April 2021 Industry Digest

NEW YORK–The Northern Access Pipeline in late March won a legal victory that brought its construction a step closer to reality. It happened when a three-judge panel of the U.S. Court of Appeals for the Second Circuit rejected a petition for review by New York regulators and an anti-development group that sought to vacate a pair of orders by the Federal Energy Regulatory Commission.

The ruling also carries implications for state regulators who attempt to elide statutory limits on the amount of time they have to exercise their authority.

The proposed project, which is a 96-mile pipeline that would connect Western Pennsylvania natural gas fields to upstate New York, has become one of many interstate midstream projects hydrocarbon opponents have sought to stymie, press accounts note.

According to court documents, the key question at stake in New York State Department of Environmental Conservation and Sierra Club v. Federal Energy Regulatory Commission, National Fuel Gas Supply Corp. and Empire Pipeline Inc. centered on state regulators’ one-year deadline for issuing or denying Clean Water Act Section 401 certification. Complicating the matter, however, was an extension to which the Department of Environmental Conservation and National Fuel agreed. The court notes that DEC received National Fuel’s initial application on March 2, 2016, with the department requesting additional information in August and October of that year.

“In an attempt to finesse the one-year deadline, the DEC entered into an agreement dated Jan. 20, 2017, ‘revising the date . . . on which the application was deemed received to April 8, 2016.’ The agreement had the effect of extending the deadline for the DEC to issue or deny water quality certification for 36 days,” the ruling states.

It goes on to note that DEC denied National Fuel’s application on April 7, 2017, but FERC countered that the department waived its Section 401 authority when it missed the one-year deadline, which the commission held could not be extended by private agreement.

According to the court, “Section 401’s one-year deadline is mandatory in a sense that it does not merely ‘spur’ the agency to action, but it bars untimely action by depriving the agency of its authority after the prescribed time limit.”

Although DEC had argued in a different case that the permitting stopwatch should only start at the point in which an application was deemed complete, the court rejected that claim and said that since Section 401 makes no such distinction, “it cannot be interpreted to require a ‘complete’ application because that approach would allow a state agency not only to dictate when the review process can begin, but also to delay it indefinitely.”

The court went on to suggest that, “However sincere the DEC’s desire might have been to review the application as thoroughly and efficiently as possible by giving itself 36 more days, and however modest and reasonable that extension may have been, allowing the state to dictate the beginning of the review by agreement would ‘blur the bright-line rule into a subjective standard.’”

National Fuel is “very pleased” with the ruling, and “has committed to meet or exceed all safety codes and environmental protective measures in the construction and operation of this project,” press accounts quote a company spokesperson. “With these measures in place, the project will not put at risk or endanger any water resources or surrounding environments.”

RICHMOND, VA.–North Carolina regulators did not perform all their due diligence when they denied Clean Water Act Section 401 certification to a project that seeks to extend the still incomplete Mountain Valley Pipeline, ruled a three-judge panel of the U.S. Court of Appeals for the Second Circuit.

Court documents note that the MVP Southgate Project involves constructing a natural gas pipeline 75 miles from Chatham, Va., to Graham, N.C.

According to the opinion penned by Chief Judge Roger Gregory “the department’s denial is consistent with the state’s regulations and the CWA. Nevertheless, the department did not adequately explain its decision in light of the administrative record. Thus, we grant the petition, vacate the denial, and remand to the agency for additional explanation.”

Considering the litigation that threatened MVP’s completion, the North Carolina Department of Environmental Quality had expressed skepticism about greenlighting Southgate construction, press accounts indicate, quoting a hearing officer’s warning that if the main line was not constructed, the extension would constitute “a pipeline from nowhere to nowhere, incapable of carrying any natural gas.”

However, in the time since, media reports note, MVP has regained two of three required permits and is taking steps to steer around legal problems associated with the third certification.

