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Legal Issues in the Marcellus and Utica Shale Plays

Legal Issues in the Marcellus and Utica Shale Plays. Presented By: Andrew Graham Steptoe & Johnson PLLC The Woodlands, TX. What We’re Going to Cover. Age-old problems New shale gas legislation Local regulation of oil and gas development New litigation Failure to develop

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Legal Issues in the Marcellus and Utica Shale Plays

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  1. Legal Issues in the Marcellus and Utica Shale Plays Presented By: Andrew Graham Steptoe & Johnson PLLC The Woodlands, TX

  2. What We’re Going to Cover • Age-old problems • New shale gas legislation • Local regulation of oil and gas development • New litigation • Failure to develop • Flat rate royalty leases • Ohio Dormant Mineral Act • Rights of surface owners • Practical problems in the Appalachian Basin

  3. Age-old Problems • Pennsylvania’s problem with “minerals” • West Virginia’s problem with “royalty” • Ohio’s problem with “dower” • Lack of statutory pooling in PA and WV for Marcellus Shale development • Statutory pooling exists for Utica Shale development in PA and WV • Metes and bounds descriptions • Consent to develop

  4. New Shale Gas Legislation • Ohio: Senate Bill 315 • May 24, 2012 • Pennsylvania: Act 13 • February 13, 2012 • West Virginia: House Bill 401 • December 14, 2011

  5. Ohio Senate Bill 315 • Producers must report volume and chemical description of fluids used in production • Requires water sampling and source disclosure • Requires horizontal well owners to obtain at least $5 million of liability coverage • OH Power Siting Board approval is not required in locating well lines, gathering lines, natural gas liquid lines or processing facilities

  6. Pennsylvania Act 13 • Allows municipalities to levy impact fees on natural gas wells • Expands environmental regulations • increased penalties • setbacks from waterways • disclosure of chemicals used in the hydraulic fracturing process • mandates new procedures for handling spills

  7. West Virginia House Bill 401 • Higher permit fees to fund WVDEP • New well location restrictions • Requires road use agreement be in place prior to issuing permit • New notices for surface owners • Compensation statute for surface owners • Greater enforcement authority for WVDEP • Water use and wastewater regulations

  8. Local Regulation

  9. Local Regulation of O&G Activity • PA: Act 13 litigation • WV: City of Morgantown • Northeast Natural Energy case • “Sole and exclusive authority” in HB 401 • New Morgantown zoning ordinance • OH: State ex rel. Morrison v. Beck Energy Corp.

  10. Act 13 Litigation • PA: Act 13 • Limits local regulation of oil and gas activity • April 11, 2012: Commonwealth Court issues preliminary injunction against enforcement of Act 13 restrictions • July 26, 2012: Commonwealth Court rules 4-3 to strike down Act 13 limits as unconstitutional • July 27, 2012: Decision appealed to PA Supreme Court

  11. “Sole and Exclusive Authority” • Permitting • Location and spacing • Drilling and Operation • Fracturing, stimulation and well completion • Other drilling and production processes • Plugging and reclamation of oil and gas wells and all plugging and reclamation operations within the State

  12. House Bill 401 – Three Exceptions “Sole and exclusive authority” does not affect the authority of the following: • Shallow Gas Well Review Board • Coalbed Methane Review Board • Oil and Gas Conservation Commission

  13. New Litigation • Failure to develop lease • OH: Hupp v. Beck Energy Corp. • Flat rate royalty leases • PA: Heasley v. KSM Energy, Inc. • Ohio Dormant Mineral Act • OH: Wendt v. Dickerson • Rights of surface owners • WV: Martin v. Hamblet • WV: Cain v. XTO Energy, Inc.

  14. Practical Problems • Small, overcrowded record rooms • Waiting lists • One-hour shifts • Old paper records • Some microfilm • Some microfiche • Some digital images • Indexing • Multiple indexing systems • Beware: computer index may require exact spelling

  15. More Practical Problems • Not enough equipment • Copiers • Microfilm machines • Microfiche machines • Computer terminals • Too many people • Working in every possible space • Hallways, ladders, windowsills

  16. Even More Practical Problems • County Clerks, Recorders and Registers • Good people under strain of increased workload • Many are limited by budget allocations and physical space • No extended hours • No additional equipment • Some have banned digital photography of records • Don’t expect record room rules/policies to be consistent between Ohio, Pennsylvania and West Virginia • For that matter, don’t expect them to be consistent from county to county in any given state

  17. Thank You! Andrew S. Graham The Woodlands, TX 281.203.5760 andrew.graham@steptoe-johnson.com

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