The Fifth District Court of Appeals affirmed the trial court’s decision in Trico Land Company, LLC v. Kenoil Producing LLC, upholding the right to have and enforce a change of ownership clause in an oil and gas lease. The case involved a property subject to a 2008 oil and gas lease that was transferred to a new owner, who did not notify the lessee of the change in ownership. No well was drilled nor were the annual delay rental payments made until 2011 when the lessee paid all delay rental payments due under the lease. The court, quoting the Ohio Supreme Court in Harris v. Ohio Oil Co., stated that an oil and gas lease is a contract and the parties should be held to the written terms in the agreement. Because the lessor failed to comply with the condition precedent requiring written notice of a change of ownership, the lessee was relieved of its obligation to pay delay rentals annually and the lease was determined to be valid upon the lessee’s payment of the past due delay rentals.
On April 15, 2014, the U.S. Environmental Protection Agency (EPA) released five technical white papers for peer review, each one focusing on a possible source of methane and volatile organic compound (VOC) emissions within the oil and natural gas sector. The papers describe estimated emissions and techniques for reducing emissions from the following: compressors; hydraulically fractured oil well completions and associated gas during production; leaks; liquids unloading; and pneumatic devices. The public has until June 16, 2014 to provide comments, which EPA will use in conjunction with the papers to develop a strategy to further reduce methane and VOC emissions pursuant to the Obama Administration’s Strategy to Reduce Methane Emissions revealed in March.
The Ohio Department of Natural Resources has changed permitting requirements after finding a probable connection between horizontal drilling activity near a previously unknown microfault and recent seismic activity in the Mahoning County area. Moving forward, any new permits for horizontal drilling located within 3 miles of a known fault or area of seismic activity would require companies to install sensitive seismic monitors. If those monitors detect a seismic event in excess of 1.0 magnitude, activities must cease while the cause is investigated. If the investigation reveals a probable connection to the hydraulic fracturing process, all well completion operations will be suspended. ODNR will also review previously issued permits that have not been drilled.
On April 10, 2014, a federal judge granted a preliminary injunction forcing Hempfield Township to permit ION Geophysical of Houston (ION) to perform seismic testing on the Township’s roads. Hempfield Township argued that it does not specifically permit seismic testing and, that by restricting the seismic testing, it was protecting the rights of property owners who did not have an agreement with ION. U.S. District Court Judge Maurice Cohill disagreed, finding that the Township was preempted by the Oil and Gas Act from prohibiting seismic testing and the Township’s refusal to negotiate an agreement with ION deprived ION of the ability to conduct seismic testing without the ability to appeal. Judge Cohill ruled that the testing will not hurt the Township and that Hempfield would be likely to lose on the merits.
Ohio House Bill 490, which would strengthen penalties for violating Ohio’s oil and gas regulations, is now pending before the Ohio House agriculture committee. The bill was introduced in response to illegal dumping of oil field waste. Industry officials have so far indicated support for the bill.
On April 9, 2014, Pennsylvania Commonwealth Court President Judge Dan Pellegrini denied the petition to intervene of the Pennsylvania Independent Oil and Gas Association, Marcellus Shale Coalition and American Petroleum Institute in the Act 13 litigation, which was remanded by the Supreme Court back to the Commonwealth Court in December. However, Judge Pellegrini granted the trade groups a total of five minutes to argue as amicus curiae at a hearing scheduled for May 14, 2014 on the remanded issues. Issues to be argued in May include the jurisdiction of the PA Public Utility Commission, eminent domain, notice requirements for spills, and the provision prohibiting disclosure by health professionals of chemicals use in hydraulic fracturing.
The Seventh District Court of Appeals issued a ruling concerning application of the Ohio Dormant Mineral Act. In Walker v. Noon, the appeals court upheld the ruling of a Noble County trial court finding that the 1989 version of the Dormant Mineral Act applied and that a severed mineral estate became vested with the owner of the surface by operation of the statute.
