There is a new suitor for Buccaneer Energy’s Alaska assets and a tangled web of legal challenges continue for the bankrupt independent producer.

Miller Energy Resources Inc. announced its intent to spend $40 million to $50 million on “substantially all” of Buccaneer’s Alaska holdings in a Sept. 15 release. The Knoxville, Tenn.-based independent entered a non-binding letter of intent with Buccaneer, according to the release.

Miller is the parent company of Cook Inlet Energy LLC, which has an office in Anchorage.

Buccaneer’s Cook Inlet interests are scheduled to go up for bid Oct. 14, a result of the company filing for Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Southern District on May 31.

An Australian company, Buccaneer has operations in Houston, but its domestic work was primarily in Southcentral Alaska.

AIX Energy LLC, a Houston-based energy finance group, also has made it known that it will bid for Buccaneer’s Alaska holdings. In April, AIX purchased debt from Buccaneer’s major creditor, Meridian Capital International.

According to court filings, Buccaneer had no more than $50,000 in cash and at least $50 million and up to $100 million in liabilities when it made its claim for bankruptcy protection.

Buccaneer’s debt to unsecured creditors in Alaska is more than $2.1 million. The state of Alaska and nine Alaska-based companies are on a list of Buccaneer’s 30 largest unsecured creditors.

Once a promising new entrant to Cook Inlet when gas production was declining, Buccaneer seemingly spread itself too thin over the past two years to absorb exploration that came up empty and financing that fell through.

The bankruptcy proceedings have slowed down and complicated Buccaneer’s other ongoing cases before the Alaska Oil and Gas Conservation Commission and Alaska Superior Court in Anchorage.

The Superior Court case — closed June 5 pending resolution of the bankruptcy proceeding — is a lawsuit filed by Cook Inlet Region Inc. against Buccaneer for natural gas royalty payments the regional Native corporation claims it is owed as a result of production from two Buccaneer wells on the Kenai Loop pad in the city of Kenai.

CIRI, which owns a property adjacent to the Kenai Loop pad, claims it owns 20 percent of the Kenai Loop gas reservoir, and thus should be paid for a portion of what Buccaneer has produced.

The state Mental Health Trust Land Office owns the pad parcel that Buccaneer is producing from via an operating lease.

Ethan Schutt, vice president of land and energy development for CIRI, has said Buccaneer’s gas contract is for about $7 per thousand cubic feet, or mcf, of gas. Based on CIRI’s claims and Alaska Oil and Gas Conservation Commission production data, the total value of the gas produced from the Kenai Loop wells is about $47 million, meaning CIRI would be owed about $9.4 million if its assertions are correct.

An Alaska Oil and Gas Conservation Commission hearing that parallels the Superior Court case resumed Sept. 17 after an August agreement between Buccaneer and its creditors allowed the Texas bankruptcy court to lift a stay on the hearing.

CIRI counsel Jim Torgerson told the commissioners that Buccaneer had — as of Sept. 17 — not followed through on a May 22 commission order to set up an escrow account at an Alaska financial institution to hold its Kenai Loop revenues until the dispute is sorted out.

“From CIRI’s standpoint the first order of business is ensuring compliance with — Buccaneer’s compliance with the commission’s order and we would ask that the commission work to ensure that compliance with its order,” Torgerson said, according to a transcript of the proceedings.

Mental Health Trust Land Office Deputy Director John Morrison said in an interview that to his knowledge the last royalty payment the state agency received from Buccaneer was in June for May production.

CIRI’s Schutt has said his company is also owed a share of the royalties Buccaneer has paid to the Mental Health Trust Land Office, because those payments were made for gas that is technically CIRI’s.

Buccaneer, CIRI, the Mental Health Trust Land Office and the state Department of Natural Resources, which manages oil and gas leases on state land, negotiated for most of the year to reach a settlement outside of the commission until recently. All of the parties willing to comment have said they were close to an agreement several times but a sticking point is unclear. Buccaneer has been publicly quiet on this point and most others throughout the saga.

According to Morrison and the hearing transcript, a holding account was set up after Buccaneer unsuccessfully tried to establish the escrow account. Morrison said all of the Kenai Loop gas revenue was being diverted to the backup account.

Commission chair Cathy Foerster said that she was aware of an issue with the wording in the commission’s order that did not comply with the rules of the bank Buccaneer used and made it clear to the producer’s attorney Jon Katchen that action needs to be taken to resolve the escrow account issue.

“We’re as serious as a heart attack when we tell you to do something here … and it goes on a piece of white paper and it goes out to everybody and I’m not aware why it hasn’t happened — really doesn’t sound good,” Foerster said. “You need to get with our assistant attorney general and figure out what you’re going to do, what we need to do to get this escrow established and get it going.”

Ultimately, the commission agreed to continue the hearing Dec. 3 with the consent of the parties.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.