In re Memorial Production Partners, L.P., 011420 FED5, 18-20794
|Opinion Judge:||PER CURIAM|
|Party Name:||In the Matter of: MEMORIAL PRODUCTION PARTNERS, L.P., Debtor v. BETA OPERATING COMPANY, L.L.C., Appellee AERA ENERGY LLC; NOBLE ENERGY INC.; SWEPI LP, Appellants|
|Judge Panel:||Before STEWART, CLEMENT, and HO, Circuit Judges.|
|Case Date:||January 14, 2020|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
Appeal from the United States District Court for the Southern District of Texas USDC No. 4:18-CV-412
Before STEWART, CLEMENT, and HO, Circuit Judges.
PER CURIAM [*]
Appellants Aera Energy LLC's, Noble Energy, Inc.'s, and SWEPI LP's (the Previous Owners) appeal the district court's affirmance of a bankruptcy court's grant of summary judgment to appellee Beta Operating Co., approving Beta's bankruptcy plan. For the following reasons, we affirm.1
This case has its origins in the Previous Owners' 2007 sale of their interest in a lease of certain offshore oil and gas fields-the Beta Interests-to Pacific Energy Resources Ltd. (PERL). Inherent in offshore oil and gas production is the potential of significant future liabilities. One of those liabilities is the cost of ending production. Operators must decommission offshore oil and gas wells-colloquially, plug and abandon them-at the end of their life. 30 C.F.R. § 250.1703. Every lessee of an offshore oil and gas field- past and present-is jointly and severally liable for decommissioning the wells in their field. Id. § 556.604(d).
It is logical, then, for a seller of an offshore oil and gas lease interest to ensure that the buyer covers decommissioning costs. One of the mechanisms the Previous Owners used to do that here is a trust. When the Previous Owners sold the Beta Interests to PERL in 2007, PERL set up a trust-with it as the Settlor, the federal government as the beneficiary, and the Previous Owners as third-party beneficiaries-to hold assets to cover the cost of decommissioning the Beta Interests. The Trust Agreement-the document at issue in this case-set out the trust's terms. After PERL went bankrupt, Beta purchased the Beta Interests from PERL. When it did, it assumed PERL's obligations-including those under the Trust Agreement.
Prior to this controversy, the trust contained about $150 million of assets, comprised of cash and a $90 million Treasury Note. However, Beta wanted to substitute performance bonds-or sureties-for the securities in the trust. The government consented to the substitution; the Previous Owners did not. Beta tried again after it went bankrupt, asking the...
To continue readingFREE SIGN UP