Last month District Court Judge Irene Keeley, sitting in the Northern District of West Virginia, sought to have the West Virginia Supreme Court of Appeals (WVSCA) rule upon whether West Virginia law permits a natural gas producer to use a surface owner’s property to sink horizontal wells that draw gas from neighboring tracts. The decision in this case will have far reaching economic consequences in West Virginia. Now, the Court is slowing down the process through which the WVSCA may decide the novel issue. According to the San Francisco Chronicle, Judge Keeley has requested the record be supplemented with additional facts before the question is submitted to West Virginia’s highest court. Under this second order, it is unclear when the WVSCA may be called upon to determine this drilling issue.
West Virginia Governor Earl Ray Tomblin and the West Virginia Oil and Natural Gas Association, both enthusiastic advocates for utilizing natural gas produced from the Appalachian basin to fuel natural gas vehicles (NGVs), sponsored the 2013 Appalachian Basin NGV Expo and Conference this past week in Charleston, West Virginia. The conference agenda included discussions on the economic and environmental benefits of converting to NGVs, converting existing fleet vehicles into NGVs, and how to expand the NGV market. The conference featured speakers from Appalachian Basin natural gas producers, including Chesapeake Energy and CONSOL Energy, and fleet vehicle operators who are transitioning their gasoline and diesel vehicles to compressed natural gas, including Waste Management, which has more than 1,000 natural gas-powered trucks, and school bus manufacturer Blue Bird Body Company. The public had the opportunity to browse an exhibit hall that displayed various NGVs, including the world’s first natural gas-powered chopper.
The U.S. Coast Guard recently indicated that GreenHunter Water’s plan to transport brine from hydraulic fracturing via barges may undergo heightened scrutiny, with more federal agencies expected to weigh in on the matter. In addition to the Coast Guard, the federal agencies reportedly involved in the project discussions are the U.S. EPA, U.S. Department of Transportation, U.S. Department of Energy, and White House Office of Management and Budget. Although EPA’s involvement was foreseeable, the involvement of these additional agencies comes as a surprise. The project review process could involve public hearings, if they are deemed necessary by the agencies. Additional layers of review will likely delay project approval. Nevertheless, GreenHunter Water hopes to operate the new processing facility associated with the barge transport project later this year.
On Friday, May 10, 2013, Columbia Gas Transmission, LLC (Columbia Gas) submitted applications to the Federal Energy Regulatory Commission (FERC) for the issuance of certificates of public convenience and necessity for a pair of natural gas pipeline projects in the Appalachian basin. The first project, the Smithfield III Expansion, would include the construction of a new compressor station in Washington County, Pennsylvania, as well as the installation of additional compressor units, new station piping, control systems, and other facilities at existing compressor stations and other sites in Pennsylvania and West Virginia. The second project, the Line 1570, would involve replacing and expanding certain existing pipeline facilities in Greene County and Washington County, Pennsylvania, as well as replacing and expanding certain facilities at an existing compressor station in Greene County, Pennsylvania. According to Columbia Gas, these two projects will allow the company to expand its gas service to customers in markets in the southwest.
Journalist Pam Kasey suggested, in a print article in the West Virginia State Journal dated May 2, 2013, that while it is possible for a surface owner to attempt to insist that a driller become certified under new certification standards set by the Center for Sustainable Shale Development (as described last week in our blog), the standards are more likely to benefit minerals owners as bargaining tools for parties signing leases for oil and gas development. If the mineral interests are severed from the surface estate, then the surface owner will have little ability to use the standards for their own benefit. Per the article, the surface landowner will derive the most benefit from the new standards in situations when the minerals and the surface estate are owned by the same party, allowing the landowner can attempt to negotiate the standards into a lease or other agreement affecting the property.
On May 7th the Fourth Circuit Court of Appeals rejected the arguments of Martha and Charles Wellman and upheld the validity of a “legacy” oil and gas lease. The lease provided for royalty payments on production and a flat-rate rental payment. The mineral owners alleged that Bobcat Oil & Gas, Inc. failed to produce oil or gas under the lease, and breached the lease by missing rental payments, resulting in forfeiture of the lease. As the West Virginia Record noted, the Fourth Circuit upheld the lease under its original 1933 terms, stating that the lease could be maintained solely by payments of the flat rental, and that the missed payments in this case were not such that warranted termination of the lease.
A copy of the unpublished opinion from the Fourth Circuit can be found here.
