41 F.4th 667
5th Cir.2022Background
- Gulfport Energy had filed-rate transportation service agreements (TSAs) with Rover Pipeline under the Natural Gas Act; those TSAs set maximum daily quantities and FERC-filed rates.
- Gulfport announced severe COVID-19–related financial distress and later filed for bankruptcy and moved to reject the TSAs as executory contracts under 11 U.S.C. § 365.
- Rover petitioned FERC for a declaratory order and expedited paper hearing, arguing FERC has exclusive jurisdiction and that Gulfport could not reject filed-rate contracts without FERC approval.
- FERC issued a declaratory order and a paper‑hearing order concluding rejection would “alter” filed-rate terms, required Commission approval to modify/abrogate those rates, and effectively directed Gulfport to continue performance.
- Gulfport challenged those FERC orders in the Fifth Circuit; the court held FERC had authority to issue a declaratory order but vacated the orders because they rested on an incorrect legal premise that rejection modifies or abrogates filed rates.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Justiciability (standing, ripeness, mootness) | FERC orders are final and directly injure Gulfport by purporting to strip bankruptcy rejection rights; review is needed now | Ultra moots the challenge or Gulfport lacks standing; administrative process or bankruptcy remedies suffice | Case is justiciable: Gulfport has standing, the issues are fit and cause hardship if withheld, and the petitions are not moot |
| Authority to issue declaratory/paper‑hearing orders | FERC abused discretion by creating legal uncertainty that interfered with bankruptcy rights; declaratory relief was improper | FERC may issue declaratory orders to resolve controversy and had a rational basis given Gulfport’s public filings | FERC had statutory authority and did not abuse discretion in issuing a declaratory order |
| Effect of bankruptcy rejection on filed‑rate contracts | Rejection is a breach under 11 U.S.C. § 365(g); it does not modify or abrogate the contract or filed rate; FERC cannot force continued performance or block rejection | Rejection of filed‑rate contracts alters essential terms of the filed rate, so FERC approval is required and it can require continued performance | Rejection is merely a breach; it does not change filed rates and FERC cannot compel continued performance or usurp the bankruptcy court’s rejection power |
| Remedy | Vacate FERC orders that purport to bind bankruptcy process and require continued performance | Affirm or limit relief; maintain agency orders | The court vacated the four challenged FERC orders in full |
Key Cases Cited
- Off. Comm. of Unsecured Creditors of Mirant Corp. v. Potomac Elec. Power Co., 378 F.3d 511 (5th Cir. 2004) (held rejection under § 365 is a breach and does not permit FERC to force continued performance)
- FERC v. Ultra Res., Inc. (In re Ultra Petroleum Corp.), 28 F.4th 629 (5th Cir. 2022) (reaffirmed Mirant; bankruptcy courts may authorize rejection of filed‑rate contracts without FERC approval)
- Mission Prod. Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 1652 (U.S. 2019) (Supreme Court: "rejection is breach, and has only its consequences")
- FERC v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols., Corp.), 945 F.3d 431 (6th Cir. 2019) (contrasting position: held FERC approval required to reject certain filed‑rate contracts)
- FPC v. Sierra Pacific Power Co., 350 U.S. 348 (U.S. 1956) (Mobile–Sierra doctrine: freely negotiated wholesale energy contracts are presumed just and reasonable absent public‑interest harm)