Oil prices rebounded since our last report while natural gas spot prices remained relatively steady but sluggish. In Appalachia, the Third Circuit approved environmental permits for the Transco Leidy Line over the objections of environmental groups, and another bankruptcy court blessed the rejection of agreements under Section 365 (this time in the coal context). Elsewhere, the judge overseeing the Sabine bankruptcy approved a final restructuring plan and settlement, while the North Dakota Supreme Court denies a lease busting attempt based on a temporary cessation of production. Here’s a roundup of the past several weeks:
The Rig Count
- The national rig count is up at 489. (Source: BakerHughes).
- The rig count in the Marcellus is up at 25. (Source: BakerHughes).
- The rig count in the Utica is up at 13. (Source: BakerHughes).
- Natural gas spot prices at the Henry Hub are up at $2.77/MMBtu as of 8/26/2016. (Source: EIA).
- In the Marcellus and Utica region, spot prices are up as of 8/26/2016. At Dominion South in northwest Pennsylvania, spot prices are up at $1.36/MMBtu as of 8/26/2016. On Transco’s Leidy Line in northern Pennsylvania, spot prices are up at $1.34/MMBtu as of 8/26/2016. (Source: EIA).
- Oil prices are up at $49.92/bbl as of 8/26/2016. (Source: WSJ).
Developments in Appalachia
- Third Circuit OK’s Transco Leidy Permits. The Third Circuit Court of Appeals held that it has jurisdiction to review the actions of PA and NJ environmental regulators issuing permits for the Transco Leidy line as required by a condition of Transco’s FERC-issued certificate of public convenience for the project but shot down challenges to those permits by environmental groups, concluding that the state regulators did not act arbitrarily or capriciously. Delaware Riverkeeper Network v. New Jersey Department of Environmental Protection, — F.3d —-, No. 15-2122, 2016 WL 4174045 (3d Cir. Aug. 8, 2016).
- Landowners Can’t Compel Class Arbitration Absent Consent. A federal court in Pennsylvania sided with an oil and gas company in a bid by landowners to arbitrate claims under an oil and gas lease on a class-wide basis, concluding that consent to class arbitration can’t be implied when a lease only provides for individual arbitration. Chesapeake Appalachia, L.L.C. v. Ostroski, — F. Supp. 3d. —-, No. 16-50, 2016 WL 4179583 (M.D.Pa., August 8, 2016).
- Virginia Bankruptcy Court Blesses Another 365 Rejection. A bankruptcy court in Virginia held that a payment obligation in connection with a coal lease is subject to rejection in bankruptcy under Section 365, concluding that the agreement created contractual payment obligations and did not convey an overriding royalty interest or other interests in real property under Wyoming law that would otherwise shield the agreement from rejection in bankruptcy. In re Alpha Nat. Res., Inc., — F. Supp. 3d —-, No. 15-33896-KRH, 2016 WL 4272236 (Bankr. E.D. Va., Aug. 11, 2016).
Developments Beyond Appalachia
- Louisiana Federal Court Upholds Broad Assignment of Oil and Gas Rights. A federal court in Louisiana endorsed a broad reading of an assignment that did not limit the interests conveyed by depth, concluding that the assignor intended to convey all its interests and that the descriptions of specific unit interests, wellbores and working interests in an exhibit to the assignment did not create (expressly or implicitly) any depth limitations. Estess v. Placid Oil Co., — F. Supp. 3d —-, No. 12-CV-0052, 2016 WL 4031031 (W.D. La., July 26, 2016).
- TX Appellate Court Confronts “Conveyed” vs. “Described” Issue in Mineral Reservation. Citing the Averyt rule of interpretation, a court of appeals in Texas concluded that a deed reserving a fraction of the minerals “from the land described” reserves a fraction of the minerals under the entire tract as opposed to that portion of the tract actually “conveyed” and held that the deed at issue did not convey a mineral interest given that it reserved a fraction of the minerals from the land described. Combest v. Mustang Minerals LLC, — S.W.3d —-, No. 04-15-00617-CV, 2016 WL 4124066 (Tex. App., Aug. 3, 2016).
- NY Bankruptcy Judge Approves Sabine Restructuring Plan and Settlement. In a lengthy opinion that described the proceedings as “unnecessarily litigious and expensive,” the judge overseeing the Sabine bankruptcy blessed the debtor’s restructuring plan and settlement as fair, reasonable, and above the lowest point in the range of reasonableness as required for approval under bankruptcy laws. In re: Sabine Oil & Gas Corp., — B.R. —-, No. 15-11835, 2016 WL 4411433 (Bankr. S.D.N.Y, August 18, 2016).
- ND Supreme Court Denied Bid to Bust Lease for Temporary Cessation of Production. The Supreme Court of North Dakota concluded that an oil and gas lease did not expire for temporary cessation of production on the leased premises even though the lessee did not drill or rework any wells during the cessation period on the landowner’s property as required by the cessation-of-production clause, concluding that the lessee’s operations on federal lands pooled with the landowner’s property sufficed to maintain the lease and the lease contained no Pugh clause that would limit the effect of the pooling clause. Horob v. Zavanna, LLC, — N.W.2d —-, No. 2016 ND 168, WL 4440382 (N.D., Aug. 23, 2016).