IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 Case No.

09-10785(KJC) (Jointly Administered)

)
)

PACIFIC ENERGY RESOURCES LTD., et al., l ) ) Debtors. )

Deadline for Objections: October 5, 2010 at 4:00 p.m. ET Hearing Date: October 12, 2010 at 1:00 p.m. ET

DEBTORS MOTION FOR ORDER APPROVING STIPULATION RESOLVING CLAIMS OF THE STATE OF ALASKA AGAINST THE DEBTORS The debtors and debtors in possession in the above-captioned cases (the "Debtors") hereby move (the "Motion") this Court for entry of an order approving the Stipulation Resolving Claims of the State ofAlaska Against the Debtors (the "Stipulation"), a true and correct copy of which is attached hereto as Exhibit 1 and is incorporated herein by reference. In support of the Motion, the Debtors respectfully represent as follows:
Jurisdiction

The Court has jurisdiction over this Motion, pursuant to 28 U.S.C. 157 and 1334. This proceeding is a core proceeding within the meaning of 28 U.S.C. 157(b)(2)(A), (B) and (0). 2. Venue of these proceedings and this Motion is proper in this

District pursuant to 28 U.S.C. 1408 and 1409.

The Debtors in these cases, along with the last four digits of each of the Debtors federal tax identification number, are: Pacific Energy Resources Ltd. (3442); Petrocal Acquisition Corp. (6249); Pacific Energy Alaska Holdings, LLC (tax I.D. # not available); Cameros Acquisition Corp. (5866); Pacific Energy Alaska Operating LLC (7021); Cameros Energy, Inc. (9487); and Gotland Oil, Inc. (5463). The mailing address for all of the Debtors is Ill W. Ocean Boulevard, Suite 1240, Long Beach, CA 90802.

DOCSLA:22533 1.2

3.

Sections 363 and 502(b) of title 11 of the United States Code (the

"Bankruptcy Code"), and Rule 9019 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules") provides the basis for the relief sought in the Motion. Background 4. On March 9, 2009 (the "Petition Date"), the Debtors each filed a

voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtors are continuing in possession of their property and are operating and managing their businesses as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. No request has been made for the appointment of a trustee or an examiner in this case. The Office of the United States Trustee appointed an Official Committee of Unsecured Creditors (the "Committee") on March 19, 2009. 5. The Debtors were a group of independent energy companies

engaged in the acquisition, development and exploitation of oil and gas properties in the western United States. As of the Petition Date, the Debtors oil and gas assets were located offshore near California and in Alaska. 6. Pacific Energy Alaska Operating LLC ("PEAO"), one of the

Debtors, entered into numerous oil and gas leases and easement agreements (collectively, the "Leases") with various agencies of the State of Alaska ("Alaska"), which Leases, among other things, granted PEAO interests in the following oil and gas properties:

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(a) interests in an offshore oil and gas platform commonly designated the "Spurr Platform" (the "Spurr Platform Interests"); (b) interests in oil and gas properties commonly referred to as "Trading Bay" (the "Trading Bay Interests"); and (c) interests in oil and gas properties (outside of an area commonly referred to as "Trading Bay") (the "Non-Trading Bay Interests"). 7. PEAO was obligated to pay rent, royalties and taxes to Alaska, as

well as to perform any plugging, abandonment, decommissioning, and other obligations, to the extent set forth in the Leases and applicable state statutes and regulations. 8. Based upon the alleged obligations of certain of the Debtors under

