New York Court Declines to Re-Hear Land Use Case as Governor Anticipates Health Report by End of 2014

On October 16, 2014, the New York Court of Appeals denied a request by the bankruptcy trustee for Norse Energy to re-hear arguments in the landmark case affirming local zoning laws adopted by two upstate towns that prohibited oil and gas-related activities within their borders.  In June 2014, the Court of Appeals issued an opinion that the New York Oil, Gas and Solution Mining Law did not preempt a municipality’s home rule authority to regulate land use.  Meanwhile, since June 2008, New York has imposed a de facto moratorium on high-volume hydraulic fracturing. Governor Andrew Cuomo has stated that a decision on whether to lift the moratorium will not be made until the New York Commissioner of Health finalizes a study on the public health effects of hydraulic fracturing.  During a gubernatorial debate on October 22, 2014, Governor Cuomo said that the highly anticipated report should be done by the end of the year,  but he did not indicate whether the moratorium would be lifted at that time.

EPA Inspector General Continues Review of Fracking Rules Over Objections from Senate

The Inspector General (IG) for the U.S. Environmental Protection Agency (EPA), Arthur Elkins, has vowed to continue to evaluate the effectiveness of state and federal regulations of hydraulic fracturing. The IG recently responded by letter to early October correspondence from Senator James Inhofe (R-OK), who claimed that the IG does not have the proper authority to review federal and state hydraulic fracturing regulations.  In February 2014, the IG announced its preliminary review of EPA and the states’ existing regulations concerning the management and responsiveness of potential threats to water resources, with the purpose of identifying preventive and response measures and improving coordination among relevant agencies.  In May 2014, five Republican Senators, including Inhofe, sent a letter to the IG questioning his authority for such a review, stating that the mission of the EPA Inspector General is to prevent and detect fraud, waste and abuse within the EPA, and not “to investigate either the states themselves or the efficacy of their regulatory programs.”

Ohio’s Fifth District Court of Appeals Weighs in on Dormant Mineral Act Issue

Ohio’s Fifth District Court of Appeals recently held that the 1989 version of Ohio’s Dormant Mineral Act applies to current disputes concerning ownership of severed mineral estates. The court in Wendt v. Dickerson followed previous rulings from the Seventh District Court of Appeals to find that the 1989 DMA is self-executing in nature and automatically vests ownership of a severed mineral estate in the surface owner after a 20-year period of non-use. The Ohio Supreme Court is expected to provide the definitive ruling on whether the 1989 or 2006 version of the DMA applies in early 2015.

Bills Affecting Production Reporting And Lease Termination Pass PA House and Senate

Two bills primarily sponsored by PA Representative Tina Pickett (Republican, Bradford/Sullivan/Susquehanna) have recently passed the State House and Senate. House Bill (HB) 2278, Unconventional Well Report Act, would require the operator of an unconventional well to file a monthly report specifying the amount of production with the Department of Environmental Protection. Currently, production is reported to the Department every six months. HB 402, Recording of Surrender Documents from Oil and Natural Gas Lease Act, states that a lessee shall deliver to a lessor a surrender document not more than 30 days after the termination, expiration or cancellation of an oil or gas lease. If a lessor does not receive such notice within the 30 day time period, the lessor is permitted to serve notice on the lessee. A lessor who has served notice and fails to receive a timely challenge from the lessee may record an affidavit of termination, expiration or cancellation of a lease in the recorder’s office of the applicable county. The bills are awaiting review by Governor Tom Corbett.

Mountaineer Keystone LLC finalizes acquisition of PDC Mountaineer LLC

As reported by the Pittsburgh Business Times on October 15, 2014, Wexford-based Marcellus driller Mountaineer Keystone LLC has finalized its acquisition of joint-venture partner PDC Mountaineer LLC for a reported sale price of $500 million. PDC Mountaineer was created in 2009 by PDC Energy and Lime Rock Partners as a joint venture for the purposes of exploring the Marcellus Shale.  Mountaineer Keystone LLC currently operates in northern West Virginia and eastern Ohio and drilled its first Utica and Marcellus wells in 2012. As a part of the deal, Mountaineer Keystone acquired 131,000 acres for its West Virginia Marcellus Shale position while also agreeing to sell the joint-venture’s midstream assets, consisting of 24 miles of high pressure gathering lines, to MK Midstream Holdings LLC, a separate joint venture in which Mountaineer Keystone holds a fifty (50%) percent stake.

