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American Midstream (Alabama Intrastate), LLC v. Rainbow Energy Marketing Corporation
The Texas Supreme Court reversed a $6.1 million judgment against pipeline owner American Midstream, holding that the trial court and Court of Appeals impermissibly "blue-penciled extra words" into Section 9.1 of a firm gas transportation agreement concerning when the owner's performance was excused due to imbalance requirements on a connected pipeline. The Court rejected Rainbow Energy's lost-profits claim, finding its use of the MAG-0005 agreement to fulfill forward sales contracts without corresponding forward supply was a "speculative, untested venture" for which lost profits could not be recovered.
Analysis
Texas Supreme Court Reverses $6.1 Million Pipeline Breach Award, Holds Courts Impermissibly Blue-Penciled Force Majeure Provision
The Texas Supreme Court reversed a $6,145,215.89 judgment against American Midstream, holding that the trial court and Court of Appeals impermissibly blue-penciled extra words into a firm transportation agreement's force majeure provision excusing performance when a connected pipeline owner requested balancing of receipts and deliveries. The Court further held that Rainbow Energy's use of the transportation agreement to fulfill forward sales contracts without corresponding forward supply constituted a speculative venture for which lost profits could not be recovered.
Texas Supreme Court Reverses $6.1 Million Award in Natural Gas Transportation Contract Dispute Over Balancing Services
The Texas Supreme Court reversed a $6.1 million judgment against pipeline owner American Midstream, holding that the trial court and Court of Appeals impermissibly "blue-penciled extra words" into Section 9.1 of a firm gas transportation agreement concerning when the owner's performance was excused due to imbalance requirements on a connected pipeline. The Court rejected Rainbow Energy's lost-profits claim, finding its use of the MAG-0005 agreement to fulfill forward sales contracts without corresponding forward supply was a "speculative, untested venture" for which lost profits could not be recovered.