Jacqueline Schweichler - Education Programs Coordinator
The following information is an update of recent local, state, national, and international legal developments relevant to shale gas.
Landowner Royalties: EQT Sues West Virginia for Changes to Flat-Rate Royalty Calculations
On April 12, 2018, EQT Production Company (EQT) filed a lawsuit against the West Virginia Department of Environmental Protection protesting changes to West Virginia’s minimum royalty statute, W. Va. Code § 22-6-8. A new bill amending the statute was signed into law in early March. The law now mandates that the minimum royalty must be calculated based on “gross proceeds, free from any deductions for post-production expenses, received at the first point of sale to an unaffiliated third-party purchaser in an arm’s length transaction...” EQT alleges that the statute infringes on their drilling rights under flat-rate leases and violates the Contracts Clause and the Due Process Clause of the U.S. Constitution. Additional information on the changes to West Virginia’s legislation can be found in our recent Shale Law in the Spotlight article.
LNG Exports: Cove Point Terminal Ships First Commercial Cargo
On April 16, 2018, the Dominion Energy Cove Point LNG terminal in Lusby, Maryland, shipped its first commercial cargo, according to LNG World News. The article states that the destination of the LNG is unclear and that the cargo vessel is 91 percent full. Dominion Energy received approval to commence service from the Federal Energy Regulatory Commission on March 5th and entered commercial service on April 10th. The Cove Point facility can process 750 million standard cubic feet per day of inlet feed gas from the Marcellus and Utica shale plays.
International Development: Northern Territory of Australia Will Allow Hydraulic Fracturing
On April 18, 2018, the Northern Territory Government of Australia announced that hydraulic fracturing will be permitted within the Territory based on the recommendations of the recently published, Scientific Inquiry into Hydraulic Fracturing in the Northern Territory. The report recommends against allowing hydraulic fracturing in “National Parks, Conservation Areas, Indigenous Protected Areas, towns, residential and strategic assets, and areas of high cultural, environmental or tourism value.” Chief Minister Michael Gunner stated that by following the recommendations in the inquiry, they will be able to protect the environment, cultures, and lifestyles, while residents will benefit from new job creation.
Induced Seismicity: Oklahoma Corporation Commission Orders Halt to Disposal Well Operations After Earthquakes
On April 19, 2018, the Oklahoma Corporation Commission (OCC) issued a directive to halt disposal well operations in the Hennessey area following a 3.8 earthquake. Seven other disposal wells in the Arbuckle formation have been directed to reduce daily volumes by 25 percent. In addition, eight other wells in the area have been directed to reduce volumes to “their last 60 day average.” According to the press release, disposal into the Arbuckle formation creates “the largest potential risk for induced seismicity.” Earlier this month, OCC issued disposal well reduction order after a 4.6 magnitude earthquake in Garfield County.
Water Quality: DEP Releases Oil and Gas Well Structural Soundness Data
On April 13, 2018, the Pennsylvania Department of Environmental Protection (DEP) announced the release of the first four years of well structural soundness data collected by oil and gas well operators. According to DEP, the data shows that most wells in Pennsylvania “are being operated in a manner that greatly reduces the risk for groundwater impacts." Under the Mechanical Integrity Assessment Program, oil and gas well operators are required to conduct quarterly inspections and submit data for one of the inspections each year. A comprehensive analysis of the data for 2014, Explanation and Summary of Preliminary Mechanical Integrity Assessment Dataset, suggests that less than 1 percent of operator observations indicated integrity problems that could “allow gas to move outside the well footprint."
GHG Emissions: EPA Releases Report on U.S. Greenhouse Gas Emissions
On April 12, 2018, the U.S. Environmental Protection Agency (EPA) released the report, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2016. The report estimates the total greenhouse gas emissions from the United States, including carbon dioxide, methane, nitrous oxide, and other flourine-containing halogenated concentrations. The report is prepared to meet commitments under the United Nations Framework Convention on Climate Change. According to the researchers, U.S. emissions increased by 2.4 percent from 1990 to 2016 and emissions decreased by 1.9 percent from 2015 to 2016. The researchers suggest that this decrease in emissions could be due to the substitution of natural gas for coal and warmer winter conditions which resulted in a decreased demand for heating fuel.
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"Shell sets out strategy for dealing with shift from fossil fuels" - Financial Times
"Regulators to consider revising natural gas flaring policy" - Bismark Tribune
"The oil bust forced more than 330 North American energy companies into bankruptcy, report says" - Houston Chron
"Five takeaways from StateImpact’s forum on gas royalties" - State Impact PA
"Shale Boom Creates New Petrochemical Hub" - Oil Price
"Is the U.S. Shale Boom Hitting a Bottleneck?" - The Wall Street Journal
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See our Global Shale Law Compendium and this week’s article, Shale Law Governance in Pennsylvania - Regulations from 2008 to 2010
Check out this week’s Shale Law in the Spotlight: Background of Recent West Virginia Legislation Addressing the Deduction of Post-Production Costs from Oil and Gas Royalties.
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