Colorado releases draft rules that may make it the first state to regulate methane from oil and gas drilling.

On November 18, Colorado released proposed rules that would directly regulate the detection and reduction of methane emissions associated with oil and gas drilling.  The rules are basically expanding the current provisions for reducing emissions that apply only in "non-attainment areas" to all areas that have been shown to have air quality worse than the national average.

The Air Quality Control Commission will be seeking additional input as the process continues but it appears that they already have the support of petroleum companies in the state.  Several petroleum companies operating in Colorado released a joint statement in support the proposal, saying that it is a “The process and increased accountability established by the proposal will provide transparency and build public trust.”

Click here for the Colorado Governor’s announcement of the rules.

Click here for the proposal and related information. 

Written by Joseph Negaard 

November 22, 2013

Third Circuit affirms summary judgment order finding well operator did not surrender non-unitized lease acreage

On Nobermber 18, 2013, the United States Court of Appeals for the Third Circuit affirmed the United States District Court for the Middle District of Pennsylvania’s decision to grant summary judgment in favor of a well operator, finding that a belated delay rental payment for non-unitized acreage was an immaterial breach insufficient for the well operator to forfeit the lease. Linder v. SWEPI, LP, 2013 WL 6052135 (3d. Cir. Nov. 18, 2013). The Third Circuit agreed with the district court holding that the lease remained in effect as to non-unitized acreage after the well operator was late in making a delay rental payment. The Third Circuit reasoned that the late payment was not detrimental to the lessor lessee relationship because the lease did not contain a “time is of the essence clause.” Further, the circuit court reasoned the late payment was not immaterial because the lease contained a sixty-day curative period that allowed the lessee to correct any incorrect or failed payments. The purpose of that clause, the court found, was to increase the chances an out-of-court resolution would occur given a breach. Therefore, it did not act as a substitute for a time is of the essence clause to establish materiality. Finally, the Third Circuit found the well operator never surrendered the non-unitized acreage because it did not file a Surrender of Lease as required by the lease’s surrender clause.

Written by: Garrett Lent, Research Assistant

Agricultural Law Resource and Reference Center

Nov. 2013

California Proposes New Well Stimulation Regulations

On November 18, 2013, California's Department of Conservation released proposed hydraulic fracturing regulations, which include requiring oil and gas producers to have permits in order to stimulate wells by hydraulic fracturing or acid treatment.  Under the proposed regulations, a producer must disclose the date of stimulation, the location of the well, and the types of chemicals and amount of water used.  In addition to those disclosures, the proposed regulations require producers to notify neighboring owners and tenants before stimulating a well and provide them an opportunity to have their water tested by a third party.  The regulation further provides that producers must monitor well pressures before, during, and after well stimulation.

The proposed regulations are available here: Proposed Regulations

Written by: Tom Panighetti

November 19, 2013

The Alaska Oil and Gas Conservation Commission Opens the Comment Period for new Proposed Hydraulic Fracturing Regulations.

On November 1st, The Alaska Oil and Gas Conservation Commission (AOGCC) announced a public comment period for the third draft of proposed regulations that will change the way hydraulic fracturing is regulated in the state.  The AOGCC’s new regulations will require the notification of landowners, surface owners, and operators within one-half mile of the wellbore, the sampling and analysis of water wells before and after hydraulic fracturing, the disclosure of the chemicals in the hydrolic fracturing fluids, the requirements for wellbore integrity and cementing, and require the containment of hydraulic fracturing fluids.

Comments on the proposed regulation changes can be set by fax to (907) 276-7542, by email, or by submitting written comments by mail to:

Alaska Oil and Gas Conservation Commission

333 West 7^th Avenue, Suite 100

Anchorage, Alaska 9950

All written comments must be received by 4:30 p.m. on January 10, 2014. Oral or written comments may also be submitted on January 15, 2014 at the public hearing in Anchorage.

Click here for a copy of the proposed regulation changes.

Click here for more information on submitting public comments.

Written by Joseph Negaard - Research Assistant

The Agricultural Law Resource and Reference Center

@PSUAgLawCenter

November 15, 2013

Court denies summary judgment in tortious interference action brought by a field services employee owning leased land

On November 4, 2013, the United States District Court for the Western District of Pennsylvania adopted the report and recommendation of a magistrate judge to deny a well operator’s motion for summary judgment. Mason v. Range Resources-Appalachia, LLC, 2013 WL 5890725 (W.D. Pa. Nov. 4, 2013). The plaintiff landowner owns land that subject to a lease between previous owners and the Manufacturers Light and Heat Company, which is currently sub-leased by Range Resources (defendant well-operator). The lease provided for the use of the subsurface for the storage of gas, and the right to produce. The landowner refused to modify the lease in negotiations with the operator and encouraged other landowners to do the same. Throughout this time, the landowner was employed with an oil field services company employed by the well operator. The well operator allegedly ordered the field service company to disallow the landowner from the well operator’s sites, which resulted in a significant demotion to the landowner. The landowner refused to accept the demotion and was terminated. As a result, the landowner brought suit against the well operator for tortious interference with contractual relations. The court denied the well operator’s motion for summary judgment because demonstration of the intent of the well operator is determined by a trier of fact and not as a matter of law. The court explained that the intent of the operator was a genuine issue of material fact because the operator did not submit any evidence of its actual motive in directing the actions of the field services company. As the movant, the operator failed to demonstrate the non-existence of a genuine issue of material fact because it did not provide any justification for directing the operator’s actions.

