Oil & Gas
Murray Energy Closes $63.6 Million Asset Sale of Utica Oil and Gas Reserves
On Wednesday, October 26, 2016 Murray Energy Corporation announced that it had entered into an agreement to sell around 5,900 acres of Utica Shale natural-gas and oil reserves located in Belmont and Monroe Counties. Murray Energy is the largest underground coal mining company in the United States. More information can be found here and here.
Midstream Companies to Appeal Rejection of Gas Agreements in Sabine Bankruptcy While Unsecured Creditors Path to Second Circuit Appeal Delayed
Two Texas midstream companies are appealing the Southern District of New York Bankruptcy Court’s rejection of their gas gathering agreements with Sabine Oil & Gas Corp in the case In re Sabine Oil & Gas Corp., 550 B.R. 59 (Bankr. S.D.N.Y. 2016). Judge Jed Rakoff of the federal district court of the Southern District of New York will now hear the appeal. The midstream companies argue that the May decision defies settled expectations under Texas law. Gathering agreements, they argue, run with the land and cannot be discharged in a bankruptcy proceeding.
The same issue is currently being litigated between unsecured creditors and midstream company Tristream East Texas in the federal Southern District of Texas Bankruptcy Court.
Meanwhile, a federal judge in the Southern District of New York rejected the attempt of the committee of unsecured creditors to appeal the Chapter 11 bankruptcy reorganization of Sabine Oil & Gas Corp. directly to the Second Circuit Court of Appeals. The unsecured creditors must instead take their appeal through the lower federal District Court of the Southern District of New York through the normal process. The unsecured creditors also lost their bid in March for standing to sue the secured creditors. The secured creditors, according to the unsecured creditors, helped Sabine incur substantial debt in a climate of falling oil and gas prices in its merger with Forest Oil Corporation.
More information on the appeal of the midstream companies can be found here. Information on the Tristream suit can be found here. More information on the committee of unsecured creditors can be found here.
Pennsylvania Doctors Propose Ban on Unconventional Drilling Operations
On Friday, October 28, 2016, the Pennsylvania Medical Society (Society), the Commonwealth’s professional body of doctors and physicians, passed a resolution calling for a moratorium on unconventional oil and gas drilling. The Society also called for an independent health registry and further study of unconventional drilling on public health. A similar resolution failed three years ago when the Society decided to await the outcome of an extensive groundwater study by the Environmental Protection Agency (EPA). The EPA report, released in 2015, concluded that hydraulic fracturing did not lead to widespread impacts on drinking water. The Society is scheduled to meet with the Pennsylvania legislature later this month. More information can be found here and here.
Issuance of Permits on Federal Land in New Mexico to Continue Despite Local Opposition
On Friday, October 28, 2016, environmental advocacy groups lost their collective bid to enjoin the Bureau of Land Management (BLM) from issuing permits to drill in New Mexico’s Mancos Shale formation. The groups argued that BLM did not properly assess the environmental impacts of unconventional drilling. The Tenth Circuit Court of Appeals found that the advocacy groups could not meet three of the four elements necessary to obtain a preliminary injunction. Specifically, the Tenth Circuit upheld a lower court’s decision that the advocacy groups could not meet the requirement that it would likely succeed on the merits. The advocacy groups argued that a relaxed standard should be applied for injunctions when the other factors are met and the issues at stake are serious, merit more investigation, and are ripe for litigation. More information can be found here.
GE Oil & Gas Unit and Baker Hughes to Merge
The Oil & Gas Unit of General Electric plans to merge with oilfield services company Baker Hughes in a company that General Electric will control in a deal reportedly worth between $30-32 billion. The GE Unit primarily manufactures equipment while Baker Hughes specializes in drilling operations, among other things. More information can be found here and here.
Governor Wolf Announces $24 Million Pipeline Investment Program
On Tuesday, November 1, 2016, Pennsylvania Governor Wolf announced a $24 million fund, the Pipeline Investment Program (PIPE), designed to make natural gas available to state residents. The fund would provide successful applicants with up to $1 million on a dollar for dollar basis for new pipeline expenses related to construction, the acquisition of land, rights-of-way, and easements, land clearing, engineering, design, and inspection. Eligible applicants include businesses, economic development organizations, hospitals, municipalities, and School Districts. PIPE plans on approving its first projects in early 2017. More information can be found here.
Carlyle Group Raises $2.8 Billion for Energy Projects as Private Equity Looks to Energy
On Tuesday, November 1, 2016, Carlyle Group LP announced the formation of its Carlyle Energy Mezzanine Opportunities Fund II Limited Partnership. The Fund intends on investing up to $500 million for individual projects. The Carlyle Group seeks to fill a void in the marketplace with private equity financing as depressed commodity prices have strained traditional financing opportunities. Similarly, Blackstone Group LP announced the formation of its new GSO fund worth $6.5 billion on Monday, October 31, 2016.
