In a continuing contest between the Federal Energy Regulatory Commission (FERC) and the US bankruptcy code, NERA provided evidence on whether any public interest matters would prevent the bankruptcy court from treating FERC-authorized natural gas pipeline contracts like any other unsecured executory contract in the bankruptcy proceedings of contract shippers.

Retained by Ultra Petroleum Corp., NERA provided an independent analysis of the effects of Ultra’s motion to reject its firm service contract with Rockies Express Pipeline in its 2020 bankruptcy. NERA analyzed the US natural gas market and the FERC’s actions in the 1980s and 1990s to promote competition in pipelines. NERA developed a unique dataset encompassing all FERC-approved natural gas pipeline projects since 2000—segregated by the type of shipper holding contracts on those lines. In addition, NERA built a model to show the savings from competitively sourced natural gas-fired electric generation in the US as compared to oil-linked prices prevalent elsewhere. NERA concluded that rejection would cause no public interest problem—and that barring rejection of such FERC-regulated pipeline contracts would create undue barriers to exit for shippers—contrary to the normal practice in bankruptcy.

Judge Marvin Isgur of the US Bankruptcy Court for the Southern District of Texas agreed and approved rejection of the contract in August 2020. Quoting from Jeff D. Makholm’s written and oral evidence, Judge Isgur rejected any public interest problem with rejection. Regarding the cost of exit, Judge Isgur wrote, “[t]he Court credits Dr. Makholm’s testimony that barring rejection of pipeline contracts would create barriers to exit for shippers, which might increase costs to consumers and diminish supply.”

The US Court of Appeals for the Fifth Circuit upheld rejection in October 2022.