Oil in Texas is an industry of mythic proportions. Steeped in legend and surrounded by stories of rags-to-riches fortune, the oil and gas economy in the Lone Star state is never far from the surface of the media news. But sometimes it’s not the best news, and reports of fraud, bankruptcy and underhanded dealings in the oil industry are enough to prompt most any law firm in San Antonio, at the heart of the Eagle Ford Shale, to brush up and get ready to handle cases like the one reported in the Daily Times.
No more than a couple hundred miles from the law firm in San Antonio that’s keeping a close eye on the state of the suit, an oil and gas deal is falling apart, spectacularly, in Houston, Texas. Claims that Citizens Bank of Kilgore loaned more than $1 million to the now bankrupt Hart Oil & Gas energy company are being resisted on more than one front, a sign that the industry is as insidiously enmeshed as any family ending up in family court can be.
The facts, as they can be interpreted from news reports, are thus: There was a $1 million loan issued to Hart Oil by Citizens Bank of Kilgore, but it was “sold to Palo Petroleum on Sept. 24, 2012, one day before Hart Oil & Gas filed for Chapter 11 bankruptcy protection.” Which means that now, Hart Oil is insisting that Citizens Bank’s claims during the bankruptcy proceedings that it is a secured creditor “is a violation of federal law.” Backed into a corner, Citizens Bank hasn’t responded to comment, and it’s looking bad for their office in this lawsuit.
So what does a law firm in San Antonio learn from an example like this? That taking on clients in the oil and gas industry in Texas means more than just being able to sort out mineral rights ownership claims—that having the know-how and expertise to deal with the entire economic model of the industry: including securities and business litigation, bankruptcy and contract law is a must. But wait, there’s more.
In a thickening plot, Hart Oil is claiming in court that scheming tactics were used by the new creditor Palo Petroleum to “force Hart Oil to sell its leasing rights it acquired from the Navajo Nation to a straw company created by [Palo] for significantly less than the leases were worth.” Which is a pretty underhanded tactic across the board. But another important element of the story you may have glossed over (you can bet the law firm in San Antonio didn’t) was that the rights were acquired from the Navajo Nation.
Meaning having an understanding of the intersection of law and business as it applies to Native American nations in Texas is a good idea, too. Which can be pretty difficult, since law school programs in Federal Indian Law and Tribal Law are highly specialized and few and far between. Being on top of your game as a firm or an attorney when you dabble in the oil and gas industry, especially in Texas, is nothing short of a necessity.