Lawyers Warn Pipeline Case May Turn Midstreamers “On Their Heads”

court-gavel.jpgA couple of legal beagles from the Fox Rothschild law firm (in NJ) are sounding the alarm that two bankruptcy court decisions in New York State are threatening to up-end the midstream industry across the country. We tend to agree with them. Earlier this year, MDN brought you the news that a NY bankrutpcy court judge had allowed Sabine Oil & Gas, going through bankruptcy, to cancel a pipeline gathering contract with Cheniere’s Nordheim Eagle Ford Gathering in Texas (see Midstream Nightmare Comes True: Judge Lets Driller Cancel Contracts). Nordheim spent $84 million building a pipeline system to Sabine’s wells. In return for laying out that kind of money, Sabine, as is always the case, signed a multi-year contract with Nordheim (10 years in this case), ensuring Nordheim would make a profit on its up-front investment. The judge allowed Sabine to carte blanche cancel the deal several years into the contract. We asked at the time: If a driller signs a contract and that signature is no longer any good, will anyone build pipeline systems anymore? A pair of lawyers delve into the case and point out: “If other judges follow the analysis and conclusions reached in the Sabine Oil case, the expectations of midstream service providers in the oil and gas extraction process might be turned on their heads.” Indeed…

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