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The oil and gas industry is experiencing uncertainty due to the depressed and fluctuating price of crude oil. Many companies in the industry may soon be forced into bankruptcy. Bankruptcy cases involving oil and gas assets present a number of complex issues. One such issue often litigated is the proper characterization of the nature of oil and gas lease interests.

The characterization of an oil and gas lease is of critical importance in bankruptcy because it determines whether or not the debtor-in-possession or trustee (“debtor”) may dispose of the interest under section 365 of the Bankruptcy Code.

This article discusses (i) assumption and rejection of oil and gas leases under section 365 of the Bankruptcy Code, in general; (ii) the protection provided for lessees’ interests in oil and gas leases that are considered “leases of real property;” and (iii) cases which highlight the futility of a debtor lessor’s rejection of an oil and gas lease that is characterized as a “lease of real property.”  Read more:  http://www.law360.com/projectfinance/articles/653737/rejection-of-oil-and-gas-leases-may-prove-futile

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Camisha is the Founder and Managing Member of Simmons Legal. She is dedicated to assisting parties in protecting their interests in corporate restructuring, creditors’ rights, real estate transactions, other business transactions, and litigation matters.

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