Midstream Nightmare Comes True: Judge Lets Driller Cancel Contracts
Two weeks ago MDN warned you of a court case that has the potential to upend the midstream (pipelines & processing plants) market–here in the Marcellus/Utica and across the country (see Shock: Judge May Allow Drillers to Cancel Gathering Pipeline Deals). That potential has now been realized. Judge Shelley Chapman, in a case in U.S. Bankruptcy Court for the Southern District of New York, has ruled that Sabine Oil & Gas may cancel a pipeline gathering contract with Cheniere’s Nordheim Eagle Ford Gathering in Texas. 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 make a profit on its up-front investment. The judge is allowing Sabine to cancel the deal several years into the contract. If a driller signs a contract and that signature is no longer any good, will anyone build pipeline systems anymore?…
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In the end, not even self-righteous Hollywood actor James Cromwell–who played Zefram Cochrane (mythical creator of the warp engine) in the 1996 movie Star Trek: First Contact (one of our favs)–could stop the chain saws in Susquehanna County, PA. We’ve been telling you about some holdout the anti-drilling Holleran family who didn’t want the much-needed Constitution Pipeline to cross their land (see
con·spir·a·cy – noun – a secret plan by a group to do something unlawful or harmful. Yesterday the U.S. Department of Justice indicted a single person–Aubrey K. McClendon, on a single count of conspiracy. He is alleged to have conspired to rig bids for oil and gas leases in Oklahoma, his home state, from 2007 to 2012. Do you see the obvious contradiction here? In order to have a conspiracy, you need more than one person. Yet the FBI and the DOJ have brought charges against only one person. It takes at least two people to have a conspiracy–so why has no one else been indicted? McClendon issued a statement (below) blasting the DOJ, pointing out he is the only person in 110 years to be prosecuted under the Sherman Act for bid rigging. What really hurts is that Chesapeake Energy, the company Aubrey co-founded, has been attempting to sell him out in return for not being prosecuted by the DOJ. Anyone else smell a rat in this whole thing?…