Melko Quoted in S&P Global About Impact of Oil and Gas Producers’ Bankruptcies on Midstream Businesses
June 17, 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
January 6, 2026
In the News
Kyle Faget Weighs in on Pharmaceutical Industry Legal Battles
Foley & Lardner LLP partner Kyle Faget shared insight with Law360 on major legal topics affecting the pharmaceutical industry.
January 2, 2026
In the News
Judith Waltz Shares Insights on Key Health Law Developments on AHLA Podcast
Foley & Lardner LLP partner Judith Waltz hosted the American Health Law Association's Speaking of Health Law podcast to discuss major health law developments from 2025 and offer insights on trends expected in 2026.
January 2, 2026
In the News
Rajiv Dharnidharka Examines Trade Secret Litigation Trends
Foley & Lardner LLP partner Rajiv Dharnidharka commented on anticipated developments in trade secret law this year in the Law360 article, “Trade Secret Trends To Watch In 2026.”