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IN THE UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re:
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ATP Oil & Gas Corporation,
Debtor.
Chapter 11
Case No.: 12-36187
Hon. Marvin Isgur
DEBTOR’S MOTION PURSUANT TO FED. R. BANKR. P. 9019 FOR ORDER
APPROVING SETTLEMENT WITH ANADARKO PETROLEUM CORPORATION,
ANADARKO E&P ONSHORE LLC, AND THE UNITED STATES
DEPARTMENT OF THE INTERIOR
NOTICE UNDER COMPLEX CASE ORDER
A HEARING WILL BE CONDUCTED ON THIS MATTER ON OCTOBER 10,
2013, AT 1:30 P.M. AT U.S. BANKRUPTCY COURT, 515 RUSK AVENUE,
HOUSTON, TEXAS 77002.
IF YOU OBJECT TO THE RELIEF REQUESTED, YOU MUST RESPOND IN
WRITING, SPECIFICALLY ADDRESSING EACH PARAGRAPH OF THIS
PLEADING. UNLESS OTHERWISE DIRECTED BY THE COURT, YOU
MUST FILE YOUR RESPONSE WITH THE CLERK OF THE BANKRUPTCY
COURT WITHIN TWENTY-THREE (23) DAYS FROM THE DATE YOU
WERE SERVED WITH THIS PLEADING. YOU MUST SERVE A COPY OF
YOUR RESPONSE ON THE PERSON WHO SENT YOU THE NOTICE;
OTHERWISE, THE COURT MAY TREAT THE PLEADING AS
UNOPPOSED AND GRANT THE RELIEF REQUESTED.
REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEYS.
ATP Oil & Gas Corporation (“ATP” or the “Debtor”) submits this Motion Pursuant to
Fed. R. Bankr. P. 9019 for Order Approving Settlement with Anadarko Petroleum Corporation,
Anadarko E&P Onshore LLC, and the United States Department of the Interior (the “Motion”).
In support of its Motion, ATP respectfully states as follows:
I.
1.
JURISDICTION AND VENUE
This Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and
1334. Venue of the Debtor’s Chapter 11 case in this district is proper pursuant to 28 U.S.C. §§
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1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b). The statutory
predicates for the relief sought hereby are Section 105 of Title 11, United States Code (the
“Bankruptcy Code”), and Rule 9019 of the Federal Rules of Bankruptcy Procedure.
II.
2.
BACKGROUND
On August 17, 2012 (the “Petition Date”), the Debtor filed a voluntary petition
for relief pursuant to Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court
for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). Since the
Petition Date, the Debtor has continued to operate its business as debtor-in-possession pursuant
to Bankruptcy Code §§ 1107(a) and 1108. The U.S. Trustee appointed a committee of unsecured
creditors (the “Creditors’ Committee”) in this case on August 24, 2012. On November 7, 2012,
the U.S. Trustee appointed an official committee of equity holders in this case (the “Equity
Committee”).
3.
Prior to the Debtor succumbing to its financial struggles and commencing these
bankruptcy proceedings, the Bureau of Ocean Energy Management (“BOEM”) (a regulatory
agency under the Department of the Interior with governing authority over the Debtor’s federal
offshore oil and gas leases) had granted the Debtor a waiver from providing supplemental
bonding to cover potential costs of plugging, abandonment, site clearance, removal and
restoration (“Decommissioning Obligations”) for wells, equipment, platforms, pipelines,
facilities, and structures associated with or attributable to the Debtor’s federal oil and gas leases
(“OGLs”) and rights-of-use and easement (“RUEs”). In the weeks leading up to the Petition
Date, the Debtor, BOEM and the Bureau of Safety and Environmental Enforcement (“BSEE”
and, together with BOEM and other agencies at the Department of the Interior collectively
referred to at times as, “DOI”) engaged in discussions related to the Debtor’s financial condition,
whether the Debtor’s request for an extension of its supplemental bonding exemption would be
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granted or denied, and the potential processes and related mechanics that might be put into place
by the Debtor and DOI to address present and future Decommissioning Obligations related to
certain of Debtor’s OGLs and RUEs.
Ultimately, however, BOEM revoked the Debtor’s
supplemental bonding waiver pursuant to a letter issued by BOEM on August 17, 2013.
4.
During the pendency of this Chapter 11 case, the Debtor maintained an open
dialog with BOEM regarding the extent of its Decommissioning Obligations and the means for
addressing them.
