An E&P's power to reject its midstream agreements in bankruptcy creates great leverage for the company to negotiate better terms with its midstream provider when faced with distress.Whether the E&P actually has this power in bankruptcy has been a hot topic during the past five years.Courts around the country have reached inconsistent conclusions.In some cases,courts have excused E&Ps from out-of-market agreements and granted them leverage to renegotiate with their midstream providers.In other cases,courts have denied an E&P this leverage and forced it to honor the terms of its agreement.The different outcomes of these cases have raised questions about how midstream companies and their E&P providers can structure their agreements to enhance the predictability of how such agreements will be treated if the E&P goes through bankruptcy Unfortunately,no silver bullet exists,but parties do have a few tools that they can use to make the treatment of their midstream agreements in bankruptcy more predictable.
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