The Shale Law Weekly Review - February 12, 2018

Written by:
Jacqueline Schweichler - Education Programs Coordinator

Tori Wunder - Research Assistant

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

Pipelines: DEP Imposes Penalty and Allows Sunoco to Resume Work on Mariner East 2

On February 8, 2018, the Pennsylvania Department of Environmental Protection (DEP) filed a Consent Order and Agreement with Sunoco Pipeline, L.P. (Sunoco) allowing work to resume on the Mariner East 2 pipeline.  The order imposes a $12.6 million civil penalty on Sunoco for permitting violations. In January, DEP ordered Sunoco to suspend all work after drilling fluids were discharged without a permit. In addition, Sunoco failed to obtain permit authorization prior to conducting horizontal directional drilling activities. The Mariner East 2 is a 20-inch pipeline project that expands the capacity of the current Mariner East 1 to 345 thousand barrels per day of natural gas liquids.

Pipelines: Immediate Access to Disputed Properties Granted to MVP 

On February 2, 2018, a federal judge in West Virginia granted Mountain Valley Pipeline, LLC (MVP) immediate access to disputed lands along the path of the Mountain Valley Pipeline (MVP v. Simmons, et al., 1:17-cv-00211). The court states that in order to access the disputed properties, MVP must deposit certified checks and post surety bonds worth several times more than the appraised easement value. The court concluded that MVP has met eminent domain requirements and is authorized to immediately access the properties. The determination was based upon MVP’s showing that it would be “irreparably harmed in the absence of a preliminary injunction,” that this harm is not outweighed by the concerns of the defendants, and that granting access is in the public interest.

Pipelines: FERC Allows Rover Pipeline to Continue Drilling Under Tuscarawas River

On February 6, 2018, the Federal Energy Regulatory Commission (FERC) approved the revised drilling plan submitted by Rover Pipeline, LLC (Rover) and issued an order authorizing Rover ro recommence drilling at the Tuscarawas River. FERC ordered Rover to cease drilling at the end of January after drilling fluid was lost.  Rover was asked to submit information on how they planned to address drilling fluid losses. In addition, Rover was told to provide a revised drilling plan with a feasibility analysis of alternate crossing locations at the Tuscarawas River. The Rover pipeline is designed to transport 3.25 bcf/d of Marcellus and Utica shale natural gas along 713 miles of pipeline.

Oil and Gas Leasing: Lawsuits Filed Against BLM for Alaskan Oil and Gas Lease Sale

On February 2, 2018, two lawsuits were filed by several environmental and conservation groups against the Bureau of Land Management (BLM) for petroleum lease sales in northern Alaska. The first lawsuit, filed by Earthjustice, alleged that BLM failed to fulfill its obligations under the National Environmental Policy Act (NEPA) in 2016 and 2017 when it held oil and gas lease sales in the National Petroleum Reserve - Alaska (Natural Resources Defense Council, et al. v. Ryan Zinke, et al.) In the complaint, the plaintiffs allege that BLM acted arbitrarily and capriciously by foregoing NEPA analysis, and the plaintiffs request that the 2016 and 2017 be vacated. The second lawsuit was filed by several groups including the Alaska Wilderness League, the Northern Alaska Environmental Center, and The Wilderness League. In this lawsuit the plaintiffs also allege that BLM violated NEPA during the 2016 and 2017 oil and gas lease sale.

Pipelines: FERC Files New Environmental Impact Statement for Southeast Market Pipeline Project

On February 5, 2018, the Federal Energy Regulatory Commission (FERC) filed a new Final Environmental Impact Statement (EIS) for the Southeast Market Pipelines Project (Project). The new EIS was filed in response to a court order issued in August 2017. In the court order, the judge stated that the initial EIS was inadequate because it did not contain sufficient information on the greenhouse gas emissions that would occur as a result of pipeline use.  The Project is comprised of three natural gas pipelines including the Sabal Trail Project, the Florida Southeast Connection, and Transcontinental Gas Pipe Line Company LLC’s Hillabee Expansion Project.