BOEM, in turn, has updated and revised its supplemental bonding
requirements for various offshore properties as the parties’ discussions progressed.
Most
recently, BOEM estimated that the Debtor would be required to provide approximately $153
million in supplemental bonding for Interior Lease No. OCS-G 14016, Mississippi Canyon
Block 711 of the offshore Louisiana Outer Continental Shelf (the “MC 711 Lease”), plus
additional amounts for the Debtor’s other Gomez Properties.1
5.
While the Gomez Properties once were a profitable and producing asset,
production volumes declined as the producing wells aged and the Gomez Properties became
uneconomical to operate, generating losses of approximately $4 to $6 million per month. Facing
this economic reality, the Debtor engaged in months of negotiation with the various Gomez
stakeholders in an effort to reach a solution that would allow the Debtor to continue production
from the Gomez Properties for the benefit of the Gomez stakeholders.
6.
Those negotiations did not bear fruit and, on April 24, 2013, BSEE issued an
order directing the Debtor to shut-in operations on its Gomez Properties by April 30, 2013 (the
“BSEE Shut-In Order”). The Debtor completed its shut-in of the Gomez Properties by April
30, 2013, and from that date forward has not produced any hydrocarbons from the Gomez wells.
1
The Debtor defines the Gomez Properties as its deepwater leases involving all or parts of three offshore
blocks, including Mississippi Canyon 711, 754, and 755, and related rights of way.
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On May 22, 2013, the Debtor filed its Motion for Entry of an Order Pursuant to 11 U.S.C. §
365(a) Authorizing Rejection of Certain Unexpired Leases and Executory Contracts Related to
the Debtor’s Gomez Properties and Abandonment of Any Interests Relating Thereto [Docket No.
1902] (the “Gomez Rejection Motion”).
7.
Anadarko E&P Onshore LLC and certain of its affiliates (collectively,
“Anadarko”), among others, objected to the Gomez Rejection Motion on the grounds that
abandonment of the Gomez Properties would violate the Supreme Court’s holding in Midlantic
Nat’l Bank v. New Jersey Dep’t of Envtl. Prot., 474 U.S. 494 (1986). See Docket No. 1981.
Following a lengthy hearing, the Court overruled Anadarko’s objection and granted the Gomez
Rejection Motion by order dated June 13, 2013 [Docket No. 1999] (the “Gomez Rejection
Order”). The Court also issued a Memorandum Opinion [Docket No. 2078] setting forth the
basis for the Gomez Rejection Order.
8.
On June 14, 2013, following entry of the Gomez Rejection Order, DOI ordered
Anadarko to (i) decommission all wells, pipelines, platforms and other facilities on the MC 711
Lease and (ii) maintain the ATP Innovator floating production platform (the “Innovator”)
located on the MC 711 Lease until such platform is removed. Pursuant to federal regulations
governing OGLs, DOI contends that Anadarko, as a predecessor in title on the MC 711 Lease, is
liable for all decommissioning obligations that accrued while it held record title to the Lease, as
well as maintenance of any platform located on the lease until such platform is removed.2
Anadarko disputed certain of DOI’s contentions regarding its decommissioning and maintenance
obligations, and indicated its intent to challenge DOI’s June 14, 2013 order in federal district
court.
2
See 30 C.F.R. § 250.1702.
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9.
Anadarko appealed the Gomez Rejection Order and related Memorandum
Opinion to the District Court for the Southern District of Texas (the “District Court”). See
Docket No. 2109. In addition, Anadarko sought and obtained from the Court a stay of the
Gomez Rejection Order pending its appeal, conditioned upon Anadarko’s filing of an appeal
bond pursuant to which Anadarko guaranteed and agreed—pending its appeal—to perform
decommissioning obligations on the MC 711 Lease in accordance with applicable nonbankruptcy law as if the property were in fact abandoned by the Debtor. See Docket Nos. 2139,
2144. Anadarko sought the stay to prevent further disposition of the MC 711 Lease, the Debtor’s
interest in the MC 711 Lease and the Innovator, arguing they may remain property of the
Debtor’s estate and the Debtor retains its operations and maintenance and decommissioning
obligations related thereto until such time as the Gomez Abandonment Order is no longer stayed.
While the Debtor contends its relinquishment of the relevant leases renders any stay order moot,
that issue has not been fully decided by this Court.