the Leases, statutes and regulations, Alaska filed the following claims in these chapter 11 cases: (a) Claim No. 7 in the amount of $7,380.79 against Pacific Energy Resources, Ltd. ("PERL"); (b) Claim No. 447 in the amount of $5,400,000.00 plus an unliquidated amount of not less than $40,000,000.00 against PERL; (c) Claim No. 448 in unliquidated amounts of not less than $4,000,000.00 against Pacific Energy Alaska Holdings, LLC ("PEAH"); (d) Claim No. 449 in unliquidated amounts of not less than $40,000,000.00 against PEAO; Claim No. 465 in the amount of $5,707,809.40, plus (e) unliquidated amounts of no less than $40,000,000.00 against PERL; and
The Spun Platform Interests are more specifically described in Exhibit A to the Motion of the Debtors for an Order Authorizing Abandonment of Interests in the Spurr Platform Located in Alaska and Rejection of Executory Contracts Relating Thereto (Docket No. 291), filed in the Debtors chapter 11 cases on May 11, 2009. The Trading Bay Interests are more specifically described in Exhibit A to the Alternative Motion of Pacific Energy Alaska Operating LLCfor an Order Authorizing Abandonment of Interests in Oil and Gas Properties at Trading Bay, Alaska and Rejection of Executory Contracts Relating Thereto (Docket No. 455), filed in the Debtors chapter 11 cases on June 16, 2009 " The Non-Trading Bay Interests are more specifically described in Exhibit A to the Alternative Motion of the Debtors for an Order Authorizing Abandonment of Certain Interests in Oil and Gas Properties in Alaska (Excluding Trading Bay) and Rejection of Executory Contracts Relating Thereto (Docket No. 456), filed in the Debtors chapter 11 cases on June 16, 2009
2

DOCS_LA:22 5331.2

(f) 9.

Claim No. 503 in the amount of $0.00 against PERL.

Alaska has asserted to the Debtors that the unliquidated portions of

Claim Nos. 448, 449 and 465 (together, the "Alaska Unliquidated Claims") total in excess of $200,000,000.00. 10. On September 2, 2009, September 11, 2009 and October 16, 2009,

this Court entered Orders authorizing and approving the abandonment by the Debtors of the Trading Bay Interests (Docket No. 832), the Non-Trading Bay Interests (Docket No. 876) and the Spun Platform Interests (Docket No. 973), respectively. 11. Due to a change in circumstances regarding the Debtors ability to

sell certain of the Non-Trading Bay Interests, on October 14, 2009, the Debtors filed the Debtors Motion for an Order: (a) Vacating this Courts Abandonment Order in Part for Certain Alaska Assets and (b) Authorizing the Debtors to Sell Such Assets to Cook Inlet Energy, LLC (Docket No. 998), seeking an order of vacating the abandonment of the NonTrading Bay Interests to the extent that such assets could be sold to Cook Inlet Energy, LLC ("CIE"). 12. On November 25, 2009, the Bankruptcy Court entered the

Conditional Order (a) Vacating This Courts Abandonment Order In Part for Certain Alaska Assets and (b) Authorizing the Debtors to Sell Certain Alaska Assets (Docket No. 115 7) (the "Non-Trading Bay Sale Order"), and on December 14, 2009, the Debtors filed the Notice of Effective Date of Conditional Order (a) Vacating this Courts Abandonment Order in Part for Certain Alaska Assets and (b) Authorizing the Debtors to Sell Certain Alaska Assets and Closing on Sale Agreement (Docket No. 1211).

DOCSLA:22533 1.2

13.

Pursuant to the terms of the Non-Trading Bay Sale Order, CIE

assumed certain liabilities owed to Alaska. 14. On March 24, 2010, the Court entered an order deeming Claim

No. 7 satisfied (Docket No. 1434). The Debtors filed an objection to Claim No. 447 as having been amended by Claim No. 465, and the Court entered an order disallowing Claim No. 447 on March 29, 2010 (Docket No. 1454). The Debtors have not yet formally raised objections to Claim No. 503. 15. The Alaska Unliquidated Claims are subject to the Debtors Third

