Oil and Gas Monitor

Ohio Oil & Gas Commission Upholds Unitization Order in First Published Opinion of O.R.C 1509.28

On September 17, the Ohio Oil and Gas Commission issued Appeal No. 895, the first order concerning Ohio’s unitization statute, colloquially known as “mandatory pooling.”  While the Commission’s order largely upheld the Ohio Division of Oil and Gas Resources Management’s initial unitization order, Ohio oil and gas operators should be aware of its slight modifications and future implications.

On May 13, 2014, Rex Energy filed an application for unitization of the Grunder North Unit in Carroll County, Ohio. The application requested inclusion of two unleased tracts owned by Ronald G. Roudebush, Trustee and Gary L. Teeter, Trustee (collectively the “Mineral Owners”). After hearing testimony from Rex and the Minerals Owners, the Division issued Chief’s Order 2014-544 on December 9, 2014, approving Rex’s development plans for four wells from a single pad encompassed within a 593 acre production unit. The division granted the Mineral Owners a 12.5% landowner royalty interest calculated on gross proceeds and a seven-eighths proportionate share of net proceeds from production only after Rex recovers 200% of the cost of the initial well and 150% of the cost of each subsequent well. Further, the Chief’s Order prohibited Rex from conducting surface operations on the Mineral Owners’ property without prior consent.

On January 7, 2015, Gary L. Teeter filed an appeal of Chief’s Order 2014-544 with the Commission. The Commission’s Appeal No. 895 focused primarily on whether the Chief acted lawfully and reasonably in issuing the Order. To resolve the issue, the Commission examined three issues: i) whether O.R.C. §1509.28 applied to the facts; ii) whether the Chief properly considered and approved Rex’s application; and iii) whether the terms and conditions of the Grunder North Unitization Order were just and reasonable.

Teeter argued that Ohio’s pooling statute applied and not its unitization statute. In determining that the unitization statute was applicable, the Commission granted great deference to the Division’s decision to move forward under O.R.C. §1509.28. The Commission noted that the pooling statute, applicable only to single well orders, is distinguishable from the unitization statute, which concerns orders targeting specific formations.

The Commission disagreed with Teeter’s argument that the Division neglected to extensively evaluate Rex’s economic projections and ‘rubber-stamped’ the application. While the Commission acknowledged that unitization was clearly necessary to increase profitability of the Grunder North wells, it did specifically reserve the right to employ more extensive scrutiny in ‘close-call’ situations.

Finally, the Commission generally considered whether the Order was just and reasonable. In its only departure from the Order, the Commission increased the gross royalty allotted to the Mineral Owners from 12.5% to 20%, which is the average royalty amount for the Grunder North Unit.

The Commission’s supportive-backing of the Chief’s Order is generally a positive for Ohio oil and gas operators. Ohio operators should, however, pay particular attention to the Commission’s authority to overturn a unitization order and its decision to increase the landowner royalty from the traditional 12.5% to the unit average.

This article was authored by Zachary Grey, Jackson Kelly PLLC.  For more information on the author, see here.

Supreme Court of Ohio Rules Municipal Ordinances Cannot Obstruct Oil and Gas Operations Under R.C. 1509

In State ex rel. Morrison v. Beck Energy Corporation et al.,2015-Ohio-485 (decided February 17, 2015), the Supreme Court of Ohio issued a 4-3 decision affirming the Ninth District Court of Appeal’s ruling that municipal ordinances cannot discriminate, impede, or obstruct activities and operations under R.C. 1509.02.

In Beck, the City of Munroe Falls sought an injunction prohibiting Beck Energy from drilling a well based on local zoning and drilling ordinances. The trial court granted the injunction, but was reversed by the Ninth District Court of Appeals. The Supreme Court of Ohio affirmed the appellate court’s decision holding that the municipal ordinances regulating zoning and oil and gas drilling were not a valid exercise of its home-rule power because they constitute an exercise of police power in conflict with R.C. 1509.02.  In its analysis, the Court noted that “R.C. 1509.02 not only gives [the Ohio Department of Natural Resources] sole and exclusive authority to regulate the permitting, location, and spacing of oil and gas wells and production operations within Ohio; it expressly reserves for the state, to the exclusion of local governments, the right to regulate all aspects; of the location, drilling, and operation of oil and gas wells, including permitting relating to those activities.”