“Until the mainline project was complete–a milestone stalled by litigation–the hearing officer found that the Southgate project’s construction would produce unnecessary harm to the state’s waters,” the court ruling observes. “‘Prior to incurring any impacts to North Carolina natural resources,’ the hearing officer wrote, the department should require ‘a level of certainty regarding the completion of the MVP mainline pipeline.’”

The court remanded the permitting decision to the department and held that it must address the hearing officer’s findings because the agency failed to reasonably reflect on some data in the record and grapple with contrary evidence.

Moreover, the ruling faulted the department’s lack of explanation for why it opted to deny certification instead of making it contingent on MVP’s completion. It concedes that DEQ may have had fair reasons for denying the certification, but notes that “the department did not offer those rationales in its decision; its denial letter did not explain at all why it chose outright denial over conditional certification . . . Given a choice between two options, the department had the obligation to explain why it chose one over the other.”

COLUMBUS, OH.–A federal judge has paused oil and gas leasing in Ohio’s Wayne National Forest, ruling that the Trump administration failed to consider threats to public health, endangered species and watersheds before opening more than 40,000 acres there for hydraulic fracturing activities, published reports say.

U.S. District Judge Michael Watson said the U.S. Forest Service and U.S. Bureau of Land Management “demonstrated a disregard for the different types of impacts caused by fracturing in the forest. The agencies made decisions premised on a faulty foundation.” Watson’s ruling requires the agencies to redo their environmental analysis of the potential harms from fracturing in the forest.

The Center for Biological Diversity notes that the suit began in May 2017, when it teamed with other anti-development groups to sue the agencies over plans to permit fracturing in the Wayne, alleging that federal approvals relied on an outdated plan and ignored significant environmental threats.

The judge’s ruling also held that the agencies ignored potential harm fracturing posed to endangered Indiana bats, the waters of the Little Muskingum River and the region’s air quality, the group adds.

The BLM’s leasing plan would industrialize Ohio’s only national forest with roads, well pads and gas lines, the lawsuit asserts.

The lawsuit also aimed to void two BLM lease sales. The court was to decide the fate of those leases at a later date, Center for Biological Diversity notes.

HARRISBURG, PA.–In a 6-1 decision that largely overturned a lower court ruling, The Pennsylvania Supreme Court in late March sided with Anadarko Petroleum Corp. and forbade the state Office of the Attorney General (OAG) from bringing claims against the company for allegations that it violated the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), published reports indicate.

“The UTPCPL clearly regulates the conduct of sellers, and it does not provide a remedy for sellers to exercise against buyers,” the ruling states. “For these reasons, we conclude the OAG may not bring claims under the UTPCPL on behalf of private landowners against Anadarko for its alleged unfair and deceptive practices in acquiring natural gas leases from the landowners.”

“We are reviewing this opinion and have plans to engage legislators on this matter to update Pennsylvania laws to better protect those misled by corporations such as this one,” media reports quote a spokesperson from the attorney general’s office.

WASHINGTON–Utah Governor Spencer Cox has signed into law HB 91, which NGVAmerica says extends a state tax credit related to certain alternative fuel heavy-duty vehicles and makes technical and conforming changes to state law.

“This legislation allows for the rapid adoption of all viable clean technologies, works to achieve aggressive emissions reductions, and provides fleets the flexibility to choose the best clean vehicle technology solution that suits their needs,” lauds NGVAmerica President Dan Gage.

Sponsored by Representative Andrew Stoddard, D-Sandy, and Senator Lincoln Fillmore R-South Jordan, Utah HB 91 encourages the transition of heavy-duty fleets to new Class 7 & 8 vehicles fueled by natural gas, electric drivetrain, or hydrogen-electric drivetrain.

“Such credits provide commercial fleets with an added incentive to be part of the clean transportation solution,” says Brett Brown, who serves as manager of gas operations, Western Gas Distribution for Dominion Energy and sits on NGVAmerica’s Board of Directors. “By focusing on heavy-duty vehicles, this program works to get the dirtiest, oldest trucks with the greatest emissions impact off our roadways with added financial incentive to do so sooner rather than later in order to improve frontline community air quality today.”