10.
Anadarko’s appeal was docketed in the District Court on August 9, 2013 (Docket
No. 2357; Civil Action 4:13cv1924); however, the District Court entered an order staying
Anadarko’s appeal on August 14, 2013 (Appeal Docket No. 8), pending settlement discussions
among Anadarko, the Debtor and DOI (among others).
11.
Those settlement discussions culminated in the MC 711 Maintenance and
Decommissioning Agreement (the “Agreement”) among the Debtor, Anadarko, and DOI, a fully
executed copy of which is attached hereto as Exhibit A.
In summary, per the terms and
conditions of such Agreement, the parties have agreed, among other things as set forth in Exhibit
A, to the following:

Anadarko will not seek judicial review or contest the validity of DOI’s June 14, 2013
order that Anadarko perform decommissioning of the MC 711 Lease;
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
Anadarko will (i) withdraw and move to dismiss with prejudice its appeal of the Gomez
Rejection Order, (ii) withdraw its performance bond or otherwise move to dissolve the
stay pending appeal granted by this Court and for the release of its appeal bond, and (iii)
withdraw any outstanding objections to the proposed sale of substantially all of Debtor’s
producing offshore assets to an entity to be formed by the Debtor’s DIP lenders
(“Newco”);

Although Anadarko does not stand in the shoes of ATP, as part of the consideration for
this Agreement, Anadarko agrees to undertake (i) decommissioning of the Innovator and
all of the wells on the MC 711 Lease, including Gomez well #8, even though Anadarko
contends it has no obligation to decommission this well drilled by the Debtor after
assignment of Anadarko’s record title interest to the Debtor, and (ii) the necessary
maintenance of the Innovator until decommissioning of the Innovator is accomplished;

Without purporting to bind or prejudice the rights of ATP IP, a non-debtor affiliate, ATP
agreed that Anadarko is authorized, to the extent such authority is vested with ATP itself,
to board the Innovator and take all necessary actions to decommission the Innovator,
including, but not limited to, the removal, extraction, use or disposal of all property,
materials and equipment within, on or connected to, the Innovator. In essence, ATP
consents to Anadarko taking such steps to the extent its consent is necessary;

DOI, with the consent of the Debtor, will release the Debtor’s existing $3 million areawide bond (the “Area-Wide Bond”) to Anadarko to reimburse, at least in part, Anadarko
for performance of maintenance and decommissioning activities on the MC 711 Lease;

Other than the payment of the proceeds of the Area-Wide Bond to Anadarko, neither
ATP nor its estate will be liable for any other or additional amounts related to the
decommissioning of the Innovator or the MC 711 Lease, unless otherwise provided in the
Agreement;

DOI will not require Anadarko to perform any work necessary to improve the condition
of the Innovator beyond that which renders it reasonably safe for decommissioning;

Except for the Innovator, which DOI requires Anadarko to decommission as soon as
practicable, DOI will grant an extension of the one-year decommissioning deadline to
June 30, 2015 to allow Anadarko to complete decommissioning of the MC 711 Lease;
and

The parties to the Agreement will provide releases to one another on the terms and to the
extent as set forth therein.
III.
12.
RELIEF REQUESTED
Accordingly, pursuant to Federal Rule of Bankruptcy Procedure 9019 and Section
105(a) of the Bankruptcy Code, the Debtor respectfully requests that the Court authorize and
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approve the Agreement, as a reasonable compromise and settlement of certain claims and issues
among the Debtor, Anadarko, and DOI that is in the best interests of the Debtor’s estate.
13.
The Agreement is the result of extensive arms’-length negotiations among the
Debtor, Anadarko, and DOI, each of whom have been represented by separate counsel, and
results in significant benefits to the Debtor’s estate.
As described above, the Agreement
facilitates a timely and effective decommissioning of the MC 711 Lease, as well as the necessary
maintenance and decommissioning of the Innovator; alleviates any burden on the estate
associated with performing such maintenance and decommissioning obligations; removes the
uncertainty and expense associated with Anadarko’s appeal of the Gomez Rejection Order or the
DOI’s June 14, 2013 order; avoids the prospect of having to deal with any further objections by
Anadarko to the Debtor’s pending asset sale (including the further expense and uncertainty
associated with any appeal Anadarko may have pursued following entry of a final sale order);
and eliminates further legal challenges associated with any arguments the Debtor is obligated to
maintain the Innovator and timely undertake decommissioning of the MC 711 Lease. In short,
the Agreement provides substantial, concrete and immediate benefit to the Debtor and its estate.
