Energy & Environmental Law Blog : Energy & Environmental Lawyer & Attorney : Vorys, Sater, Seymour and Pease Law Firm : Oil, Gas & Green Technology

Yesterday, the United States Court of Appeals for the Sixth Circuit upheld a lower court's ruling that Kentucky follows the “at-the-well” rule for purposes of royalty calculations, meaning that - with appropriate lease language - lessees may deduct post-production costs before paying landowner royalties (Poplar Creek Development Company v. Chesapeake Appalachia, LLC).  The royalty provision cited by the court stated:  "To pay to the Lessor a royalty for the gas produced and marketed from any gas well on the leased premises at the rate of one-eighth (1/8) part of the wholesale market value of such gas at the well based on the usual prices paid therefor ..."  (Emphasis is ours.)  Moreover, the court held that "'at-the-well' refers to gas in its natural state, before the gas has been processed or transported from the well."

Another good case for the Basin!

• Email This
• Print

The Elmira Star-Gazette is reporting that a group of New York families has filed suit claiming that Anschutz Exploration Corp. contaminated their water wells through the company's drilling operations.  "The lawsuit seeks $150 million for each of 10 claims in the suit and another $500 million in punitive damages."  You can't help but like the way the report starts, though:  "A New York City law firm has filed a suit ..."  New York City?  Elmira's a couple hundred miles away ...

• Email This
• Print

We've reported several times on the rules proposed for drilling in the Delaware River Basin by the Basin's Commission (DRBC) (see here, e.g.).  The Philadelphia Inquirer has focused on one significant point regarding those rules - "The Delaware River Basin Commission has drafted regulations that would ban so-called reserve pits in the environmentally sensitive Delaware watershed. The DRBC's regulations would require closed-loop drilling and off-site disposal of cuttings."

Just thought you might want to know.

• Email This
• Print

There have been a number of tragic natural gas transmission line incidents lately, prompting a call for greater regulation.  Among the responses is the Pipeline Transportation Safety Improvement Act of 2011 sponsored by Senator Lautenberg.  Notably, it calls for a reconsideration of the exemption for natural gas gathering lines - despite the fact that the incidents in no way relate to gathering lines - and would require excavators, as well as the owners of underground facilities, to participate in One-Call programs.

It's still the beginning of the legislative process, but this is something to monitor.

• Email This
• Print

The Columbus Dispatch is reporting that Governor Kasich has appointed a new chairman of the Public Utilities Commission of Ohio (PUCO) - State Representative Todd Snitchler of Uniontown  (R).  "Snitchler will leave the legislature to fill the three remaining years on the term of Alan Schriber, who resigned as chairman of the Public Utilities Commission of Ohio."  Congratulations!

• Email This
• Print

The NYT is reporting on congressional hearings convened by the House Energy and Commerce Committee to address U.S. EPA's regulation of greenhouse gases.  A sample:  "'The E.P.A. and the Obama administration have decided that they want to put the American economy in a straitjacket, costing us millions of jobs and billions of dollars a year,' Representative Joe L. Barton, Republican of Texas, said in his opening remarks. 'They couldn’t get it through the legislative process, so they’ve tried to do it by a regulatory approach. It’s not going to work.'”

Of course, the opening remarks of U.S. EPA's Administrator were just as strong, suggesting that pending legislation to eliminate that regulatory authority would harm the children:  "The bill appears to be part of a broader effort in this Congress to delay, weaken, or eliminate Clean Air Act protections of the American public. I respectfully ask the members of this Committee to keep in mind that EPA’s implementation of the Clean Air Act saves millions of American children and adults from the debilitating and expensive illnesses that occur when smokestacks and tailpipes release unrestricted amounts of harmful pollution into the air we breathe."  For a copy of those remarks, see here.

The next year or two promise to be interesting ...

• Email This
• Print

The WSJ is reporting that West Virginia's Department of Environmental Protection (DEP) is asking for a more than 10-fold increase in its permitting fees for producers looking to drill horizontal wells in the Marcellus Shale:  "DEP has proposed increasing the fee to $10,000, in legislation introduced Monday. Huffman said the resulting revenues would fund the additional inspectors needed, while also covering costs of other regulatory provisions in that bill."