The Court expressly limited its holding to the five municipal ordinances at issue, noting that “we make no judgment as to whether other ordinances could coexist with the General Assembly’s comprehensive regulatory scheme.”

Justice O’Donnell concurred in judgment only to emphasize the limited scope of the Court’s decision, which is limited to the specific ordinances at issue, stating “whether a municipality has authority to enact zoning ordinances that affect oil and gas wells within its territory is a question yet to be decided.”

Justices Lanzinger, Pfeifer, and O’Neill dissented, with Lanzinger noting that R.C. 1509 does not expressly prohibit the enforcement of local zoning ordinances, which may differ from and co-exist with statewide regulations governing drilling.

This article was authored by Andrew Schock and Alex Quay, Jackson Kelly PLLC.

Pa. Gov. Comes Out Swinging Against Gas Industry

On January 20, 2015, Democrat Tom Wolf was sworn in as Pennsylvania’s 47th governor, replacing Republican Tom Corbett. Governor Wolf’s inauguration ceremony was interrupted with chants of “ban fracking now.” On Thursday, January 29, 2015, Governor Wolf responded to those chants by issuing an executive order reinstating a moratorium on oil and gas drilling in state parks and forests.

Executive Order No. 2015-03 bans new oil and gas leases from being issued for lands managed by the state’s Department of Conservation and Natural Resources. The order rescinded Executive Order No. 2014-03, issued by Governor Wolf’s predecessor, which allowed the rights to oil and minerals below state forest land to be leased to drilling companies that maintained surface wellheads on adjacent private property.

The now banned leases were projected by former Governor Corbett to generate $95 million for the state budget. This has led natural gas industry trade groups to criticize the governor’s action due to its impact on the state’s revenue and economic development needs.

Prior to this ban, Governor Wolf has spoken of plans to issue a new tax on the oil and gas industry. Louis D’Amico, president of the Pennsylvania Independent Oil and Gas Association, pointed out the irony of the new administration preventing drilling for a resource that they are also seeking to tax. According to Mr. D’Amico, the order is “a lose-lose for Pennsylvania’s taxpayers and energy consumers.”

This order comes only weeks after Governor Wolf nominated John Quigley to be secretary of the Department of Environmental Protection. Mr. Quigley led the Department of Conservation and Natural Resources from 2009 to 2011 under Democratic Governor Ed Rendell. In recent years, Mr. Quigley has worked for Harrisburg-based environmental group PennFuture. In a recent blog post, Mr. Quigley commented on New York’s decision to ban high-volume hydraulic fracturing, stating that the report on it “should add great weight to the already self-evident case for tougher, more comprehensive regulation.” In addition, Mr. Quigley stated that there was an urgent need to study hydraulic fracturing’s impact on public health and the environment.

Understandably, many in the oil and gas industry are watching the early moves of the newly appointed governor with concern.

This article was authored by Matthew S. Tyree, Jackson Kelly PLLC.  For more information on the author, see here.

Eleventh District Court of Appeals Issues Decision Concerning the 1989 Version of Ohio’s Dormant Mineral Act

The Seventh District Court of Appeals recently issued a decision in Thompson v. Custer, 11th Dist. Trumbull No. 2014-T-0052 (Dec. 29, 2014) concerning the applicability of the 1989 version of R.C. 5301.56 (the “1989 DMA”).

Following the reasoning of the Seventh District in Walker v. Shondrick-Nau (appeal accepted by the Supreme Court of Ohio) and the Fifth District’s recent decision in Wendt v. Dickerson, the Eleventh District held that the 1989 DMA remains applicable to quiet title actions filed after the statute’s amendment in 2006, and operates to abandon and vest a severed mineral interest with a surface owner automatically where no savings event occurred within the twenty years preceding its effective date. The court also ruled that the 1989 DMA is constitutional based on the U.S. Supreme Court decision in Texaco v. Short, 454 U.S. 516 (1982), which concerned the constitutionality of Indiana’s Mineral Lapse Act.

