Local & Regional
Wed July 29, 2009
Oklahoma City, OK – Citing a "significant impact on the governance of the oil and gas industry in Oklahoma," Attorney General Drew Edmondson yesterday filed an amicus brief before the Third Circuit Court of Appeals in the Semcrude bankruptcy case.
The attorney general interprets state law to create an implied trust between producers and companies like Semcrude. The proceeds in question therefore belong to the producers and should not be used to satisfy other debts. The bankruptcy court ruled that it would divide the proceeds between the secured creditors.
In his brief, intended to help Oklahoma oil and gas producers, Edmondson asks the federal court to allow the Oklahoma Supreme Court to answer questions surrounding the Oklahoma Production Revenue Standards Act (PRSA) currently at issue in the Semcrude case.
"The conflict in this case arises from the fate of oil and gas proceeds Semcrude was holding at the time it declared bankruptcy," Edmondson said. "Oklahoma producers claim those proceeds belong to them and should be kept separate from bankruptcy proceedings, but the company's secured creditors claim those funds should be used to cover Semcrude's debts.
"There are two questions concerning implied trusts that have yet to be interpreted by an Oklahoma court," Edmondson said. "My office issued an Opinion late last year stating that the statute imposes an implied trust, but the Delaware bankruptcy court disagreed with our conclusion. Since we have conflicting legal interpretations, and since this deals with Oklahoma law, we want the federal court to permit our state's highest court to decide these important issues."
Edmondson's amicus is in support of a motion filed by a group of Oklahoma oil and gas producers calling on the circuit court to send the questions to the state supreme court.
"Any interpretation of the PRSA will have an immediate and sustained impact on Oklahoma and its economy," the state's brief said. "Just as important, the interpretation of this particular statute will dictate the protections afforded to thousands of royalty interest owners in the future."