Southwestern Energy to Acquire 413,000 Acres in West Virginia and Pennsylvania from Chesapeake Energy

Southwestern Energy Co. announced that it has signed a deal to acquire 413,000 net acres in West Virginia and Pennsylvania from Chesapeake Energy Corp. for $5.375 billion, reports the Pittsburgh Business Times.  This acquisition includes 256 producing and 179 unoperated or nonproducing Marcellus and Utica Shale wells.  These assets will complement those Southwestern already has in the Marcellus Shale in northeastern Pennsylvania.

Zoning Hearing Board Erred When It Denied Application for Natural Gas Compressor Station

On September 26, 2014, the Commonwealth Court of Pennsylvania issued an opinion in favor of MarkWest Liberty Midstream & Resources, LLC.  MarkWest had purchased a 71.5 acre parcel of undeveloped land in Cecil Township, Pennsylvania, and had applied to the township’s zoning hearing board for a special exception under the zoning ordinance to construct and operate a natural gas compressor station.

The zoning hearing board denied MarkWest’s special exception application holding that MarkWest failed to satisfy the zoning ordinance’s requirements that the compressor station would be of the same general character as other permitted uses, and that its impact would be equal to or less than other permitted uses.  MarkWest appealed to the trial court, which affirmed the zoning board’s decision.  MarkWest then appealed to the Commonwealth Court.

On appeal, MarkWest argued that the zoning board erred because the compressor station is of the same general character as an “essential service” and because it meets the standards for permitted uses in the Township’s I-1 Light Industrial District.  The zoning hearing board argued that MarkWest is a commercial enterprise that is neither a public utility nor an entity that provides an essential service to the public.  The Commonwealth Court noted that the issue is not whether MarkWest’s proposed use is an “essential service” as defined, but rather, whether MarkWest’s proposed use is of the same general character as any essential service.  The court then held that the zoning hearing board did not make any finding that the proposed compressor station was not of “the same general character” as other permitted uses.  Instead, the court found that the zoning hearing board applied the wrong legal standard by requiring the use to be “of the same character” rather than “the same general character.”

Accordingly, the Commonwealth Court concluded that the zoning hearing board’s position was an unreasonable interpretation and application of the zoning ordinance, and it reversed the portion of the trial court’s decision affirming the denial of the special exception application.  The Commonwealth Court remanded the case to the trial court and directed it to immediately remand the case to the zoning hearing board with the direction to grant MarkWest’s special exception application within 45 days of receiving the remand order.

Magnum Hunter’s West Virginia “Monster Well” the Largest Utica Well Drilled to Date

As reported by Columbus Business First and NGI’s Shale Daily, Magnum Hunter Resources Corporation’s first Utica well in West Virginia has reported production of 46.5 million cubic feet of natural gas per day, thereby rendering the Stewart Winland 1300U well in Tyler County the biggest Utica well drilled to date.  The well has a true vertical depth of 10,825 feet, and is only the second Utica well that has been drilled in West Virginia.  Magnum Hunter’s CEO Gary Evans said, this well “represents the greatest flow rate and one of the highest sustained flowing casing pressures of any Utica well drilled in the entire play of Ohio and West Virginia [and] is one of the highest flow rate gas wells ever reported in any shale play located in the U.S.”  The well is positioned in the far southeastern part of the play, and indicates a highly productive area of dry gas Utica in West Virginia. Three additional wells on the Stewart Winland pad have been completed and are expected to be put into production in the coming weeks.

USEPA Extends Waters of the United States Comment Deadline

The U.S. Environmental Protection Agency (USEPA) has, for a second time, extended the public comment deadline associated with its proposed rule to redefine “waters of the United States” and related terms for purposes of various federal Clean Water Act programs.  USEPA and the U.S. Army Corps of Engineers initiated the joint rulemaking effort this past spring.  Comments are now due on Friday, November 14, 2014.  Additional information is available at http://www2.epa.gov/uswaters.

FERC Gives Approval for East Coast LNG Export Project

The Economic Times and other news sources are reporting that the U.S. Federal Energy Regulatory Commission (FERC) issued a permit for Dominion Resources to operate the first natural gas liquefaction plant on the east coast.  Dominion’s Cove Point plant on the Chesapeake Bay will be used to export more than 5 million metric tons of liquefied natural gas each year.  The plant will also be the first export terminal connected to the Marcellus Shale by pipeline.  It has been reported that Dominion already has agreements with energy companies in India and Japan to ship the natural gas overseas.  The project is likely to be completed by June of 2017.