According to the association, the incentive will be available to corporations and individuals purchasing a new qualified truck through 2030. The credits start at $15,000 for 2021 purchases and decline thereafter by $1,500 a year. The law caps the credit at $500,000 each year and includes a 25% set-aside for small fleets, defined as those with 40 or fewer heavy-duty vehicles registered in the state and owned by a single taxpayer. NGVAmerica points out that vehicles only qualify for the credit if they drive more than half their annual miles within the state.

AUSTIN, TX.–The Texas Independent Producers & Royalty Owners Association has announced its education and advocacy platform is integrating Texans for Natural Gas. It goes on to say that under TIPRO’s guidance, the organizations will create the most comprehensive statewide oil and natural gas campaign in Texas, comprised of data, analysis, grassroots engagement and rapid response capabilities designed to provide accurate information about the industry and its unprecedented economic contributions in Texas.

Texans for Natural Gas formed in 2014 as North Texans for Natural Gas and adopted its current name when it expanded statewide in 2017, TIPRO recounts. As a grassroots organization that gives a voice to those who support Texas oil and natural gas production, TNG has attracted more than 400,000 supporters from across the state and created reports, digital content, and research that has shaped the state’s energy conversation, TIPRO praises.

Moving forward, TNG will operate as a TIPRO-managed resource. In the weeks following the groups’ March 4 combination, TIPRO says, all related TNG websites, social media channels and assets are being updated to reflect the new structure.

“TIPRO is excited to bring such a well-respected program like TNG into our organization’s communication efforts,” affirms TIPRO Chairman Brent Hopkins, chief executive officer of Suemaur Exploration & Production LLC. “Providing education about the Texas oil and natural gas industry at the community, state and national level is of critical importance and a priority that is central to TIPRO’s mission.”

“TNG has always aimed to give a voice to those who support Texas oil and natural gas production, and since its inception, TNG has given hundreds of thousands of Texans the tools and resources to stand up for Texas energy,” describes TIPRO President Ed Longanecker. “Under the TIPRO banner, TNG will emerge as a stronger organization that will enable the group to better fulfill its mission for years to come.”

According to TIPRO, the union will fortify both organizations for a tumultuous year, with the 87th Texas Legislative Session, a new presidential administration in Washington, and an escalation of efforts designed to reduce oil and gas production in the United States.

“Anti-oil-and-gas campaigns and unrealistic energy policy proposals have unfortunately increased in recent years, which could have a devastating impact on our nation’s economy, national security and the livelihoods of millions of Americans that rely on the oil and natural gas sector,” Longanecker warns. “It’s incumbent upon our organization to provide a credible source for anyone seeking information about oil and natural gas and our ongoing work to support sound, science-based policies at all levels of government.”

DALLAS–Pioneer Natural Resources Co. announces it has entered a definitive purchase agreement to acquire the leasehold interests and related assets of DoublePoint Energy in a transaction valued at $6.4 billion as of April 1. Payment consists of 27.2 million shares of Pioneer common stock, $1 billion in cash and the assumption of $0.9 billion in debt and liabilities, Pioneer details.

“DoublePoint has amassed an impressive, high quality footprint in the Midland Basin, comprised of tier one acreage adjacent to Pioneer’s leading position,” praises Scott D. Sheffield, Pioneer’s chief executive officer. “Pioneer will incorporate these assets into our investment model, migrating the assets from significant production growth to a free cash flow model, moderating growth for the U.S. shale industry and generating significant value for our shareholders.”

This transaction represents a contiguous position of 97,000 net acres directly offsetting and overlapping Pioneer’s existing footprint, Pioneer says. According to the company, the acquired acreage primarily is undrilled and increases its acreage position to more than 1 million net acres with no exposure to federal lands. Pioneer indicates production from the acquired assets should reach 100,000 barrels of oil equivalent per day by late in the second quarter.

