United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit

FILED July 19, 2022 No. 21-60017 Lyle W. Cayce consolidated with Clerk No. 21-60200

Gulfport Energy Corporation,

Petitioner,

versus

Federal Energy Regulatory Commission,

Respondent.

Petitions for Review of Orders of the Federal Energy Regulatory Commission Nos. RP20-1204, RP20-1236, RP20-1206, RP20-1233

Before Davis, Smith, and Engelhardt, Circuit Judges. Jerry E. Smith, Circuit Judge: The Bankruptcy Code allows debtors to breach and cease performing executory contracts if the bankruptcy court approves. We thus have held that debtors may “reject” regulated energy contracts even if the Federal Energy Regulatory Commission (“FERC”) would not like them to. Off. Comm. of Unsecured Creditors of Mirant Corp. v. Potomac Elec. Power Co. (In re Mirant Corp.), 378 F.3d 511, 515 (5th Cir. 2004). A sister circuit agrees, FERC v. Case: 21-60017 Document: 00516398943 Page: 2 Date Filed: 07/19/2022

No. 21-60017 No. 21-60200

FirstEnergy Sols. Corp. (In re FirstEnergy Sols., Corp.), 945 F.3d 431, 446 (6th Cir. 2019), and we confirmed our view mere months ago, FERC v. Ultra Res., Inc. (In re Ultra Petroleum Corp.), 28 F.4th 629, 634 (5th Cir. 2022). Nevertheless, FERC persisted. Anticipating the petitioner’s insol- vency, FERC issued four orders purporting to bind the petitioner to continue performing its gas transit contracts even if it rejected them during bankruptcy. The petitioner asks us to vacate those orders. Because FERC cannot coun- termand a debtor’s bankruptcy-law rights or the bankruptcy court’s powers, we grant the petitions for review and vacate the orders.

I. We start with legal background. We then turn to the facts. After ad- dressing the facts developed in the agency proceedings, we review the history of Gulfport’s bankruptcy, which began after FERC issued the subject orders.

A. The parties dispute how two legal regimes—the Bankruptcy Code and the Natural Gas Act—interact. But their dispute is narrow. The question is how a bankrupt debtor’s power to reject executory contracts interacts with FERC’s power to decide whether a party may change or cancel filed-rate con- tracts, which the agency regulates. To answer that question, we must review what rejection does and then explain how it relates to the Natural Gas Act. The Bankruptcy Code empowers debtors, “subject to the court’s ap- proval,” to “assume or reject any executory contract.” 11 U.S.C. § 365(a).1 That means that a debtor may choose either to perform (assume) or “breach” (reject), § 365(g), any contract “that neither party has finished performing,”

1 Technically, the Code vests that power in “the trustee,” 11 U.S.C. § 365(a), but a reorganizing “debtor in possession” has “all the . . . powers . . . of a trustee,” § 1107.