Storey Minerals v. EP Energy E&P

Summarized by Danielle Scott , U.S. Bankruptcy Court, Southern District of West Virginia
16 hours 48 min ago

Case Type:

Business

Case Status:

Affirmed

Citation:

24-20477 (5th Circuit, Mar 10,2026) Published

Tag(s):

Ruling:

The Fifth Circuit affirmed the district court and bankruptcy court. The bankruptcy court had jurisdiction to decide the state-law issues underlying the administrative expense claim. The landowners were not entitled to an administrative expenses under 11 U.S.C. 503(b) in the Chapter 11 case

Procedural context:

After EP Energy filed for bankruptcy in October 2019, the bankruptcy court confirmed the debtor's plan in August 2020, which became effective on October 1, 2020 and established October 31, 2020 as the deadline for filing administrative expense claims. One day before that deadline, the MSB Owners, landowners who had leased mineral rights to EP Energy, filed an administrative expense claim under 11 U.S.C. 503(b)(1)(A). They contended that EP Energy's temporary cessation of production during the pendency of the bankruptcy terminated the leases under Texas law and that the debtor's continued operations constituted a trespass. MSB Owners explained that this would entitle them to administrative priority damages. Although they filed the motion with the bankruptcy court, the MSB Owners simultaneously sought a determination that the underlying lease-termination and tort issues could be litigated in state court. The bankruptcy court rejected that approach, concluding it had jurisdiction to decide these issues, since administrative expenses are a core bankruptcy proceeding. The bankruptcy court declined to abstain and proceeded to resolve the merits of the claims, ultimately determining that the leases had not terminated and denying the administrative expense motion. The MSB Owners appealed to the district court, which affirmed the bankruptcy court's decision. The MSB Owners then appealed to the United States Court of Appeals for the Fifth Circuit, challenging the bankruptcy court's jurisdiction, ripeness of the claims, and the interpretation of the lease provisions. The Fifth Circuit affirmed the district court and bankruptcy court, concluding that the bankruptcy court had jurisdiction to adjudicate the claims and that the landowners were not entitled to administrative expense priority.

Facts:

The Debtor, EP Energy E&P Company, L.P. ("EP Energy"), is an oil and gas operator that filed for Chapter 11 in October 3, 2019. The appellants, Storey Minerals and related landowners (collectively "MSB Owners"), owned mineral interests in sixteen oil-and-gas leases in Southern Texas for which EP Energy served as the lessee and operator. During the pendency of the bankruptcy, oil demand collapsed due to the pandemic in 2020. In response, EP Energy temporarily ceased production from wells in Eagle Ford field, including wells located on MSB Owners' leased premises. Production resumed approximately forty days later. The Chapter 11 plan was confirmed in August 2020 and became effective on October 1, 2020. In accordance with the Plan, the bankruptcy court set October 31, 2020 as the Administrative Expense Claims Bar Date. One day before the administrative expense claims bar date, MSB Owners filed a motion in the bankruptcy court seeking allowance of administrative expense claims under 11 U.S.C. 503(b)(1)(A). They argued that EP Energy's temporary cessation of production had automatically terminated the leases under their terms. According to the MSB Owners, once the leases terminated, EP Energy's continued extraction of oil and gas postpetition constituted trespass and conversion under Texas law. MSB Owners asserted that the damages arising from those alleged torts should be treated as administrative expenses. At the same time, the MSB Owners contended that the underlying lease termination and tort issues should be decided in state court and asked the bankruptcy court to make a threshold determination allowing them to pursue those claims. The bankruptcy court concluded that it had jurisdiction to resolve the dispute. The bankruptcy court denied the administrative expense motion and the district court affirmed. The MSB Owners then appealed to the United States Court of Appeals for the Fifth Circuit.

Judge(s):

Elrod, Duncan, Engelhardt

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!