[Congressional Record Volume 140, Number 146 (Saturday, October 8, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 8, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
            CLARIFICATION OF SECTION-BY-SECTION ON H.R. 5116

                                 ______


                            HON. JACK BROOKS

                                of texas

                    in the house of representatives

                        Friday, October 7, 1994

  Mr. BROOKS. Mr. Speaker, I would like to make certain clarifications 
to the section-by-section description I placed in the Record during the 
October 5, 1994 debate concerning H.R. 5116, the Bankruptcy Reform Act 
of 1994. Attached are descriptions of sections 208 and 216 of that Bill 
which should be inserted in lieu of the language currently in the 
Record.

     Section 208. Production payments.
       A production payment is an interest in certain reserves of 
     an oil or gas producer that lasts for a limited period of 
     time and that is not affected by production costs. The owner 
     has no other interest in the property or business of the 
     producer other than the interest in the reserves. The 
     production payment is created out of an oil and gas lease, 
     each of which is a real property interest. Production 
     payments represent a means by which capital-strapped oil 
     producers may monetize their property without giving up 
     operating control of their business. Although a number of 
     States use the ownership theory by treating production 
     payments as conveying interests in real property (See In re 
     Simasko Production Co, 74 B.R. 947 (D. Colo. 1987) 
     (production payment treated as a separate property 
     interest)), it is not clear that this treatment will 
     necessarily apply in all States in case of bankruptcy. As a 
     result, this section modifies section 541 of the Bankruptcy 
     Code to exclude production payments sold by the debtor prior 
     to a bankruptcy filing from the debtor's estate in property. 
     It is not the intent of this section to permit a conveyance 
     of a production payment or an oil and gas lease to be 
     recharacterized in a bankruptcy context as a contractual 
     interest subject to rejection under section 365 of the 
     Bankruptcy Code.
     Section 216. Limitation of avoiding powers.
       This section defines the applicable statute of limitation 
     period under section 546(a)(1) of the Bankruptcy Code as 
     being two years from the entry of an order of relief or one 
     year after the appointment of the first trustee if such 
     appointment occurs before the expiration of the original two-
     year period. Adoption of this change is not intended to 
     create any negative inference or implication regarding the 
     status of current law or interpretations of section 
     546(a)(1).
       The section is not intended to have any bearing on the 
     equitable tolling doctrine where there has been fraud 
     determined to have occurred. Further, the time limits are not 
     intended to be jurisdictional and can be extended by 
     stipulation between the necessary parties to the action or 
     proceeding.

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