As profiled in an article by Pam Kasey in the West Virginia State Journal, Charleston-based Appalachian Basin natural gas operator Triana Energy, LLC has meet the stringent environmental standards required to achieve ISO 14001 certification. To achieve certification, Triana established a comprehensive environmental management system for its operations. The company claims to be one of the first oil and gas exploration and production companies in the U.S. to receive ISO 14001 certification, which requires internal environmental controls and standards that are more demanding than current regulatory requirements.
As Pam Kasey explains in her May 2, 2013 article in the print edition of the West Virginia State Journal, the industry has voluntarily come together to be “good actors” in mineral development by incorporating input from oil and gas industry leaders, environmental groups and philanthropic organizations to design a certification program for gas producers in Appalachia, including West Virginia and Pennsylvania, under a new organization called the Center for Sustainable Shale Development based in Pittsburgh. This two year CCSD certification, while voluntary, examines 15 of the most critical areas in natural gas production to ensure producers are following the highest standards and comply with efforts to make production of natural gas in Appalachia as ‘green’ as possible.
The West Virginia Department of Environmental Protection will present an Oil & Gas Workshop at the Charleston Civic Center on May 16th beginning at 8:00 a.m. Speakers will address a wide variety of topics of interest to operators, contractors, consultants and attorneys- including waste water issues, permitting, compliance, pipeline safety, and horizontal well issues. To attend the workshop, contact B. J. Chestnut at B.J.Chestnut@wv.gov by May 10, 2013.
The West Virginia Department of Environmental Protection, Division of Air Quality (DAQ) recently extended the public comment period for the draft Class II General Permit G70-A for the Prevention and Control of Air Pollution in regard to the Construction, Modification, Relocation, Administrative Update and Operation of Natural Gas Production Facilities Located at the Well Site. All written comments or requests for a public meeting must now be received by the DAQ before 5:00pm on May 17, 2013. (The original deadline was April 29, 2013, as discussed in a prior blog post.)
The West Virginia legislature has passed Senate Bill 243, the legislation which authorizes the Department of Environmental Protection, Office of Oil and Gas (OOG), to promulgate the pending Horizontal Well Act regulations. According to the West Virginia Legislature’s bill tracking tool, Senate Bill 243 currently awaits Governor Tomblin’s signature. Notably, this bill includes a measure that would allow an operator to designate certain information regarding hydraulic fracturing chemicals as trade secret when filling out a well completion report. The trade secret measure compels the operator to share the information designated as trade secret with health professionals or the OOG in the event of a medical emergency or an investigation by the OOG.
The West Virginia Department of Environmental Protection Division of Air Quality recently issued the draft Class II General Permit G70-A for the Prevention and Control of Air Pollution in regard to the Construction, Modification, Relocation, Administrative Update and Operation of Natural Gas Production Facilities Located at the Well Site. The Notice of Intent to approve the permit indicates that the public may provide written comments regarding the permit to the Division of Air Quality, and that all such comments and requests for a public meeting regarding the permit must be received before 5:00 p.m. on Monday, April 29, 2013. The Draft Engineering Evaluation/Fact Sheet regarding Class II General Permit G70-A can be found here.
Updating a previous post, The Intelligencer reports that the West Virginia Senate declined to consider legislation that would have allowed un-leased land to be included in drilling units. Senator Brooks McCabe (D-Kanawha), who introduced Senate Bill No. 616, stated that “I don’t want to speculate whether it was for a lack of support, or if it was just introduced too late in the session. It just never got any traction.”
The West Virginia Senate is reportedly considering legislation, Senate Bill No. 616, that would allow un-leased land to be included in drilling units. This bill would not force an unwilling landowner into a unit, but rather would provide a mechanism for land with unknown owners to be included in a pool. Any royalties resulting from drilling on those lands would be paid into an escrow account until the owner could be found.
On February 8, 2013, federal District Court Judge John Preston Bailey struck down a lawsuit attempting to void an oil and gas lease agreement. The lessors argued that the lease should be voided based upon an inconsistency in the “commencement” date in the lease document according to the West Virginia Record. Judge Bailey refused to void the lease stating “the appropriate remedy in this case is to resolve the discrepancy [of the commencement date] by endorsing the date supplied by Range.” The Lessors have appealed the District Court’s ruling and opening briefs before the Fourth Circuit Court of Appeals are due by April 22.