The Pennsylvania Supreme Court recently accepted the appeal of Mitch-Well Energy, Inc. (“Mitch-Well”) in SLT Holdings, LLC v. Mitch-Well Energy, Inc. on the issue of whether Mitch-Well effectively abandoned its leases by failing either to produce oil or gas or pay required minimum rental payments to the landowners. In 2019, the Pennsylvania Superior Court affirmed the trial court’s determination that Mitch-Well abandoned its leases due to the lack of production and payments.
The leases, executed in 1985, cover two tracts in Warren County, Pennsylvania, and contain provisions requiring Mitch-Well to drill a certain number of wells on the parcels and make yearly minimum payments to the lessors. The leases also contain a provision stating that the leases will continue for so long as Mitch-Well determines that oil and gas can be produced in paying quantities. From 1996 through 2013, wells drilled under the leases failed to produce in paying quantities and Mitch-Well neglected to make the minimum payments are required by the leases, prompting the landowners to seek judicial determination that Mitch-Well abandoned the leases.
On appeal, the Supreme Court will consider Mitch-Well’s argument that in its good faith determination, the wells were productive even though the trial court failed to take testimony on this issue. The Supreme Court asked Mitch-Well and the landowners to address Aye v. Philadelphia Co. and Jacobs v. CNG Transmission Corp., indicating that the Court may consider whether the leases survive both the automatic termination due to the non-payment of royalties and whether Mitch-Well abandoned the leases during the 16 years of non-production. This is an opportunity for the Court to provide additional clarity on Pennsylvania law relating to cessation of production and lease abandonment and termination.
Tags: Cessation of Production,
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Marcellus.com reports that an intrastate pipeline is under construction in northern West Virginia. The Stonewall Gas Gathering pipeline will connect Doddridge and Harrison counties to the Columbia Transmission interstate pipeline that runs through Braxton County, West Virginia. Wisconsin-based Precision Pipeline has been contracted to build the pipeline, which plans to hire approximately half of the necessary employees from local areas. The pipeline will help to fill the need for new infrastructure from gas producing areas in West Virginia to other markets. Charlie Burd, executive director of the Independent Oil and Natural Gas Association of West Virginia, stated that “[c]ustomers and producers are ready and waiting for pipelines that connect gas wells to markets.”
American Energy Partners, LP (“AEP”) announced yesterday that its affiliates, American Energy-Utica, LLC (“AEU”) and American Energy – Marcellus, LLC (“AEM”) are combining in an all-stock transaction to form American Energy Appalachian Holdings, LLC (“AEA”). AEP hopes that the “attractive positions [of AEU and AEM] in each of these respective plays and their complementary nature will allow AEA to maximize returns by realizing administrative and operational efficiencies.” The transaction will result in AEA holding a position in over 300,000 net Utica and Marcellus shale acres in eastern Ohio and northern West Virginia. AEP entered the Marcellus shale play in June as part of a larger $4 billion effort to expand its holdings in West Virginia, Ohio and Texas. AEP affiliates also maintain positions in the Woodford Shale in central Oklahoma and the Permian Basin in western Texas.
On December 17, 2014, New York Governor Andrew Cuomo’s administration said it would ban hydraulic fracturing for shale gas development throughout the state. Dr. Howard Zucker, the Acting Commissioner of Health, announced that the state Department of Health (DOH) completed its long-awaited public health review report, which recommended prohibiting hydraulic fracturing in New York. Citing significant uncertainties regarding risks to public health, Dr. Zucker said “it would be reckless to proceed [with hydraulic fracturing] in New York until more authoritative research is done.” Based upon the DOH report, New York State Department of Environmental Conservation (NYSDEC) Commissioner Joe Martens announced that the NYSDEC will issue a legally-binding findings statement that will prohibit hydraulic fracturing in the state. Martens noted that “with the exclusion of sensitive natural, cultural and historic resources and the increasing number of towns that have enacted bans and moratoria, the risks substantially outweigh any potential economic benefits” of hydraulic fracturing. A copy of the DOH public health report can be found here.
