It is common for E&P companies in chapter 11 to seek to reject burdensome midstream contracts under Bankruptcy Code § 365. Rejection has not been permitted by bankruptcy courts where such agreements create enforceable covenants running with the land (“CRWL”) because a CRWL is a real property interest of the midstream gatherer, not just a contract right. Accordingly, before a debtor can seek to reject midstream agreements, the bankruptcy court must first determine whether an enforceable CRWL exists.
USA, Texas, Energy & Natural Resources, Insolvency & Restructuring, Litigation, Vinson & Elkins LLP, Mediation, Title 11 of the US Code