Written by: Garrett Lent, Research Assistant

Agricultural Law Resource and Reference Center

November 11, 2013

OH and CO Localities Vote on Hydraulic Fracturing Bans

Several localities in Colorado and Ohio voted last Tuesday on ballot measures that would result in hydraulic fracturing bans, and half of the ballot measures succeeded. In Colorado, two cities, Lafayette and Boulder passed bans, but the ban failed in Broomfield, a suburb of Denver, by an extremely narrow margin of 49.97% voting for the 5-year moratorium and 50.03% against (currently unofficial). In Ohio, the ban initiatives failed in Bowling Green and Youngstown, but passed in Oberlin.  The ballot measures were proposed as either community rights bills or hydraulic fracturing moratoriums.  According to the New York Times, both Ohio and Colorado state officials argue that only state officials, not city officials, may regulate oil and gas drilling.

Broomfield, CO voting results

Lafayette, CO voting results

Boulder, CO voting results

Youngstown, OH voting results 

Bowling Green, OH voting results

Oberlin, OH voting results 

New York Times article on state officials

Written by: Tom Panighetti

November 13, 2013

IEA releases its 2013 World Energy Outlook

On November 12, 2013, the International Energy Agency released its 2013 World Energy Outlook.  The annual report predicted that recent growth in oil and natural gas production in both the United States and Brazil will reduce energy and electricity costs in both countries.  The report further stated that the reduction in U.S. energy costs will fuel energy-intensive industries and increase exports, therein providing the U.S. a significant trade advantage over Europe, Japan, and China, where energy costs at least double the cost in the U.S.  While the report noted the oil production growth in the U.S. and Brazil, it also predicts that OPEC countries will continue to grow their production to satisfy increased demand from India and Southeast Asia.  In addition to discussing oil and natural gas production, the report discussed the potential impact of fossil fuel usage on global warming and the predicted increase of renewable energy subsidies from $101 billion in 2012 to $220 billion by 2035.

 

An IEA Press Release regarding the 2013 World Energy Outlook is available here: http://www.iea.org/newsroomandevents/pressreleases/2013/november/name,44368,en.html

Written by: Tom Panighetti

November 12, 2013

Chevron has signed an agreement with the Ukrainian government to develop oil and gas in western Ukraine.

On November 5^th, Chevron signed a 50-year agreement to develop oil and gas.   The exploration will take place in the Oleska Block, which is heavy with shale rock deposits.  Ukraine has much to gain if oil and gas are found.   In the past, Ukraine has relied on Russia to import its supply of natural gas and Russia had the power to cut off winter heating fuel whenever it wanted to. By finding a source of its own natural gas, Ukraine can decrease its reliance on Russian natural gas.  This is another example of shale gas technologies that are altering the geopolitics of energy. Traditionally, three countries (Russia, Iran and Qatar) have held about half the reserves of natural gas. But shale is found in many other places, and could undercut the traditional balance of power in the energy markets.

Russia maintains that shale gas causes pollution and is more expensive than gas from traditional deposits that are abundant in Russia.  It also argues that shale gas wells are quickly depleted.  In former Soviet Bloc countries, there is still uncertainty about shale drilling, and many are not convinced that it is in their best interest as fears of polluting water supplies and disrupting local lifestyles are widespread.

Written by Joseph Negaard - Research Assistant

The Agricultural Law Resource and Reference Center

@PSUAgLawCenter

November 9, 2013

District court denies immediate pipeline rerouting

On October 24, 2013, the United States District Court for the Middle District of Pennsylvania denied a gas pipeline company’s motions for partial summary judgment and immediate possession for the construction of a replacement pipeline in York County. Columbia Gas Transmission, LLC v. 1.01 Acres, More or Less in Penn Tp., York County, Pa., 2013 WL 5773414 (M.D. Pa Oct. 24, 2013). Columbia gas sought to replace and reroute a portion of an existing pipeline that runs through York County because the current location of the pipeline has become heavily populated. In that process the pipeline company was unable to obtain the necessary easements from four landowners, and filed suit against the lands and the owners of the lands, asserting eminent domain. The pipeline company moved for summary judgment on the issue of its right to condemn the easements. The court denied the pipeline company’s motion for summary judgment because the pipeline company failed to establish the proposed reroute was an authorized “replacement” of an “eligible facility,” so as to allow automatic authorization under FERC Guidelines (codified at  18 C.F.R. §§15.203(a)-(b), 157.208(a) & (d)). The court reasoned that it should resolve whether the pipeline company satisfied regulations by deferring to FERC’s interpretations of its own regulations. The relevant interpretations provided automatic approval of reroutes where the new route was “outside but adjacent to” an existing right-of-way, or “spill over from the original temporary workspace or permanent right-of-way.” (Emergency Reconstruction, 68 Fed.Reg. at 4122). Here, the court explained the new proposal created “an entirely new route due to the need to circumvent [a congested area].” 

