Background

Pioneer Natural Resources contracted to sell natural gas to MIECO, L.L.C. under a sales agreement governed by New York law. During Winter Storm Uri in February 2021, Pioneer invoked the contract's force majeure clause to excuse its failure to deliver agreed-upon volumes of gas. MIECO sued for breach of contract, arguing that Pioneer improperly invoked force majeure and was obligated to purchase replacement gas on the spot market to fulfill its delivery obligations. The district court granted Pioneer summary judgment, and MIECO appealed.

The Force Majeure Interpretation Dispute

The central dispute turned on interpreting the contract's force majeure provision, which defined force majeure as an "event or circumstance which prevented one party from performing its obligations." MIECO argued that "prevent" required literal impossibility of performance under New York law. The Fifth Circuit rejected this interpretation, holding that dictionary definitions of "prevent" are not limited to impossibility, and that requiring impossibility would render other contractual provisions meaningless—specifically, the clause requiring parties claiming force majeure to exercise "due diligence" to overcome the event would be superfluous if only impossible events qualified. The court further noted that limiting "prevent" to impossibility would render the list of events excluded from force majeure, such as the ability to sell or purchase gas at a better price, largely superfluous.

The "Seller's Gas Supply" Issue

A critical interpretive question involved whether Pioneer's contractual "gas supply" included gas available for purchase on the spot market. The contract provided that "loss or failure of seller's gas supply" did not constitute force majeure unless caused by enumerated events. The Fifth Circuit held that under New York law, the phrase "seller's gas supply" referred only to gas Pioneer produced from the Permian Basin oil field and sent to a third-party processing plant—not gas available on the spot market. The court reasoned that the use of the possessive "seller's" suggested the gas supply was owned or possessed by the seller, which could not be said of gas on the spot market.

Due Diligence Requirement and Remand

Despite ruling in Pioneer's favor on contract interpretation, the Fifth Circuit reversed the grant of summary judgment on critical factual issues. The force majeure clause required Pioneer to exercise "due diligence" to overcome Uri's impact, and the court held that this duty was not limited to promptly restoring its gas supply. Genuine disputes of material fact remained regarding whether Winter Storm Uri actually prevented Pioneer's performance and whether Pioneer exercised the required due diligence, precluding summary judgment.

Implications for Practitioners

This decision clarifies that force majeure clauses governed by New York law do not require absolute impossibility of performance, but rather that the triggering event "prevent" performance in a manner consistent with the contract's plain language. The court's interpretation of "seller's gas supply" as limited to the seller's own production—rather than including spot market purchases—provides important guidance for drafting and interpreting supply obligations in natural gas sales agreements. The remand on the due diligence issue underscores that parties invoking force majeure must be prepared to demonstrate reasonable efforts to mitigate the impact of the force majeure event, not merely that the event occurred.