Kevin Haggerty, a Democratic state representative from the northeast region of Pennsylvania, recently introduced House Bill 1947 to impose a 5% severance tax on the gross value of each unit severed, plus an additional 4.6 cents per unit. “Unit” is defined to mean a thousand cubic feet of natural gas measured at the well head. Unlike previous severance tax proposals that would spread the tax dollars across various programs and beneficiaries, this bill seeks to use the tax proceeds solely to benefit Pennsylvania’s transportation system via the Motor License Fund.
Two Ohio trial courts issued new decisions on Ohio’s Dormant Mineral Act (“DMA”) addressing an unsettled issue of law concerning whether the 1989 or 2006 version of the DMA should apply to current disputes over the ownership of severed mineral rights. Both trial court decisions held that the 2006 version of the DMA applies to current disputes, which indicates a further reversal of the trend favoring claims made by surface owners that severed mineral interests “automatically vest” under the 1989 DMA. This blog previously reported on Dahlgren v. Brown Farm Properties, which was one of the first trial court decisions to apply the 2006 DMA and provided a short background of the two versions of the law. The blog post is available here.
In M&H Partnership v. Hines, Plaintiffs proceeded under a theory that the 1989 DMA applied “automatically” to extinguish the rights of the owners of a severed mineral estate. After considering the application of both the 1989 and 2006 versions of the DMA, the trial court found that the 2006 DMA applied. The court cited the Seventh District Court of Appeals’ decision in Dodd v. Croskey and noted the 2006 DMA’s procedures comport with the Ohio Marketable Title Act’s purpose of simplifying and facilitating title transactions. Further, the surface owner’s theory of “automatic vesting” under the 1989 DMA was contrary to the purpose of the Ohio Marketable Title Act because it would not allow people to rely on the record chain of title for a property. Applying the 2006 DMA, the trial court found that the surface owners had not complied with its procedural requirements and that the mineral owners had properly preserved their interest in the mineral estate.
The second recent trial court decision applying the 2006 DMA was issued by the Monroe County Court of Common Pleas. In Gentile v. Ackerman, the trial determined that the 2006 DMA applies to current lawsuits based on the precedent of Dodd v. Croskey. The trial court held it was expressly required to follow the Seventh District Court of Appeals’ decision in Dodd and that the procedures of the 2006 DMA must be followed to achieve abandonment and vesting of a severed mineral estate in a surface owner.
IGS CNG Services, in conjunction with other partners and Governor Tomblin’s office, announced that the grand opening of Charleston, West Virginia’s first compressed natural gas fueling station for vehicles will be held on January 28, 2014. The fueling station is located at 10 Spring Street in Charleston.
West Virginia’s Ohio River region is one step closer to seeing construction begin on a cracker plant in the Wood County area. According to the Charleston Gazette, Appalachian Shale Cracker Enterprise, owned by Brazilian based Odebrecht, purchased the SABIC Plastics Innovations facility in Wood County for approximately $11 million. The “Ascent” complex, once it is complete, will include three polyethylene plants in addition to the ethane cracker plant and associated infrastructure. The SABIC plant is anticipated to continue operations until 2015 making the timeline for constructing and opening the ethane cracker facility unknown.
The Sixth Circuit Court of Appeals ruled that unitizing a property can be sufficient to extend a lease beyond its primary term. In Henry v. Chesapeake Appalachia, the dispositive issue concerned whether “operations” were conducted on the landowner’s property prior to the lease’s expiration. The lease permitted Chesapeake to pool or unitize the landowner’s property with other land to create one or more drilling units. Chesapeake filed a Declaration and Notice of a Pooled Unit (“DPU”) which included the landowner’s property in a drilling unit and specified that production would be allocated to the lease. The Court held that the filing of the DPU was an act incidental to the endeavor to obtain production of oil and gas from the landowner’s property and constituted “operations” as defined by the lease. The Court ruled in Chesapeake’s favor finding that the lease had been extended beyond its primary term.
On January 13th, the Pennsylvania Senate Appropriations Committee voted in favor of a senate bill that encourages oil and gas operators to re-use mine-influenced water for hydraulic fracturing. Senator Kasunic (D-Fayette/Somerset) re-introduced the bill, known as Senate Bill 411 (previously Senate Bill 1346 of last session). The bill is set to move to the full Senate floor for a vote in the near future.
A third, 160-foot demethanizer tower was completed January 11th at the Utica East Ohio Kensington Plant in Columbiana County, Ohio. The plant serves as a collection and compression point for harvested natural gas from the Utica Shale. The tower, which will likely be commissioned within the next three months, separates the natural gas liquids from the shale gas. As production from the Utica shale formation increases an additional tower may be installed to keep up with demand.
