Shale Law Weekly Review – Week of March 15, 2021

Landowner Royalties: Pennsylvania Attorney General Settles Lawsuit Against Chesapeake Energy ⚡
On March 8, 2021, Pennsylvania Attorney General, Josh Shapiro, announced a settlement with Chesapeake Energy to settle litigation related to Chesapeake’s business practices with landowners.  The Attorney General initially filed a complaint against Chesapeake alleging that Chesapeake engaged in deceptive and unfair acts that induced landowners to sign leases with them.  (Commonwealth of Pennsylvania v. Chesapeake Energy Corp., No. 2015IR0069).  The settlement requires Chesapeake to pay landowners a total of $5.3 million in restitution and will allow landowners to change the terms of their existing leases with regard to royalty provisions.   Chesapeake will also be required to provide pricing information on its website and remove “market enhancement” clauses or “ready for sale or use” clauses from its leases with landowners. The settlement was filed under seal in Chesapeake’s Chapter 11 bankruptcy case.  (In Re: Chesapeake Energy Corp., et al., U.S. Bankruptcy Court for the Southern District of Texas, Houston Division, No. 20-33233).

Production and Operation: Pennsylvania Natural Gas Production Report Shows Small Increase in Production Volume
On March 2, 2021, the Pennsylvania Independent Fiscal Office (IFO) released its quarterly Natural Gas Production Report for October to December of 2020.  The report shows a production growth rate of 2.9% from the same time last year.  While production has increased, the amount of new wells spud was down by 15.4% from 2019.  The number of producing wells still increased by 5.5% from the fourth quarter in 2019, despite decelerating growth from 2019 due to a decrease in drilling and discontinuing use of older wells.  Susquehanna County was the only county among the top five producing counties that had a decrease in growth production by volume since 2019.  Lycoming County had the largest production growth rate from 2019 at 19.5%.  The IFO report uses data from the Pennsylvania Department of Environmental Protection, the U.S. Energy Information Administration, and Bentek Energy.

Municipal Regulation: California City Bans Construction of New Gas Stations and Expansion of Fossil Fuel Uses at Existing Stations
On March 1, 2021, the Petaluma, California City Council held a meeting where it approved a zoning ordinance amendment prohibiting the approval of new gas station uses and enacting “non-conformity regulations” for existing gas stations.  (Video discussion at 1:58, vote at 2:10).  Existing stations will be prohibited from increasing their storage and dispensing capacity of any fossil fuels.  The ordinance also creates additional regulations for fueling Zero Emission Vehicles.  A few public comments were received by the City Council during the meeting, raising concerns regarding the limited number of charging stations available for electric vehicles and the proximity of proposed hydrogen stations to schools.

Environmental Impact Studies: Ohio Federal District Court Enjoins Surface Disturbing Activities in the Wayne National Forest Pending Federal Agency NEPA Analysis
On March 8, 2021, the U.S. District Court for the Southern District of Ohio enjoined construction under oil and gas leases in the Wayne National Forest pending completion of a National Environmental Policy Act (NEPA) analysis by federal agencies.  (Center for Biological Diversity v. U.S. Forest Service, No. 2:17-cv-00372).  The court previously found that the U.S. Forest Service (USFS) and the Bureau of Land Management (BLM) did not take the required “hard look” at impacts of hydraulic fracturing on surface area, local animal habitats, and air quality before signing leases in the area.  The court vacated the agencies’ previous Environmental Assessment and Finding of No Significant Impact and ordered a revised NEPA analysis.  The court then considered appropriate remedies for the period in which a NEPA analysis would be conducted.  The court ultimately decided that a full revocation of the signed leases was not necessary due to the economic and practical impacts it would have on the parties.  However, the court ordered that any “surface disturbance activities” would be enjoined pending NEPA analysis.  The court also prevented BLM from issuing new applications for drilling permits and prevented leaseholders from withdrawing water from the Little Muskingum River for current drilling.

Shale Law/Policy Resources of Interest:

Carrie Garrison, Texas Power Outages Threaten Mass Litigation: Should Potential Defendants Be Shaking In Their Cowboy Boots? (March 8, 2021)

Vera Neinast & Shawn Whites, FERC Revisits Natural Gas Certificate Policy Statement to Elevate Climate Change, Environmental Justice Considerations (March 8, 2021)

Vera Neinast & Shawn Whites, FERC Seeks Additional Comments on Potential Modifications to Its Natural Gas Certificate Policy Statement (March 8, 2021)

Scott Daniel Johnson & George (Chip) Cannon Jr., FERC Announces June 2021 Technical Conference on Climate Change, Extreme Weather and Electric System Reliability (March 9, 2021)

Stacey H. Mitchell, Cynthia M. Mabry, Stephen M. Boone Jr. & Bryan C. Williamson, Interior Department to Hold Forum on March 25, to Discuss Future of Federal Oil and Gas Program (March 11, 2021)