The Roanoke Times reports that Mountain Valley Pipeline LLC will be hosting 14 “community open houses” in several counties throughout the region where they have proposed a 300-mile interstate natural gas pipeline. If approved by the Federal Energy Regulatory Commission (FERC), the pipeline will deliver natural gas produced from wells in Pennsylvania, West Virginia and Ohio to Pittsylvania County, Virginia. Mountain Valley spokesperson Natalie Cox stated that up to 30 representatives from Mountain Valley who are subject matter experts in their particular area of the project will be present at the open-houses. The first four open-houses are scheduled for this week and will consist of various stations focused on specific topics as opposed to formal presentations. Representatives from FERC will also be in attendance to answer questions about the proposed pipeline.
A recently released report from the U.S. Energy Information Administration (“EIA”) indicates that last year Pennsylvania became the second-largest shale gas producing state, only falling behind Texas in the amount of gross withdrawals from shale gas wells. The EIA report also indicates that shale gas wells have become the largest source of total national gas production in the United States.
As reported by NGI’s Shale Daily on June 4, many descended upon Pittsburgh, Pennsylvania on Wednesday for the first day of Hart Energy’s Developing Unconventional Gas (DUG) East Conference, where representatives from industry leaders discussed recent industry trends occurring in Ohio, Pennsylvania and West Virginia. Of the speakers on Wednesday, Range Resources Corp.’s CEO Jeffrey Ventura, Randall Wright, President of the consulting firm Wright & Co., Inc., were most notable, discussing the explosive and unparalleled growth in the Appalachian Basin in the past decade. Range CEO Jeffrey Ventura attributed Range’s growth in the past 10 years to expanding pipeline infrastructure and the wealth of knowledge that it has acquired through years of exploration and production, but noted that the Utica Shale, Marcellus and Upper Devonian formations were responsible for helping Range to assemble an asset base that it expects will grow the company’s current reserves by seven to ten times. President Randall Wright mirrored these observations by noting that a new, advanced learning curve, developed through years of experience resulting in more efficient practices by operators has led to an increase of thousands of dollars in property value as well as vast increase in production from 1.5 bcf/d in 2007 to 15 bcf/d this month. The DUG East conference concluded on Thursday, June 5 at the David L. Lawrence Convention Center, located in Pittsburgh, Pennsylvania.
IGS Energy CNG Services (IGS) has opened its first compressed natural gas (CNG) fueling station in West Virginia, reports the State Journal. IGS president Scott White stated that the Bridgeport, WV station is the first of three that are planned to serve the I-79 corridor between Pittsburgh and Charleston, and is the first publically accessible station to open in West Virginia in the past twenty years. West Virginia has taken aggressive steps to promote the use of CNG as an alternative fuel for public and commercial fleet vehicles. At the grand opening of the Bridgeport CNG station, Governor Earl Ray Tomblin made the following statement: “With the opening of this station, West Virginia once again is taking a bold step and leading the way toward national energy independence. Not only are we utilizing a cleaner burning fuel, but we are putting to use one that is produced right in our own state by hard-working West Virginians.”
Updating our previous post, a representative of the Center for Sustainable Shale Development (CSSD) indicated at a recent workshop that CSSD leaders want to begin certifying compliance with the CSSD Performance Standards later this year. The CSSD represents a collaborative effort by Chevron Corp., Shell Oil Co., EQT Corp., and Consol Energy Inc., as well as various environmental advocacy groups and philanthropic organizations, to support innovative practices and continuous improvement in the way companies develop shale gas. The CSSD Performance Standards focus on preventing potential water and air pollution issues. Compliance with the Performance Standards is voluntary and will be certified by independent auditors.
