The rig count continues to climb while the Henry Hub flirted with $3 gas for the first time in months. However, spot prices in the Appalachian region dropped significantly since our last report and oil prices fared only slightly better, posting a decline of a couple of dollars per barrel since last week based on the Brent Crude and West Texas benchmarks. In Appalachia, there’s a new attorney general in town following Kathleen Kane’s perjury conviction who will preside until the voters elect a new chief for the embattled office in November. Also, the Commonwealth Court denied a bid to stop PADEP from considering the effect of proposed wells on public resources under a part of the Oil and Gas Act the Pennsylvania Supreme Court previously struck down in Robinson Township. Elsewhere, a Louisiana judge says unrelated environmental damage can’t form the basis for a bad-faith trespass claim by a well operator, and a federal court in Texas breaks from the pack with a decision that says sometimes an arbitrator, not the courts, decides class arbitrability even if the parties’ agreement is not explicit. Here’s your week in review:
The Rig Count
- The national rig count is up at 497. (Source: BakerHughes).
- The rig count in the Marcellus is up at 27. (Source: BakerHughes).
- The rig count in the Utica is up at 14. (Source: BakerHughes).
- Natural gas spot prices at the Henry Hub are up at $2.94/MMBtu as of 9/2/2016. (Source: EIA).
- In the Marcellus and Utica region, spot prices are down as of 9/2/2016. At Dominion South in northwest Pennsylvania, spot prices are down at $1.22/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are down at $1.23/MMBtu. (Source: EIA).
Developments in Appalachia
- Commonwealth Court Holds that PADEP Can Consider Impact on Public Resources as Part of Permit Applications Despite Robinson Township. Despite objections from Pennsylvania’s oil and gas industry association, the Commonwealth Court of Pennsylvania held that the Oil and Gas Act authorizes PADEP to consider the effect that proposed wells may have on public resources (such as parks, rivers, landmarks, historic sites, flora and fauna habitat, and public drinking water sources) as part of the permitting process, concluding that the Pennsylvania Supreme Court’s decision in Robinson Township left the door open for PADEP to evaluate those issues despite striking down related permit approval provisions in the act. Pennsylvania Independent Oil and Gas Association v. Commonwealth, Department of Environmental Protection, — A.3d —-, No. 321 MD 2015 (Pa. Cmwlth., September 1, 2016).
- New AG in PA Following Kane’s Perjury Conviction. Following the resignation of convicted former Attorney General Kathleen Kane, the Pennsylvania Senate confirmed Bruce Beemer to take over the office following his service as the Commonwealth’s Inspector General. Beemer will be in charge until January when a newly elected Attorney General (either Josh Shapiro (D) or John Rafferty (R)) will take over.
Developments Beyond Appalachia
- No Evidence of Environmental Damage in Bad-Faith Trespasser Case. A federal judge in Louisiana granted a well operator’s motion to exclude evidence of alleged environmental harm caused by well operations in a bad-faith trespass case alleging that the operator built a pipeline in an unauthorized area, concluding that allegations of environmental harm caused by well operations (even if true) are irrelevant when the question in the case is whether the operator trespassed in bad faith and should therefore disgorge any ill-gotten profits. Mary v. QEP Energy Corp., — F. Supp. 3d —-, No. CV 13-2195, 2016 WL 4487804 (W.D. La., Aug. 25, 2016).
- In Oilfield Labor Spat, TX Federal Court Says Arbitrator, not the Court, Sometimes Determines Class Arbitrability if the Agreement is Broad Enough. Breaking away from the Third Circuit’s decision in Scout Petroleum that says courts decide if a dispute is subject to class action arbitration unless an arbitration clause “clearly and unmistakably” provides for class action arbitration, a federal court in Texas held that “a broad arbitration clause or agreement to submit to the AAA Rules may constitute an agreement by the parties to submit that question to the arbitrator” and therefore denied a bid by a drilling company in an employment dispute to construe the parties’ arbitration clause otherwise. Langston v. Premier Directional Drilling, L.P., — F. Supp. 3d —-, No. CV H-15-0882, 2016 WL 4491765 (S.D. Tex., Aug. 25, 2016).