Alta Mesa Holdings, LP v. Kingfisher Midstream, LLC, 19-03609

Background

Debtors Alta Mesa Holdings, LP and Oklahoma Energy Acquisitions, LP (collectively "Alta Mesa") contracted with Kingfisher Midstream, LLC to build and operate oil/gas gathering systems in the Oklahoma STACK area.
Original and amended gathering agreements dedicated Alta Mesa’s produced hydrocarbons to Kingfisher, granted surface easements, required recording, and described the covenants as "running with the land;" fees were fixed and later adjusted by amendment that also added a "Conveyance of Transportation Right."
Alta Mesa filed this adversary proceeding in its Chapter 11 case seeking a declaratory judgment that the gathering agreements are executory and may be rejected under 11 U.S.C. § 365; Alta Mesa also asserted fiduciary-duty and aiding-and-abetting claims against its owners and Kingfisher (Counts IV & V).
Kingfisher moved for summary judgment on Count I (rejection), arguing the agreements created real property covenants that cannot be rejected in bankruptcy.
The court applied Oklahoma law, held the agreements form covenants running with the land (touch and concern, privity, intent to bind successors), granted summary judgment to Kingfisher on Count I, and denied summary judgment on the fiduciary claims because material fact disputes remain.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are the gathering agreements executory and rejectable under § 365?	Agreements are executory and may be rejected to free the estate from onerous fixed fees.	Agreements created real-property covenants running with the land and thus are not executory.	Court: Agreements run with the land and are not rejectable; summary judgment for Kingfisher on Count I.
Do the agreements "touch and concern" the land?	No — obligations trigger at receipt and do not alter leasehold rights while hydrocarbons are in ground.	Yes — easements, dedication of production, and fixed fees affect the value/use of Alta Mesa’s leasehold reserves.	Court: Touch-and-concern satisfied; covenants affect leasehold value and use.
Is there privity of estate (horizontal/vertical)?	No — surface easements do not create privity with the mineral/leasehold estate.	Yes — contemporaneous conveyance of surface easements and recorded dedications establish privity (horizontal and vertical).	Court: Privity present (horizontal and vertical) under the facts here.
Did parties intend the covenants to bind successors?	No clear, enforceable intent to run with the land.	Yes — agreements expressly state they are covenants running with the land, require recording and transferee acknowledgments.	Court: Intent to bind successors is evidenced by contract language, recording, and negotiation history.
Are fiduciary-duty and aiding-and-abetting claims appropriate for summary judgment?	Owners breached loyalty by controlling both Alta Mesa and Kingfisher; Kingfisher aided and abetted.	No breach as owners controlled subsidiaries; summary judgment should be granted.	Court: Summary judgment denied on Counts IV & V — factual disputes remain (e.g., minority owner existence).

Key Cases Cited

Mission Prod. Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 1652 (2019) (definition and consequences of executory contracts/rejection)
Beattie v. State ex rel. Grand River Dam Auth., 41 P.3d 377 (Okla. 2002) (Oklahoma elements for covenants running with the land: touch and concern, privity, intent)
Sw. Pipe Line Co. v. Empire Nat. Gas Co., 33 F.2d 248 (8th Cir. 1929) (similar gas agreement created an easement/leasehold interest enforceable against assignees)
Sabine Oil & Gas Corp. v. HPIP Gonzales Holdings, LLC, 550 B.R. 59 (Bankr. S.D.N.Y. 2016) (contrasting bankruptcy decision that gathering agreements did not run with the land under Texas law)
El Paso Refinery, LP v. TRMI Holdings, Inc., 302 F.3d 343 (5th Cir. 2002) (touch-and-concern requires effect on owner’s interest or use of property)
Atlantic Richfield Co. v. Tomlinson, 859 P.2d 1088 (Okla. 1993) (rule that oil and gas are real property while in ground and become personal property upon severance)
Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment burden-shifting principles)