On March 8, 2016, Judge Shelley C. Chapman of the U.S. Bankruptcy Court for the Southern District of New York (the "Court") issued a bench decision (the "Decision"), granting Sabine Oil & Gas Corporation's ("Sabine") motion to reject four executory gathering agreements with pipeline operators in its chapter 11 bankruptcy case. More significantly, the Court found, on a preliminary basis, that Sabine's obligations to continue to deliver products and pay certain transaction fees were not "covenants running with the land," and therefore could be stripped away with rejection of the gathering agreements. Given the near-ubiquity of such covenants, the Decision stirred up a renewed focus on these contracts and unsettled the midstream market. It is likely these agreements will be subjected to increased scrutiny and rejection requests in future energy bankruptcy cases.
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