That's up from $650.  Ouch.

• Email This
• Print

There are a number of interesting updates regarding U.S. EPA's plan to study the use of hydraulic fracturing in E&P activities:

First, the members of the agency's Science Advisory Board (SAB) were announced earlier this month.  See here.  You will note, the group is heavy with academics.

Second, U.S. EPA has published a draft of its plan for review by the agency's Science Advisory Board.  According to the press release, "The scope of the proposed research includes the full lifespan of water in hydraulic fracturing, from acquisition of the water, through the mixing of chemicals and actual fracturing, to the post-fracturing stage, including the management of flowback and produced or used water and its ultimate treatment and disposal."

• Email This
• Print

The U.S. Department of Interior - for its moratorium activities related to the Gulf of Mexico - has been held in contempt by Judge Martin Feldman of the U.S. District Court for the Eastern District of Louisiana, according to this article in the Politico.  The order finds, interestingly:

[T]hat the government did not simply reimpose a blanket moratorium; rather, each step the government took following the Court’s imposition of a preliminary injunction showcases its defiance: the government failed to seek a remand; it continually reaffirmed its intention and resolve to restore the moratorium; it even notified operators that though a preliminary injunction had issued, they could quickly expect a new moratorium. Such dismissive conduct, viewed in tandem with the reimposition of a second blanket and substantively identical moratorium and in light of the national importance of this case, provide this Court with clear and convincing evidence of the government’s contempt of this Court’s preliminary injunction Order.

The article has a link to the order itself.  Worth a look.

• Email This
• Print

The Houston Chronicle is a good source for updates on the frac study contemplated by U.S. EPA.  For example:  "The Environmental Protection Agency is close to launching a broad study on hydraulic fracturing, but the probe doesn’t guarantee that the federal government will step in and regulate the drilling technique, EPA Administrator Lisa Jackson said Wednesday."  The agency expects to have the work plan finished within the next month or two.

• Email This
• Print

The NYT is reporting on recent legislative initiatives to curtail U.S. EPA's regulation of greenhouse gases:  "The Inhofe-Upton-Whitfield bill would, its sponsors say, prevent the E.P.A. from enacting rules that should properly be written by Congress, restrict use of the Clean Air Act to address climate change, prevent the administration from enacting a 'backdoor' carbon tax and protect American jobs from foreign competition."  Interesting.

• Email This
• Print

 We've reported several times on new rules proposed by the Delaware River Basin Commission (DRBC) to govern oil and gas development projects in the Basin (see here, e.g.).  The WSJ is reporting that two environmental groups have filed suit to prevent exploratory wells from being drilled in the Basin.

We suspect that there's more to come.

• Email This
• Print

The NYT is reporting on a letter sent by House Democrats alleging that some service companies have illegally used diesel fuel in their frac fluids:  "Oil and gas service companies injected tens of millions of gallons of diesel fuel into onshore wells in more than a dozen states from 2005 to 2009, Congressional investigators have charged. Those injections appear to have violated the Safe Water Drinking Act, the investigators said in a letter to the Environmental Protection Agency on Monday."

For a copy of the letter, see here.  According to industry (in the NYT article):  "Oil and gas companies acknowledged using diesel fuel in their fracking fluids, but they rejected the House Democrats’ assertion that it was illegal. They said that the E.P.A. had never properly developed rules and procedures to regulate the use of diesel in fracking, despite a clear grant of authority from Congress over the issue."

• Email This
• Print

We reported previously here on a study done by Pennsylvania's Department of Environmental Protection finding no air emissions that would be a cause for concern.  WHYY is reporting on another study with similar results:  "The survey observed four Susquehanna County sites from August to October. DEP official Mark Carmon said the study found elevated levels of methane, propane, butane and other gasses in the air, but nothing surpassing the warning levels for 'air-related health issues.'"

For more, including a copy of that study, see here.

Or for another related article, see here.

• Email This
• Print