The U.S. House of Representatives passed a bill prohibiting the Interior Department from enforcing regulations on hydraulic fracturing in any state that already has regulations in place. The bill recognizes the states’ authority to regulate hydraulic fracturing within their borders and was passed in reaction to recent federal regulations that have been proposed to regulate hydraulic fracturing. The House bill would not prevent the federal government from implementing baseline standards in states where none exist. However, under the legislation federal regulations would not be permitted to supersede the applicable states’ laws.
In order to fill vacancies at the Department of the Interior, President Obama recently nominated Janice Schneider as Assistant Secretary for Land and Minerals Management, a move welcomed by Secretary Sally Jewell. Currently an environment and energy lawyer in private practice in Washington, D.C., Schneider, if confirmed, will oversee all energy development activities on federal lands and supervise the Bureau of Land Management (BLM), the Bureau of Ocean Energy Management (BOEM), and the Bureau of Safety and Environmental Enforcement. Also nominated were Neil Kornze as Director of the BLM and Tommy Beaudreau as Assistant Secretary for Policy, Management, and Budget. Because Beaudreau currently serves as head of the BOEM, Secretary Jewell is expected to pick his replacement upon confirmation of his new role.
On October 24, 2013, the U.S. District Court for the Middle District of Pennsylvania denied Columbia Gas Transmission, LLC’s (Columbia) request to use the eminent domain authority provided in the Natural Gas Act to acquire new pipeline easements from certain landowners in York County, Pennsylvania. Columbia filed the request to facilitate its efforts to replace and relocate portions of an existing gas pipeline in order to comply with the Pipeline and Hazardous Materials Safety Administration’s integrity management program requirements in Subpart O of 49 C.F.R. Part 192. Although the company’s efforts obtain the necessary easements through private negotiation had proved unsuccessful, the Court concluded that Columbia had not shown that the Federal Energy Regulatory Commission’s regulations for performing activities under a blanket certificate would allow the easements to be acquired through the use of eminent domain.
The Pennsylvania Public Utility Commission (“PUC”) unanimously approved a settlement that merges Equitable Gas Co. with Peoples Natural Gas Co. and transfers certain pipeline assets from Peoples to EQT Corp., the parent company of Equitable. The PUC approved Administrative Law Judge Mark Hoyer’s Initial Decision, which found the settlement to be in the public interest. The companies filed a joint application for all of the necessary PUC approvals on March 19, 2013.
As reported by The Intelligencer, MarkWest Energy and Kinder Morgan Inc. are planning to convert 1,000 miles of pipeline connecting Pennsylvania and Louisiana to allow Marcellus and Utica Shale gas to be transported to the Gulf Coast. The project is estimated to have an initial capacity to ship 150,000 barrels of natural gas liquids per day, with potential expansion to 400,000 barrels per day. The conversion is expected to be complete by 2016.
An Ohio trial court issued a key ruling on Ohio’s Dormant Mineral Act (“DMA”). The Carroll County Court of Common Pleas in Dahlgren v. Brown Farm Properties, LLC departed from a series of trial court decisions adopting the legal theories of surface owners concerning “automatic vesting” under the 1989 version of the DMA. In a 20-page opinion, the court analyzed both the 1989 version of the DMA and the 2006 version and concluded that the 2006 version applied to a mineral interest that was originally created in 1949. The surface owners argued that the 1989 version of the DMA should apply to the case and that the mineral interest was abandoned after a 20 year period. The court rejected their arguments and instead applied the 2006 version of the DMA as advocated by the holders of the severed mineral interest. The court set forth multiple reasons why the theory of automatic vesting does not comport with the purpose of the DMA and Ohio’s Marketable Title Act, which are to simplify and facilitate land title transactions. The court provided additional grounds in support of its ruling and also determined that the 2006 version of DMA provides a specific statutory procedure to follow in order to deem a severed mineral interest “abandoned” under the law. Thus, the record chain of title will clearly demonstrate the existence or abandonment of the severed mineral interest as opposed to the automatic vesting theory, which would provide no notice.
The DMA was originally enacted in 1989 and later amended in 2006. The 1989 version of the DMA provides that where a severed mineral interest has not been the subject of a title transaction (e.g. there has been no leasing activity) for a period of 20 years, the mineral interest may “merge” with the surface estate and the owners of the surface become the owners of the minerals. However, the 1989 version does not expressly define the procedures to be followed in order for the surface owners to claim ownership. The 2006 version of the DMA amended the 1989 DMA to provide specific procedures that a surface owner must follow to obtain ownership in the mineral estate. The 2006 DMA also provides the owner of the severed mineral estate a means by which he can preserve his interest by filing an affidavit of preservation. Among the unsettled issues of law is whether the 1989 version or 2006 version applies to pending lawsuits.
The Dahlgren decision is significant because it interrupts a trend of trial court decisions in which courts were adopting the automatic vesting theory of the surface owners. An additional recent appellate court decision applied the 2006 version of the DMA although the issue of which version of the DMA applied was not at issue in the case. See Dodd v. Croskey, 7th Dist. Harrison No. 12 HA 6, 2013-Ohio-4257. These two decisions could indicate a reversal of the current trend favoring application of the 1989 version of DMA and the automatic vesting theory.
