The Supreme Court of Texas's answer could reshape how natural-gas sellers draft contracts, document supply decisions, and respond when an emergency sends spot prices sharply higher.
On August 7, 2026, the Supreme Court of Texas accepted two certified questions from the Fifth Circuit in MIECO L.L.C. v. Targa Gas Marketing L.L.C., a Winter Storm Uri dispute over the force-majeure provisions in the standard North American Energy Standards Board (NAESB) natural-gas contract. Following briefs on the merits, the Court will hear argument on December 2. The questions go directly to who bears the risk when gas remains available during a supply emergency, but only at sharply higher spot-market prices. As the Fifth Circuit has recognized, the answers to these questions are “of importance to a significant Texas industry and to those who rely on it[.]”
The certification follows an unusual appellate course. In December 2025, the Fifth Circuit—in an opinion by Judge Southwick, joined by Chief Judge Elrod and Judge Higginbotham—held that a nonproducer’s “gas supply” could include sources it had regularly used to perform the contract, including the spot market. Because Targa had historically purchased some gas from non-affiliates, the panel concluded that sharply higher prices amounted to economic hardship, which the contract didn't recognize as a categorical basis for excusing performance. It reversed summary judgment for Targa and remanded for factual development about available supply and reasonable efforts.
Targa sought rehearing, arguing that the decision conflicted with the Fifth Circuit’s earlier interpretation of the same NAESB language in MIECO v. Pioneer Natural Resources. And with the amicus assistance of the Texas Oil and Gas Association, Targa emphasized that the panel’s approach could turn ordinary sourcing practices into emergency-period obligations and create uncertainty across an industry that relies on a standard form.
While denying en banc rehearing, the Fifth Circuit granted a panel rehearing in part, issuing a revised per curiam opinion that significantly changed course. It withdrew the force-majeure section of its original opinion, acknowledging that its interpretation may have affected settled expectations and that Texas law did not clearly answer the issue. It then asked the Texas Supreme Court whether the NAESB provisions require a nonproducer seller to enter the spot market during a force-majeure event if the seller had previously used that market for part of its supply—and, if so, what “reasonable efforts” require.
The Supreme Court’s answers will matter well beyond the next severe weather event. If historical sourcing helps define “Seller’s gas supply,” companies will need detailed records connecting purchases to particular delivery obligations, and the Court must then decide what “reasonable efforts” to obtain spot-market gas require. A contrary answer may eliminate the need to reach that second question, although the Supreme Court may choose to reach the broader issue anyway. Either way, the Court’s analysis will affect pricing, drafting, operational decisions, and litigation strategy.
The case also offers an important appellate lesson: An adverse panel opinion need not end the matter when a federal court has made an Erie prediction on an unsettled and consequential question of state law. While no active Fifth Circuit judge requested an en banc poll, Targa’s rehearing petition, supported by TXOGA’s industry-focused amicus brief, still led the panel to withdraw its force-majeure analysis and certify the controlling questions to the Supreme Court of Texas. When state law is genuinely uncertain, rehearing, targeted amicus support, and certification should remain part of the appellate strategy.
Why It Matters
- Review existing language now. Parties that want a clear rule on replacement purchases should consider addressing spot-market obligations expressly rather than relying on the standard form.
- Preserve the operational record. Historical sourcing, available gas, contemporaneous market conditions, and mitigation efforts may become central to any future force-majeure dispute.
- Watch both questions. A decision that historical sourcing can require spot-market purchases will put the meaning of “reasonable efforts” squarely before the Court. While a contrary answer may eliminate the need to reach that issue, the Supreme Court remains free to frame its response more broadly.
- Don’t treat an adverse panel opinion as necessarily final. When the decision rests on unsettled state law, rehearing, certification, and well-targeted amicus support may provide a path to reconsideration even without en banc review.
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