Oil Companies Contaminated a Family Farm. The Courts and Regulators Let the Drillers Walk

Progress in the lawsuit was short-lived. In November 2019, shortly after the Ledgerwoods’ attorney sent discovery requests to Wise Oil & Gas, the company filed in a Texas court for voluntary Chapter 7 bankruptcy — a full liquidation of its assets.

Company executives acknowledged they declared bankruptcy to avoid legal fees associated with the Ledgerwoods’ suit, according to court records.

Bankruptcy court has become an easy escape hatch for the industry to shed its costly obligations. More than 250 oil and gas companies in the U.S. filed for bankruptcy protection between 2015 and 2021, bringing about $175 billion in debt with them, according to research from law firm Haynes and Boone. (Haynes and Boone is representing ProPublica in several Texas lawsuits.)

Sen. Jeff Merkley, an Oregon Democrat, said it is “outrageous” that oil executives can pay themselves handsomely before offloading liabilities via bankruptcy. He is preparing a Senate bill to amend the Bankruptcy Code to address this pattern in the oil industry.

“They privatize the profits, and then they dump the costs on the taxpayer, which is an outrageous arrangement that needs to end,” Merkley said, adding that “this is not just one company in one place. This is a practice that has been exquisitely developed by the industry.”

Josh Macey, a University of Chicago law professor who studies bankruptcy, said that “one of the most significant benefits you get when you file for bankruptcy protection is the automatic stay,” which puts other cases on hold while the bankruptcy is ongoing.

The Wise Oil & Gas bankruptcy halted the Ledgerwoods’ suit.

So the Ledgerwoods ventured into labyrinthian bankruptcy court proceedings as creditors. But the bankruptcy filings for Wise Oil & Gas — which owned a 20% stake in the oil underlying the Ledgerwood farm — listed between $1 million and $10 million in liabilities against less than $33,000 in assets.

While Wise Oil & Gas appeared to be underwater, financial and legal documents showed that the company was one node in a sprawling business empire run by the wealthy Cocanougher family of North Texas.

Alongside their extended family, brothers Daniel and Robert Cocanougher own the web of businesses that included real estate holdings, golf courses, trash services, charitable organizations and more. A company representative estimated in court that the family controlled more than 100 companies. The entire operation was managed by Cocanougher Asset Management #1 LLC out of an office in North Richland Hills, Texas, near Fort Worth.

Wise Oil & Gas was kept afloat by more than 30 loans from other Cocanougher companies, chiefly Wise Resources Ltd., which shared an office with the oil company, according to records filed in court. The loans ensured the oil company had enough cash to operate, but it otherwise hovered around insolvency. Wise Oil & Gas periodically held less than $0 in its account, internal records revealed in court show.

The Ledgerwoods would never see any money from the Cocanoughers’ businesses.