Custer is the Eleventh District’s first decision concerning the 1989 DMA. The Eleventh District covers Ashtabula, Geauga, Lake, Portage, and Trumbull Counties.

The issue of whether the 1989 or 2006 version of R.C. 5301.56 controls quiet title actions filed after the statute’s amendment in 2006 is also pending before the Supreme Court of Ohio. See Corban v. Chesapeake Exploration, L.L.C., Case No. 2014-0804, and Shannon/Swartz v. Householder, Case Nos. 2014-1208 and 2014-1209.

This article was authored by Alex Quay, Jackson Kelly PLLC. 

PA Superior Court finds drilling well following only “bring down” title search constitutes bad faith trespass

In Sabella v. Appalachian Development Corp., --- A.3d ----, 2014 Pa. Super. 237 (Pa. Super. Oct. 20, 2014), the Superior Court of Pennsylvania held that an oil and gas developer who innocently drilled on another’s mineral estate without actual knowledge of their ownership was still a bad faith trespasser with constructive notice of the true owner’s rights, and therefore, liable to the owner for all revenues derived from the well without any deduction for costs because the developer conducted an abbreviated “bring down” title search instead of a full-scale title search prior to drilling. 

The facts of Sabella are as follows: In 1997, the Plaintiff purchased 66 acres of subsurface oil and gas rights at a tax sale and duly recorded his deed. In 2001, the surface owners, mistakenly believing they owned the property in fee, leased the mineral estate to an oil and gas company for drilling and development. In 2003, the Defendants purchased that company and its assets, including the oil and gas lease. As part of the acquisition, counsel advised Defendants that they could conduct a full-scale search of the property's title or an abbreviated and less costly “bring down” title search, bridging the gap between the date the original search was performed and the date of the closing. Defendants chose the latter, and began drilling wells on the property. 

Subsequently in 2008, Plaintiff and Defendants met through a mutual acquaintance to discuss potential joint oil and gas business opportunities. At this meeting, Defendants for the first time learned that they had been drilling on Plaintiff’s property; however, Defendants declined to reveal this fact to Plaintiff. Instead, after the meeting, Defendants went on to drill three (3) more wells on Plaintiff’s property. In 2010, Plaintiff finally discovered Defendants were drilling on his property and brought suit against Defendants for trespass, conversion, and ejectment. 

In Pennsylvania, a bad faith trespasser must pay the owner all revenues derived from the property; the bad faith trespasser cannot deduct its costs associated with drilling and operating the well. A good faith trespasser, on the other hand, can deduct its costs, and only owes the owner any net profits earned. 

The Sabella court held that Defendants trespassed in good faith from 2001 to 2008, thereby only owing profits over that time span, but trespassed in bad faith from 2008 to 2010, consequently owing revenues. Defendants only drilled on property they knew belonged to Plaintiff following the 2008 meeting. Prior to that time, they had no actual knowledge of his ownership and reasonably believed they had a valid oil and gas lease on the property.  

On appeal, the Superior Court reversed in part, holding that while Defendants did not have actual knowledge of Plaintiff’s ownership until the 2008 meeting, they had constructive knowledge of his recorded deed in 2003 when they “willfully elected not to conduct the full title search that would have informed them of [Plaintiff’s] interest.” Sabella at p. 30. Since Defendants had constructive notice of Plaintiff’s ownership in 2003, they were “barred from recovering any offset when they willfully left themselves ignorant of [Plaintiff’s] interest by consciously…declining to run complete title searches for the property, thus assuming the risk of bad-faith status.” Id. at p. 31. The Court concluded that Defendants owed Plaintiff all revenues derived from the wells from 2003 to present without any deduction for costs. 

In light of Sabella, oil and gas developers in Pennsylvania should avoid “bring down” title searches and conduct full title searches prior to drilling. 