Follow us on Twitter at PSU Ag & Shale Law (@AgShaleLaw) to receive ShaleLaw HotLinks

"The new legal threat to environmental attorneys: Sanctions from judges and attorneys general" - ThinkProgress

"US projected to become net exporter of energy by 2022" - The Hill

"Shale Powers US Oil Output To Heights Of 1970" - UG Center

"North Dakota Bakken Oil Rises Again in Shadow of Mighty Permian" - Bloomberg

"DEP proposes to double drilling fees to pay for Pa.'s oil and gas regulators"  - Post-Gazette

"Senate Panel Approves Fracking Ban But Longshot In The House" - WFSU News

"Republicans oppose Gov. Wolf's latest attempt to tax natural gas drilling" - TribLive

"Nat gas producers faced with rising output from Pennsylvania, west Texas" - SeekingAlpha

"Clinton commissioners look to the future of natural gas, local rail trail" - The Express

"Natural gas will remain primary source of electricity generation" - Shale Gas Reporter

"Halliburton Takes Fracking Fight From Oil Field to Patent Office" - Bloomberg

Connect with us on Facebook! Every week we will post the CASL Ledger which details all our publications and activities from the week.

See our Global Shale Law Compendium and this week’s article, Shale Governance in the Netherlands

Check out this week’s Shale Law in the Spotlight: Oil and Natural Gas Severance Taxes in the United States (Florida, New York, Tennessee, Illinois, and Virginia)

Stay informed with our monthly Agricultural Law Brief located here.

Shale Law in the Spotlight: Oil and Natural Gas Severance Taxes in the United States (Michigan, Alaska, Nebraska, and California)

Written by Chloe Marie – Research Fellow

This series addresses severance taxes on oil and natural gas imposed by various states, and this sixth article will review the severance tax systems for the states of Michigan, Alaska, Nebraska, and California. In prior articles, we addressed the severance tax systems for the states of Pennsylvania, Ohio, and West Virginia; for the states of Texas, Oklahoma, Louisiana, and Wyoming; for the states of North Dakota, Arkansas, New Mexico, and Colorado; for the states of Kansas, South Dakota, Montana, and Utah; and for the states of Indiana, Kentucky, Alabama and Mississippi.

Michigan

The Michigan legislature (MCL 205-301 to 317) provides for a tax on oil and gas severed from the Michigan soil at a rate of 5% of the gross cash market value of the total production of gas and at a rate of 6.6% of the gross cash market value of the total production of oil. Crude oil produced from stripper or marginal wells is taxed at a reduced rate of 4% of the gross cash market value of the oil total production. As of March 30, 2014, oil or gas produced from a carbon dioxide secondary or enhanced recovery projects also is taxed at a rate of 4% of the gross cash market value.

The Michigan Severance Tax Act also provides for a tax exemption for certain production from the Devonian or Antrim Shale.

At least $1,000 or 2% of the revenue received from the severance tax goes to the Orphan Well Fund created under Part 616 of the Natural Resources and Environmental Protection Act, while the remaining revenue is allocated to the state general fund.

Alaska

The state of Alaska levies an annual severance tax on oil and gas produced in the state with a production tax rate set at 35% of the production tax value of the oil and gas as of January 1, 2014. The Alaska legislation also states that oil and gas produced from leases or properties outside the Cook Inlet sedimentary basin that do not include land north of 68 degrees North latitude are taxed at a rate not exceeding 4% of the gross value where production started after December 31, 2012, and before January 1, 2027.

The state legislation provides for various credit programs, such as a carried-forward annual loss credit in the amount of 45% for lease expenditures incurred between January 1, 2014, and January 1, 2016, relating to oil and gas developments located north of 68 degrees North latitude or in the amount of 35% for leases expenditures incurred on or after January 1, 2016. Other credit programs include the alternative tax credit for oil and gas exploration, oil or gas producer education credit, the qualified capital expenditure credit, the well lease expenditures credit, the transferable tax credit certificate, the transitional investment expenditure credit, the new area development credit, the small producer credit, the per-taxable-barrel credit, the Cook Inlet jack-up rig credit, the frontier basin credits, and the cash purchases of tax credit certificates.

On September 19, 2014, Alaska Governor Bill Walker signed into law Senate Bill 138 amending some provisions of the existing legislation, and providing new tax rates as of the year 2022. For oil and gas produced on or after January 1, 2022, the tax rate respectively would be equal to 35% of the annual production tax value of the taxable oil and 13% of the gross value at the point of production of the taxable gas.

