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that benefits the estate and thus entitled to administrative status under § 503(b)(1)(A).
Rules: 28 U.S.C. § 959 requires that, without abandonment, "property in the trustee's possession must be managed in accordance with state law. The fact that the debtor does not intend to operate the property does not diminish its duty under § 959 to manage the property in accordance with state law." Additionally, in Midlantic Nat. Bank v. N.J. Dept. of Envtl. Prot., 474 U.S. 494, 507 (1986), the Supreme Court said that "'the trustee may not abandon property in contravention of a state statute or regulation that is reasonably designed to protect the public health or safetey [sic] from identified hazards.'" Whether the obligation to plug the wells arose pre-petition or postpetition is irrelevant because the "continuing state-law-health-and-safety duty makes the plugging obligation a post-petition obligation that has pre-petition antecedents." Thus, the test or analysis that a court must perform in determining whether the Claim is entitled to administrative priority is "whether the obligation continues to arise anew with the passage of each day." If so, the Claim is an administrative expense claim.
Holding: Pursuant to 28 U.S.C. § 959 and Midlantic Nat. Bank v. N.J. Dept. of Envtl. Prot., 474
U.S. 494, 106 S.Ct. 755, 88 L.Ed.2d 859 (1986), the Debtor's "obligation to plug the wells in accordance with Texas law is a continuing post-petition obligation. American Coastal's continuing post-petition duty to conform with Texas law renders expenditures necessary to conform with that law actual and necessary costs of preserving the estate entitled to § 503(b)(1)(a) administrative priority."
Reasoning: "Bankrupt debtors are no different from any citizen in that they must comply with state and federal laws. Section 959(b) of Title 28 of the United States Code provides that a trustee or debtor-in-possession 'shall mange [sic] and operate the property in his possession ... according to the requirements of the valid laws of the State in which such property is situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof.'" And, although Midlantic was based on policy rather than on the text of the Bankruptcy Code, the Supreme Court nonetheless concluded in that case that "a trustee cannot abandon contaminated estate property if state health or safety law prohibits such abandonment." For support, the court notes that the Second, Third, and Sixth Circuits have all held that post-petition expenditures incurred to remedy pre-petition environmental liabilities are entitled to administrative expense priority. The court specifically disagreed with the test set forth by the District Court for the Northern District of Texas in the In re Nat'l Gypsum Co., 139 B.R. 397, 413 (N.D. Tex. 1992) case when it limited its holding to "where the 'costs were necessitated by conditions that posed an imminent and identifiable harm to the environment and public health.'" The court felt that, under the Midlantic case, courts are required to determine whether a debtor "violating a statute 'reasonably designed to protect public health and safety from identified hazards,' not the extent to which particular conduct imposes actual and imminent threats." Lastly, the court notes that there is a very real possibility that environmental liabilities may be so significant relative to a debtor's ability to pay that characterizing all or a portion of such environmental liabilities as an administrative expense may interfere with the bankruptcy itself. However, that fact pattern did not present itself in either the Midlantic case nor in this case and the court thus refrained from addressing the question.
Facts: On July 22, 2008, SemGroup, L.P., and certain direct and indirect subsidiaries (the "Debtors"), filed for chapter 11 bankruptcy and were consolidated for procedural purposes only. Chevron Products Company ("Chevron") had entered into a number of pre-petition contracts with three of the Debtors. Certain of the contracts allowed Chevron and the relevant debtors to perform triangular setoffs amongst each other. On the petition date, Chevron was a creditor of one of the Debtors with which it had contracted - although Chevron owed around $1.5 million to one of the debtors, two of the other debtors owed Chevron around $13.5 million. Thus, Chevron sought relief from the automatic stay to perform a 'triangular setoff' of debts owing between Chevron and the three debtor-entities with which it had contracted pursuant to the terms of the