The Akron Beacon Journal reports that Gulfport Energy Corp. of Oklahoma and Chesapeake Energy Corp. are producing increasing amounts of natural gas from Utica wells in Ohio and anticipate continued growth in 2014. Gulfport’s operations are led by its Irons 1-H well located in Belmont County; this well is producing over 30.3 million cubic feet of natural gas per day (making it the No. 2 best-producing well in Ohio). Chesapeake’s wells are averaging 164 million cubic feet of natural gas equivalent per day, making it the leading player in Ohio’s Utica Shale. Both companies intend to continue drilling in Ohio. Chesapeake’s Chief Executive Officer, Doug Lawler, stated that he “anticipate[s] our growth [in 2014] will be led by an increase in oil production from the Eagle Ford shale and an increase in natural gas and natural gas liquids from the Utica and Marcellus shales, which will benefit from new gas processing and pipeline takeaway capacity.” Gulfport officials have stated that the energy company anticipates spending up to $250 million on additional drilling leases in eastern Ohio in 2014.
On a conference call following the announcement of CONSOL Energy Inc.’s $3.5 billion sale of its longwall coal mines in West Virginia to Murray Energy, CONSOL President Nick DeIuliis stated that the deal would allow CONSOL to go from a coal company with natural gas exploration and production to a natural gas exploration and production company that now has coal, reported the Charleston Daily Mail. CONSOL’s press release for the deal states that it will enable the company to extend its gas growth production targets beyond 2014, citing expected 30% annual gas production growth rates in 2015 and 2016.
The United States Coast Guard is accepting public comments on a proposal that would allow wastewater from hydraulic fracturing to be transported on barges using the Ohio River. According to the Coast Guard there is commercial interest in transporting shale gas extraction wastewater from northern Appalachia to storage and reprocessing centers in Ohio, Texas and Louisiana via inland waterways, rather than by truck or rail service.
Several counties in the southern end of Ohio’s Utica Shale play, including Guernsey, Noble, Harrison and Belmont counties are showing big gains in the number of drilling permits filed by oil and gas companies. More specifically, drilling permit activity gathered from the Ohio Department of Natural Resources for October of 2013, showed totals anywhere from four to six times higher than in July of 2012. All four counties are south of Carroll County, which remains the leader for permits and drilling.
The Pittsburgh Post-Gazette reports that the number of compressed natural gas stations could double over the next two years. The increase is a result of a number of companies converting their vehicle fleets to run on CNG. Recently, Shale Hotels Inc. and “O” Ring CNG Fuel Systems LP entered into a joint venture to build an undisclosed amount of CNG stations. There are currently five CNG stations in Southwestern Pennsylvania that are open to the public: EQT’s Strip District facility, Giant Eagle’s stations in Crafton and Cranberry, American Natural’s Station Square station and Waste Management’s Clean-n-Green station in Washington County.
Largely due to increased revenues from drilling permit fees, the West Virginia Department of Environmental Protection (DEP) has nearly doubled its staff in the last two years. Metro News reports that the DEP cites this growth as allowing them to be more responsive to both the public and the oil and gas industry. An additional change that the DEP expects to have significant impact on the industry is the implementation of an e-filing system for drilling permit applications. The e-filing system is expected to improve the efficiency of the permitting system for both the DEP and the companies seeking permits.
Workforce West Virginia Investment Council has released findings that cite a 20 percent jump in oil and gas industry employment last year, the West Virginia Gazette reports. During the same period, the average wage for workers in the industry has also risen by nearly $5,500. The rise in employment is focused in the regions where Marcellus Shale activity is the highest, and the growth can be seen in ancillary industries as well. Particularly, the pipeline and storage tank construction sector has experienced significant growth corresponding to the oil and gas industry.
On October 23rd, the Middle District of Pennsylvania dismissed Dr. Alfonso Rodriguez’s complaint challenging Act 13’s so-called “Medical Gag Act.” If, during the course of treating a patient, a health professional deems it necessary for an operator to disclose the exact mixture of hydraulic fracturing fluids, Act 13 requires the operator to disclose the information upon a verbal acknowledgement by the health professional that the information will not be used for purposes other than the health needs asserted and must be maintained confidentially.
Dr. Rodriguez is a nephrologist who allegedly treats patients who have been directly exposed to high volume hydraulic fracturing fluid. In his complaint, he alleged that Act 13 violates the First and Fourteenth Amendments of the United States Constitution, and that it requires him to violate his ethical obligations as a physician. The Court dismissed his complaint on the grounds that Dr. Rodriguez never suffered an actual injury and thus, did not have standing. The Court held that the alleged injury was “too conjectural to satisfy the injury in fact requirement of Article III standing” which requires an alleged injury to be “distinct and palpable” rather than “abstract.” In other words, Dr. Rodriguez does not have standing to sue because he has never been in a position “where he was required to agree to any sort of confidentiality agreement under the act.” His alleged injuries are hypothetical.
America Energy – Utica, headed by Aurbrey McClendon, recently completed a purchase of 24,000 acres in Guernsey County, Ohio. According to paperwork filed in the Guernsey County Recorder’s Office, America Energy – Utica aquired the lease holdigs from SWEPI, LP (a Shell company). McClendon’s company was recently in the news after raising $1.7 billion to invest in the Utica shale play.