Stacey H. Mitchell, Cynthia M. Mabry, Stephen M. Boone Jr. & Bryan C. Williamson, Upcoming DOI Forum to Set the Stage for the Future of Oil and Gas Regulation (March 11, 2021)

Margaret Barry & Korey Silverman-Roati, March 2021 Updates To The Climate Case Charts (March 9, 2021)

AGENCY PRESS RELEASES – STATE/FEDERAL

Pennsylvania Department of Environmental Protection

Wolf Administration Announces Equity Principles to Guide Investments Through Regional Greenhouse Gas Initiative (March 10, 2021)

STATE ACTIONS—EXECUTIVE/LEGISLATIVE

Pennsylvania Legislature

SB 387 “An Act providing for the protection of water supplies” Referred to Environmental Resources and Energy (March 10, 2021)

Environmental Resources and Energy Committee

“Informational meeting on Embracing Pennsylvania’s energy potential: hydrogen power and carbon capture” (March 15, 2021 at 9:30 a.m.)

Pennsylvania Executive Agencies—Actions and Notices (Pa. Bulletin Vol. 51, No. 11—March 12, 2021)

51 Pa.B. 1429 Department of Labor and Industry “Liquefied Petroleum Gas Facility; Notice of Application” (March 13, 2021)

51 Pa.B. 1439 Pennsylvania Public Utilities Commission “Revocation of Natural Gas Supplier Licenses of Companies that Did Not File a Natural Gas Supplier Annual Report or Pay Past Due Annual or Supplemental Fees” (March 13, 2021)

FEDERAL ACTIONS—EXECUTIVE/LEGISLATIVE

Federal Executive Agencies (Federal Register March 8-12, 2021):

Federal Energy Regulatory Commission

86 FR 13360 Notice—Comments Period “Atlantic Coast Pipeline, LLC, Eastern Gas Transmission and Storage, Inc.; Notice of Amendment of Certificates and Opening of Scoping Period” (March 8, 2021)

85 FR 13538 Notice “Equinor Marketing & Trading (US) Inc. v. Mustang Pipe Line LLC; Notice of Complaint” (March 9, 2021)

86 FR 13889 Notice—Comments Period “Columbia Gas Transmission, LLC.; Notice of Request Under Blanket Authorization and Establishing Intervention and Protest Deadline” (March 11, 2021)

Land Management Bureau

86 FR 13584 Notice of information collection—Comments Period “Agency Information Collection Activities; Submission to the Office of Management and Budget for Review and Approval; Oil Shale Management” (March 9, 2021)

House Energy and Commerce Committee Actions:

H.R. 1889 “To require the Administrator of the Environmental Protection Agency to continue to carry out certain programs relating to environmental justice, and for other purposes” Referred to the Committee on Energy and Commerce (March 12, 2021)

H.R. 1879 “To promote American leadership in vehicle manufacturing, job creation, improved air quality, and climate protection through domestic manufacturing of low- and zero-emission vehicles and development of electric vehicle charging networks, and for other purposes” Referred to the House Committee on Energy and Commerce (March 12, 2021)

H.R. 1819 “To require a certain percentage of natural gas and crude oil exports be transported on United States-built and United States-flag vessels, and for other purposes” Referred to the Committee on Energy and Commerce (March 11, 2021)

H.R. 1761 “To amend title XVII of the Energy Policy Act of 2005 relating to the eligibility for loan guarantees for carbon capture, utilization, and storage projects, and for other purposes.” Referred to the Committee on Energy and Commerce (March 10, 2021)

H.R. 1616 “To provide for Federal and State agency coordination in the approval of certain authorizations under the Natural Gas Act, and for other purposes” Referred to the House Committee on Energy and Commerce (March 8, 2021)

Senate Energy and Natural Resources Committee Actions:

1. 694 “A bill to require the Secretary of Energy to provide grants for energy efficiency improvements and renewable energy improvements at public school facilities, and for other purposes” Read twice and referred to the Committee on Energy and Natural Resources (March 10, 2021)
2. 624 “A bill to amend the Mineral Leasing Act to increase certain royalty rates, minimum bid amounts, and rental rates, and for other purposes” Read twice and referred to the Committee on Energy and Natural Resources (March 9, 2021)

Follow us on Twitter @AgShaleLaw—Top #ShaleLaw HotLinks March 9-12, 2021:

“Biden Federal Leasing Pause Won’t Impact Energy Production This Year, Agency Says” The Hill

“Pennsylvania Saw Modest Increase in Unconventional Natural Gas Production Last Year, but Activity Down” Natural Gas Intelligence

“No Roaring USA Shale Industry to Respond to OPEC+” Rigzone

“Keystone XL. Dakota Access. Now Line 3?” Energywire

“New Mexico Senate Passes Bill Creating Task Force To Shift Away From Oil And Gas Reliance” Carlsbad Current Argus

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Written by:
Sara Jenkins – Research Assistant
Jackie Schweichler – Staff Attorney
Sarah Straub – Research Assistant