Midstream And E&P Pipeline Contracts May Be Rejected In Bankruptcy Cases

On March 8, a U.S. bankruptcy judge ruled that debtor Sabine Oil & Gas Corporation (Sabine),¹ an upstream company, was permitted to reject pipeline contracts with midstream gatherers. U.S. Bankruptcy Judge Chapman for the Southern District of New York did not make a final determination as to whether the contracts were covenants running with the land under Texas law—though she did provide an advisory, non-binding decision that they were not, and invited the parties to negotiate or make separate filings with the court.

What You Need To Know

• A U.S. bankruptcy judge has held that midstream gatherer contracts may be rejected in a bankruptcy case.
• Midstream companies should review pipeline contracts to evaluate risk of rejection in the event of a bankruptcy by the upstream producer.