Motion for Order Deeming Certain Claims to Have Been Satisfied (the "Third Motion Regarding Paid Claims") (Docket No. 1549) filed on April 27, 2010, on the basis that certain of these claims have been paid by virtue of the Non-Trading Bay Sale Order. Although Alaska has not filed a formal objection to the Third Motion Regarding Paid Claims, Alaska has raised informal objections to that motion with the Debtors. Specifically, Alaska asserts continuing claims exceeding $200,000,000.00 associated with, among other things, plugging, abandonment, and decommissioning obligations as to the Trading Bay Interests and the Spun Platform Interests. The Debtors dispute these claims. 16. Further, the Debtors assert that PEAO has credits due from Alaska

in the amount of $2,869,468.16 for over-payment of royalty due to a change in royalty rate related to the Trading Bay Interests (the "Royalty Credit") and in the amount of $5,666,807.00 related to production tax credits (the "Production Tax Credits"). The Debtors have filed an application for the Production Tax Credits, and Alaska is reviewing that application. Alaska, however, having taken the position that the doctrine of

DOCS_LA:22533 1.2

recoupment applies to the Royalty Credit, has already applied it to PEAOs alleged plugging, abandonment, decommissioning and other obligations under the Leases, state statutes and regulations. 17. In order to resolve all outstanding disputes with Alaska, the

Debtors and Alaska have reached agreement on the terms set forth in the Stipulation. Relief Requested 18. By this Motion, the Debtors respectfully request that the Court

enter an order pursuant to Bankruptcy Rule 9019 approving the Stipulation. Terms of the Stipulation 19. 20. Claim Nos. 448, 465 and 503 are disallowed in their entirety. Claim No. 449 is allowed as a general unsecured claim against

PEAO in the amount of $40,000,000.00 solely on account of PEAOs share of plugging, abandonment, and decommissioning obligations relating to the Spurr Platform Interests and the Trading Bay Interests. The settlement of Claim No. 449 is without prejudice to any claims that Alaska may have against any third parties, including predecessors-ininterest, as a result of the agreement to reduce its claims, relating to the Spun Platform Interests and Trading Bay Interests. 21. The Royalty Credit is deemed validly applied by Alaska.

This Motion provides a summary of the principal terms of the Stipulation. All parties are encouraged to read the entirety of the Stipulation attached as Exhibit 1 hereto. In the event any discrepancies exist between the terms of the Stipulation and the summary contained in this Motion, the Stipulation shall be the controlling document.

DOCS_LA:22 5331.2

22.

Alaska is allowed an administrative claim against PEAO in the

amount of $301,140.35 for post-petition 2009 property taxes, including penalties and interest, which administrative claim PEAO has filly paid and satisfied. 23. Alaska is allowed a priority tax claim against PEAO in the amount

of $68,561.57 for pre-petition 2009 property taxes, including penalties and interest through October 1, 2010, which claim PEAO shall pay within fourteen (14) days following the entry of an order of this Court approving this Stipulation. 24. Alaska is allowed an administrative claim against PEAO in the

amount of $2,046.60 for the use of easements on the King Salmon platform pipelines during the period March 9, 2009 through September 2, 2009, which administrative claim PEAO shall pay within fourteen (14) days following the entry of an order of this Court approving this Stipulation. 25. The Debtors, on behalf of their estates, release all of their rights to

the Royalty Credits and the Production Tax Credits and will not pursue recovery of same. 26. Alaska will not assert or be allowed any claims against any of the

Debtors estates other than as specifically set forth above in the Stipulation. 27. The Debtors and Alaska mutually release each other of all claims

other than those allowed by the Stipulation. 28. Alaskas claims or rights against any non-Debtor third parties,

including any predecessors-in-interest to any of the Debtors in any properties located in Alaska, are not affected in any way by the Stipulation or any order approving the Stipulation.

DOCS_LA:22533 1.2

Basis For Relief A. Governing Legal Standards for Approval of Bankruptcy Rule 9019 Compromise and Settlement 29. Bankruptcy Rule 9019(a) provides, in relevant part:

On motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement. Notice shall be given to creditors, the United States trustee, the debtor and indenture trustees as provided in Rule 2002 and to any other entity as the court may direct. Fed. R. Bankr. P. 9019(a). The Third Circuit Court of Appeals has stated that section 363 of the Bankruptcy Code is the substantive provision requiring a hearing and court approval of settlements, while Bankruptcy Rule 9019 establishes the procedure by which such approval may be secured. See In re Martin, 91 F.3d 389, 395 n.2 (3rd Cir. 1996) (distinguishing substance of section 363 from procedural effect of Rule 9019). 30. In determining whether to approve a settlement, the Third Circuit

has also instructed that a bankruptcy court should "assess and balance the value of the claim that is being compromised against the value to the estate of the acceptance of the compromise proposal." Id. at 393 (citing Protective Comm. for Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424-25, 88 S. Ct. 1157, 1163 (1968)). In TMT Trailer, the Supreme Court held that compromises reached during the course of insolvency proceedings must be "fair and equitable." 390 U.S. at 424. The Court stated that "basic to this process in every instance, of course, is the need to compare the terms of the compromise with the likely rewards of litigation." Id. at 425. In making this determination, a court should consider four criteria:

DOCS_LA:22533 1.2

(1) the probability of success in the litigation; (2) the likely difficulties in collection; (3) the complexity of the litigation involved and related expense and inconvenience; and (4) the interests of the creditors. Id.; see also In re Marvel Entertainment Group, Inc., 222 B .R. 243, 249 (D. Del. 1998) (citing TMT Trailer factors as controlling whether settlement should be approved). The ultimate inquiry is whether the compromise is "fair, reasonable, and in the interest of the estate." In re Louises, Inc., 211 B.R. 798, 801 (D. Del. 1997). 31. In ruling on a proposed compromise, however, the Court should

not substitute its own judgment for that of the trustee or debtor in possession. See In re Carla Leather, Inc., 44 B.R. 457, 466 (Bankr. S.D.N.Y. 1984), affd, 50 B.R. 765 (S.D.N.Y. 1985). Nor is the Courts task to determine whether the settlement was the best that the trustee could have obtained. See In re W. T Grant, 699 F.2d 599, 608, 613 (2d Cir. 1982), cert, denied, 464 U.S. 822, 104 S.Ct. 89 (1983). Rather, the Court should "canvass the issues and see whether the settlement fall[s] below the lowest point in the range of reasonableness." Id. at 608; see also In re Bell & Beckwith, 87 B.R. 472, 474 (N.D. Ohio 1987). In determining whether to approve a compromise, a bankruptcy court is not required to conduct a "mini-trial" on the merits of the underlying cause of action. US. v

Alaska National Bank of the North (In the Matter of Walsh Construction, Inc.), 669 F.2d 1325, 1328 (9th Cir. 1982); see also In re Blair, 538 F.2d 849, 851-52 (9th Cir. 1976). B. The Stipulation Should Be Approved 32. The Stipulation meets the statutory and applicable case law

standards for the approval of a settlement, and thus should be approved.

DOCS_LA:22533 1.2

33.

The Stipulation will reduce Alaskas remaining general unsecured

claims by more than $160,000,000.00 below the amounts currently asserted. Further, Alaskas remaining allowed claims will be limited to a single Debtor, PEAO, the entity which the Debtors believe is the proper obligor for the obligations to Alaska. The Stipulation also will eliminate the risk that Alaska might seek recovery of additional administrative or general unsecured claims against the Debtors estates. 34. The Stipulation is the product of arms length negotiations

between the Debtors and Alaska. These negotiations have involved an examination of the factual and legal issues raised by Alaskas remaining claims. 35. As applied in the instant case, the applicable TMT Trailer factors

strongly support this Courts approval of the Stipulation as being in the best interests of the Debtors, their estates and their creditors. The Debtors submit that the Stipulation should be approved for each of the following reasons: a. Probability of Success of Claims Litigation. Although the

Debtors believe that they have a chance in having the Unliquidated Claims reduced, it is unlikely that the Debtors would be able to achieve the result contemplated in the Stipulation of capping Alaskas general unsecured claims at $40,000,000.00. There would also be risks, costs and delays associated with such litigation which are entirely avoided under the Stipulation. b. Difficulties in Collection. This factor is not applicable here. Litigation of the

Complexity of Litigation; Related Expense.

