors are included in a Comment and Response document published on the Department’s website today. The final Spill Policy is effective as of September 21, 2013.
WFMJ reports that State Sen. Jim Ferlo (D-Allegheny) announced that he will introduce Senate Bill 1100 next week, which will place a moratorium on new permits for hydraulic fracturing. The bill, known as the Natural Gas Drilling Moratorium Act, will also seek to create a commission to analyze the agricultural, economic, environmental and social effect of Marcellus Shale drilling. WESA indicates that such a commission would be comprised of seven individuals from various backgrounds, including a nonprofit environmental organization, an academic institution, the oil and gas industry, a geologist, a medical or public health expert, the Pennsylvania Secretary of Environmental Protection and the Pennsylvania Secretary of Conservation and Natural Resources. The bill would halt any new permits for natural gas drilling. StateImpact reports that the bill does not provide a time limit on the proposed moratorium.
EQT Corporation and Green Field Energy Services announced on Monday that they had achieved a major milestone in the hydraulic fracturing field. Using pumps powered entirely by “field” gas, or gas supplied from a separate (and previously drilled) natural gas well, Green Field successfully completed multiple stages in the hydraulic fracturing process on lands leased by EQT Corp.
What this means for the industry is a potentially cleaner method of operating some of the machinery necessary in the hydraulic fracturing process. Rather than relying on diesel-powered trucks and pumps, Green Field’s Turbine Frac Pump technology uses natural gas, a cleaner and more environmentally friendly fuel than diesel. Steve Schlotterbeck, Senior VP and President of EQT Exploration and Production noted that this new technology allows companies to “reduce emissions of carbon monoxide, carbon dioxide, nitrogen, and sulfur oxides; as well as decrease the amount of truck traffic on local roads.”
EQT began a program in 2012 to convert a number of their drilling rigs to natural gas-powered rigs, and so far four such rigs have been converted.
The Pittsburgh Business Times recently reported that Giant Eagle and Peoples Natural Gas have partnered to open a compressed natural gas filling station at the GetGo station in Cranberry Township on Route 228. According to the article, Giant Eagle expects to begin selling CNG at between $1.90 and $2.00 per gallon.
As previously reported on the Babst Calland Shale Energy Law Blog, the Pennsylvania Environmental Quality Board considered and approved the Pennsylvania Department of Environmental Protection’s (“PADEP”) proposed regulations regarding Subchapter C to Chapter 78 of Pennsylvania’s oil and gas regulations by a vote of 16 to 2 at its August 27, 2013 meeting. The proposed rulemaking will next be reviewed by the Commonwealth’s Attorney General’s Office and the Office of General Counsel. Following this review, the proposed rulemaking will be published in the Pennsylvania Bulletin for public review and comment. PADEP has recommended a 60-day public comment period and at least six public hearings to be held at various locations across the Commonwealth.
The Pittsburgh Post-Gazette reports that Shell Chemical, a division of Royal Dutch Shell, has begun to solicit ethane commitments from Marcellus Shale operators for its proposed Beaver County, Pennsylvania cracker plant. The company has already secured commitments from CONSOL Energy Inc., Noble Energy Inc., Seneca Resources Corp. and Hilcorp Energy Co. Shell has indicated that the response from bidders will help to determine whether it will build the first world-scale cracker plant in the Marcellus region. The bidding period will last two months.
The Pennsylvania Environmental Quality Board, the Commonwealth’s environmental rulemaking body, will consider proposed rulemaking to Subchapter C to Chapter 78 of Pennsylvania’s oil and gas regulations during its next meeting on August 27, 2013.
On August 13th, the United States District Court for the Middle District of Pennsylvania granted partial summary judgment in favor of Chief Exploration & Development and other defendants (Chief) in a consolidated case regarding the extension of three oil and gas leases in which the primary terms had expired. Three landowners filed lawsuits in the Court of Common Pleas against Chief in order to terminate the oil and gas leases. Chief then removed the suits to the federal district court based on diversity jurisdiction, and filed a motion for summary judgment arguing that it had extended the term of the leases pursuant to the habendum clause and unitization clause by performing various predrilling activities.
The habendum clause of the lease provided that “the lease shall remain in force for a primary term of five (5) years . . . for as long thereafter as operations are conducted on the Leasehold in search of production of oil, gas or their constituents . . .” The court recognized this provision as a ‘commence clause’. The plaintiffs argued that the habendum clause was ambiguous and that parol evidence was required to determine the intention of the parties. The plaintiffs further argued that Chief failed to commence operations prior to the expiration of the primary term and failed to proceed to the completion of a well with due diligence.
The court first concluded that the habendum clause was not ambiguous. It summarized the rules of contract interpretation and how they apply to oil and gas leases. In doing so, it stated that while it is common for commence clauses to condition a lease extension explicitly on the commencement of operations, the failure to use the word commencement or commence does not render such a clause ambiguous. It further provided that a reference to operations standing alone is generally sufficient to make the meaning of the clause distinct. Therefore, the court found that it was the intent of the parties to condition the extension of the leases on the commencement of operations and that the habendum clause was unambiguous.
The court then held that Chief adequately commenced operations in order to extend the term of the lease. It first stated that commencement of operations does not mean actual drilling of the well. It noted that lessees must be given “great leeway” in manifesting their intent to drill. The court held that the quantum or nature of the lessee’s preparatory activities do not in themselves matter much to the commencement inquiry. The material issue is, rather, whether the activity – minimal or extensive – is undertaking “in good faith, and with a determination on the lessee’s part to prosecute with due diligence the work the lessee was authorized by the lease to do.” The court held that Chief’s activities were sufficient to trigger the lease extensions. Specifically, Chief established the location of the well on a neighboring tract, conducted field surveys, staked the well location, obtained a vertical drilling permit and Erosion and Sediment Control General Permit from the Department of Environmental Protection, and finalized several necessary regulatory submissions prior to unitizing the plaintiffs’ leaseholds. After creating the unit, Chief surveyed the tract of land in which the well was to be located, placed a bulldozer on the property and began to clear lumber.
Essroc Cement Corporation, with locations scattered across the Midwest and Northeast, has filed a federal lawsuit in Pittsburgh, seeking to stop a planned pipeline from crossing property in Lawrence County. The pipeline is a joint venture operation between NiSource Inc., of Indiana, and Hilcorp Energy Co., of Texas, and is planned to travel upwards of 50 miles from Utica Shale wells in Pennsylvania and Ohio to a liquids processing plant in Ohio.
According to Essroc, the 20-inch pipeline would materially affect its ability to extract valuable coal and limestone from Essroc’s property. The company, which holds nearly 4,000 acres of subsurface rights around the North Beaver plant, is attempting to sell the property, according to the lawsuit.
As reported by the Pittsburgh Business Times, Pennsylvania Representative Michele Brooks (R-Crawford) issued a memorandum on August 12, 2013 to all House members regarding her intent to introduce two pieces of legislation regarding pooling in the near future. She stated that the legislation would repeal the pooling provisions of the Oil and Gas Conservation Law (Act 359 of 1961) and Section 2.1 of the Oil and Gas Lease Act (Act 60 of 1979 as amended by Act 66 of 2013). Section 2.1 of the Oil and Gas Lease Act authorizes an oil and gas operator to combine contiguous leased acreage for more efficient development unless any such lease expressly prohibits unitization or pooling. Representative Brooks did not indicate when she will introduce the legislation.