Pipeline owners file $300 million breach of contract lawsuit against midstream operator

An amended breach of contract lawsuit was filed by Magellan Midstream Partners and Plains All American Pipeline against Stampede Energy, seeking over $300 million in damages over an oil transport deal.

The lawsuit claims that Stampede did not meet minimum volume obligations on the BridgeTex pipeline from March 2015 through 2016, breaching its contract. The BridgeTex pipeline carries around 300,000 barrels per day from Colorado City, Texas to the Gulf Coast. Stampede is a privately held midstream operator.

From mid-2014 to early 2016, oil prices dropped by more than 70 percent, prompting production cuts and leading several energy firms to declare bankruptcy. Pipelines function like toll roads, so they are generally considered to be better protected from commodity price fluctuations, but with fewer barrels to ship, pipelines have been affected by output declines.

An amended petition filed March 22 claimed that Stampede owed the plaintiffs over $311.8 million, including interest and late fees, for breaching its shipping obligations. The BridgeTex firms also filed a claim against Ballengee Interests, which guaranteed payments owed by Stampede.

According to court documents, Stampede agreed in August 2014 to ship 30,000 barrels per day of crude and condensate on BridgeTex, which is about 10 percent of the pipeline’s capacity. Court filings state that Stampede executed a Transportation Service Agreement calling for the company to ship on the pipeline for 29 quarters.

Gregory D. Jordan is an Oil and Gas lawyer in Austin. To learn more, visit http://www.theaustintriallawyer.com or call 512-419-0684.

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