This is the first of several posts on gathering agreements in bankruptcy, covenants running with the land and rejection claims that arise when a debtor finds gathering agreements financially burdensome. As our readers know, we waited with much anticipation for theSabine ruling and wait with equal anticipation for the ruling on similar issues in QuickSilver.  Being pragmatic business lawyers we decided to blog on what parties to gathering agreements should be doing now in light of the non-binding, advisory Sabine ruling.

On Tuesday, March 8, 2016, U.S. Bankruptcy Judge Shelley C. Chapman in New York permitted Sabine Oil & Gas Corporation to reject three gas gathering and handling agreements with Nordheim Eagle Ford Gathering, LLC and HPIP Gonzales Holdings, LLC. All of the agreements are governed by Texas law.

When a business files for bankruptcy, it can be a confusing and frustrating time for the debtor’s creditors. If an investment firm reaches out with an offer to purchase a creditor’s claim against the debtor, it may appear to be a great opportunity to be paid at least some cash now. The sale of a bankruptcy claim may also be attractive because it allows the creditor to avoid the time and expense involved in protecting its rights in the bankruptcy case.

U.S. Bankruptcy Judge Shelley Chapman ruled last week in the chapter 11 case of Sabine Oil & Gas that Sabine could utilize the U.S.

Executive Summary New York bankruptcy judge allows Sabine Oil & Gas to reject gathering agreements over the objections of midstream companies, finding that the covenants do not run with the land.

Updates

On March 2, 2016, Sports Authority, Inc. (“Sports Authority”) and six of its affiliates filed for Chapter 11 bankruptcy in Delaware.  The filing will significantly impact Sports Authority’s landlords and trade creditors.  In a press release, Sports Authority stated that it intends to close or sell approximately 140 locations and two distribution centers in the coming months.  The company is also seeking $595 million in post-bankruptcy financing to continue operations.  Sports Authority is a sporting goods retailer with 463 locations in 41 states and Puerto Rico.

Last week, we discussed the complexities of metals exploration chapter 11 bankruptcy cases and addressed several of the notable issues that arise in those cases. The discussion of significant issues continues below.

With the steep collapse of oil and gas prices in the last eighteen months, dozens of exploration and production companies have declared bankruptcy and many more companies are expected to file for bankruptcy protection unless prices rebound dramatically. As the prospect of further bankruptcies looms, it is important for parties to understand how to adequately protect their security interests and the nature of competing liens that could prevent them from fully realizing on the value of the collateral securing their counterparty’s obligations.

In a dispute that once generated the “largest environmental bankruptcy award ever,” the United States District Court for the Southern District of New York this month issued a decision further clarifying the effects of the monumental 2014 bankruptcy settlement agreement.  The February 1, 2016 decision in In re Tronox Incorporated, No.