Accordingly, the Debtor submits that entry into the Agreement is in the best interests of the
Debtor’s creditors and its estate and should be approved by the Court.
14.
Bankruptcy Rule 9019(a) provides that after notice and a hearing a court may
approve a proposed settlement of a claim. The settlement of time-consuming and burdensome
litigation, especially in the bankruptcy context, is encouraged and “generally favored in
bankruptcy.” In re World Health Alternatives, Inc., 344 B.R. 291, 296 (Bankr. D. Del. 2006);
see also In re Penn Cent. Transp. Co., 596 F.2d 1102 (3d Cir. 1979) (“[i]n administering
reorganization proceedings in an economical and practical manner it will often be wise to
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arrange the settlement of claims …”) (quoting In re Protective Comm. for Indep. Stockholders of
TMT Ferry, Inc. v. Anderson, 300 U.S. 414, 424 (1968)). And numerous courts have approved
settlements of a debtor’s environmental liabilities as “fair and reasonable.” In re High Voltage
Engineering Corp., 397 B.R. 579, 603 (Bankr. D. Mass 2008), aff’d 403 B.R. 163 (D. Mass.
2009); see also In re Witt, 473 B.R. 284 (Bankr. N.D. Ind. 2012).
15.
In deciding whether to approve a proposed settlement, the Court is required to
exercise its sound discretion in assessing the reasonableness of a proposed settlement. In re
World Health Alternatives, 344 B.R. at 296; see also In re Honeywell, 93 B.R. 291, 294 (Bankr.
S.D. Fla. 1988); In re Jackson Brewing Co., 624 F.2d 599 (5th Cir. 1980); In re Teltronics
Services, Inc., 762 F.2d 185 (2d Cir. 1985).
Moreover, a bankruptcy court need not be
convinced that the proposed settlement is the best possible, but “need only conclude that the
settlement falls within the reasonable range of litigation possibilities somewhere above the
lowest point in the range of reasonableness.” In re Nutritional Sourcing Corp., 398 B.R. 816,
833 (Bankr. D. Del. 2008).
16.
And, of course, Section 105 of the Bankruptcy Code otherwise empowers the
Court to “issue any order, process, or judgment that is necessary to carry out the provisions of
this title.” 11 U.S.C. § 105(a).
17.
Here, it is plainly clear that the Agreement is in the best interests of the Debtor’s
estate and its creditors. First, the Agreement permits finality of the order that eliminates the
Debtor’s obligation to perform significant maintenance and Decommissioning Obligations of the
Debtor’s estate relating to the Innovator and those Gomez Properties located on the MC 711
Lease, while assuring that those obligations are performed by a responsible party whose
undertakings will protect the environment and public health and safety. Second, the Agreement
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provides for broad releases of the Debtor by both DOI and Anadarko and allows the Debtor to
avoid spending further scarce estate resources in defending Anadarko’s appeal of the Gomez
Rejection Order. As with any litigation, the outcome of Anadarko’s appeal is uncertain. The
Agreement produces a substantial and material benefit to the Debtor’s estate and at the same
time allows the Debtor to avoid the risks and costs associated with protracted litigation of the
Anadarko appeal. Third, the Agreement also removes a potential obstacle to the closing of the
Debtor’s asset sale by eliminating not only any objection Anadarko may have at the final sale
hearing but also any appeal Anadarko may have pursued following entry of a final sale order.
Fourth, the Agreement minimizes the potential for additional administrative expense claims that
could arise from damage to the environment and neighboring facilities in the Gulf of Mexico if
the Innovator were to be unmanned.
18.
Finally, Anadarko estimates that over 200 tons of spare parts, equipment,
chemicals and other goods (collectively, the “Materials”) previously used for either long-term
care and maintenance of the Innovator, or the treatment of hydrocarbons processed thereon are
currently stored on the Innovator. Other than certain of the chemicals, the Materials will not be
used during decommissioning and storing the excess Materials on the Innovator both complicates
decommissioning and threatens the environment and other production facilities in the Gulf of
Mexico, particularly during hurricane season when the Innovator may become unmanned and the
excess Materials may become unsecured causing damage to both the environment and
neighboring facilities.
