StateImpact reported that the Federal Energy Regulatory Commission recently approved an addition to the interstate Transco pipeline that will transport Marcellus shale gas to New Jersey, where there is a high demand. The approval comes after several other pipeline expansions to New York and New England were recently approved. The Leidy Southeast line will total approximately 30 miles in Pennsylvania and New Jersey and is scheduled to be completed by late 2015.
StateImpact, a reporting collaboration supported by NPR, that the Federal Energy Regulatory Commission has approved a proposed interstate pipeline that would transport Marcellus Shale natural gas from Pennsylvania to New York and New England markets. The 30-inch pipeline would cover 124 miles, connecting gas production in Susquehanna County, Pennsylvania to existing transmission lines in New York. The pipeline will be operated by subsidiaries of Williams Partners, Cabot Oil and Gas, Piedmont Natural Gas, and WGL Holdings. The Pennsylvania Department of Environmental Protection, the U.S. Army Corps of Engineers and the New York Department of Environmental Conservation must still issue final permits.
The Pennsylvania Superior Court recently ruled that constructive notice of a title defect may toll the running of the statute of limitations and affect damages for an action in trespass and conversion to oil and gas rights in Sabella v. Appalachian Development Corp., et al., Case No. 722 WDA 2013. Sabella purchased the oil and gas underlying 66 acres of land in 1997. The owner of the surface executed a lease purporting to cover Sabella’s oil and gas interest in favor of Appalachian Development Corporation, who subsequently assigned its interest in the lease to Brian and Lisa Haner, d/b/a Pine Ridge Energy. The Haners opted not to conduct a full title search upon its acquisition, but instead conducted a bring-down title search. The Haners drilled several wells pursuant to the lease prior to receiving actual notice that their lease was producing interests actually owned by Sabella.
The Court held that the two year statute of limitations did not preclude the trespass and conversion claims, because the statute had been tolled by the discovery rule. The trespass and conversion began in 2003, approximately 7 years before Sabella filed the suit. However, Sabella met his burden of establishing that he was unaware of the trespass and that a reasonable person would not have discovered the trespass. Sabella drove down the public road along the property to look for oil and gas activity, but did not enter upon the surface of the property to determine whether activities were taking place. Despite the open oil and gas development that had occurred on the property for years, the activity was not clearly visible from any public areas or other areas in which Sabella may have been. The Court held that, in properly recording his mineral deed, Sabella could reasonably expect that anyone seeking to drill on the property would discover his interest through a title search. The Court stated that the mere recording of a deed in all instances does not relieve a party of an obligation of affirmative observation in protecting his interests. However, the specific factors showed that a reasonable person would not have discovered the trespass in this case.
The Court also ruled that because the Defendants had constructive notice of Sabella’s interest under Pennsylvania’s Constructive Notice Statute, they were precluded from asserting a good faith defense to trespass damages. The Haners were ignorant of Sabella’s interest not because of a recording error or latency, but because they willfully chose not to conduct a title search. Therefore, the Haners were found by the Court to have acted in bad faith.
A recently released report from the U.S. Energy Information Administration (“EIA”) indicates that last year Pennsylvania became the second-largest shale gas producing state, only falling behind Texas in the amount of gross withdrawals from shale gas wells. The EIA report also indicates that shale gas wells have become the largest source of total national gas production in the United States.
Southwestern Energy Company and Detroit-based DTE Energy Company have made a deal to expand DTE’s natural gas gathering system in Susquehanna County, PA by 50%. The Bluestone Gathering System delivers gas from the Marcellus shale in Pennsylvania through the Millennium Pipeline in Broome County, NY and the Tennessee Gas Pipeline in Susquehanna County. According to Nasdaq, the new agreement will increase Southwestern’s transportation capacity on the Bluestone Pipeline, which currently ships up to 0.8 Bcf per day and will increase to 1.0 Bcf per day by mid-2016. The plan for increased infrastructure is significant for Southwestern, which recently acquired 413,000 net acres and 1,500 wells in southern Pennsylvania and northern West Virginia from Chesapeake Energy Corporation and had an increase of 47% in gas production over the past year.
