The City of Homer and local businesses were shocked last summer when the trustee of a bankrupt oil and gas exploration company’s assets demanded they give back money they were paid over a year ago. There are a lot of regrets over contracting with Buccaneer Energy. But a city official says he would do it again.
Buccaneer left Alaska owing a lot of people money. The company listed dozens of creditors in court documents when it filed for bankruptcy in 2014.
Buccaneer Resources and its eight subsidiaries are technically out of business. The corporation’s assets were sold to pay for some of its debts. But, Buccaneer’s shadow still hasn’t quite left Alaska. After the company shut down, people started getting letters from a trustee in charge of Buccaneer’s estate.
David Bundy is a private practice lawyer. He represents two Homer businesses that got letters from the trustee.
“And the purpose of the trustee’s notices was to ask creditors who received money within 90 days of the bankruptcy filing to pay that back to the bankruptcy estate. Because under bankruptcy law those payments might have been what is called a preference payment,” said Bundy.
Bundy says preference payments are a very old but often unheard-of part of bankruptcy law. He says companies on their way out usually have trouble paying their bills before they file for bankruptcy. They may pay a lot of one debt but very little of another.
“The reason the bankruptcy case wants that money is so it can be redistributed to all the creditors equally instead of getting some creditors ahead of others which is what a preference would be,” said Bundy.
He says the logic behind preferential payments is not a surprise to bankruptcy lawyers. But for everybody else it can sound ridiculous.
“My initial feeling was well baloney! We did our job. We took pride in the service. We collected the money [and] we shouldn’t have to pay any back,” said City of Homer Port and Harbor Director Bryan Hawkins.
Hawkins says Buccaneer docked its jack up rig in the Homer Port in 2012 before sending it out to drill for oil and gas in Cook Inlet.
“While the rig was at the dock and we had their tugs and rig support vessels here I think we received about $577,000 during those seven months,” said Hawkins.
The city was told to pay back more than $17,000. According to a report from the Homer City Manager they settled for $8,730.
Ross Spence is with the law firm representing the trustee, Snow Spence Green. He says letters were sent to dozens of businesses. Some settled and some proved they didn’t have to pay the trustee, and others are fighting in court.
Court documents show there were at least 10 local Homer businesses paid within 90 days of Buccaneer’s bankruptcy filing. One local business owner, who wants to remain anonymous, confirmed the Buccaneer trustee sued them for a large sum of money and they’re in the process of settling.
They said the amount demanded would be a huge blow to their business and they’d only take a similar contract in the future if the company paid cash up front.
Port and Harbor Director Bryan Hawkins says as unpleasant as the ending was, working with Buccaneer was still worthwhile for the city.
“It was a very big year for the City of Homer. That money went into our reserves. Also because we did in a small part support their efforts, a successful drilling operation took place at cosmopolitan that’s going to be proved up on by BlueCrest Energy,” said Hawkins.
The City of Homer ordered an analysis of Buccaneer’s impact on the Kenai Peninsula Borough. According to the Northern Economics report, the company spent well over $3.7 million dollars in the borough.
Now, Buccaneer is gone and it is unlikely they will ever be operating again.