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Our Shale Energy Law Blog provides timely legal and business information on issues impacting the energy industry and specifically natural gas development, as well as articles published by the attorneys of Babst Calland.

 


 

 

Pipeline Safety Alert – PHMSA Publishes Long-Awaited Mega-Rule for Gas Transmission Lines

On October 1, 2019, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published a final rule in the Federal Register amending the federal safety standards for gas pipeline facilities at 49 C.F.R. Part 192 (Rule). The Rule primarily addresses concerns identified in congressional mandates and National Transportation Safety Board (NTSB) recommendations for gas transmission lines.  The most significant provisions include new requirements for verifying pipeline materials, reconfirming maximum allowable operating pressure (MAOP), and performing periodic assessments of pipeline segments located outside of high consequence areas (HCAs), including in newly-defined moderate consequence areas (MCAs).  Other changes include amendments to the integrity management (IM) requirements, new requirements for reporting MAOP exceedances and the safety of inline inspection launcher and receivers, as well as related recordkeeping requirements.

This alert is the first in a four-part Babst Calland series on the Rule.  This first alert discusses the new MAOP reconfirmation and material verification requirements.  The next alert will cover MCAs and new assessment requirements for pipelines located outside of HCAs.  The third client alert will review the new recordkeeping requirements.  Finally, Babst Calland will survey the remaining Rule topics.

Please read more about this Final Rule in this Alert.

Tagged:  MAOP, PHMSA, gas transmission pipelines, maximum allowable operating pressure, operator


Ohio’s Seventh District Court of Appeals Clarifies Past Holdings, Confirms Marketable Title Act Available to Surface Owners Seeking to Extinguish Severed Mineral Interests

Ohio’s Seventh District Court of Appeals recently ruled that Ohio’s Marketable Title Act (the “MTA”) does not conflict with the Dormant Mineral Act (“DMA”), and that both statutes can be utilized by a surface owner to claim ownership of severed minerals. W. v. Bode, 2019-Ohio-4092 (Ct. App.). The Monroe County trial court found that the DMA irreconcilably conflicted with the MTA and that the surface owners were limited to the process set forth in the DMA to claim ownership of a severed royalty interest. However, the Seventh District reversed and determined that, although the DMA provides a separate procedure, both the MTA and the DMA are available to surface owners attempting to claim ownership of a severed mineral interest.

In addition to Bode, the Seventh District issued two opinions clarifying earlier 2019 decisions pertaining to the MTA. Hickman v. Consolidation Coal Co., 2019-Ohio-4077 (Ct. App.) and Miller v. Mellot, 2019-Ohio-4084 (Ct. App.). In its previous decisions, the Seventh District held that if the surface owner’s root of title contained any reference to an oil and gas exception/reservation, the surface owner was precluded from claiming the mineral interest had been extinguished under the MTA. In Hickman and Miller, the Seventh District clarified that it reached that conclusion solely due to the void in the post-severance/pre-root deed history contained in the record in these cases. Because the records were silent as to the interest owned by the grantors in the root of title deeds, the court could not ascertain that the exception/reservation contained therein operated as a reference instead of an original severance. The Seventh District confirmed that the Blackstone analysis1 applies where the root of title contains a reference to a prior reference.

Enacted in 1961, the MTA operates to extinguish interests after 40 years unless a statutory exception applies. While originally excluding minerals from its application, a 1973 amendment caused the MTA to apply to all minerals except coal. In 1989, the Ohio legislature amended the MTA to include the DMA, which provides a method to have severed minerals “deemed abandoned” after 20 years absent a savings event. Therefore, the DMA provides a method, including service of notice on the holders, of declaring a mineral interest abandoned after only 20 years and the MTA results in an automatic extinguishment of an interest after 40 years. The availability of these coextensive alternatives depends on the time passed and the nature of the chain of title for both the surface and minerals. In holding that both the DMA and MTA apply to minerals, the Seventh District provided greater flexibility to surface owners and operators seeking to develop oil and gas in Ohio.

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1 (1) Is there an interest described within the chain of title? (2) If so, is the reference to that interest a “general reference”? (3) If the answers to the first two questions are “yes,” does the general reference contain a specific identification of a recorded title transaction?

