Press Release
Press Release
Press Contacts: Erik Cummins, Matt Hyams, Olivia Thomas
10.18.16
On behalf of the official committee of unsecured creditors of Tristream Energy, LLC, Pillsbury has filed a suit holding that Tristream’s pipeline agreements with Eagle Rock Acquisition Partnership L.P. and Targa Southtex Midstream Company L.P. cannot be entirely rejected in bankruptcy. The suit seeks to reduce or eliminate more than $30 million in damages claimed by natural gas producers for losing their pipeline contracts in a bankruptcy case.
The lawsuit was filed in the Southern District of Texas on October 18, 2016 and takes the opposite stance from the highly controversial Sabine decision, rendered in March 2016. In that case, bankruptcy Judge Shelley Chapman of the Southern District of New York held that the covenants of gas gathering agreements do not “run with the land” and can therefore be rejected by debtors.
The oil and gas pipeline industry has since been troubled by the possibility that they would pay billions to install thousands of miles of underground pipelines to gas wells, only to have contracts with well owners rejected in bankruptcy. Such an outcome would leave the pipeline with a large unsecured claim against the gas well producer but no guarantee of the pipeline’s future use.
“With all due respect to the logic of the Sabine decision, we believe that in Tristream’s case, the gas gathering agreements run with the land and cannot be entirely rejected,” said Hugh Ray, Pillsbury partner and lead counsel to the unsecured creditors committee. “We hope this lawsuit will help establish a clear rule of law as to the status of gas gathering agreements in contract and avert issues that could have a destabilizing impact on the energy industry as a whole.”
Ray is being assisted in the matter by San Francisco partner Cecily Dumas, New York partner Andrew Troop and New York associate Dina Yavich.