More information on the Carlyle fund can be found here. More information about Blackstone’s new fund can be found here, and information about the energy investments of previous GSO funds can be found here.
Royalty Underpayment Lawsuits Continue in Pennsylvania
A class action lawsuit alleging against Carrizo (Marcellus) LLC and investors, Reliance Marcellus II, LLC and Reliance Holdings USA, Inc. was removed to the federal district court for the Middle District of Pennsylvania on Monday, October 31, 2016. The class alleges that Carrizo and the named investors have violated their leasing agreements with landholders by using below-market gas prices to determine royalty payments and deducting post-production costs from gross revenue. More information can be found here.
Power Generation & Utilities
Siemens and Panda Power Commission Advanced Gas-Powered Electric Plant in Northeastern PA.
On Thursday, October 27, 2016, Siemens and Panda Power Funds commissioned of the Panda Liberty Power Project located in Bradford County, Pennsylvania. This northeastern Pennsylvania power plant will feature Siemens advanced 829 Megawatt H-class gas turbines, which will be powered by natural gas from the surrounding Marcellus Shale formation. Electric production using H-class turbines has been touted as the most efficient conversion of natural gas to electricity. The Liberty facility also will utilize a single-shaft design, which will provide greater efficiency with multiple turbines powering a single electric generator. Expected output from Liberty will eventually supply energy for around 2 million households in Pennsylvania as well as in surrounding markets. Siemens and Panda Power also expect to commission the similar “Patriot Power Project” to be located in nearby Lycoming County. Liberty represents one of seven such projects between Siemens and Panda Power Funds in the United States.
Pennsylvania Public Utility Commission Adopts Modified Rules for Alternative Energy Portfolio Standards
The Pennsylvania Utility Commission (PUC) has approved modified rules regarding net metering and alternative energy credit programs oversight among other rules. The PUC’s adoption of the rules comes as the result of Alternative Energy Portfolio Standards Act of 2004, which mandated that Pennsylvania electric distributors and generation suppliers provide at least eighteen percent of their output from alternative energy sources by 2021. These regulations will become effective on publication in the Pennsylvania Bulletin. More information can be found here and here.
National Mining Association Challenges Assumptions Underlying Clean Power Plan
The National Mining Association (NMA) filed a letter with the federal Circuit Court for the District of Columbia challenging the metrics EPA used in forming a 2016 baseline for coal production. The EPA estimated coal production would contract by twenty percent, even if Clean Power Plan regulations were not adopted. The Clean Power Plan would further require a decline in US coal capacity from that 2016 baseline in order to reach the carbon emission reduction targets of thirty-two percent of 2005 levels by 2030. The NMA points to actual 2016 production levels that are forty eight percent higher than the EPA baseline. The NMA number is similar to the baseline of Energy Information Agency. Consequently, mining capacity would have to decrease by a third or more to comply with the Clean Power Plan. The Circuit Court has taken an interest in the case, scheduling a rare en banc hearing before all D.C. Circuit judges. More information can be found here and here.
EPA to Conduct an Analysis of Job Losses as a Result of Environmental Regulations
On Monday, November 1, 2016, EPA announced that it is taking steps to comply with an order from Judge John Preston Bailey of the Southern District of West Virginia to analyze the effect of air pollution regulations on job losses. The October order stems from a suit by Murray Energy Corp. against the EPA for ignoring the effect of its air pollution regulations on employment despite the Clean Air Act’s requirement to do so. EPA must now provide the court with a compliance plan within 14 days. The agency has referred the order to its Science Advisory Board and has indicated that full compliance with the order may take as long as two years. More information can be found here.
EPA To Reevaluate Safety of Lead Pipes
On Friday, October 28, EPA published a white paper outlining a major policy shift away from the use of lead in the nation’s drinking water infrastructure. The report considered several measures, among them, replacement of lead pipes in service lines, corrosion control and treatment, and the use of filters at the point of use. EPA plans to propose its policy with more specificity sometime in 2017. More information can be found here.
Contamination Suit Settles for $151 Million in West Virginia Chemical Spill
On Monday, October 31, 2016, a federal judge approved a class-action settlement between West Virginia residents and the defendants West Virginia American Water Company and Eastman Chemical Company for $151 million. The class-action arose out of a 2014 spill of coal-cleaning fluids from a containment tank. The spill prompted officials to issue a water ban lasting up to nine days in some areas. More information can be found here and here.