Nebraska

In Nebraska, a severance tax is levied at a rate of 3% of the value of non-stripper oil and gas from state lands. The Nebraska Revised Statutes also provide for a tax preferential rate at 2% of the value of stripper oil severed from low producing wells as well as a tax exemption from the severance tax for the oil and gas used only in severing operations or for re-pressuring or recycling purposes.

All the revenue received from the oil and gas severance tax is credited to the Severance Tax Fund and then allocated based on whether the tax collected is coming from school or from all other lands. The balance of the Severance Tax Fund received from school lands is deposited in the permanent school fund and the balance of the Severance Tax Fund received from all other lands is distributed as follows:

-          1% is distributed to the Severance Tax Administration Fund;

-          Up to $300,000 goes to the State Energy Office Cash Fund;

-          Up to $300,000 is credited to the Public Service Commission for administration of the Municipal Rate Negotiations Revolving Loan Fund; and

-          The remaining money is distributed to the Permanent School Fund.

California

According to the California Department of Conservation, there is no severance tax imposed on oil and gas production in California, but there is an assessment on oil and gas produced within the state. The oil and gas assessment rate is based on the Division of Oil, Gas, and Geothermal Resources’ (DOGGR) estimated budget for the ensuing fiscal year and the total amount of assessable oil and gas produced during the prior year. For fiscal year 2017/2018, the oil and gas assessment rate is 50.38349 cents per barrel of oil or 10 Mcf of natural gas produced. The DOGGR states that this rate represents “an increase of 14.12298 cents from the previous fiscal year.”

Under Art. 7, Division 3 of the Public Resources Code, the revenue received from this assessment must be used exclusively for the support of the DOGGR, the State Water Resources Control Board and the regional water quality control boards, and the State Air Resources Board and the Office of Environmental Health Hazard Assessment for their oil and gas related activities.

Shale Law Weekly Review - August 14, 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.

Water Quality: Cabot Oil Files Suit Against Dimock Township Resident for Harassment

On August 7, 2017, Cabot Oil & Gas Corporation (Cabot) filed suit against Dimock, Pennsylvania resident, Ray Kemble and his legal team (Cabot Oil & Gas Corporation v. Charles Speer et al.). Cabot claims the defendants abused the legal process and lacked probable cause in their April 2017 complaint against Cabot. Cabot also claims that the defendant’s complaint breached their settlement agreement and now seeks to recover 5 million in punitive damages. Lawsuits against Cabot were initially brought in 2009 by Dimock residents who claimed their water was contaminated by nearby hydraulic fracturing operations.

Pipelines: Sunoco and Environmental Groups File Settlement Agreement for Mariner East 2

On  August 8, 2017, the Clean Air Council and the Commonwealth of Pennsylvania filed a proposed settlement agreement regarding Sunoco Pipeline L.P.’s Mariner East 2 Pipeline. The settlement follows a court order prohibiting construction activities by Sunoco. Under the settlement agreement, Sunoco must perform several evaluations by re-examining geology at sites where spills or “inadvertent returns” occur. In addition, Sunoco must consider additional data, conduct geotechnical evaluations, including sampling, surveys, radar and tomography.

Pipelines: Hearings Begin for Keystone XL Pipeline in Nebraska

On August 7, 2017, the Nebraska Public Service Commission commenced an evidentiary hearing on TransCanada’s application for the Keystone XL Pipeline. The Keystone XL Pipeline is a “36-inch diameter crude oil pipeline, beginning in Hardisty, Alberta and extending south to Steele City, Nebraska.” The hearing continued for five days and included witness testimony, exhibits, and cross examination. According to the Lincoln Journal Star, attorneys for landowners primarily questioned how TransCanada plans to avoid damaging land and natural resources. Recordings of the hearing can be found on Nebraska’s PBS & NPR Station.

Public Lands: Repeal of Oil and Gas Valuation Rule for Federal Leases

On August 8, 2017, the Office of Natural Resources Revenue published in the Federal Register their intent to repeal the Consolidated Federal Oil & Gas and Federal Indian Coal Valuation Reform Final Rule. The rule amended regulations governing oil and gas royalty valuation for Federal and Indian leases. According to the U.S. Department of the Interior press release, the rule “created confusion and uncertainty regarding how companies report and pay royalties…” The repeal will go into effect on September 6, 2017, and previous valuation regulations will be reinstated.

