Bankrupt Buccaneer Energy Ltd. is demanding more than $20 million from the state of Alaska, days after appearing to sell its remaining assets.
The Australia-based independent filed a motion Oct. 30 to compel the state to pay tax credits it claims it is owed under the Alaska’s Clear and Equitable Share (ACES) oil and gas tax system in U.S. Bankruptcy Court for the Southern District of Texas.
Buccaneer’s domestic subsidiary, Buccaneer Resources LLC is based in Houston.
On Oct. 27 AIX Energy LLC, an energy-finance company that in April purchased much of Buccaneer’s debt, won an auction for Buccaneer’s assets with a $44 million bid.
Miller Energy Resources Inc., which owns Cook Inlet Energy, was the only other participant with a $35 million bid.
The sale agreement is tentative pending final approval.
Buccaneer filed for Chapter 11 bankruptcy in May after Cook Inlet gas exploration came up empty and financing deals fell through.
Its claim that it is owed more than $20 million in ACES tax credits came about 40 days after the company paid $380,000 in property taxes and associated fees related to the small Kenai Loop gas field to the state and the Kenai Peninsula Borough, according to the filing.
The gas field in the city of Kenai is Buccaneer’s only producing asset.
The state has paid $37.9 million in ACES credits to Buccaneer to date, the company states.
Prior tax credit payments were made between two and six days after approval notifications were received from the state, Buccaneer claims, and the notifications for the three applications in question were dated Oct. 8, more than three weeks before the motion requesting the court order the state to pay was filed.
“The state’s current treatment deviates significantly from historical practice,” Buccaneer’s attorneys wrote.
Department of Revenue spokeswoman Lacy Wilcox said agency officials could not comment on the issue because it is pending litigation.
A hearing on the outstanding tax credits is scheduled for Nov. 12 in the Houston court.
Cook Inlet Region Inc. has objected to the auction and sale proceedings multiple times, claiming the expedited timing has not given affected parties enough time to review critical documents. The latest such objection was filed Nov. 4 regarding a proposed hearing about Buccaneer’s bankruptcy plan.
CIRI owns land adjacent to the Kenai Loop pad and is involved with Buccaneer and the state of Alaska in an ongoing Alaska Oil and Gas Conservation Commission hearing over how much it is owed for gas Buccaneer produced from the Kenai Loop field.
Buccaneer has acknowledged in the hearing that it produced gas attributable to the Southcentral Native regional corporation.
“It’s a question of how much. There’s no question that we’re due production from that field. I don’t want to beat around the bush on that,” CIRI Vice President Ethan Schutt said.
The funds in an escrow account that Buccaneer has been feeding with its production revenue should be enough to cover royalty payments to both the state and CIRI, according to Schutt.
Buccaneer was ordered to set up the account by the AOGCC as a way to segregate funds it may need to disburse later. According to a Nov. 3 court filing, about $8 million had been transferred to the account as of Oct. 31, and Buccaneer had $10.9 million in unrestricted cash, nearly all of which came from an ACES credit payment.
When the company filed for bankruptcy it claimed to have assets of less than $500,000 and liabilities between $50 million and $100 million.
To the degree that CIRI is asking for more than royalty payments “it gets a little dicier” as to where that money would come from, Schutt said.
Buccaneer also owes the Alaska Department of Natural Resources more than $605,000 for lease and royalty payments. The state was listed as the company’s ninth largest unsecured creditor for the amount in a June court filing.
Schutt said that CIRI has had several conversations with AIX representatives presuming it takes over Buccaneer’s assets, which also includes standing in a state Superior Court case that largely parallel’s the AOGCC docket.
“We have some terms to work out with (AIX) one way or another,” he said.
Elwood Brehmer is a reporter for the Alaska Journal of Commerce. He can be reached at firstname.lastname@example.org.