New York Bankruptcy Court Authorizes Rejection of Midstream Contracts

Pillsbury Winthrop Shaw Pittman LLP
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Bad news for midstream counterparties of bankrupt oil & gas producers: you may not be able to rely (as much as you might have expected) on covenants “running with the land” to save your contracts from rejection in bankruptcy.

One strategy commonly used by midstream counterparties of oil & gas producers to mitigate upstream risk has been to craft their contractual entitlements as covenants that “run with the land,” generally expecting that these covenants are immune from rejection in bankruptcy.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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