Public Lands: BLM Requests Comment On Oil and Gas Leasing in Alaska

On August 7, 2017, the Bureau of Land Management (BLM) published in the Federal Register a Call for Nominations and Comments for the National Petroleum Reserve in Alaska Oil and Gas Lease Sale. The call for nominations affects 22.8 million acres of the National Petroleum Reserve in Alaska as well as all tracks under the NPR-A Oil and Gas Lease Sale. Nominations and comments are due by September 6, 2017. The BLM press release can be found here.  

Induced Seismicity: Oklahoma Governor Creates Task Force to Evaluate Oklahoma Corporation Commission

On August 7, 2017, Mary Fallin, Governor of Oklahoma issued an executive order creating a Task Force to conduct an organizational analysis of the Oklahoma Corporation Commission (OCC) for the purpose of improving agency operations. The OCC regulates oil and gas drilling as well as enforces federal regulations for underground injection of water and chemicals. The Task Force will conduct a performance assessment, assess the OCC’s mission, examine funding, and evaluate the OCC’s structure. The final report  is due to the governor by November 15, 2018.

Follow us on Twitter at PSU Ag & Shale Law (@AgShaleLaw) to receive ShaleLaw HotLinks

"BP announces potential for a major gas field in the U.S." - Kallanish

"U.S. natural gas production continues climbing: STEO" - Kallanish

"Driller files $5M suit against Pa. 'Gasland' resident, lawyers" - Philly Voice

"Pa. business community fires back against energy-oriented tax proposals" - Penn Live

"Proposed settlement would allow drilling to resume on Mariner East pipelines" - Power Source

MA AG Maura Healey fights EPA delay in cutting methane pollution - Mass Live

"BP Energy to market NGLs from Rex Energy" - Kallanish

"Sunoco agrees to new drilling conditions, groups withdraw challenge" - Kallanish

"Shell Pipeline spends additional $221,000 on easements" - The Times

"API urges EPA to reconsider, not just stay, new VOC emissions limits" - Oil & Gas Journal

"Upcoming solar eclipse is showtime for natural gas" - Kallanish

Connect with us on Facebook! Every week we will post the CASL Ledger which details all our publications and activities from the week.

Check out this week’s Shale Law in the Spotlight: Endangered Species Act - Impacts on Shale Gas Development

Stay informed with our monthly Agricultural Law Brief located here.

Dallas Federal Reserve Predicts Economic Troubles for Oil and Gas Dependent States

On August 7, 2015, the Federal Reserve Bank of Dallas held a one day conference entitled, “Vistas from Texas: An Economic Outlook.”  The conference was a part of the Sizing Up Texas’ Growth Conference Series.  The series focuses on Texas’ economic growth that has been largely supported by the energy sector and the sustainability of that growth with the downturn in energy prices.

The Dallas Federal Reserve Director of Research, Mine Yucel, predicted that eight oil and gas economically dependent states have a poor economic outlook due to low oil and gas prices.  Texas, Alaska, Oklahoma, Louisiana, Wyoming, West Virginia, New Mexico, and North Dakota make up the eight oil and gas dependent states.   Yucel believes that Texas will avoid a recession because of its economic diversification and its continued ability to attract new jobs and residents.  The other oil and gas dependent states are not predicted to weather the economic storm as well.

Yucel believes that North Dakota will be hardest hit with job losses.  Last year, North Dakota was number one in the nation in job growth.  Yucel predicts that this year North Dakota will be last in job growth.  She also believes that the other oil and gas dependent states will have to reduce spending due to the smaller severance tax revenue.  She especially believes that Alaska will be adversely affected because so much of its revenue is dependent upon oil.  Yucel definitively said that there will not be a recession in Texas.

Federal Reserve economists stated that energy booms have proved to be highly beneficial to the overall U.S. economy.  The economists believe that the current boon’s contribution to low gasoline prices could contribute between .3 and 1 percent to GDP growth.  Still overall GDP growth is predicted to be 2.3 percent.

Written by Stephen Kenney - Research Assistant

Center for Agricultural and Shale Law

August 8, 2015

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