The following are summaries of selected civil opinions issued by the Fifth Circuit in June 2024. The summaries are overviews of particular aspects of the opinions; please review the entire opinions.
CONTRACTS: Force majeure provision in natural gas supply contract did not require showing that performance is impossible.
MIECO, LLC v. Pioneer Nat. Res. USA, 2024 WL 3418718 (5th Cir. June 16, 2024).
The North American Energy Standards Board (NAESB) publishes a standardized but customizable base contract for fuel supply. Using the NAESB contract, parties may contract for “firm” delivery, meaning either party may interrupt its performance without liability only to the extent that such performance is prevented for reasons of force majeure.
Pioneer produces natural gas from West Texas’s Permian Basin, and, after processing by a third party, sells the final product and transfers it to customers like MIECO. MIECO and Pioneer entered into a customized NAESB contract governed by New York law, providing for firm delivery of 20,000 MMBtu of natural gas daily from Pioneer to MIECO.
The parties customized the NAESB contract’s force majeure provision to excuse nonperformance when performance is “prevented” by unforeseeable events outside the nonperforming party’s reasonable control—expressly including freezing weather. To be outside the nonperforming party’s reasonable control, the nonperforming party must be unable to overcome or avoid the event’s effects through due diligence and reasonable efforts.