disputes over Alaskas claims are fact-intensive and involve complicated issues of oil and

DOCSLA:22533 1.2

10

gas law. Litigating these issues would involve many hours of attorney time as well as the employment of experts. Given the existence of factual disputes, an evidentiary hearing would be necessary. The Debtors believe that resolution of their disputes with Alaska through litigation would be very time consuming and costly. d. Interest of Creditors. Another key factor that weighs heavily

in favor of approving the Stipulation is this Courts consideration of the best interests of the Debtors creditors. The Stipulation is in the interest of the Debtors creditors because it resolves all of the remaining claims of Alaska and contemplates a substantial reduction of Alaskas general unsecured claims by over $160,000,000.00. Alaskas allowed claims under the Stipulation are also limited to PEAO, rather than the other Debtors. Taken together, the Stipulation will facilitate the Debtors efforts to make distributions under a confirmed liquidating plan to the creditors as quickly as possible. 36. In light of the foregoing, the resolution of Alaskas claims is

eminently reasonable and, based on all the facts and circumstances, represents a fair and equitable result for the Debtors estates. No Prior Request 37. No previous motion for the relief requested herein has been made

by the Debtors to this or any other court. Notice 38. Notice of this Motion has been provided to (i) counsel for Alaska,

(ii) the counsel for the Committee, (iii) the United States Trustee for the District of Delaware, (iv) counsel to the Debtors secured lenders, and (v) those parties that have

DOCS_LA:225331.2

11

requested special notice pursuant to Bankruptcy Rule 2002. The Debtors submit that no other or further notice need to be given. WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form attached hereto (i) authorizing and approving the compromise and settlement between the Debtors and Alaska as set forth in the Stipulation (ii) authorizing the Debtors to pay the administrative and priority claim amounts as set forth herein and in the Stipulation, and (iii) granting such other and further relief as the Court may deem proper.

Dated: September 21, 2010 PACHULSKI STANG ZIEHL & JONES LLP /s/ Kathleen P. Makowski Ira D. Kharasch (CA Bar No. 109084) Maxim B. Litvak(CA Bar No. 215852) James B. ONeill (DE Bar No. 4042) Scotta E. McFarland (DE Bar No. 4184) Kathleen P. Makowski (DE Bar No. 3648) 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705 Telephone: 302/652-4100 Facsimile: 310/652-4400 Email: ikharaschpszjlaw.com mlitvak@psxjlaw.com joneill@pszjlaw.com smcfarland@pszjlaw.com kmakowski@pszjlaw.com Counsel for Debtors and Debtors in Possession

DOCS_LA:22533 1.2

12

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re:

)
)

Chapter 11 Case No. 09-10785 (KJC) (Jointly Administered)

PACIFIC ENERGY RESOURCES LTD., et al., ) ) Debtors. )

Deadline for Objections: October 5, 2010 at 4:00 p.m. ET Hearing Date: October 12, 2010 at 1:00 p.m. ET

NOTICE OF DEBTORS MOTION TO APPROVE STIPULATION RESOLVING CLAIMS OF THE STATE OF ALASKA AGAINST THE DEBTORS TO: (a) the Office of the United States Trustee for the District of Delaware; (b) counsel for the Official Committee of Unsecured creditors; (c) the Debtors pre-petition and post-petition lenders or their counsel; (d) all parties who have requested notice pursuant to Bankruptcy Rule 2002 PLEASE TAKE NOTICE that on September 21, 2010, the debtors and debtorsin-possession (collectively, the "Debtors") in the above-captioned case have filed the attached Debtors Motion to Approve Stipulation Resolving Claims of the State ofAlaska Against the Debtors (the "Motion") with the Clerk of the United States Bankruptcy Court for the District of Delaware. PLEASE TAKE FURTHER NOTICE that any response or objection the Motion must be filed on or before October 5, 2010 at 4:00 p.m. prevailing Eastern Time. Objections or other responses to the Motion, if any, must also be served so that they are received not later than October 5, 2010 at 4:00 p.m. prevailing Eastern time, by:

