Until Monarch Midstream v. Badlands Energy, midstream companies facing rejection of their contracts in a producer’s bankruptcy were left with Abraham Lincoln’s least favorite negotiating option: If the both law and the facts are against you, pound on the table. Under Sabine gathering agreements are not covenants running with the land and can be rejected in the producer’s bankruptcy. Sabine was the only law on the books, but now a Colorado bankruptcy court has determined that a gathering agreement was a covenant running with the land.This opinion makes for a fair fight and gives midstream companies legal authority that agreements dedicating oil and gas reserves should survive bankruptcy unscathed. Still following Mr. Lincoln, they can now pound the law and not the table.
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