The Court of Common Pleas of Lycoming County, Pennsylvania recently granted the condemnation of a temporary construction easement to UGI Penn Natural Gas, Inc. (UGI). UGI is a public utility, regulated by the Pennsylvania Public Utility Commission. The term of the easement is for 1 year in order to park and store vehicles and equipment and materials related to the construction, maintenance, replacing and changing of one or more pipelines for the transportation, transmission and distribution of gas.
The issue in the case was whether a public utility’s condemnation for the construction and maintenance of a pipeline for the transportation, transmission and distribution of natural gas to a private business which operates as a power generating plant within its service area violates Pennsylvania’s Property Rights Protection Act. The court concluded that it did not. Because UGI is a public utility, regulated by the Public Utility Commission, it falls within “the limited, defined class of condemners” permitted to use the eminent domain power to provide public services in tandem with benefits to a private enterprise. 26 Pa.C.S. Sec. 204(b)(2)(i). The Court also distinguished the present case from prior cases in that UGI, as the public utility, will own the easement rather than the private enterprise.
On Saturday, November 15th, the Pennsylvania Department of Environmental Protection (DEP) published proposed changes to its General Plan Approval and/or General Operating Permit (BAQ-GPA/GP-5 or General Permit) for Natural Gas Compression and/or Processing Facilities (known as “GP-5”) issued in February 2013. Operators may apply for coverage under GP-5 to authorize the construction, modification, and/or operation of a natural gas compression and/or a gas processing facility.
Among other proposed changes, DEP has deleted the applicability threshold requirement for greenhouse gases in response to the United States Supreme Court’s Utility Air Regulatory Group (UARG) v. Environmental Protection Agency (EPA) decision issued on June 23, 2014. DEP also added a requirement to submit an annual compliance certification for GP-5; the annual certification would be due to DEP by March 1 each year. Public comments on the proposed revisions to GP-5 will be accepted by DEP until January 6, 2015.
According to a report published by Pennsylvania Business Daily, Reading-based UGI Utilities, Inc. recently became Pennsylvania’s first natural gas utility to connect one of its pipelines to a Utica Shale well, thereby increasing the supply of natural gas available to customers in Tioga and Potter counties. The expansion required UGI to construct a new meter and regulator station system, but it is estimated that the natural gas resources in the expanded system, which includes one Utica well and two Marcellus wells, can meet the energy needs of more than 50,000 households. According to a statement by Kelly Beaver, UGI’s Vice President of Supply, “[m]ore than 70 percent of the natural gas we deliver through our system is produced in the Marcellus Shale region. We are pleased to add volumes of lower-cost Utica Shale natural gas to our portfolio as another supply source.”
On October 22, 2014, Pennsylvania Governor Tom Corbett signed House Bill 2278, The Unconventional Well Report Act, into law. The Act requires operators of unconventional wells to submit monthly production reports to the Department of Environmental Protection. The change is to revise Act 13, which had required semi-annual production reporting for unconventional wells. The initial report under the Act is due to the DEP on March 31, 2015, and thereafter monthly production reports are due 45 days after the close of the reporting period. The DEP will make the submitted reports available on its website and may use the reports in enforcement proceedings.
On October 22, 2014, Pennsylvania Governor Tom Corbett signed House Bill 402, also known as the Recording of Surrender Documents from Oil and Natural Gas Lease Act, into law. The Act imposes a duty on a lessee to deliver a surrender document to a lessor within 30 days of the termination, expiration or cancellation of an oil and gas lease. Read our Administrative Watch to learn more.
Two bills primarily sponsored by PA Representative Tina Pickett (Republican, Bradford/Sullivan/Susquehanna) have recently passed the State House and Senate. House Bill (HB) 2278, Unconventional Well Report Act, would require the operator of an unconventional well to file a monthly report specifying the amount of production with the Department of Environmental Protection. Currently, production is reported to the Department every six months. HB 402, Recording of Surrender Documents from Oil and Natural Gas Lease Act, states that a lessee shall deliver to a lessor a surrender document not more than 30 days after the termination, expiration or cancellation of an oil or gas lease. If a lessor does not receive such notice within the 30 day time period, the lessor is permitted to serve notice on the lessee. A lessor who has served notice and fails to receive a timely challenge from the lessee may record an affidavit of termination, expiration or cancellation of a lease in the recorder’s office of the applicable county. The bills are awaiting review by Governor Tom Corbett.
