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CIRI asks court to continue Kenai Loop cases, despite Buccaneer bankruptcy

Eric Lidji | Petroleum News,Petroleum News

Cook Inlet Region Inc. believes a pair of legal cases over the Kenai Loop field should be resolved before operator Buccaneer Energy Ltd. completes its bankruptcy proceedings.

The Alaska Native corporation has asked the U.S. Bankruptcy Court for the Southern District of Texas to allow two cases concerning the onshore natural gas field to continue.

The cases concern correlative rights at the field, which CIRI believes is “essential” for determining how Buccaneer and its eight affiliate companies will sell its assets and distribute the resulting funds. “The debtors cannot, for example, effectively market assets to third parties in connection with the sale process proposed in the sale motion, or seek outside financing, unless and until the appropriate allocation of subsurface mineral rights for the Kenai Loop gas field is resolved,” attorneys for CIRI wrote in a July 1 motion.

Damages sought for drainage

CIRI is seeking damages against Buccaneer in Alaska State Court for claims of illegal drainage at Kenai Loop. In April 2014, the court stayed its decision to allow an Alaska Oil and Gas Conservation Commission case to conclude on pooling issues at the field.

In late May, the AOGCC required Buccaneer to set up an escrow account to collect proceeds from two producing wells at the field while the cases proceed. The order required Buccaneer to establish the account by June 1 and start making deposits June 10.

The AOGCC also proposed forced pooling or unitization to resolve future disputes. The area in question also includes state of Alaska and Alaska Mental Health Trust leases.

Buccaneer filed for bankruptcy protection on May 31 and is proposing an auction of its Alaska assets in early August, a proposal that the court has yet to approve or reject.

Also challenging sale

CIRI is also challenging a point in the proposed sale.

In a motion to schedule the proposed auction, Buccaneer included its CIRI lease among the potential assets to be made available, noting that the lease was “pending litigation.”

CIRI wants the bankruptcy court to remove its lease from the assets made available at the auction, citing an Alaska State Court ruling that the lease expired by Jan. 9, 2013.