Melko Quoted in S&P Global About Impact of Oil and Gas Producers’ Bankruptcies on Midstream Businesses
17 June 2020
S&P Global
Partner John Melko was quoted in the S&P Global article, “As upstream bankruptcies loom, oil and gas pipelines brace for contract disputes,” where he discussed how a midstream agreement is structured can have major implications in bankruptcy proceedings.
As more oil and gas producers in the United States file or are expected to file for bankruptcy, midstream firms are preparing for a wave of upstream customers trying to get out of contracts. How a midstream agreement is set up can have major implications for how it is treated during a bankruptcy. For example, midstream gathering and processing agreements are often written as real property interests, as opposed to executory contracts. A real property interest, which is tied to the property, cannot be rejected in bankruptcy; an executory contract obligates the debtor and or another party to fulfill its terms at a later date.
Some covenants, or legal contracts, can “run with the land,” mean that rights or limitations apply to not only current landowners but also to future ones. “It doesn’t give the gathering company an interest in the minerals themselves … but it does give them this covenant — sort of like an easement — that attaches itself to the mineral interest, such that when the oil and gas is produced, it’s committed … to flow through that gathering system,” Melko said.
The devil is often in the details with these types of covenants. Midstream operators have had to grapple with whether they could satisfy “touch and concern” requirements, which involve demonstrating that their covenants impact how the land is used or valued, and whether covenants running with the land have been formally conveyed, or transferred. If done correctly, Melko noted, covenants running with the land are also legally recorded to back up ownership claims.
People
Related News
20 December 2024
In the News
Foley Attorneys Explore Alice Patent Eligibility Analysis Divergence
Foley & Lardner LLP attorneys Jack Carroll, Chethan Srinivasa, and Kevin Malaney authored the IP Litigator article, "Alice Patent Eligibility Analysis Divergence Before USPTO and District Court."
19 December 2024
In the News
Jason Mehta Shares Perspective on Biggest Government Contracts Cases of 2024
Foley & Lardner LLP partner Jason Mehta commented on the legal battle over the constitutionality of the False Claims Act's qui tam provision in the Law360 article, "Top Gov't Contracts Cases Of 2024."
19 December 2024
In the News
Key Rulings On Sentencing Guidelines After Loper Bright
The U.S. Sentencing Guidelines are instrumental in criminal sentencing, as they provide courts with advisory ranges for imposing sentences.