After a few weeks off we’re back at the well. The national rig count dipped two units last week for the first time in a long time while oil and natural gas prices increased slightly. Since our last report, the Pennsylvania Supreme Court issued its long-awaited decision in Pennsylvania Environmental Defense Fund v. Commonwealth in which the state’s highest court scrapped a longstanding test for determining violations under the state’s Environmental Rights Amendment. The Third Circuit was also busy issuing decisions on a wide range of topics while a federal court in Kentucky interpreted “oil and gas” as used in a farmout agreement as excluding NGLs for purposes of royalty payment obligations. In North Dakota, the state’s highest court held that a surface owner is the owner of the pore space beneath the land under the state’s surface owner protection act. Here’s the roundup:

The Rig Count

  • The national rig count is down from 952 last week at (Source: BakerHughes).
  • The rig count in the Marcellus is flat at 45. (Source: BakerHughes).
  • The rig count in the Utica is flat at 25. (Source: BakerHughes).

Commodity Prices

  • The Henry Hub natural gas spot price is up at $3.10/MMBtu as of 7/21/2017. (Source: EIA).
  • In the Marcellus and Utica region, spot prices are up as of 7/21/2017. At Dominion South in northwest Pennsylvania, spot prices are up at $2.24/MMBtu. On Transco’s Leidy Line in northern Pennsylvania, spot prices are up at $2.18/MMBtu. (Source: EIA).
  • Oil prices are up at $49.55/bbl as of 7/21/2017. (Source: WSJ).

Developments in Appalachia

  • PA Supremes’ Ruling on Environmental Rights Amendment: A Month Later. The Pennsylvania Supreme Court in Pennsylvania Environmental Defense Fund v. Commonwealth ruled that the Environmental Rights Amendment, Article I § 27, prevented the General Assembly from using proceeds from the state’s oil and gas leases collected in the Oil and Gas Lease Fund for purposes other than protections for the state’s public natural resources. In the process, the court overruled a 40-year-old balancing test established by the Commonwealth Court of Pennsylvania in Payne v. Kassab for evaluating claims that government action violated the Environmental Rights Amendment. In the wake of the decision, the Fund filed a motion seeking a declaration that the recently enacted General Appropriations Act is unconstitutional to the extent it funds the administration of the Department of Conservation and Natural Resources (such as salaries etc.) instead of using those funds directly for the protection of environmental resources of the Commonwealth. Pennsylvania Environmental Defense Foundation v. Commonwealth, — A.3d —, No. 10 MAP 215, 2017 WL 2645417 Supreme Court of Pennsylvania. June 20, 2017 — A.3d —- 10 MAP 2015
  • Employees Survive Motion to Dismiss Employment Discrimination Claims. The Third Circuit Court of Appeals sent back an employment discrimination case dismissed by the district court after concluding that the employees stated plausible claims for relief based on alleged racial remarks and unfair work treatment. Castleberry v. STI Group, — F.3d —, 16-3131, 2017 WL 2990160 (3d Cir., July 14, 2017).
  • Third Circuit Says No Intervention for Enviro Groups Defending Withdrawn Community Bill of Rights Ordinance Banning Underground Injection Wells. The Third Circuit concluded that environmental groups can’t intervene to defend a so-called “Community Bill of Rights” Ordinance that banned frac wastewater injection wells after the municipality withdrew the ordinance, holding that the township’s withdrawal of the measure rendered any defense of it moot and therefore rendered intervention unnecessary. Seneca v. Highland Township, — F.3d —, No. 16-3592 (3d Cir., July 17, 2017).
  • Religious Group Sues FERC Over Atlantic Sunrise Pipeline Approvals. A group known as “The Adorers of the Blood of Christ” sued FERC in federal court in Philadelphia claiming that a portion of the route of the Atlantic Sunrise Pipeline through Lancaster County, PA approved by FERC violated the Religious Freedom Restoration Act. The Adorers of the Blood of Christ v. FERC, No. 17-3163 (E.D. Pa.).
  • Third Circuit Says Downstream Purchasers of Oil from Bankrupt Midstream Re-Seller are “Buyers for Value” and can Dodge Oil Producer/Seller Claims for Payment. The Third Circuit concluded that oil producers could not recover from downstream buyers any payments for oil sold to now-bankrupt midstream company SemCrude, concluding that the seller hadn’t perfected its security interests and the downstream buyers of the oil from SemCrude on credit were “buyers for value” without knowledge of the oil producer’s unperfected claims for payment. In re SemCrude, — F.3d —, Nos. 15-3094, 15-3095, 15-3096, 15-3097, 15-3121, 15-3123, 15-3124 (3d Cir., July 19, 2017).
  • Kentucky Federal Court Says No Royalties on Sale of NGLs. A federal court in Kentucky concluded that royalties payable on “oil or gas” in various farmout agreements did not include NGLs and therefore the farmee did not owe royalties on the sale of NGLs. EQT Prod. Co. v. Magnum Hunter Prod. Co., — F. Supp. —, No. 5:16-CV-150-JMH, 2017 WL 3052979 (E.D. Ky., July 19, 2017).

Developments Beyond Appalachia

  • Answering Certified Question, ND Supreme Court Says Mineral Owner may be Liable to Surface Owner for Saltwater Disposal into Pore Space. Fielding various certified questions from a magistrate judge in federal court, the Supreme Court of North Dakota held that a surface owner has a right to recover from a mineral owner that uses the pore spaces in the subsurface for saltwater disposal, concluding that the term “land” as used in the state’s surface owner protection act encompasses the pore space. Mosser v. Denbury Res., Inc., — N.W.2d —, No. 20160379, 2017 WL 2962824, 2017 ND 169 (N.D., July 12, 2017).