Tagged:  Dormant Mineral Act, Leasing, Litigation, Marketable Title Act, Natural gas, Ohio, Oil and gas, Title, reference


Pipeline Safety Alert – PHMSA Publishes Long-Awaited Final Rule for Hazardous Liquid Pipelines

On October 1, 2019, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published a final rule in the Federal Register amending the federal safety standards for hazardous liquids pipelines at 49 C.F.R. Part 195 (84 Fed. Reg. 52260) (Rule). The publication of the Rule ends a nearly decade-long rulemaking process that began in the wake of a significant pipeline accident in Marshall, Michigan. A prior version of the Rule, released in the closing days of the Obama administration, was returned to PHMSA for further review pursuant to a White House memorandum issued at the start of the Trump administration. This version of the Rule reflects changes that PHMSA made after receiving input from the current administration, the most significant of which is the removal of new requirements for performing pipeline repairs. The effective date of the Rule is July 1, 2020.  Please read more about this Final Rule in this Alert.

Tagged:  PHMSA, PIPES Act, pipelines, reporting


Pipeline Safety Alert – PHMSA Releases Enhanced Emergency Order Procedures

On October 1, 2019, the Pipeline and Hazardous Materials Safety Administration (PHMSA or the Agency) published a Final Rule in the Federal Register updating its procedural requirements for issuing emergency orders (EO).  In 2016, PHMSA issued temporary regulations for issuing emergency orders in an interim final rule (IFR).  Unlike the process that ordinarily applies to PHMSA rulemakings under the Pipeline Safety and Administrative Procedure Acts, the Agency issued the temporary EO requirements without providing the public with prior notice or the opportunity to submit comments.  The final rule takes effect on December 2, 2019, and includes changes that the Agency deemed necessary based on comments submitted after the IFR.  Please read more about this Final Rule in this Alert.

Tagged:  PHMSA, PIPES Act of 2016, Pipeline, emergency orders, imminent hazard


U.S. Department of Energy Approves Gulf LNG Project

On July 31, 2019 the U.S. Department of Energy (DOE) issued an order authorizing Gulf LNG Liquefaction Company, LLC to export domestically produced liquefied natural gas (LNG) from the Gulf LNG Project located in Jackson County, Mississippi, near the city of Pascagoula. The Gulf LNG Project is owned by Kinder Morgan’s Southern Gulf LNG Company, LLC. The proposed terminal would export up to 1.53 Bcf/d and be built at the same site as the existing Gulf LNG Terminal.

Initially in 2009, the 230 acre Gulf LNG site was developed as a liquefied natural gas import terminal. However, natural gas production has been ever increasing from shale plays within the United States. In July of 2015 Kinder Morgan responded to the surplus and began the federal application process to redevelop a portion of its plant into an export terminal.

Energy Secretary Rick Perry said, “This announcement advances the Trump administration’s commitment to energy security here at home and for our friends abroad. Increased amounts of U.S. LNG on the world market benefit the American economy, American workers, and consumers and help make the air cleaner around the globe.”

According to the DOE, there are currently five existing LNG export terminals in North America. If the Gulf LNG export terminal is built it will be the sixth.

Tagged:  LNG, Natural gas, U.S. Department of Energy


DC Circuit Court of Appeals Upholds FERC Approval of Atlantic Sunrise Project

On August 2, 2019, the District of Columbia Circuit Court of Appeals upheld the Federal Energy Regulatory Commission’s (“FERC”) orders approving the construction and operation of Transcontinental Gas Pipe Line Company’s Atlantic Sunrise Project. The Atlantic Sunrise Project is an approximately 196.5 mile 1.7 Bcf/d pipeline spanning from northern Pennsylvania, across the Carolinas and into Alabama. The pipeline was originally approved by FERC in February of 2017 and went into service in the fall of 2018. Opponents of the project sought review of FERC’s orders permitting the pipeline’s expansion and operation.

Specifically, opponents asserted that the Commission: i) improperly conducted its environmental impact statement under the National Environmental Policy Act (“NEPA”); ii) failed to substantiate market need for the Project as required by the Natural Gas Act; and iii) denied them due process by authorizing construction to commence before the issuance of the Certificate Order could be judicially reviewed.

The D.C. Circuit found that FERC’s NEPA analysis was acceptable, and that FERC appropriately considered individual utility and the reasonableness of the pipeline route; substantiated the requisite market need; and that due process was not denied. The court also found that opponents made no claim that they were deprived of a meaningful opportunity to be heard as part of the FERC certificate process.