Written by: Garrett Lent, Research Assistant

Agricultural Law Resource and Reference Center

Nov. 2013

Senate Subcommittee Holds Hearing on Fugitive Methane

On November 5, 2013, the Senate Environment and Public Works Committee's Subcommittee on Oversight held a hearing to discuss fugitive methane, with testimony coming from the EPA, oil and gas producers, and academics/researchers.  Fugitive methane is methane that is not capturing during oil and gas production and that escapes into the atmosphere.  The hearing discussed the recent Methane Emissions study by Dr. David Allen of the University of Texas and Dr. A. Daniel Hill of Texas A&M, which found that natural gas production releases significantly less methane than the 2011 EPA estimates and that pneumatic devices at wellsites account for more methane releases than estimated by the EPA in 2011.  The subcommittee discussed the economics of natural gas, the possibility of LNG exports, and the financial incentive that energy companies have in capturing methane. The subcommittee further discussed environmental concerns, such as the global warming ramifications of methane, which is 28 times stronger than carbon dioxide as a greenhouse gas.  Several of the panelists discussed how to better capture or prevent fugitive methane, such as with better methane capture devices or with flaring, which burns methane, turning it into carbon dioxide.

A video of the subcommittee hearing is available here: http://www.epw.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_id=0ad995f7-0b75-a66e-155c-bc7397b70d86

The methane emissions study by the University of Texas is available here: http://www.pnas.org/content/early/2013/09/10/1304880110.full.pdf+html

Written by: Tom Panighetti

November 6, 2013

PA DEP Opens Permit Decision Guarantee Policy for Comments

On November 1, 2013, Pennsylvania's Department of Environmental Protection announced that it is opening the Permit Decision Guarantee policy for a supplemental 30-day comment period.  The Permit Decision Guarantee policy (PDG) rescinded and replaced the Money-Back Guarantee policy when it was implemented in November of 2012.  The PDG requires the DEP to make permitting decisions within published timeframes for completed applications.  The PDG aims to expedite permit decisions and to provide applicants predictability by making the regulatory and statutory requirements clear.  Under the new process, the DEP reviews permits based on an established priority rather than on a "first-in-first-out" basis. Currently, permits necessary for environmental protection and restoration are the highest priority permits. The Permit Decision Guarantee program is only available for certain types of permits, which are listed in the policy as Appendix A. The DEP's Acting Secretary Chris Abruzzo stated that, "The comments we receive after this first year of implementation will help shape the future direct of DEP's permitting."  

The PA DEP's press release is available here: http://www.portal.state.pa.us/portal/server.pt/community/news_releases/14288

The Permit Decision Guarantee policy may be found here: http://files.dep.state.pa.us/ProgramIntegration/PermitDecisionGuaranteePortalFiles/021-2100-001_PRP_and_PDG_Policy.pdf

Written by: Tom Panighetti

November 5, 2013

District court dismisses summary judgment in ongoing Butters Living Trust litigation.

On October 18, 2013, a magistrate judge for the United States District Court for the Middle District of Pennsylvania issued a memorandum opinion that dismissed a well operator’s motion for summary judgment in an on-going action revolving around the status of an oil and gas lease. Butters Living Trust v. SWEPI, Inc., 2013 WL 5707787 (M.D. Pa. Oct. 18, 2013). At this juncture of the litigation, the trust and gas producer disputed whether operations had commenced sufficient to propel the lease beyond its primary term. The language of the May 27, 2001, lease contained a ten year primary term and a habendum clause, negotiated in 2009, that stated “any drilling or reworking operations on or production from a well on that unit shall continue this lease in full force and effect.” In the weeks before May 27, 2011, the gas producer initiated surveying, permitting, and site preparation activities. Actual drilling did not occur. On May 31st, counsel for the trust informed the operator that the lease expired. During the discussions, the trust conveyed a portion of the estate’s surface rights, and language in the conveying deed reserved “all past and future rents and royalties from the existing [emphasis added] oil and gas lease.” Additionally, during conversations between counsel for the trust and a representative of the producer, it was alleged the producer representative tacitly conceded the lease had expired.

The court held that the motion for summary judgment should be denied because the landowner’s “contested claims” and producer’s “disputed assertions” contained genuine issues of material fact. The court reasoned that each party’s allegations contained factual disputes because of the alleged treatment of the lease by the parties. While the landowner maintained the lease expired, it referenced an “existing lease” when deeding a portion of the surface estate. Conversely, while the operator maintains the lease remains in effect, a representative allegedly admitted to its expiration. Therefore, the court found summary judgment would be inappropriate because the interpretations of the habendum clause entailed legal and factual matters that were genuinely disputed.

Written by: Garrett Lent, Research Assistant

Agricultural Law Resource and Reference Center

November 2013