This article was authored by Daniel R. Michelmore, Jackson Kelly PLLC.  For more information on the author, see here.

Pennsylvania Court Allows Horizontal Drilling Under State Game Land

On October 6, 2014, the Commonwealth Court of Pennsylvania in Commonwealth v. Seneca Resources Corp., an unreported panel decision, interpreted a 1928 deed in which Sancrik Lumber Company (“Sancrik”) transferred over 3,000 acres of land to the Pennsylvania Game Commission (“Commission”) but excepted and reserved “all the oil and gas in or under the herein[-]described lands with the right to operate for same by ordinary means now in use.”  2014 WL 4966736 (Pa. Commw. Ct. Oct. 6, 2014).  Sancrik thereafter transferred all of the “petroleum oil and natural gas in and under or which may be produced” from the land “TOGETHER with the right to enter upon all of the above[-]described tracts of land at any and all times, for the purpose of operating for, producing and removing said petroleum oil and natural gas in the usual and ordinary manner” to the predecessor of Seneca Resources Corporation (“Seneca”).  The Commission filed a complaint seeking declaratory and injunctive relief related to Seneca’s development of oil and natural gas under state game lands.  The Commonwealth Court granted partial summary judgment in favor of Seneca finding “that the 1928 Deed [did] not preclude Seneca from horizontally extracting its oil and gas beneath the Property from adjacent land,” and “[t]his permissible use carries with it the same reasonable effect of permitting Seneca to access and extract its oil and gas from under the Property while simultaneously respecting the Commission’s surface rights in accordance with [well-established Pennsylvania precedent].”  The court, however, denied summary judgment as to “whether the 1928 Deed restricts Seneca’s oil and gas extraction methods from the Property’s surface to ordinary means in use in 1928.”  Although this is an unreported decision limiting its citation largely to persuasive value, it is notable that the Commonwealth Court found a contract pre-dating the invention of hydraulic fracturing to permit drilling and hydraulic fracturing from adjacent lands. 

This article was authored by Nicole Starr, Jackson Kelly PLLC.  For more information on the author, see here.

Seventh District Court of Appeals Issues New Decision Concerning Ohio’s Dormant Mineral Act

The Seventh District Court of Appeals recently issued a decision in Farnsworth v. Burkhart, 7th Dist. Monroe No. 13 MO 14 (Sept. 22, 2014) concerning the application of R.C. 5301.56, commonly known as the Ohio Dormant Mineral Act (the “DMA”). The court reaffirmed its prior decisions in Dodd v. Croskey, Walker v. Shondrick-Nau, and Eisenbarth v. Reusser, holding: 

1. The 1989 version of the DMA can still be applied to current actions, and is self-executing in nature; 
2. The statute’s twenty-year look back period is fixed to the twenty years preceding the effective date of the statute and does not apply on a “rolling” basis; and 
3. A reference to a prior mineral reservation in a surface conveyance does not constitute a title transaction preventing abandonment.

The court declined to address arguments concerning the constitutionality of the 1989 DMA because the issue was not raised by the parties in the lower court.

Applying a fixed twenty-year look back period under the 1989 DMA, the court found that abandonment did not occur because the mineral rights were not severed until 1980. Under the 2006 DMA, the court found that the mineral holders timely filed a claim to preserve under R.C. 5301.56(H)(1), which prevents abandonment itself.

Judge DeGenaro, concurring in judgment only, found the 2006 DMA to be the controlling version of the statute for the reasons previously set forth in her concurring opinion in Eisenbarth v. Reusser.  Judge DeGenaro further noted that although the doctrine of laches was not raised, a quiet title action could have been filed by the surface owners in 2000 when the mineral rights would have arguably reverted to them under the 1989 DMA (assuming that the 1989 DMA provides for a rolling twenty year period), but they failed to do so until 2012.

The issues of whether the 1989 or 2006 version of R.C. 5301.56 governs quiet title actions filed after 2006, and whether a reference to a prior mineral reservation in a surface conveyance constitutes a title transaction, are currently before the Supreme Court of Ohio. See Corban v. Chesapeake, Exploration, L.L.C., Case No. 2014-0804, and Dodd v. Croskey, Case No. 2013-1730.

