When a pipeline company considers whether or not to build a new pipeline, the company conducts an “open season”–a time when drillers (producers) can sign long-term contracts to use capacity along the pipeline. Such contracts guarantee pipeline companies will be able to make back the considerable amount of money they have to spend to build the pipeline. What happens when a driller that signed to a 10- or 20-year contract goes bankrupt? Or what happens if a contract will force a driller into bankruptcy? Can such a contract be canceled?
When a pipeline company considers whether or not to build a new pipeline, the company conducts an “open season”–a time when drillers (producers) can sign long-term contracts to use capacity along the pipeline. Such contracts guarantee pipeline companies will be able to make back the considerable amount of money they have to spend to build the pipeline. What happens when a driller that signed to a 10- or 20-year contract goes bankrupt? Or what happens if a contract will force a driller into bankruptcy? Can such a contract be canceled?