Alan Simpson: “this is an amendment to the Bankruptcy Code which is similar to another amendment that I offered last year to the energy…”

“this is an amendment to the Bankruptcy Code which is similar to another amendment that I offered last year to the energy bill and which was enacted into law during the 102d Congress. This amendment will exclude interests owned in oil and gas production from bankruptcy proceedings. It is important to note, however, that the interest in production that is excluded from bankruptcy is not owned by the debtor. Any debtor-owned production is still available to the court to satisfy claims of creditors. The interest being protected by my amendment is referred to in the industry as a ``production payment''. I would take just a moment to describe what a production payment is and how it comes into existence, so my colleagues will understand how necessary and fair this amendment is. There are instances when owners of a right to drill for and to produce oil or gas cannot afford to drill the well themselves. Drilling an oil or gas well often costs millions of dollars. It is a high risk venture, and there is no guarantee that production will be established after undertaking that phenomenal expense. Companies that purchase the product, of course, have an interest in seeing oil and gas wells being drilled. The production is the ``life blood'' of their business and they often are willing to share in the expense of drilling in return for a share in production.”