This article was authored by Alex Quay, Jackson Kelly PLLC.  For more information on the author, see here.

Ohio Seventh District Court of Appeals Issues Recent Ruling in a Case Concerning the Application of Ohio’s Dormant Mineral Act

Ohio’s Seventh District Court of Appeals recently issued a decision in Eisenbarth v. Reusser, 7th Dist. Monroe No. 13 MO 10 (Aug. 28, 2014) concerning the application of R.C. 5301.56, commonly known as the Ohio Dormant Mineral Act (the “DMA”).  Specifically, the appellate court held: 

1. a recorded oil and gas lease constitutes a “title transaction,” which prevents abandonment of a severed mineral interest pursuant to the statute; 
   
   
2. the statute’s twenty-year look-back period is fixed to the twenty years preceding the effective date of the statute (March 22, 1989), plus the three-year grace period, and does not apply on a “rolling” basis to require preservation events to have occurred every twenty years; and 
   
   
3. a conveyance of the executive right to lease does not result in a conveyance of the right to receive a bonus payment.

With regard to the interpretation of the look back period, the court majority found that the statute’s use of the words “preceding twenty years” alone does not create a rolling look-back period, and is therefore “ambiguous as to whether the look-back period is anything but fixed.”  The appellate court noted that the mention of successive claims to preserve under division (D)(1) of the statute does not necessarily provide that the look-back period was intended to apply on a rolling basis; rather, it may have been included as a reference to prior claims to preserve filed under the Marketable Title Act prior to the 1989 DMA. The court further noted that the legislature may have intended the 1989 DMA to have a limited twenty-year application because it planned to enact a new version of the statute to address the next twenty-year period, which it did by amending the statute in 2006.

Judge DeGenaro’s opinion concurred with the majority’s decision, but held that the 2006 DMA is the controlling version of the statute.  Noting that this decision was her first opportunity to address the application of the statute, Judge DeGenaro provides a thorough analysis with regard to the purpose and intent of the DMA and its subsequent procedural amendments.  Finding the trial court’s decision in Dahlgren v. Brown Farm Properties, L.L.C., Carroll C.P. No. 2013 CVH 274455, to be persuasive, the Judge reasoned that the 1989 DMA does not provide for automatic vesting of a severed mineral interest, but instead provides for an “inchoate interest,” contrary to the appellate court’s recent decisions in Walker v. Shondrick-Nau, 7th Dist. No. 13 NO 402, 2014-Ohio-1499 (Apr. 3, 2014), and Swartz v. Householder, 7th Dist. No. 13 JE 24, 2014-Ohio-2359 (June 2, 2014).  Further the Judge reasoned that the 2006 version of the DMA, like the 1989 version, must be applied in a retrospective manner.  Accordingly, the Judge held that, because Plaintiffs did not bring a claim until after the effective date of the amendments to the statute, the 2006 DMA controls.  Judge DeGenaro also found that, in the alternative, that if the 1989 DMA does apply as provided by the majority’s decision, the statute provides for a rolling twenty-year look-back period.

The issue of whether the 1989 or 2006 version of the DMA governs quiet title actions filed after the enactment of the 2006 DMA is currently before the Supreme Court of Ohio.  See Corban v. Chesapeake, Exploration, L.L.C., Case No. 2014-0804.

This article was authored by Alex Quay, Jackson Kelly PLLC.  For more information on the author, see here.

Appeal Filed After Title Washing Upheld by Pennsylvania Superior Court

On May 9, 2014, in a decision it acknowledged “may be seen as unduly harsh,” the Pennsylvania Superior Court upheld the practice of title-washing, which can be used to nullify early oil and gas reservations underlying formerly undeveloped lands.  The case is now before the Pennsylvania Supreme Court, appealed by the heirs of Harry and Anna Keller last month.  The case originated in 2008 when a drilling company contacted the Herder Spring Hunt Club, expressing an interest in leasing the club's mineral rights if the club could clear up the title.  A title search revealed that the 19th-century owners of the land, Harry and Anna Keller, had retained the mineral rights when they sold the land in 1899. The surface property formerly owned by the Kellers was resold several times before the Centre County commissioners acquired title during the Depression for back taxes. The county sold the property in 1941, and the hunt club bought it in 1959.