The New York Attorney General’s office has filed motions to dismiss two lawsuits that seek to force Governor Cuomo to end a delay in deciding the future of shale drilling within the State. The two lawsuits, filed separately by a group of landowners and the bankruptcy trustee for Norse Energy, argue that that the State’s delay in issuing an environmental review of hydraulic fracturing is illegal and amounts to an unconstitutional “taking” of the plaintiffs’ property without just compensation. The State asserts in the motions for dismissal that the landowner group and the bankruptcy trustee lack standing to bring the suits.
Governor Tom Corbett announced on Friday that the state of Pennsylvania expects to collect $224.5 million in 2014 through Act 13’s well fee assessed on unconventional wells. This figure represents an 11% increase over the previous year. Since Act 13 became law in 2012, the total amount collected from the fee accounts for more than $630 million in revenue.
The majority of the Act 13 well fee funds are directly distributed to counties and municipalities for a variety of authorized uses. A portion of the funds are also distributed to commonwealth agencies such as the DEP and conservation programs like Growing Greener and Marcellus Legacy Fund.
Act 13 imposes a 15 year fee for companies drilling into the Marcellus Shale formation. The annual fees can range between $5,000 to $60,000 per well, depending on the current price of natural gas and the age of the well.
As reported by the Akron Beacon Journal Online on April 4, 2014, the Ohio Environmental Protection Agency issued revised general permits for the installation and operation of air contaminant sources at oil and gas horizontal well sites to address methane gas released from valves, connectors and other equipment. Under the new permits, operators are required to scan all the equipment at a well site on a quarterly basis for any leaks of hydrocarbons. The purpose of the new permits is to quickly identify and correct potential gas leaks at well sites and to prevent unnecessary emissions. Colorado and Wyoming have recently adopted similar air emissions requirements.
NPR’s StateImpact Pennsylvania reports that the Pennsylvania Farm Bureau is getting involved in the debate over minimum royalties. As we have previously posted, House Bill 1684 is currently in the state House. If passed, the bill would guarantee landowners a minimum royalty of 12.5%, which could not be reduced further by post-production costs. The Farm Bureau is putting its support behind the bill, as indicated by remarks from the Farm Bureau’s President, Carl Shaffer.
This week the Pennsylvania Department of Environmental Protection (PADEP) announced the availability of emissions data from oil and gas operations in the Commonwealth. According to the PADEP press release, the data represents “2012 emissions levels from Marcellus Shale natural gas production and processing operations as well as compressor stations that receive gas from traditional oil and gas well sites.” PADEP reportedly received data from “56 Marcellus Shale operators covering 8,800 natural gas wells and 70 operators of 400 compressor stations.” Air contamination sources in the industry report emissions annually to PADEP.
On April 1, 2014, a group of eight U.S. House Democrats sent a letter to the U.S. Environmental Protection Agency (USEPA) urging the agency to address alleged water contamination near drilling sites in Dimock, Pennsylvania; Pavillion, Wyoming; and Parker County, Texas. The congressmen acknowledged that states act as a “major source” of regulations for the oil and gas industry, but expressed their belief that USEPA “has a key role to play in oil and gas development.”
TransCanada Corporation’s ANR Pipeline system has secured nearly 2.0 billion cubic feet per day of natural gas transportation commitments for the movement of oil and gas produced from the Utica and Marcellus formations through its Southeast Main Line. These contracts involve transporting natural gas to points both north and south within ANR’s system, as well as increasing their flow capability to the Gulf Coast. ANR is one of the few existing pipeline systems with access to both the Upper Midwest and the Gulf Coast, and they are exploring further opportunities to transport gas produced from the Utica Shale to these areas.
Utica East Ohio Midstream (“UEO”) recently purchased two buildings in downtown Salineville, Ohio. The company owns natural gas processing plants in nearby Kensington and Leesville. UEO plans to use the buildings for administrative offices for its oil and gas operations in the area. A company spokesman says that the purchase of the buildings solidifies UEO’s presence in the community. They estimate that 40 people will be working in the buildings.