News
Miki Kolobara To Conduct a Seminar Titled
“Understanding the NAESB Master Agreement for Natural Gas & NGLs”
We are pleased to announce that Miki Kolobara will conduct a two-day
seminar titled "Understanding the NAESB Master Agreement for Natural Gas & NGLs" on
October 4-5, 2018 in Houston. This seminar is intended to be an in-depth, practical
analysis of the NAESB master agreement and special provisions relevant to successfully
drafting and negotiating NAESB documentation. The seminar will provide a detailed review
of the NAESB provisions and identify the most relevant shortcomings that can be remedied
in the special provisions to the master agreement. Also, the seminar will outline the best
practices for drafting and negotiating NAESB special provisions and transaction confirmations,
credit support documentation, and cross-product and cross-affiliate master netting agreements
in the current regulatory environment.
The attendees will learn various operational factors impacting NAESB
transactions including, but not limited to selling and buying natural gas at illiquid
delivery points, pipeline curtailments and force majeure events, natural gas buy-backs
and swing volume adjustments, asset management agreements and capacity releases, buying
and selling intra-day gas, volumetric adjustments in physically settled transactions,
and many more.
Also, the seminar will also provide insight into the best practices
and standards for drafting effective transaction confirmations, netting agreements, and
asset management agreements frequently used in the gas marketing process. This seminar
also will outline practical steps to addressing the relevant operational issues such as
natural gas capacity curtailments, force majeure events, natural gas buy-backs, and bookouts.
For more information and registration,
click here:
Miki Kolobara To Conduct An
ISDA® Master Agreement Seminar
Miki Kolobara will conduct a two-day seminar titled
UNDERSTANDING ISDA® AGREEMENT IN THE EVOLVING REGULATORY ENVIRONMENT on
April 5-6, 2017, in Omaha, NE.
This seminar is intended to help attendees better understand the key
provisions of the ISDA® Master Agreement, Credit Support Annex and various
Schedules. In addition, attendees will learn the most relevant and
recent regulatory developments regarding mandatory margin requirements,
position limits, collateral management, and reporting requirements.
In recent years, participants in over-the-counter
(“OTC”) derivatives markets have experienced an unprecedented regulatory
burden. Because of Dodd-Frank, EMIR and similar regulations, the
documentation for OTC derivatives is becoming increasingly complex and
uncertain. Many companies are looking for clarity about their ability to
hedge due to regulatory and financial risk associated with derivatives
documentation. In order to facilitate an in-depth analysis of the OTC
documentation drafting, analysis, and review, Miki Kolobara perform an
in-depth review of key provisions of the ISDA® Master Agreement, Credit
Support Annex and various Schedules and Protocols. In addition,
attendees will learn the most relevant and recent regulatory developments
regarding mandatory margin requirements, position limits, collateral
management, and reporting requirements.
In order to assist the attendees to better understand
the drafting, negotiating, and enforceability risks, this seminar will
analyze and discuss Some of the topics to be covered during this seminar
will cover the following topics:
- Architecture of ISDA® Documentation
- 1992 and 2002 Master Agreements
- 1994 Credit Support Annex
- Schedules to the master agreement and credit
support annex, natural gas and power annex, crude oil annex, long form
confirmation.
- Various confirmation provisions for interest rate,
credit default, and FX swaps.
- Comprehensive overview of events of defaults,
remedies, cross-affiliate and cross-products netting and setoff.
- Bankruptcy and liquidation considerations.
- Special considerations regarding swap reporting
and recordkeeping under Dodd-Frank.
- ISDA® August 2012 and March 2013 Dodd-Frank
Protocols.
- EMIR provisions applicable to the U.S. market
participants.
- Implementation of mandatory margin requirements.
Click on the
following to access the seminar agenda and
registration information.
For more information about this seminar please
contact Kolobara Law Firm by email at info@kolobaralaw.com or by phone at
402-881-3987.
Bankruptcy Court Allows Rejection of Midstream
Gathering Agreements
On March 8, 2016, U.S. Bankruptcy Court Judge Shelley C. Chapman permitted
Sabine Oil & Gas (“Sabine”) to reject its gathering agreements with two
pipeline operators as “executory contracts.” Although the Court’s decision
is non-binding as to the underlying issue of the whether the contracts
created a property interest in the underlying mineral estate, the ruling
could nevertheless create a chilling effect on industry-typical practices
regarding such agreements. Prior to this decision, pipeline operators (and
the banks providing them financing for building the gathering and processing
facilities) have believed that a well-drafted gathering and processing
contract for certain minimum delivery obligations would survive a driller’s
bankruptcy.
Before filing for bankruptcy, Sabine had entered into gathering contracts
with pipeline operators where Sabine agreed to dedicate all oil and gas from
certain designated areas, subject to specified minimum volume or payment
requirements, to the pipeline operators. The agreements, governed by Texas
law, specifically provide that the agreements themselves create a “covenant
running with the land.” After filing for Chapter 11 protection in the
Southern District of New York, Sabine filed a motion to reject the gathering
agreements under the Bankruptcy Code as unduly burdensome “executory
contracts.” The pipeline operators objected, arguing that the gathering
agreements are covenants that run with the land and, therefore, cannot be
rejected in bankruptcy. If the agreements are, in fact, covenants that run
with the land, they would not be subject to rejection in bankruptcy.