The transaction will be accretive to financial metrics, including cash flow and free cash flow per share, earnings per share and corporate returns in 2021 and beyond, Pioneer assures. The company says the transaction’s accretive nature leads to an increase in the expected per share variable dividend beginning in 2022.

SAN RAMON, CA.–Chevron Corp. and Noble Midstream Partners LP have entered a definitive agreement for Chevron to acquire all publicly held common units representing the limited partner interests in Noble Midstream, not already owned by Chevron and its affiliates, in an all-stock transaction.

“We believe this buy-in transaction is the best solution for all stakeholders, enabling us to simplify the governance structure and capture value in support of our leading positions in the DJ and Permian basins,” relates Colin Parfitt, vice president of Chevron Midstream and chairman of the board of the general partner of Noble Midstream Partners LP.

According to Chevron, the Conflicts Committee of the Board, comprised entirely of independent directors, after consultation with its independent legal and financial advisors, unanimously approved the merger. Subsequently, the merger was approved by the board.

Chevron says it expects the transaction to close in the second quarter of 2021, subject to customary approvals.

DALLAS–Midstream provider Tall Oak Midstream has acquired Oklahoma STACK play gas gathering, treating and processing services provider Redcliff Midstream. Financial terms of the transaction were not disclosed.

Founded in 2017 as a wholly owned subsidiary of Canyon Midstream Partners II LLC, Redcliff Midstream provides gas gathering, treating and processing services in the northern region of the STACK play. Its assets include more than 200 miles of gathering pipeline, five field compression stations spread across Oklahoma’s Woodward, Dewey, Blaine and Canadian counties and a 240 million cubic feet a day cryogenic gas processing plant in Woodward County, Tall Oak describes.

The company says these assets will complement its existing asset base–which includes more than 750 miles of low- and high-pressure gathering lines across seven Oklahoma counties–and expand its infrastructure footprint in the Northern STACK Extension region.

In January 2021, Tall Oak was acquired by Tailwater Capital, a private equity firm based in Dallas. The transaction closed in February 2021.

“Redcliff Midstream’s complementary network of high-quality assets and its diverse customer base are a perfect fit for Tall Oak as we continue to grow our footprint and service offerings in the region,” affirms Tall Oak Chief Financial Officer Max Myers. “We are thrilled with how quickly our partnership with the Tailwater team has presented new opportunities, and we look forward to continuing to work together to grow our business while maintaining best-in-class service for our customers.”

“Redcliff brings an attractive asset base with newly-built pipelines and high-quality compression and processing facilities that augment Tall Oak’s existing capabilities and grow the existing platform,” says Tailwater co-founder and Managing Partner Jason Downie. “The Northern STACK Extension encompasses a robust inventory of economic undeveloped drilling locations and underutilized midstream infrastructure that Tall Oak is actively evaluating as it searches for accretive bolt-on opportunities to expand its regional footprint.”

MIDLAND–Diamondback Energy Inc. completed its previously announced acquisition of QEP Resources Inc. in an all-stock merger after QEP’s stockholders voted in favor of the merger and related proposals at their special meeting on March 16, 2021.

“We are excited to announce that we have completed our acquisition of QEP,” states Diamondback Chief Executive Officer Travis Stice. “This deal, along with our recently completed acquisition of certain assets from Guidon Operating LLC, bolsters our Tier 1 Midland Basin inventory and positions us to allocate a majority of our capital to the high-returning Midland Basin for the foreseeable future.”

Under the deal, QEP stockholders receive 0.05 of a share of Diamondback common stock for each share of QEP common stock issued and outstanding immediately prior to the effective time of the merger, with cash to be received in lieu of any fractional shares. As a result of the merger, QEP common stock will no longer be listed for trading on NYSE and its reporting obligations under the Securities Exchange Act of 1934 will be suspended.

MOUNDSVILLE, W.V.–Peregrine Energy Partners has agreed to acquire additional producing and nonproducing oil and gas royalties in Marshall County, W.V., from an undisclosed seller.

