United States District Court, D. Alaska
ORDER CERTIFYING QUESTIONS TO THE SUPREME COURT OF
ALASKA [[1]]
SHARON
L. GLEASON UNITED STATES DISTRICT JUDGE.
This
case is presently before the United States District Court on
appeal from the United States Bankruptcy Court for the
District of Alaska.
Pursuant
to Alaska Rule of Appellate Procedure 407(a), the District
Court for the District of Alaska respectfully requests the
Alaska Supreme Court to answer the following certified
questions of Alaska law as set forth below:
1. Can a "dump lien" under AS 34.35.125 et
seq. apply to gas stored in its natural reservoir; if
so, was a mineral "dump" created under AS 34.35.140
and AS 34.35.170(a)(1) when All American drilled three
natural gas wells at the request of Cook Inlet?
2. Is a mineral "dump" created under AS 34.35.140
and AS 34.35.170(a)(1) each time that Cook Inlet releases
natural gas from the natural reservoir in which the gas was
formed and transports that gas through a pipeline to the
point of sale?
The
Alaska Supreme Court's answers to these questions may be
determinative of this appeal to which it appears there is no
controlling Alaska Supreme Court precedent. The state's
highest court has acknowledged the need to adapt the language
of prior cases interpreting Alaska's dump lien statutes
to modern times.[2] But the Alaska Supreme Court has not had
the opportunity to determine the applicability of those
statutes to natural gas reservoirs. The Alaska Supreme Court
may, in its discretion, answer these questions in any form
that it chooses.
BACKGROUND
The
facts underlying this case are not disputed. On October 1,
2014, All American Oilfield, LLC, an Alaska-based oilfield
services company, entered into a contract with Cook Inlet
Energy, LLC, to provide oilfield services, including the
operation, development, and extraction of gas on real
property in the North Fork field owned and/or leased by Cook
Inlet.[3] With the help of All American, Cook Inlet
accessed and extracted underground natural gas reservoirs,
which were later sold to third parties.
Previously,
on February 3, 2014, Cook Inlet and certain other affiliates
had refinanced an existing $100 million credit facility with
Apollo Investment Corp.[4] The agreement granted Apollo Investment
a security interest in substantially all of Cook Inlet's
assets, including the gas reserves at issue in this
case.[5]
In May
of 2015, All American concluded its work.[6] Cook Inlet failed
to pay All American for that work within the time period
required by the contract.[7] On June 11, 2015, All American recorded
a claim of lien pursuant to Alaska Statute § 34.35.125
et seq. in the Homer Recording
District.[8] After recording the lien, Cook Inlet paid
a portion of the balance remaining, but $267, 706.32 remained
unpaid.[9]
On
August 6, 2015, an involuntary petition for relief under
Chapter 11 of Title 11 of the United States Code was filed
against Cook Inlet in the United States Bankruptcy Court for
the District of Alaska.[10] On January 14, 2016, All American
filed an adversary complaint in the Bankruptcy Court seeking
a determination that its lien against Cook Inlet on the gas
stored in the North Fork wells took priority above all other
liens and encumbrances, including priority over Apollo
Investment's security interest.[11]
On
January 27, 2016, the Bankruptcy Court held a hearing where
Cook Inlet introduced evidence that the amount owed to Apollo
Investment far exceeded the value of all of Cook Inlet's
assets, including the North Fork gas reserves.[12] On April 4,
2016, All American moved for summary judgment, seeking a
determination that All American had a valid dump lien in the
North Fork gas reserves under AS 34.35.140 that took priority
over Apollo Investment's lien.[13] On April 8, 2016, Cook
Inlet cross-moved for summary judgment, asserting that All
American did not have a senior lien because it did not meet
the statutory requirements for a dump lien.[14]
On
August 16, 2016, All American filed a motion with the
Bankruptcy Court seeking to certify two questions relating to
the dump lien statutes to the Alaska Supreme
Court.[15]The Bankruptcy Court denied the motion
for certification, holding that "the statutory scheme
related to mining liens, and the classification of property
subject to those liens (e.g., against the mine or well,
against machinery and equipment, and against the
'dump' or 'mass') enables a straightforward
interpretation of those statutes."[16]
On
March 21, 2017, the Bankruptcy Court granted Cook Inlet's
motion for summary judgment in part and denied All
American's motion for summary judgment.[17] The court
held that "All American has failed to show that a dump
or mass exists to which its Lien Claim could attach"
under AS 34.35.140.[18] Accordingly, the court found "All
American cannot establish a priming dump lien in the natural
gas remaining in the North Fork wells superior to Apollo
Investment's secured interests under its previously
recorded deed of trust."[19]
All
American filed a timely appeal to this Court on May 31,
2017.[20] This appeal focuses on whether All
American has a valid dump lien under AS 34.35.140 that
"is prior and preferred over a deed, mortgage, bill of
sale, attachment, or other claim whether given before or
after the work for which the lien is claimed is
started."[21] All American asserts that the
territorial cases interpreting the dump lien statutes are
"grossly antiquated" and should the dump lien
statutory scheme require "removal" and
"piling" then it "necessarily means it can
never meaningfully apply to natural gas" because natural
gas is "stored in its natural reservoir over 90% of the
time."[22]
Two
territorial cases provide some interpretation of the statute.
However, at the time of those cases, the statute did not
include oil and gas. It was not until 1933 that the statute
was amended to include oil and gas. In Nordstrom v.
Sivertsen-Johnsen Min. & Dredging Co., Alaska's
territorial court reviewed the dump lien statutes and held
that minerals that were not piled up or collected into a dump
...