Ultimately, the Court denied the petitions for review and deferred to the Commission’s decision to approve the Atlantic Sunrise Project expansion and operation.

Tagged:  Atlantic Sunrise Project, FERC, Pipeline


The 2019 Babst Calland Report Highlights Federal, State and Local Challenges and Opportunities for the U.S. Oil and Gas Industry

The law firm of Babst Calland today released its annual energy industry report: The 2019 Babst Calland Report – The U.S. Oil and Gas Industry: Federal, State and Local Challenges & Opportunities; Legal and Regulatory Perspective for Producers and Midstream Operators. In this Report, Babst Calland energy attorneys provide perspective on issues, challenges, opportunities and recent developments in the oil and gas industry that are relevant to producers and midstream operators. According to the International Energy Agency, “the second wave of the U.S. shale revolution is coming” and the United States will account for a 70 percent increase in global oil production and a 75 percent expansion in LNG trade in the next five years.  On a year-over-year basis, natural gas production continues to increase in each of the seven largest shale basins in the United States. Most notably, oil and natural gas production is being driven by three of the largest producing basins including Appalachia in Pennsylvania, West Virginia and Ohio, the Permian Basin in Texas and New Mexico, and the Haynesville Basin in southwestern Arkansas, northwest Louisiana, and east Texas. Joseph K. Reinhart, shareholder and co-chair of Babst Calland’s Energy and Natural Resources Group, said, “Domestic shale producers and operators continue to face myriad legal and regulatory challenges by regulatory agencies, the courts, activists, and the market. This annual review is a snapshot of the issues and trends on the federal, state and local level in the oil and gas industry over the past year.” The 92-page Babst Calland Report covers a range of topics from the industry’s business outlook, regulatory enforcement and rulemaking to developments in pipeline safety and litigation trends. A few of the Report’s highlights include:
  • The U.S. Department of Energy’s Energy Information Administration (EIA) reports both oil and dry natural gas production set U.S. records this year. Oil production hit 12.4 million barrels per day in May, natural gas soared above 90 billion cubic feet per day. U.S. production of gas liquids also set records and now account for over a quarter of U.S. petroleum product output.
  • This year, the oil and gas industry received mixed messages regarding environmental matters. On the federal level, the Trump administration generally loosened regulatory and/or statutory constraints, such as narrowing the Clean Water Act definition of “Waters of the United States.” In contrast, at the state level, some agencies introduced or considered more rigorous standards, including Pennsylvania’s proposed cap-and-trade program.
  • Public interest in pipeline safety has grown significantly in recent years. Consequently, operators’ installation of new pipeline infrastructure to transport energy products from the nation’s shale plays to domestic and foreign markets has resulted in increased scrutiny.
  • In Pennsylvania, the contours of the Robinson Township II decision continue to be litigated and legislated by local governing bodies, while the Commonwealth Court provided clarity concerning a municipality’s right to determine the location of oil and gas operations. In West Virginia, the extent of a county government’s ability to investigate alleged nuisances is being considered in the state’s highest court. In Colorado, new legislation has empowered local governments to take a much more active role in regulating oil and gas development.
  • Significant title issues concerning oil and gas property rights continue to be addressed in states in shale plays throughout the country. The desire to improve efficiencies has resulted in the use of allocation wells and cross unit drilling, particularly in Texas and Oklahoma.
  • Nuisance claims, alleging that excessive noise, traffic, dust, light, air pollution and impaired water quality interfere with the use and enjoyment of private property, continue to be asserted across the shale plays.
  • An increasing number of oil and gas companies recognize the advancements in commercial unmanned aircraft systems (UAS) technology and the utility and cost savings associated with using UAS to inspect and monitor assets such as pipelines and infrastructure.
After more than a decade, the shale gas industry continues to expand its reach and impact on our country’s energy supply and independence. Babst Calland’s Energy and Natural Resources attorneys support clients operating in multiple locations throughout the nation’s shale plays. To request a copy of the Report, contact info@babstcalland.com.

Tagged:  Appalachian Basin, Gas drilling, Law, Marcellus Shale, Midstream, Natural gas, Ohio, Oil and gas, Pennsylvania, Regulatory, Utica Shale, West Virginia


Alert: The West Virginia Supreme Court Confirms the Right of Mineral Owners to “Reasonably Use” the Surface to Extract Minerals – for Now

The West Virginia Supreme Court issued an opinion in Andrews v. Antero Resources Corp. and Hall Drilling, LLC, No. 17-0126 (W. Va. June 10, 2019), an eagerly-awaited decision arising out of the In re: Marcellus Shale Litigation, in which hundreds of lawsuits have been filed against E&P and midstream oil and gas companies alleging that activities related to the production, compression, and transportation of natural gas represented a private nuisance.