The hunt club claimed it owned the mineral rights by virtue of the tax sale based upon the concept known as “title washing,” which it said reunited the surface and subsurface properties.  Though the Kellers had recorded the mineral rights with the county in 1899, the hunt club claimed the Kellers had not reported the mineral estate to the tax assessor, as it believed was required under an 1804 law. The club argued that the tax sale extinguished the Kellers' mineral rights.

The Centre County Common Pleas Court ruled against the hunt club and awarded the rights to the Keller heirs. However, the three-judge Superior Court panel overturned the ruling and upheld the title wash in its May 9, 2014, ruling. 

Specifically, at issue in Herder Spring Hunting Club v. Harry and Anna Keller, 2014 Pa. Super. 100 (May 9, 2014), were the following transactions: (i) the 1899 conveyance by Harry and Anna Keller, wherein they conveyed the subject property but reserved all subsurface minerals, including oil and gas (horizontal severance deed); (ii) the 1935 acquisition of the property by the county commissioners for failure to pay property taxes; (iii) a 1941 tax sale from the commissioners, conveying the property (without any subsurface reservation) to Herder Spring’s predecessor in title; and (iv) a 1959 conveyance to Herder Spring by a deed providing the conveyance was “subject to all exceptions and reservations as are contained in the chain of title” but containing no specific reservations.  

Under Pennsylvania law in effect at the time of the horizontal severance deed, persons who acquired unseated land (unimproved land) were required to furnish a description describing the land to the county commissioners, or the board for the assessment and revision of taxes, so that a proper tax assessment could be levied. Although the law did not specifically address the situation where the subsurface rights to a parcel of land were horizontally severed from the surface rights, thereby creating two estates in the same parcel of land, the Court reviewed relevant case law and concluded the statute applied such that, upon the horizontal severance in 1899, the Kellers had a duty to notify the county commissioners of their retention of subsurface rights in the unseated lands so that their reserved interest could be properly assessed. The Kellers did not provide the required notice, and the property continued to be taxed as a whole. Thereafter, in 1935, the treasurer obtained the rights to the property pursuant to a treasurer’s sale.  Because the horizontal severance had never been reported to the commissioners, the treasurer obtained the property as a whole and transferred it to the commissioners as a whole.  In 1941, the property was sold at a tax sale to a predecessor in title to Herder Spring.  The Court noted that under Pennsylvania law, the Keller heirs had two years following the 1941 tax deed to challenge it, and that after the two year period passed without challenge, any subsequent transferee of the title to the property was entitled to rely on the deed containing no reservation of subsurface rights.  The 1959 deed to Herder Spring provided the conveyance was subject to all exceptions and reservations as contained in the chain of title, but the Court stated there were no active exceptions or reservations, as the horizontal severance had been extinguished upon the expiration of the two year period after the 1941 tax deed.

The case has now been appealed to the Pennsylvania Supreme Court.  "Although this case concerns a dispute over the ownership of oil and natural gas under roughly 433 acres of property, the questions presented potentially affect the mineral ownership rights of hundreds of thousands of acres of property located in this commonwealth," Ronald L. Hicks, a Pittsburgh lawyer who represents the aggrieved heirs, wrote in the Aug. 8 Supreme Court filing.

Jackson Kelly PLLC will continue to monitor this important legal issue.  The ultimate resolution of the legal questions involved has the potential to affect the natural resources beneath huge expanses of land in the heart of the Marcellus Shale region, which now accounts for nearly a quarter of the nation's natural gas production.

This article was authored by Whitney Clegg, Jackson Kelly PLLC.  For more information on the author, click here.

