Bankruptcy Court Holds Texas Chapter 56 Mineral Lien Claimants Not Entitled to Chapter 67 Withholding Protections
A Texas bankruptcy court denied a motion to stay pending appeal in a dispute over whether oilfield service providers holding Chapter 56 mineral liens can invoke Chapter 67's statutory withholding mechanism to intercept over $2.5 million in crude oil proceeds. The ruling affects Force Pressure Control and Axis Energy Services, which had demanded Plains Marketing withhold payments from debtor Barrow Shaver Resources' oil sales based on unpaid service claims totaling approximately $2.5 million.
Background and Procedural Posture
Barrow Shaver Resources Company LLC, an independent oil and gas operator in Texas, filed for Chapter 11 bankruptcy protection after oilfield service providers filed lien claimant affidavits in 2024 for unpaid services. Force Pressure Control, LLC claimed $2,054,436.24 plus legal interest and attorney's fees, while Axis Energy Services, LLC claimed $452,070.57. The case originated as an involuntary Chapter 7 petition filed by Force, Axis, and other creditors on July 23, 2024, before the debtor filed a voluntary Chapter 11 petition on August 19, 2024, leading the court to convert the matter to a voluntary Chapter 11 case.
The dispute centered on withheld funds totaling $2,506,506.81. Prior to bankruptcy, Force sent a letter to Plains Marketing, L.P., the purchaser of Barrow Shaver's crude oil, on May 3, 2024, asserting it was a mineral lien claimant under Texas Property Code Chapter 56 and requesting under Chapter 67 that Plains withhold payment
up to the amount of [Force's] claim from all oil and gas proceeds attributable to the operating and working interest in the wells located on the Lease until such time as you receive notice that the [Force] Claim has been satisfied.Axis sent a similar letter on July 15, 2024. Plains responded by filing a complaint for interpleader on August 17, 2024, informing the court it had held the funds in suspense and depositing them into the court registry pursuant to stipulation and court order.
The Debtor's Response
On September 6, 2024, Barrow Shaver answered the interpleader complaint and filed crossclaims against Force and Axis asserting four causes of action: (1) Turnover of the Withheld Funds Under 11 U.S.C. § 543, (2) Turnover of the Withheld Funds Under 11 U.S.C. § 542, (3) Axis and Force Willfully Violated the Automatic Stay, and (4) Damages for Willful Violation of the Automatic Stay. Axis and Force subsequently filed answers to both the interpleader complaint and the debtor's crossclaims.
The Stay Pending Appeal
Following an earlier ruling in the debtor's favor, Axis and Force filed a notice of interlocutory appeal and moved for a stay pending appeal. On March 3, 2025, the bankruptcy court issued a memorandum opinion denying the motion for stay pending appeal. The court's analysis of whether Chapter 56 mineral lien claimants qualify as interest owners entitled to invoke Chapter 67's statutory withholding mechanism represents a significant issue of Texas oil and gas law in the bankruptcy context.