Additionally, the excessive weight of the unused Materials requires
greater effort to keep the Innovator afloat and increases the risk that it may sink. Consistent with
the federal regulations governing decommissioning activities3 and the Debtor’s obligations under
3
See 30 C.F.R. §§ 1700-1754.
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its Platform Use Agreement4 with the owner of the Innovator, the Agreement contemplates
Anadarko’s removal, extraction, use or disposal of any materials and equipment within, on or
connected to, the Innovator, and application of the proceeds therefrom to offset a portion of its
costs for manning and decommissioning the Innovator. To the extent the Materials are property
of the Debtor’s estate, Anadarko is permitted to remove, dispose of and retain any proceeds from
those assets. As such, the Agreement benefits both the Debtor’s estate and the public interest by
decreasing the risks posed by the unused Materials and any resulting administrative expense
claims they may present against the Debtor’s estate.
19.
For the foregoing reasons, the Debtor believes that the terms of the Agreement are
fair and reasonable and constitute a reasonable exercise of business judgment and should be
approved in all respects.
IV.
20.
NOTICE
Notice of this Motion shall be provided in accordance with this Court’s Order
Establishing Notice Procedures [Docket No. 132].
WHEREFORE, the Debtor respectfully requests entry of an order granting the relief
requested herein and such further relief as may be just and necessary under the circumstances.
[Remainder of Page Intentionally Left Blank]
4
See Platform Use Agreement by and Between ATP Infrastructure Partners, L.P. and ATP Oil & Gas
Corporation, dated March 6, 2009, § 11(c)(11) [Docket No. 1924, Exhibit A].
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Dated: September 10, 2013
Respectfully submitted,
MAYER BROWN LLP
By:
/s/ Charles S. Kelley
Charles S. Kelley
Attorney-in-Charge
State Bar No. 11199580
Southern District of Texas Bar No. 15344
700 Louisiana Street, Suite 3400
Houston, TX 77002-2730
Telephone: 713 238-3000
Facsimile: 713 238-4888
and
Craig E. Reimer (admitted pro hac vice)
Rue K. Toland (admitted pro hac vice)
71 South Wacker Drive
Chicago, IL 60606
Telephone: 312 782-0600
Facsimile: 312 701-7711
ATTORNEYS FOR THE DEBTOR AND DEBTORIN-POSSESSION
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Exhibit A
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IN THE UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re:
ATP Oil & Gas Corporation,
Debtor.
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Chapter 11
Case No.: 12-36187
Hon. Marvin Isgur
ORDER GRANTING DEBTOR’S MOTION PURSUANT TO FED. R. BANKR. P.
9019 FOR ORDER APPROVING SETTLEMENT WITH ANADARKO PETROLEUM
CORPORATION, ANADARKO E&P ONSHORE LLC, AND THE UNITED STATES
DEPARTMENT OF THE INTERIOR
Upon the motion (the “Motion”) of ATP Oil & Gas Corporation (“ATP” or the
“Debtor”) pursuant to Federal Rule of Bankruptcy Procedure 9019 for an Order approving the
Agreement between and among the Debtor, Anadarko Petroleum Corporation, Anadarko E&P
Onshore LLC, and the United States Department of the Interior; and the Court having
jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. § 1334
and 28 U.S.C. § 157(b); and due and proper notice of the Motion having been provided; and it
appearing that in the Debtor’s sound business judgment, the relief requested is in the best
interests of the Debtor and its estate and creditors; and the Court having reviewed the Motion;
and the Court having determined that the legal and factual bases set forth in the Motion establish
just cause for the relief granted herein; and upon all of the proceedings had before the Court and
after due deliberation and sufficient cause therefor; it is hereby:
ORDERED that the Motion is GRANTED in its entirety; and it is further
ORDERED that all capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms as set forth in the Motion; and it is further
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ORDERED that the MC 711 Maintenance and Decommissioning Agreement attached as
Exhibit A to the Motion is approved in all respects; and it is further
ORDERED that, the Debtor is authorized to enter into the MC 711 Maintenance and
Decommissioning Agreement and take all actions contemplated by the Agreement; and it is
further
ORDERED that the Court shall retain jurisdiction to hear and determine all matters
arising from the implementation of this Order.
SIGNED this ___ day of October, 2013.
____________________________________
MARVIN ISGUR
UNITED STATES BANKRUPTCY JUDGE
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