Commonwealth Court Continues the Dismantling of Pennsylvania Act 13

In February 2012, the Pennsylvania legislature passed Act 13, which provided a comprehensive regulatory scheme for oil and gas operations throughout the Commonwealth. In December 2013, the Pennsylvania Supreme Court ruled that Act 13’s preemption of local zoning ordinances and institution of mandatory statewide zoning rules for oil and gas operations violated the Pennsylvania Constitution’s seldom invoked Environmental Rights Amendment. The Supreme Court subsequently remanded the case to the court below to consider whether its ruling invalidated other challenged portions of the Act, most crucially the Act’s provision giving the Pennsylvania Public Utility Commission (“PUC”) authority to review local zoning ordinances and withhold impact fees from municipalities whose local zoning ordinances do not comply with the Act.

On July 17, 2014, the Commonwealth Court of Pennsylvania ruled that, because the mandatory statewide oil and gas zoning regime was unconstitutional, those parts of the Act giving the PUC enforcement powers to ensure compliance with that mandatory statewide regime, including the withholding of impact fees, were likewise invalid. Robinson Tp. v. Com., No. 284 M.D. 2012, --- A.3d ---- (Pa.Cmwlth.July 17, 2014).  Because the Supreme Court returned zoning power to the municipalities, local zoning ordinances would revert to being reviewed in the same manner as before the enactment of Act 13—in the courts of common pleas, not the PUC.

The Commonwealth Court’s decision did, however, uphold several portions of the Act. The Court held that Act 13’s requirement that the Pennsylvania Department of Environmental Protection (“DEP”) notify public drinking water facilities of spills and contamination but not private well owners did not violate equal protection because this difference in treatment was grounded in the practical fact that DEP does not regulate private well owners and therefore lacks information on private well location or ownership, making it “impossible for DEP to provide notice to…unknown private well owners.” Robinson at pp. 10-11.

Similarly, the Commonwealth Court found that Act 13’s quid pro quo requiring oil and gas companies to disclose the chemical composition of hydraulic fracturing liquids to physicians to assist in medical treatment in exchange for that physician’s confidentiality agreement did not violate equal protection or constitute preferential treatment to the industry, but rather “reflect[ed] the balance struck by the General Assembly between the need to disclose confidential and proprietary information for medical treatment, the public's interest in protecting these trade secrets, and the industry's interest in protecting its proprietary information.” Robinson at p. 15.

Finally, the Court found that giving public utilities eminent domain power to condemn property for natural gas storage facilities was not an unlawful taking for a private purpose because it could only be done where the gas stored was for “later public use,” not a private one.

While the Supreme Court’s decision only invalidated a part of Act 13, its reasoning served to doom many of the other significant provisions in the Act, according to the Commonwealth Court. Though the Commonwealth Court’s decision will be appealed, its tenor is consistent with the Supreme Court’s prior holding, making it likely that allocatur will be denied or, if granted, granted only in part and limited to very narrow grounds.  The core premise of the Act—to establish a uniform set of rules across the state to maximize the benefits of the oil and gas boom and minimize its potential costs—has been frustrated, leaving behind continued uncertainty across the state.

This article was authored by Daniel R. Michelmore, Jackson Kelly PLLC. For more information on the author, see here.

 

Jackson Kelly continues to grow and expand services in Indiana and Ohio

Jackson Kelly expands presence in Illinois Basin through merger with Evansville, Indiana, law firm.
In response to the continued growth of the region and its local businesses, Rudolph, Fine, Porter & Johnson, LLP, of Evansville, Indiana, has elected to merge its 20 attorney practice into the Firm.  For more information please click here.

Jackson Kelly relocates and expands Ohio office: Addition of three attorneys focused on oil & gas highlights demand in market.
To serve its growing energy practice, Jackson Kelly has moved its Ohio office from Canton to Akron and added established Akron attorneys Mark Bernlohr, Clay Keller and J. Alex Quay who will practice in the Firm’s Industrial, Environmental and Complex Litigation Practice Group. Working with Sandra Zerrusen, who joined Jackson Kelly in 2012, and the Firm’s other Ohio attorneys, the group will continue to offer clients the dedicated service they have come to expect from Jackson Kelly. Click here to continue reading.