The Debtors in these cases, along with the last four digits of each of the Debtors federal tax identification number, are: Pacific Energy Resources Ltd. (3442); Petrocal Acquisition Corp. (6249); Pacific Energy Alaska Holdings, LLC (tax I.D. # not available); Cameros Acquisition Corp. (5866); Pacific Energy Alaska Operating LLC (7021); San Pedro Bay Pipeline Company (1234); Cameros Energy, Inc. (9487); and Gotland Oil, Inc. (5463). The mailing address for all of the Debtors is ill W. Ocean Boulevard, Suite 1240, Long Beach, CA 90802.

00001-001\DOCSDE: 163851.1

(a) counsel to the Debtors, (1) Pachuiski Stang Ziehi & Jones LLP, 919 North Market Street, 17th Floor, Wilmington, DE 19899-8705, Attn: James E. ONeill, Esq.; Fax: 302-652-4400, e-mail: joneill@pszjlaw.com and (2) Pachuiski Stang Ziehl & Jones LLP, 10100 Santa Monica Blvd., 1 1th Floor, Los Angeles, CA 90067-4100; Attn: Ira D. Kharasch, Esq; Fax: 310-201-0760, e-mail: ikharash@pszjlaw.com; (b) counsel to the Lenders: Goldman Sachs (1) Bingham McCutchen, 399 Park Avenue, New York, NY 10022, Attn: Jeffrey Sabin, Esq.; Fax: 212-752-5378, e-mail: ieffrey.sabin(bingham.com and (2) Bingham McCutchen, One Federal Street, Boston, MA 01221-1726, Attn: Amy Kyle, Fax: 617-345-5001, e-mail: amy.kyle@bingham.com and Silver Point Finance: Skadden, Arps, Slate, Meagher & Flom, LLP, 333 West Wacker Drive, Chicago, IL 60606-1285, Attn: Seth Jacobson, Esq.; Fax: 312-407-8511, e-mail: seth.jacobson@skadden.com and (c) the Office of the United States Trustee, J. Caleb Boggs Federal Building, 844 N. King Street, Suite 2207, Lock Box 35, Wilmington, Delaware 19801, Attn: Joseph McMahon, Esq. A HEARING ON THE MOTION WILL BE HELD BEFORE THE HONORABLE KEVIN J. CAREY AT THE UNITED STATES BANKRUPTCY COURT, 824 MARKET STREET, FIFTH FLOOR, COURTROOM #5, WILMINGTON, DELAWARE 19801 ON OCTOBER 12, 2010 AT 1:00 P.M. PREVAILING EASTERN TIME. IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY APPROVE THE MOTION WITHOUT FURTHER NOTICE OR HEARING.

00001-001 \DOCS_DE: 16385 1 1

Dated: September 21, 2010 PACHULSKI STANG ZIEHL & JONES LLP

Is! Kathleen P. Makowskil Ira D. Kharasch (CA Bar No. 109084) Scotta E. McFarland (DE Bar No. 4184, CA Bar No. 165391) Robert M. Saunders (CA Bar No. 226172) James E. ONeill (DE Bar No. 4042) Kathleen P. Makowski (DE Bar No. 3648) 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705 Telephone: 302/652-4100 Facsimile: 310/652-4400 Email: ikharasch@pszjlaw.com smcfarlandC2ipszj law.com rsaunders@pszjlaw.com ioneill@pszilaw.com kmakowski@pszjlaw.com Counsel for Debtor and Debtor in Possession Pacific Energy Resources Ltd.

00001 -001\DOCS DE: 163851 I

EXHIBIT 1

DOCSLA:22533 1.2

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re: PACIFIC ENERGY RESOURCES LTD., et al., Debtor.

Chapter 11 Case No. 09-10785 (KJC) (Jointly Administered)

Related to Docket No. 1549 STIPULATION RESOLVING CLAIMS OF THE STATE OF ALASKA AGAINST THE DEBTORS
This Stipulation is entered into by and between (a) the State of Alaska, on behalf of its various agencies ("Alaska" or the "Claimant") and (b) the above-captioned debtors and debtors-in-possession (the "Debtors"), for the purpose of settling all alleged administrative and other claims of the Claimant against the Debtors, as set forth below.