The legal issue before the Court, then, was whether the gathering agreements
are executory contracts subject to rejection in bankruptcy (thus creating a
breach of contract and putting the pipeline operators in the category of
general unsecured creditors), or if the agreements create a property
interest that attaches to the mineral estate and continues with the land,
unaffected by the bankruptcy.
The Court did not resolve the property interest issue in its ruling. Rather,
the Court decided that Sabine satisfied the “reasonable business judgment”
standard that is applied in determining whether executory contracts have
been properly accepted or rejected by the debtor. For procedural reasons
(the issue was before the Court on a Motion to Reject rather than an
adversarial proceeding or contested matter, and the Court found that a
substantive legal ruling must occur in the context of one of the latter),
the Court explained that it’s decision was non-binding. However, it left no
doubt as to what the final, binding determination would be if properly
brought before the Court:
If it is ultimately determined that the covenants at issue in the Agreements
do not run with the land, as the Debtors and the Court believes to be the
case, the Debtors will be free to negotiate new gas gathering agreements
with any party, likely obtaining better terms than the existing agreements
provide. If, however, the covenants are ultimately determined to run with
the land, the Debtors will likely need to pursue alternative arrangements
with [the pipeline operators] consistent with the covenants by which the
Debtors would be bound. In either scenario, the Debtors’ conclusion that
they are better off rejecting the [gathering] Agreements is a reasonable
exercise of their business judgment. Therefore, even though, as explained
below, the Court’s conclusion that the covenants at issue do not run with
the land is non-binding, the Court finds that the Debtors’ decision to
reject each of the [gathering] Agreements to be a reasonable exercise of
business judgment.
Applying Texas law, the Court noted that “language in a contract containing
a covenant is the primary evidence of the parties’ intent, but terminology
is not dispositive.” Instead, applying admittedly archaic property law
principles, the Court determined that a covenant runs with the land when,
among other elements, and it “touches and concerns the land.” The Court also
considered whether there was “horizontal privity of estate,” which
traditionally involves a property owner reserving, by covenant, an interest
in the property for a third party.
Under the Court’s analysis, the primary terms of the gathering agreements
relate to the rights and obligations regarding the oil and gas rather than
to the land or leasehold interests from which they came. Further, the right
to transport and transform the oil and gas products is not one of the
property rights of a mineral estate under Texas law. The Court went on to
find that to “touch and concern the land,” a covenant must affect the
owner’s interest or its use of the land, and the gathering fee covenant had
no direct impact on the land or on Sabine’s property rights.
While this ruling may fuel a driller’s desire to re-negotiate more favorable
terms with pipeline operators, the impact of the non-binding ruling is still
limited to the specific terms of those gathering agreements and the state
law governing those agreements.
There are plenty of contract drafting questions to consider in light of the
ruling. The Court distinguished certain cases where covenants were found to
grant property interests, and arguably drafters could work to more closely
mirror those covenants and the underlying provisions to create a genuine
property interest.
Another option may be to consider an entirely different drafting approach,
such as structuring the gathering agreements as forward contracts and/or
swaps, especially in light of the CFTC’s recent willingness to include
transportation and tolling agreements in the definition of a swap. Such a
designation could potentially bring these contracts under the safe harbor
provisions of the Bankruptcy Code, and the parties’ initial intent to have a
gathering agreement survive a driller’s bankruptcy could be preserved.
Minimizing Energy Trading Compliance Risk in the
Evolving Legal Environment
Kolobara Law Firm was selected by a prominent energy seminar organization,
PGS Energy Training, to conduct a two-day seminar titled “Minimizing Energy
Trading Compliance Risk in the Evolving Legal Environment” in Houston, TX on
December 9-10, 2014. This seminar will provide an in-depth analysis of the
current state of energy commodities and derivatives regulations. In
particular, the seminar will examine some of the most relevant Dodd-Frank
rules and regulations and their affect on the day-to-day operations of
energy market participants. For example, we will examine the trade-option
definition and its impact on the full requirement transactions, variable
baseload transactions, swing load and fuel requirement contracts. Also,
there will be a detailed examination of the new position limits rule,
including the affiliate aggregation of positions and bona fide hedging
definition.
The seminar will provide a roadmap for risk management and trading
compliance, starting with mandatory policies and procedures. Further, we
will examine some of the most critical contractual issues and provisions
including the ISDA, NAESB, EEI, and WSPP master agreements, the relevant
annexes, trading confirmations, and credit support documentation. Also, the
seminar will analyze the regulatory requirements for mandatory training for
the front and middle office personnel and the best practices for creating
and implementing a culture of compliance.
For additional information or to register for this seminar, please
click here
Kolobara Law Firm’s Miki Kolobara Quoted in Bloomberg Article
Bloomberg News recently conducted an interview with
Miki Kolobara, managing attorney at Kolobara Law Firm, LLC. The interview
focused on a recent market manipulation case in the energy trading arena.
Mr. Kolobara shared his experience on the importance of adequate training
and an ongoing compliance program for all market participants engaged in
energy trading. Also, Mr. Kolobara emphasized the financial, regulatory, and
legal benefits of creating and maintaining a culture of compliance for
energy trading entities. The article can be viewed
here.