Southwestern Energy Co. announced that it has signed a deal to acquire 413,000 net acres in West Virginia and Pennsylvania from Chesapeake Energy Corp. for $5.375 billion, reports the Pittsburgh Business Times. This acquisition includes 256 producing and 179 unoperated or nonproducing Marcellus and Utica Shale wells. These assets will complement those Southwestern already has in the Marcellus Shale in northeastern Pennsylvania.
On September 26, 2014, the Commonwealth Court of Pennsylvania issued an opinion in favor of MarkWest Liberty Midstream & Resources, LLC. MarkWest had purchased a 71.5 acre parcel of undeveloped land in Cecil Township, Pennsylvania, and had applied to the township’s zoning hearing board for a special exception under the zoning ordinance to construct and operate a natural gas compressor station.
The zoning hearing board denied MarkWest’s special exception application holding that MarkWest failed to satisfy the zoning ordinance’s requirements that the compressor station would be of the same general character as other permitted uses, and that its impact would be equal to or less than other permitted uses. MarkWest appealed to the trial court, which affirmed the zoning board’s decision. MarkWest then appealed to the Commonwealth Court.
On appeal, MarkWest argued that the zoning board erred because the compressor station is of the same general character as an “essential service” and because it meets the standards for permitted uses in the Township’s I-1 Light Industrial District. The zoning hearing board argued that MarkWest is a commercial enterprise that is neither a public utility nor an entity that provides an essential service to the public. The Commonwealth Court noted that the issue is not whether MarkWest’s proposed use is an “essential service” as defined, but rather, whether MarkWest’s proposed use is of the same general character as any essential service. The court then held that the zoning hearing board did not make any finding that the proposed compressor station was not of “the same general character” as other permitted uses. Instead, the court found that the zoning hearing board applied the wrong legal standard by requiring the use to be “of the same character” rather than “the same general character.”
Accordingly, the Commonwealth Court concluded that the zoning hearing board’s position was an unreasonable interpretation and application of the zoning ordinance, and it reversed the portion of the trial court’s decision affirming the denial of the special exception application. The Commonwealth Court remanded the case to the trial court and directed it to immediately remand the case to the zoning hearing board with the direction to grant MarkWest’s special exception application within 45 days of receiving the remand order.
A bill that would amend taxation on oil and gas drilling was referred to the Pennsylvania House Committee on Environmental Resources and Energy on Monday. House Bill 2508, which was introduced by Margo Davidson (Democrat, Delaware County) and others, seeks to impose a severance tax of 5% of the gross value of units severed at the wellhead during a reporting period, plus 5 cents per unit severed. Filing of a tax return would be required within 15 days following the end of a reporting period. Oil and gas producers would also be required under the Bill to apply to the Department of Revenue for a severance tax registration certificate prior to conducting operations, which must include, among other items, a declaration of all producing sites and nonproducing sites used by the producer for severance of natural gas. The Department may refuse to issue or revoke a registration certificate, and the Bill provides a process for appealing such determination. The violation of such provisions under the Bill would result in a producer being found guilty of a summary offense and sentenced to pay a fine. The Bill includes additional provisions regarding assessments, interest, and penalties. The Bill in its entirety can be found here.
The Pittsburgh Tribune Review reports that colleges located in Western Pennsylvania are creating programs to prepare students for jobs in the energy industry. For example, Kennedy Township’s Rosedale Technical Institute (soon to be re-named Rosedale Technical College) currently offers an industrial technician associate degree program, and it will add additional programs next year. Westmoreland County Community College offers an energy degree program and Butler County Community College recently added four energy classes to its course offerings. Allegheny County and Beaver County Community Colleges also offer classes geared toward the energy industry. According to the Pennsylvania Department of Labor and Industry, shale-related industries employed approximately 238,000 people in 2013.