On July 19, 2017, the U.S. Court of Appeals for the Third Circuit (the “Court”) issued an opinion, upholding a district court’s ruling that downstream purchasers took oil purchased from a bankrupt intermediary, SemGroup L.P. (collectively with its affiliates including SemCrude L.P.), free and clear of the oil producers’ purported liens.
Background and the Bankruptcy Court Decision -
In a fact setting that is typical for an interstate transaction: oil was produced by a collection of producers and then purchased by a midstream company, SemGroup. Thereafter, SemGroup transported and/or stored the oil and, at the same time, commingled the producers’ oil with oil purchased from a multitude of other producers. SemGroup then sold the oil to a downstream buyer. The downstream buyer would buy for value, in the ordinary course, and without information regarding the source of the underlying production and without communicating with the producers.
Please see full publication below for more information.