Monday, February 6, 2017

Shale Law Weekly Review - February 6, 2017

Written by Jacqueline Schweichler - Education Programs Coordinator

The following information is an update of recent, local, state, national, and international legal developments relevant to shale gas.

Senate Passes Bills that Favor Oil and Gas Royalty Interest Owners
On January 30, 2017, the Pennsylvania Senate unanimously passed two oil and gas related bills sponsored by Senator Gene Yaw. Senate Bill 138 would amend the Oil and Gas Lease Act by allowing royalty interest owners to inspect the records of drilling companies to verify payments. In addition, the bill requires that payments be made within 90 days of production. The second bill, Senate Bill 139, would prohibit gas company retaliation against a royalty interest owner who has made a “good faith” inquiry about the accuracy of payments.

Federal Court Puts Keystone Pipeline Lawsuit on Hold
On January 30, 2017,  the United States District Court for the Southern District of Texas issued an abatement order in a lawsuit brought by TransCanada Keystone Pipeline, LP against the Secretary of State, John Kerry (TransCanada Keystone Pipeline v. Kerry). The lawsuit was brought to determine whether the president has the power to prohibit the development of a pipeline on the basis that the pipeline would cross a United States border. The District Court has now abated the case for 90 days due to the recent Presidential memorandum that invited TransCanada to re-submit their pipeline application. The District Court wrote that the presidential action “has the potential to materially vary the contours of this litigation…”

Army Secretary Directs Army Corps of Engineers to Allow Dakota Access Easement
On January 31, 2017, a press release by Senator John Hoeven stated that Acting Secretary of the Army, Robert Spear has directed the Army Corps of Engineers to permit the easement required for the completion of the Dakota Access Pipeline. This new action is a result of the Presidential Memorandum which orders the expedited review of the pipeline.  The memorandum also requested that the Secretary of the Army reconsider the proposed Environmental Impact Statement.

House of Representatives Voted In Favor of Voiding Stream Protection Rule
On February 1, 2017, the U.S. House of Representatives voted on a resolution to disapprove of the Stream Protection Rule submitted by the Department of the Interior.  The Stream Protection Rule is meant to provide “mine operators with a regulatory framework to avoid water pollution and the long-term costs associated with water treatment.” The rule requires that permits for coal mining operations will not be granted for operations that will result in material damage to water sources. In addition, operators would be required to restore any streams affected by the mining operation.   The measure disapproving the rule was passed, 228 to 194.

House Approves Resolution to Rescind BLM Oil and Gas Emissions Rule
On February 3, 2017, the United States House of Representatives voted on House Resolution 36, disapproving of the Bureau of Land Management’s final rule “Waste Prevention, Production Subject to Royalties, and Resource Conservation.” The rule was promulgated to “reduce waste of natural gas from venting, flaring, and leaks during oil and natural gas production activities.” The House passed the measure to disapprove the rule by a vote of 221 to 191.

New Chairman Appointed to Federal Energy Regulatory Commission After Bay Resigns
On January 25, 2017, Cheryl LaFleur was appointed to Acting Chairman of the Federal Energy Regulatory Commission (FERC), according to the National Law Review. The appointment occurred following the resignation of former Chairman Norman Bay. Bay’s resignation was effective February 3rd, at which point the FERC lacked a quorum to take any actions requiring a majority vote by the Commissioners. According to a statement by LaFleur, “The Commission is working to get as many orders out as we can in the time we have left with a quorum.”

Ohio Landowners File Arbitration Complaint Against Chesapeake for Underpaid Royalties
On January 27, 2017, an arbitration complaint has been filed against Chesapeake Energy for underpaying royalties to landowners, according to Farm and Dairy. The complaint alleges that Chesapeake Energy has underpaid royalties by “(1) understating the amount of the product sold; (2) understating the price paid; and (3) deducting non-deductible costs” (Hale v. Chesapeake). The plaintiffs allege breach of contract, conversion, as well as violations of the Ohio Corrupt Practices Act.

Proposed Budget for Ohio Includes Severance Tax on Horizontal Wells
On January 30, 2017, the Governor of Ohio, John Kasich, submitted his executive budget for the next two years. The budget proposes additional revenue from a new severance tax on products from “horizontal wells.” The new tax rate would be “6.5% on oil, condensate, and natural gas; 4.5% on processed hydrocarbons such as natural gas liquids (NGLs).” The additional severance tax, if enacted, is expected to generate over $136 million in 2018 and more than $310 million in 2019. The revenue from this new tax would go to the General Revenue Fund.

West Virginia Supreme Court to Rehear Question on Royalty Interest Payments
On January 27, 2017, the Supreme Court of Appeals of West Virginia has agreed to a rehearing of a certified question regarding natural gas royalty interests (Leggett v. EQT Production Company, et at.) The landowners are the mineral interest owners of several oil and gas wells that have been drilled by EQT Production Company. The plaintiffs in this case argue that EQT was underpaying royalties by deducting post-production costs from their payments. In November, the court held that these deductions were improper.

Lawsuit Argues Communities Should be Able to Ban Rail Transport of Fossil Fuels
On January 31, 2017, the Community Environmental Legal Defense Fund filed an action on behalf of several Washington residents against the United States (Holmquist v. United States). The complaint alleges that federal laws prohibiting communities from banning the transportation of fossil fuels by rail are unconstitutional. The plaintiffs argue that these laws are unconstitutional because they “violate the federal constitutional right of the people of Spokane to a liveable climate, and because the provisions violate their federally and state-guaranteed constitutional right of local community self-government.”

Report Suggests that Mineral Estate Conservation Easements May be Used to Prevent Oil and Gas Development
In the February 2017 edition of the Environmental Law Reporter, several authors have published a report entitled “Mineral Estate Conservation Easements: A New Policy Instrument to Address Hydraulic Fracturing and Resource Extraction.” The authors suggest that in some states a mineral estate conservation easement (MECE) could potentially be used by landowners in order to restrict oil and gas development. This legal remedy would allow landowners to continue normal use of the surface estate while prohibiting any mineral extraction activities beneath the property. It is uncertain if states will support these conservation easements.

Scotland Reconsiders Moratorium on Unconventional Oil and Gas
On January 31, 2017, the Scottish Government initiated a consultation period to determine whether hydraulic fracturing should be permitted in Scotland. The government has created a website which provides information on hydraulic fracturing and forums for discussion called “Talking “Fracking” A Consultation on Unconventional Oil and Gas.” The comment period will be open until the 31st of May, at which point the government will consider the evidence and make a recommendation to Parliament.  Currently, there is a moratorium on unconventional oil and gas development which was imposed in January 2015.

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