In re EP Energy: Administrative Claims and Lease Termination Jurisdiction

This episode details a case from the United States Court of Appeals for the Fifth Circuit affirming that a bankruptcy court has the subject-matter jurisdiction to resolve state-law property disputes when they are central to an administrative expense claim. The case originated when the MSB Owners alleged that EP Energy triggered an automatic termination of their oil and gas leases by pausing production for forty days during the pandemic. The court determined that because the landowners filed for administrative priority under the Bankruptcy Code, the bankruptcy court was the appropriate forum to adjudicate the underlying trespass and contract claims. On the merits, the court applied Texas law to conclude that the leases did not terminate because the operator resumed production within the contractually allowed 120-day grace period. The ruling clarifies that "temporary cessation" clauses provide alternative methods for maintaining a lease, meaning new drilling is not required if existing production is restored timely. Ultimately, the court rejected the appellants' arguments regarding ripeness and abstention, finding the legal issues sufficiently concrete for a final federal ruling.