According to the company, the acquisition features production from multiple oil and gas wells under Chevron, which saw its production in the region taken over by EQT in October 2020.

“We have been following EQT’s development of its Appalachian assets over the past few years and continue to be impressed with the results,” relates Peregrine co-founder Wolf Hanschen. “When they announced their acquisition of Chevron’s Appalachia interests in October of last year, we started looking closer at properties that would be included in this purchase, especially knowing EQT is one of the most active operators in the region.”

Peregrine Managing Director Josh Prier says the company is excited about the properties because they fit well within its acquisition criteria. “They have shallow declines, a best-in-class operator and legacy reserves,” he describes. “We expect this to be an asset that provides solid cash flow for years to come and will continue to look for additional similar opportunities both here in West Virginia and nationwide.”

PITTSBURGH–LOLA Energy III LLC has acquired 100% of the equity membership interests in an exploration and production company with operations in Butler County, Pa. The acquired company has changed its name to LOLA Energy PetroCo LLC to rebrand as a LOLA Energy owned and operated company.

“Under our brand of local and accountable ownership, we will safely and efficiently continue operations and rejoin the northeastern Butler County communities where LOLA Energy is making a substantial investment with this acquisition. We look forward to making our presence known in a positive way,” says Jim Crockard, LOLA Energy’s chief executive officer.

According to LOLA Energy, the acquired company’s assets and operations include:

• 22,000 net mineral acres in the natural gas liquids rich window of the Marcellus and Burkett shale plays in Butler County;
• 48 proved developed producing horizontal oil and gas wells with more than 300,000 feet of completed pay and production of approximately 85 million cubic feet of natural gas equivalent a day, even with many wells choked back while a pipeline is being recommissioned;
• 18 drilled and uncompleted horizontal wells and four top set planned horizontal wells; and
• An extensive water system, including a water pump station, water tanks and impoundment, and a 30+ mile water line transfer network.

The company indicates the production and reserves benefit from a high concentration of natural gas liquids. The gas composition mix is approximately 73% natural gas, 25% natural gas liquids, and 2% condensate oil.

WASHINGTON–Underground natural gas storage in the United States stood at 1.764 trillion cubic feet on March 26, 1.0% below the five-year average, according to the U.S. Energy Information Administration. That was down 81 billion cubic feet from the 1.764 Tcf in storage on Feb. 26, which was 8.8% above the five-year average. The March. 26 storage number was 225 Bcf lower than a year ago, when gas storage stood at 1.989 Tcf.

Gas storage in the East Region was 307 Bcf on March. 26, 1.0% below the five-year average, and 76 Bcf less than on Feb. 26, when storage stood at 383 Bcf, 7.7% above the five-year average. East Region gas storage on March 26 fell 77 Bcf from a year ago, EIA reports.

Gas storage in the Midwest stood at 401 Bcf on March. 26, 1.5% below the five-year average and 64 Bcf less than the 465 Bcf in storage on Feb. 26, which was 1.5% above the five-year average. March 26 gas storage in the Midwest was 77 Bcf less than a year ago.

In the Mountain Region, EIA continues, gas storage was 112 Bcf on March. 26, 5.7% above the five-year average and 5 Bcf less than the 117 Bcf stored on Feb. 26, which was 3.5% above the five year-average. Gas storage in the Mountain Region was 20 Bcf more than a year ago.

Gas storage in the Pacific Region was 194 Bcf on March 26, 2.6% above the five-year average and 16 Bcf less than the 210 Bcf stored on March 26, which was 9.9% above the five-year average. Pacific Region gas storage on Feb. 26 was down 3 Bcf from a year ago.

In the South-Central Region, gas storage levels on March 26 were 749 Bcf, 2.0% below the five-year average and 79 Bcf more that the 670 Bcf in storage on Feb. 26, which was 15.8% below the five-year average. The March 26 gas storage level for the South-Central Region was down 89 Bcf from a year ago.