The U.S. Department of Energy (DOE) recently released its 2013 annual report to Congress entitled, “2013 Annual Plan: Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Research and Development Program.” This seventh annual report issued pursuant to the 2005 Energy Policy Act lays out the DOE’s research focus and activities for the coming fiscal year. Acknowledging the national strategic interest in domestic oil and gas production, DOE proposes to continue its research regarding the extraction of onshore shale gas and other petroleum products from deep-water production. Regarding its research on unconventional shale gas resources, the focus will be on protecting groundwater and air quality, including water treatment technologies and water management. Regarding offshore production, the focus will be on improving understanding of systems risk and reducing risk through real-time information and development of advanced technologies. The research activities will be administered by the Research Partnership to Secure Energy for America, which is a consortium comprising representatives from industry, academia, and research institutions.
On June 10, 2013, the U.S. Energy Information Administration (EIA) released a report assessing shale oil and gas resources in 137 shale formations in 41 countries outside of the United States. The report expanded upon EIA’s April 2011 assessment of 69 shale formations in 32 countries. In the updated report, EIA indicated that the current estimates of worldwide technically recoverable resources, including the United States, amount to 345 billion barrels of shale oil and 7,299 trillion cubic feet of shale gas. EIA estimates that shale resources account for 10 percent of global crude oil and 32 percent of the world’s natural gas. (The current estimate of global shale gas resources is 10 percent higher than EIA’s 2011 report, which did not include an assessment of shale oil.)
According to EIA, significant data gaps in global shale resources still exist. For example, potentially productive shale formations underlying large oil fields located in the Middle East and the Caspian region have not been assessed. EIA also indicated that although shale resources have revolutionized oil and gas production in the United States—representing 29 percent of total U.S. crude oil production and 40 percent of natural gas production in 2012—the economic recoverability of global shale resources and the market implications of abundant shale resources remain uncertain.
On May 29th, KDKA reported that Pennsylvania State Rep. Jesse White (D-Cecil) may have anonymously attacked local bloggers who supported the oil and gas industry. Specifically, it alleged that Mr. White may have used various aliases to anonymously criticize industry supporters. Energy In Depth traced the internet protocol (IP) addresses related to the anonymous posts and confirmed the posts were made by Representative White. The Pittsburgh Post-Gazette reports that after initially denying the accusations, Mr. White released a statement through the House Democratic caucus in which he acknowledged making the posts and apologized to two people.
The Pittsburgh Presbytery recently ended a yearlong moratorium on shale gas leasing and development on church property, the Pittsburgh Post-Gazette reports. Despite the recommendation of a special Presbytery shale gas task force, which favored extending the ban for another year, 230 voting members decided against renewing the year-old ban on shale gas development.
The Presbytery also approved allowing negotiation of a lease with Shell Oil and Gas Co. for a 32-inch gas pipeline across the Crestfield Camp & Conference Center, a 226-acre property near Slippery Rock, Pennsylvania. The proposed pipeline would be located on a corner of the property away from Slippery Rock Creek, camp buildings and activity areas.
As Pam Kasey explains in her May 2, 2013 article in the print edition of the West Virginia State Journal, the industry has voluntarily come together to be “good actors” in mineral development by incorporating input from oil and gas industry leaders, environmental groups and philanthropic organizations to design a certification program for gas producers in Appalachia, including West Virginia and Pennsylvania, under a new organization called the Center for Sustainable Shale Development based in Pittsburgh. This two year CCSD certification, while voluntary, examines 15 of the most critical areas in natural gas production to ensure producers are following the highest standards and comply with efforts to make production of natural gas in Appalachia as ‘green’ as possible.
The West Virginia Department of Environmental Protection will present an Oil & Gas Workshop at the Charleston Civic Center on May 16th beginning at 8:00 a.m. Speakers will address a wide variety of topics of interest to operators, contractors, consultants and attorneys- including waste water issues, permitting, compliance, pipeline safety, and horizontal well issues. To attend the workshop, contact B. J. Chestnut at B.J.Chestnut@wv.gov by May 10, 2013.