A Harrison County trial court issued a decision in a Dormant Mineral Act case addressing the issue of whether a release of an oil and gas lease is a title transaction affecting and preserving a severed mineral interest from being abandoned. The trial court in Schucht v. Bedway Land and Minerals ruled that a release of an oil and gas lease constitutes a title transaction under the Dormant Mineral Act. The court found that given the nature of the interest conveyed by an oil and gas lease, the release of an oil and gas lease affects title to the mineral interest as well. This conclusion was further supported by Ohio’s lease forfeiture statute (R.C. 5301.332), which provides a mechanism for oil and gas leases to be cancelled of record.
Proposed regulatory amendments published on April 19, 2014 are likely to affect hundreds of facilities in Pennsylvania. The Pennsylvania Department of Environmental Protection (PADEP) has estimated that 141 sources will need to install additional pollution control equipment under the proposal. Read our full Administrative Watch to learn more.
On April 21, 2014, the U.S. Environmental Protection Agency published in the Federal Register its proposed rule to define “waters of the United States” and related key terms for purposes of determining the extent of federal agency jurisdiction under the Clean Water Act. Public comments will be accepted until July 21, 2014.
An Ohio trial court issued a decision in Marshall v. Beekay Company. The case involved an action seeking declaratory judgment as to leasehold rights for formations below the Germantown Sand Formation. The court ruled that there was no breach of the implied covenant to reasonably develop, or actual abandonment, of the rights to deeper geological formations when production was only found in “paying quantities” for formations located above the Germantown Sand Formation. The ruling is important for oil and gas producers against landowners seeking to terminate those portions of oil and gas leases covering the rights to deeper geological formations because of an alleged breach of the implied covenant to reasonably develop them when only shallower formations are being explored and produced.
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.