The Property Owners in Andrews, which represented the first trial group in In re: Marcellus Shale Litigation, alleged that the fracking operations of Antero and Hall Drilling “in relation to their development of the Marcellus shale have caused Property Owners to lose the use and enjoyment of their properties due to the annoyance, inconvenience, and discomfort caused by excessive heavy equipment and truck traffic, diesel fumes and other emissions from the trucks, gas fumes and odors, vibrations, noise, lights, and dust.”  They filed a complaint alleging claims for “private temporary continuing abatable nuisance and negligence” against Antero and Hall Drilling arising from their “natural gas exploration, extraction, transportation and associated activities in close proximity to [Property Owners’] properties.”

Please read more about this decision in this Alert.

Tagged:  Horizontal drilling, Mass Litigation Panel, mineral leases, private nuisance, property owners, property rights, surface


Alert: West Virginia Supreme Court Opinion Limits Use of Surface Tract for Production of Gas from Neighboring/Unitized Tracts

On June 5, 2019, the West Virginia Supreme Court issued its opinion in EQT Production Company v. Crowder affirming a decision of the circuit court of Doddridge County, holding that a surface tract cannot be used to produce minerals from neighboring lands in the absence of an agreement with a surface owner, even if the mineral owners/lessees agreed to pooling and unitization.  Please read more about this decision in this Alert.

Tagged:  Litigation, Oil and gas, lessor, minerals, pooling, surface owner, unitzation


Sixth District Court of Appeals Analyzes Date Marketability Determined under Ohio Marketable Title Act

Ohio’s Sixth District Court of Appeals recently ruled that Ohio’s Marketable Title Act (the “MTA”) extinguished restrictive covenants on a parcel located in a residential subdivision due to a gap in excess of 40 years without being identified in the parcel’s chain of title. David v. Paulsen, No. OT-18-032, 2019 Ohio App. LEXIS 2229 (Ct. App. May 31, 2019).  The MTA allows an owner to establish marketable title, being title free from reasonable doubt of litigation, by relying on a record chain of title to extinguish interests and claims existing prior to the root of title unless an exception applies. The root of title is the most recent instrument of record at least 40 years prior to the time marketability is being determined. While not immediately impacting the oil and gas industry, at the heart of the dispute in Paulsen was when marketability is determined under the MTA, which may affect future oil and gas ownership claims under the MTA.

The Appellants, members of a subdivision seeking to enforce the restrictive covenant against the landowner Appellees’ building of a shed, argued that the date of the 2009 deed where the landowners took title to the lot should be used to determine marketability. If so, the root of title would be a 1964 deed which predated the restrictions of the subdivision. Therefore, the MTA would not extinguish the restrictions, as they would post-date the root of title. The landowners countered with the argument that the date the members of the subdivision filed their summary-judgment motion, being the date most recent in time, should be the date the court uses to determine marketability.

Finding fault with both positions, the court instead determined marketability when the members of the subdivision sought to enforce their purportedly-superior right, being the date they filed their complaint. Thus, the court found that a July 3, 1973 deed, being the first deed of record 40 years prior to the filing of the complaint, operated as the root of title for the land in dispute. The court concluded that the MTA extinguished the restrictions because the restrictions existed prior to the root of title and were not stated or identified in the July 3, 1973 deed or specifically referenced in any of the documents of the chain of title in the 40 years following the root of title.

While only binding on courts located within the jurisdiction of the Sixth District in northwest Ohio, Paulsen is the first appellate decision in Ohio to analyze the date that marketability is determined under the MTA. If adopted by other courts of appeal, particularly the Seventh District, Paulsen may render the MTA toothless in reclaiming title to previously severed oil and gas interests. Because the court in Paulsen determined marketability on the filing date of the complaint, a landowner would arguably be required to file a quiet title action to claim severed oil and gas interests under the MTA - an action not contemplated by the statute.

Tagged:  Litigation, Marketable Title Act, Ohio, Oil and gas, Title, marketability, real estate, restrictive covenant, root of title