The Henry Hub continues to underwhelm since our last report, rising modestly after dropping to its lowest point since mid-November 2016. In Appalachia, a court of appeals in Ohio says landmen need a broker’s license to lease oil and gas rights in order to recover disputed payments for services. Elsewhere, Trump’s EPA rolls back prior information requests issued by the Obama Administration for data to evaluate proper methane reduction regs for existing oil and gas sites, drawing cheers from state governments and jeers from environmental groups. In other news, the Texas Supremes confirmed that the statute of limitations bars old groundwater contamination claims while a federal court in Virginia says a royalty agreement under Wyoming law is subject to rejection in bankruptcy. Here’s your week in review
The Rig Count
- The national rig count is up at 756. (Source: BakerHughes).
- The rig count in the Marcellus is down at 41. (Source: BakerHughes).
- The rig count in the Utica is down at 20. (Source: BakerHughes).
- The Henry Hub natural gas spot price is down at $2.60/MMBtu as of 3/3/2017. (Source: EIA).
- In the Marcellus and Utica region, spot prices are down as of 3/3/2017. At Dominion South in northwest Pennsylvania, spot prices are down at $2.21/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are down at $2.01/MMBtu. (Source: EIA).
- Oil prices are up at $55.26/bbl as of 3/3/2017. (Source: WSJ).
Developments in Appalachia
- Trustee Can’t Change Distribution of Oil and Gas Rights in Ohio Following Trustor’s Death. A court of appeals in Ohio rejected a trustee’s attempt to claim oil and gas rights on property that a trustor wished to distribute to a technical school upon her death, holding that the trust document unambiguously conveyed all the interests in property at the time of the trustor’s death (including the oil and gas rights and a related oil and gas lease) and reasoning that a trustee’s general powers to control trust property does not trump the intent of the trustor particularly when the trust contained no express reservation of the oil and gas rights. Ashtabula Cty. Tech. & Career Ctr. v. Thompson, — N.E.3d —, 2016–A–0035, 2017 WL 685160, 2017-Ohio-618 (Ohio Ct. App., February 21, 2017).
- Ohio Landmen Need Real Estate Broker’s Licenses to Recover Fees. An Ohio appeals court concluded that landmen who gathered up landowners to lease their properties in exchange for a per-acre fee and 1% override on any wells drilled on the leased premises engaged in brokerage services for “real estate” such that they must be licensed by the state before they can recover monies owed for those services, reasoning that the phrase “leases for real estate” includes leases of oil and gas interests based on Ohio’s somewhat unclear treatment of oil and gas rights as real property interests. Dundics v. Eric Petroleum Corp., — N.E.3d —, 15 MA 0156, 2017 WL 696811, 2017-Ohio-640 (Ohio Ct. App., February 17, 2017).
- Corban Decision by Ohio Supremes Forecloses Claim that 1989 Dormant Minerals Act Governs Dispute Over Severed Mineral Interests. A pair of appellate decisions in Ohio confirm that the 2006 Dormant Minerals Act applies to disputes over severed mineral interests arising after the June 2006 amendment to the statute pursuant to Corban v. Chesapeake Exploration, L.L.C., — N.E.3d —-, No. 2014–0804, 2016 WL 4887428 (Ohio, September 15, 2016). Williams v. Stillion, — N.E.3d —, No. 14 MO 0011, 2017 WL 773683, 2017-Ohio-714 (Ohio Ct. App., February 27, 2017); Stadler v. Bucher, — N.E.3d —, 2017 WL 823760, No. 14 MO 0010, 2017-Ohio-725 (February 27, 2017).
- Ohio Appellate Court Denies Reconsideration of Decision that Acceptance of Delay Rental Payments Doesn’t Sustain Expired Oil and Gas Lease. A court of appeals in Ohio held that a lessor’s acceptance of annual delay rental payments did not maintain an expired lease on a year-to-year basis as the lessee claimed, rejecting the lessee’s argument that the acceptance of payments triggered a mutual consent provision to maintain the lease and holding instead that the lessor’s acceptance at most maintained the oil and gas lease as long as the lessor wanted – similar to a month-to-month tenancy – until the lessor decided to terminate the lease by filing suit. Wilson v. Beck Energy Corp., — N.E.3d —, 15 MO 0010, 2017 WL 823777, 2017-Ohio-734 (Ohio Ct. App., February 27, 2017).
Developments Beyond Appalachia
- Tracking the Trump Effect on Energy. The Trump Administration’s EPA withdrew a previous request issued by the Obama Administration’s EPA that operators of oil and gas facilities provide information about their existing methane emissions. The EPA had issued its information request as a first step toward drafting regulations targeting methane emissions from existing oil and gas well sites.
- Federal Court in Louisiana Says 30-Year Old Royalty Claim is Time Barred. A federal court in Louisiana dismissed a case in which a landowner claimed that his lessees owed him royalties on production from the mid 1980s to present, concluding that the three-year statute of limitations for unpaid royalties ran and the discovery rule that might otherwise toll the statute didn’t apply given the landowner’s initial investigation in the 1980s put him on constructive notice of the potential claim. Griffin v. Amerada Petroleum Corp., — F. Supp. 3d —, No. CV 14-02998, 2017 WL 663253 (W.D. La., Feb. 17, 2017).
- Virginia Federal Court Says a Wyoming Coal Royalty Agreement is Subject to Rejection in Bankruptcy under Section 365. A federal court in Virginia concluded that an agreement for royalty payments from coal mined on certain tracts of land is an executory contract that the debtors may reject under Section 365 of the Bankruptcy Code, reasoning that the agreement created contractual rights to royalties, not a conveyance of a real property right. In re Alpha Nat. Res., Inc., — F. Supp. 3d —, No. 15-33896-KRH, 2017 WL 690539 (E.D. Va., Feb. 21, 2017).
- TX Supremes Hold that Groundwater Contamination Claims are Time-Barred. The Supreme Court of Texas concluded that landowners claiming groundwater contamination from 2005 were time-barred and could not rely on the discovery rule for tolling the limitations period, reasoning that the discovery rule only applies when a claim is “inherently undiscoverable” during a limitations period and that soil contamination is not the type of “inherently undiscoverable” claim that would work to toll the statute. ExxonMobil Corp. v. Lazy R. Ranch, LP, — S.W.3d —, No. 15-0270, 2017 WL 730424 (Tex., Feb. 24, 2017).