Chesapeake Energy has run into a fight with its Chapter 11 reorganization plan as it is not only opposed by the Royalty Owners Committee but also by the Federal Energy Regulatory Commission.
FERC does not want the Federal Bankruptcy Court in the Southern District of Texas to have “exclusive jurisdiction” since it would preclude FERC from controlling Chesapeake’s contractual pipeline obligations. It argues the bankruptcy court “may not divest other courts of their concurrent jurisdiction to interpret bankruptcy court orders.”
“Although this Court has jurisdiction to authorize rejection (of contracts)—it cannot deprive FERC of its authority to make certain determinations under non-bankruptcy law,” argued FERC in an objection filed this week. It also contends the agency should not have to contend with a plan purporting to compel it to cede its authority under the Natural Gas Act to the Bankruptcy Court.
As for the Royalty Owners Committee’s objection, “Chesapeake deliberately excluded royalty owners in the pre-bankruptcy restructuring support agreement negotiations. The Debtors then took the draconian position that all royalty owners who were owed pre-petition amounts were unsecured creditors. As such, the Debtors’ actions speak louder than their words.”
The royal owners charged that unsecured claims total more than $5 billion while only $1 million is set aside for the class into which they fall, leaving them with “effectively zero.”
The group also stated that it has grave concerns with the handling of their accounts by Chesapeake. It also raised concerns about perceived inconsistencies in statements “believed to be either overstated, above market, or in violation of applicable law or lease terms.”
