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Marathon Oil Co. v. Mercuria Energy America, LLC
The Business Court of Texas ruled that modified NAESB contract language expressly relieving a party claiming force majeure of any obligation to seek alternative gas supplies excused Marathon Oil from purchasing spot-market gas or buying back delivery obligations after a winter storm disrupted its natural gas production. The decision clarifies that parties to oil and gas contracts can contractually limit the scope of "reasonable efforts" required under force majeure provisions, even when such efforts might otherwise be commercially feasible.
Analysis
Business Court Construes Force Majeure Carve-Out in Industry Form Gas Contract: No Duty to Purchase Spot-Market Gas
Marathon Oil declared force majeure during a winter storm and delivered less natural gas than contracted to energy trader Mercuria Energy America, triggering a breach of contract dispute over whether Marathon was required to purchase spot-market gas to fulfill delivery obligations. The Business Court of Texas held that the contract's force majeure provision relieved Marathon of any obligation to seek alternative gas supplies including spot-market purchases, construing 'seller's gas supply' to refer only to gas Marathon had available and not gas available for purchase on the spot market.
Business Court Enforces NAESB Transaction Confirmations in Natural Gas Force Majeure Dispute
Marathon Oil successfully defended its force majeure declaration after the Business Court of Texas held that a pipeline delivery term in its transaction confirmation became binding despite Mercuria's failure to check a box or expressly object to the term. The court ruled that timely transaction confirmations did not materially differ and combined with the parties' NAESB base contract to form an integrated agreement supporting Marathon's reduced delivery obligations.
Business Court Resolves Transaction Confirmation Dispute in Post-Winter Storm Uri Force Majeure Case
Marathon Oil invoked force majeure under a NAESB-form natural gas purchase agreement, with Mercuria challenging whether transaction confirmations specifying pipeline delivery terms were binding contract components. The Business Court held that both parties' transaction confirmations—despite only Marathon's containing the critical pipeline delivery specification—did not materially differ and thus combined with the base contract to form an integrated agreement supporting Marathon's force majeure declaration.
Texas Business Court Holds Force Majeure Clause Excused Spot Market Purchases and Buybacks After Winter Storm Uri
The Business Court of Texas ruled that modified NAESB contract language expressly relieving a party claiming force majeure of any obligation to seek alternative gas supplies excused Marathon Oil from purchasing spot-market gas or buying back delivery obligations after a winter storm disrupted its natural gas production. The decision clarifies that parties to oil and gas contracts can contractually limit the scope of "reasonable efforts" required under force majeure provisions, even when such efforts might otherwise be commercially feasible.