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Supreme Court Backs PennEast Pipeline in NJ Challenge

The U.S. Supreme Court on June 29 ruled in favor of a consortium of energy companies including Enbridge Inc. seeking to seize land owned by New Jersey to build a federally approved natural gas pipeline despite the state’s objections, though hurdles remain for the $1 billion project.

The 5-4 ruling, authored by conservative Chief Justice John Roberts, handed a victory to PennEast Pipeline Co. LLC, a joint venture seeking to build the 116-mile (187-km) pipeline from Pennsylvania to New Jersey. The justices overturned a lower court ruling in favor of New Jersey’s government.

The decision enables interstate pipelines to move forward with efforts to seize state-owned lands without a state's consent as long as federal regulators have approved the project. But New Jersey Attorney General Gurbir Grewal said the ruling does not bring an end to the state’s fight against the PennEast project.

PennEast wants the land to build a pipeline designed to deliver 1.1 Bcf/d of gas—enough to supply about 5 million homes—from the Marcellus shale formation in Pennsylvania to customers in Pennsylvania and New Jersey.

The court ruled that a 1938 U.S. law called the Natural Gas Act that lets private energy companies seize “necessary” parcels of land for a project if they have obtained a certificate from the Federal Energy Regulatory Commission (FERC) can be applied to state-owned land. The law effectively gives private companies the power of eminent domain in which government entities can take property in return for compensation.

FERC in 2018 approved PennEast’s request to build the pipeline. The company then sued to gain access to properties along the route. New Jersey did not consent to PennEast’s seizure of properties that the state owns or in which it has an interest.

After a federal judge approved the property seizure, the Philadelphia-based 3rd U.S. Circuit Court of Appeals ruled in 2019 that PennEast could not use federal eminent domain to condemn land controlled by the state, prompting the appeal to the Supreme Court.

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$5 Billion Returns for ConocoPhillips’ Shareholders as Prices Grow

Shareholder’s payout target was increased by 50% after the largest U.S. independent oil producer surpassed Wall Street’s earnings estimates on growing energy prices, said Houston-based Conoco Phillips Co. on Aug. 4. Due to Western sanctions on major producer Russia throttling energy supply amid a rebound in demand from pandemic lows, oil and gas #prices have soared. Crude has been trading more than 25% higher since the start of the year and results also benefited from high natural gas prices. Meanwhile, shares were down a fraction, to $91.03, in early trading but are up about 26% year to date. Conoco Phillips stated, that the average price obtained for a barrel of oil and gas accelerated 77% from a year earlier to $88.57. The company acknowledges that it has not hedged any of its oil and gas sales to make the most of higher market prices. The capacity of 1.69 million boe/d was in line with Wall Street estimates, however, the company expected the current quarter’s output would be between 1.71 million and 1.76 million boe/d.

Southland Royalty sold its San Juan Basin assets to MorningStar for $17.3 million. We go over the basics with an emphasis on the data needed to evaluate Southland Royalty's acreage in the San Juan Basin.

California oil joint venture, Aera Energy, of Exxon Mobil Corp. and ShellPlc is being sold to German asset manager IKAV, according to the agreement of Sept. 1. Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed. Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors. Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d. Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system. The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.

The completion of the merger between Centennial Resource Development Inc. and Colgate Energy Partners II LLC happened on Sept. 1, sealing the debut of Permian Resources Corp., which is considered the largest pure-play E&P company in the Delaware Basin. Permian Resources’ idea was to combine two successful E&P companies, creating a better, stronger, and more strategically compelling company. Centennial and Colgate announced an agreement to merge in May, denying rumors that Colgate, a privately held independent Midland-based company, had been seeking an IPO. The merger estimated Colgate at about $3.9 billion and consists of 269.3 million shares of Centennial stock, $525 million of cash, and the assumption of approximately $1.4 billion of Colgate’s outstanding net debt. Permian Resources, being the combined company, has a deep inventory of “high-quality” drilling locations on around 180,000 net acres the companies anticipate will provide more than $1 billion of free cash flow in 2023 at current strip prices, in accordance with the company release on Sept. 1.

2022 blog posts