Monthly Archives: March 2017

The Case Against Eminent Domain

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The very large pipelines that will be cutting through West Virginia are using federal eminent domain to acquire property from people who don’t want to sell to them.  The only reason the pipelines can use federal eminent domain is because the pipeline is considered to be a “public use”.

This article by David McMahon, a West Virginia attorney and founder of the West Virginia Surface Owners’ Rights Organization, points out why a pipeline shouldn’t be considered a “public use”.  I fully agree with him.  The full article is worth the read, so I won’t summarize it here.

He also points out how West Virginians “are poor because we cede too often and too much to the drillers and pipeline companies”.  Well said, Dave.  Well said.

FERC Won’t Stop the Pipelines, but the States Might

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There are several very big pipelines that are proposed for West Virginia, including the Atlantic Coast Pipeline, the Mountain Valley Pipeline, the Mountaineer Xpress, and others.  There’s a lot of debate over whether these pipelines are good, with most of the lines being drawn over environmental/economic arguments.  Basically, if the environment is more important to you, then you oppose the pipelines and if the economy is more important to you then you support the pipelines.

If you oppose the pipelines, then this article in the Register Herald holds a tasty tidbit for your consumption.

Autumn Crowe with the West Virginia Rivers Coalition said that even if the FERC green lights [the pipeline], if West Virginia fails to issue one of the permits, the project comes to a halt.

That’s something I had not realized until now, and I think a lot of other people hadn’t realized, either.

When I first started researching the pipelines it took about two seconds to discover that they would have the power of federal eminent domain.  In other words, once the FERC gave permission for the project to proceed, any property the pipeline wanted to cross automatically and immediately belonged to them.

I didn’t think there was any way to stop that from happening.

FERC, after all, has only turned down a small handful of projects in its 39 years of existence.  One Atlantic Coast Pipeline official I talked to said only four.

However, if you can show that the West Virginia Department of Environmental Protection shouldn’t issue one of the permits that the pipeline requires, it seems you can actually stop the process.

As I have become more opposed to the pipeline (not on environmental grounds) this gives me and my clients some hope.

The State of Oil and Gas: March 3, 2017

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Natural gas prices continue to plummet.  Today, Feb 21, prices have dropped 27 cents down to $2.57/MMBtu.  The reason is simple.  We haven’t used as much gas as investors expected.  The positive way of looking at this is that we’re still a dollar higher than we were this time last year, and we have less gas in storage than we did this time last year.  Andrew Hecht over at Seeking Alpha thinks that there is reason to believe that prices will be pretty volatile in the next few weeks.

What will really be interesting is to watch the rig count in the Utica/Marcellus area.  Prices below $3.00/MMBtu will discourage new drilling.  Producers have been ramping up drilling in the last six months or so.  It will be interesting to see how quickly they slow drilling down.

Oil prices are doing well, which is unfortunate for natural gas prices. Oil production will continue to climb, and the gas produced with oil will compete with our Marcellus/Utica wells, keeping prices and development down.

RB Energy did an excellent breakdown of why natural gas prices have dropped so much and how the market compares to last year and the five year average.  Most of you don’t have a subscription to RB Energy, so here’s a very condensed summary: this winter hasn’t been cold enough.  That’s really it.  Production has been picking up a little, but not enough to make the difference.  Storage levels aren’t ridiculously high.  If you plug in last year’s winter weather into this year’s winter weather you end up with very low storage levels and, consequently, higher natural gas prices.  It’s that simple.

Oil prices remain above $50.00/bbl.  In fact, it’s better to say they are around $55/bbl.  The main cause is the production cut set in place by OPEC in November.  OPEC has said they have about 70% compliance with the agreement.  Pretty impressive, especially considering past performance.  More importantly, the non-OPEC countries that agreed to cut production were at about 66% compliance.

U.S. oil drillers, however, have increased production since last summer.  That increase is not as much as the decrease by OPEC, but you can bet there is a lot more U.S. production planned in the very near future.

Sorry for the late and short nature of this post.  I’ve been sick again this week.