The New York State Energy Planning Board released its Draft 2014 State Energy Plan on January 7, 2014. Although one of the draft plan’s key initiatives includes expanding access to natural gas as an alternative to petroleum products for heating and power generation, the Energy Planning Board does not take a position on whether the State should allow Marcellus Shale drilling. The Energy Planning Board notes in the draft plan that, although “both horizontal drilling and hydraulic fracturing are not new to natural gas development in New York, Marcellus Shale drilling using these techniques is on hold pending additional review.” According to the Energy Planning Board, natural gas production in other states currently satisfies 97 percent of New York’s demand, with a growing proportion of that supply coming from the Marcellus and other shale plays.
The Energy Planning Board predicts that New York’s natural gas production will continue to decrease significantly unless the State’s Marcellus Shale reserves are developed. Regardless of New York’s decision on whether to lift its five-year moratorium on hydraulic fracturing, the Energy Planning Board concluded that sufficient natural gas supplies should be available from other states to meet future demand, as long as interstate pipeline capacity exists to serve New York. The Energy Planning Board intends to hold public hearings in several cities and is currently accepting public comments in writing or electronically at energyplan.ny.gov.
The Pennsylvania Department of Environmental Protection (DEP) recently published on its website a series of video training tutorials to provide guidance on how to complete quarterly well inspections under the Mechanical Integrity Assessment (MIA) requirements. MIA forms, instructions and user guides are also available on DEP’s website.
DEP also recently published a Frequently Asked Questions (FAQ) document addressing the Bureau of Air Quality’s General Permit-5 (GP-5) and Plan Approval Exemption Category No. 38. The GP-5 is a General Plan Approval and/or Operating Permit used to permit emissions from natural gas gathering, compression and/or processing facilities that are minor air contamination facilities, while Exemption Category No. 38 concerns a permit exemption for air emission sources located at a well pad.
West Virginia delegates outlined their agendas for the legislative session that began last week. Among the items included in the agendas is a “future fund” that would be established with proceeds generated by the oil and gas industry in West Virginia, as reported by The Charleston Gazette. Kevin Craig, D-Cabell, indicated that the revenue from the fund should be utilized for investment in West Virginia’s future, for activities such as education, teacher salaries and infrastructure. Democratic leaders are also advocating the creation of a standing committee on energy that will be headed by Kevin Craig. The legislative session lasts for 60 days.
The Pittsburgh Post-Gazette reports that Pennsylvania Governor Tom Corbett has requested that oil and gas operators continue to help protect the rivers, streams and wetlands by adhering to environmental standards, including setback provisions, that were recently struck down by the Pennsylvania Supreme Court. According to Governor Corbett’s press release, the setback provisions had required a minimum of 300 feet between an unconventional oil or gas well bore and a stream, spring, body of water or wetland (or 100 feet for a conventional well). The distance provisions could only be waived by the Department of Environmental Protection upon satisfactory demonstration of additional protective measures taken by an operator to ensure that water quality was fully protected. The Marcellus Shale Coalition, the Associated Petroleum Industries of Pennsylvania and the Pennsylvania Independent Oil and Gas Association have indicated that they will comply with Governor Corbett’s request.
The director of the Ohio Environmental Protection Agency, Scott Nally, abruptly resigned yesterday after three years on the job. Nally departed his position on short notice and did not give a specific reason for his resignation. Craig Butler, a senior director of energy and environmental policy in Ohio governor John Kasich’s office, will replace Nally on an interim basis.
The Ohio Department of Natural Resources released its first quarterly production update thanks to a new law that requires production to be reported on a quarterly versus annual basis. The report showed that Ohio’s 245 horizontal wells produced a total of 1,332,477 barrels of oil and 33,606,075 thousand cubic feet of natural gas during the third quarter of 2013 (July to September). Industry analysts say that the results are positive and indicate that the 245 wells could produce as much as $1 billion in revenue per year . Ohio’s largest producing oil well is operated by Gulfport in Harrison County and produced 41,617 barrels of oil during 70 days of production in the third quarter. The largest producing gas well is also operated by Gulfport, but in Belmont County. That well produced 1,249,739 thousand cubic feet of natural gas during 89 days of production.
As reported in December, the Pennsylvania Supreme Court on December 19, 2013 invalidated portions of Act 13, including provisions limiting local government control and provisions regarding setbacks from the waters of the Commonwealth, pursuant to Article 1, Section 27 of the Pennsylvania Constitution.
However, the Pennsylvania Office of General Counsel (OGC) today filed an Application for Reconsideration requesting that the Pennsylvania Supreme Court remand the case to the Commonwealth Court so that a hearing can be held to create a factual record because the Supreme Court’s decision relied upon broad factual findings that were not of record before any court. Second, the OGC requested that the Supreme Court remand to the Commonwealth Court the issues related to setbacks from waters of the Commonwealth.
The Pittsburgh Post-Gazette recently reported that Horsehead Corp. and Shell Chemical LP have extended their land option agreement for a third time, giving Shell more time to decide whether it will build an ethane cracker on the site of Horsehead’s Beaver County Pennsylvania smelter. Unlike the previous two extensions, the expiration date of the third extension is confidential. The third extension also includes a provision that Horsehead will soon begin demolition activities at the site and that Shell will cover the expenses. Horsehead and Shell first entered into a land option agreement in March 2012.