Two more U.S. natural gas pipelines called for the Federal Energy Regulatory Commission to preserve its jurisdiction over gas transportation agreements in case producer Gulfport Energy Corp. files for bankruptcy protection.
The pipeline companies, TC Energy Corp. and Midship Pipeline Co. LLC, pointed to Gulfport statements in an SEC 10-Q filing that revealed doubt about the producer's ability to continue as a going concern.
The pipeline requests to FERC come as a wave of producer bankruptcies continues in the aftermath of coronavirus-related impacts on demand, particularly for oil. About 30 U.S. exploration and production companies filed for Chapter 11 bankruptcy protection through the end of August, mostly on the oil side, and the number is expected to continue climbing through the second half of the year.
Requests on a theme
On Sept. 21, TC Energy and Midship each filed requests that FERC assert concurrent jurisdiction under the Natural Gas Act with U.S. bankruptcy courts if Gulfport seeks bankruptcy protection, following a similar pitch that Rockies Express Pipeline LLC made Sept. 15. They also asked FERC for expedited action and shortened adjudicative proceedings to evaluate the public interest implications should Gulfport propose the rejection of transportation contracts.
In asking for FERC involvement, the companies pointed to the agency's recent declaratory order in a case involving ETC Tiger Pipeline LLC. FERC declared June 22 that while shale driller Chesapeake Energy Corp. can move to reject a contract in bankruptcy court without agency approval, this rejection does not alter regulatory obligations under the commission's jurisdiction. Chesapeake filed for Chapter 11 bankruptcy protection June 28.
Transportation contracts
Midship's request was based on its firm transportation service agreements, negotiated rate agreements and surviving terms of precedent agreements with Gulfport. The company said it was filing the request out of an abundance of caution to protect its legal rights.
"Although the commission's regulatory powers permit it to act after a bankruptcy filing has been made, granting the petition expeditiously and prior to a bankruptcy filing will eliminate unnecessary uncertainty," Midship said.
Gulfport is one of Midship's three foundation shippers, originally signing up for 300,000 Dth/d of firm transportation capacity, over 20% of Midship's certificated capacity, according to the Midship filing. In light of Gulfport's financial difficulties, Midship said it agreed in July to restructure Gulfport's jurisdictional contract. FERC accepted an amended contract Sept. 14, with varying contractual quantities encompassing a total financial obligation of about $380 million over the life of the contract. (FERC docket RP20-1202)
TC Energy's request related to contracts representing a combined 293,700 Dth/d of firm transportation service between TC Energy subsidiary ANR Pipeline Co. and Gulfport as well as firm transportation agreements involving Gulfport and TC Energy's Columbia Gas Transmission LLC and Columbia Gulf Transmission LLC units of 100,000 Dth/d each.
"Recent experience in other producer bankruptcy proceedings suggests that if the commission does not act promptly, the commission may be foreclosed from assessing the public interest associated with proposed contract rejection in order to inform the bankruptcy process," TC Energy told FERC.
TC Energy noted that in some instances, pipelines have been forced to withdraw petitions for declaratory relief with FERC due to producer bankruptcy filings prior to agency action, citing examples involving REX and Gulf South Pipeline Co. LP. (FERC docket RP20-1204)
Maya Weber is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.