WHEREAS, Pacific Energy Alaska Operating LLC ("PEAO") leased and owned
certain oil and gas properties in Alaska described as follows: interests in an offshore oil and gas platform commonly designated (a) the "Spun Platform," as more specifically described in Exhibit A to the Motion of the Debtors for an Order Authorizing Abandonment of Interests in the Spurr Platform Located in Alaska and Rejection of Executory Contracts Relating Thereto (Docket No. 29 1) filed in the Debtors chapter 11 cases on May 11, 2009 (the "Spun Platform Interests"); interests in oil and gas properties commonly referred to as (b) "Trading Bay" as more specifically described in Exhibit A to the Alternative Motion of Pacific Energy Alaska Operating LLCfor an Order Authorizing Abandonment of Interests in Oil and Gas Properties at Trading Bay, Alaska and Rejection of Executory Contracts Relating Thereto (Docket No. 455) filed in the Debtors chapter 11 cases on June 16, 2009 (the "Trading Bay Interests"); and interests in oil and gas properties (outside of an area commonly (c) referred to as "Trading Bay") as more specifically described in Exhibit A to the
The Debtors in these cases, along with the last four digits of each of the Debtors federal tax identification number, are: Pacific Energy Resources Ltd. (3442); Petrocal Acquisition Corp. (6249); Pacific Energy Alaska Holdings, LLC (tax I.D. # not available); Cameros Acquisition Corp. (5866); Pacific Energy Alaska Operating LLC (7021); Cameros Energy, Inc. (9487); and Gotland Oil, Inc. (5463). The mailing address for all of the Debtors is 111 W. Ocean Boulevard, Suite 1240, Long Beach, CA 90802. ny-9393 14
DOCSSF:74039.2

Alternative Motion of the Debtors for an Order Authorizing Abandonment of Certain Interests in Oil and Gas Properties in Alaska (Excluding Trading Bay) and Rejection of Executory Contracts Relating Thereto (Docket No. 456) filed in the Debtors chapter 11 cases on June 16, 2009 (the "Non-Trading Bay Interests"). WHEREAS, PEAO entered into numerous oil and gas leases and easement agreements with Alaska (collectively, the "Leases") setting forth the terms and obligations of PEAOs oil and gas interests. WHEREAS, PEAO was obligated to pay rent, royalties and taxes to Alaska, as well as to perform certain plugging, abandonment, decommissioning, and other obligations, as set forth in the applicable Leases and applicable state statutes and regulations. WHEREAS, the Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") entered the Order Authorizing Abandonment of Interests in the Spurr Platform Located in Alaska and Rejection of Executory Contracts Relating Thereto (Docket No. 973) on October

16, 2009, approving the abandonment by the Debtors of the Spun Platform Interests. WHEREAS, the Bankruptcy Court entered the Order Granting Alternative Motion of Pacific Energy Alaska Operating LLCfor an Order Authorizing Abandonment of Interests in Oil and Gas Properties at Trading Bay, Alaska and Rejection of Executory Contracts Relating Thereto (Docket No. 832) on September 2, 2009, approving the abandonment of the Trading Bay Interests. WHEREAS, the Bankruptcy Court entered the Order Granting Alternative Motion of the Debtors for an Order Authorizing Abandonment of Certain Interests in Oil and Gas Properties in Alaska (Excluding Trading Bay) and Rejection of Executory Contracts Relating Thereto (Docket No. 876) on September 11, 2009 (the "Non-Trading Bay

DOCSSF:74039.2 ny-9393 14

Abandonment Order"), approving the abandonment of the Non-Trading Bay Interests. WHEREAS, the Debtors filed the Debtors Motion for an Order. (a) Vacating this Courts Abandonment Order in Part for Certain Alaska Assets and (b) Authorizing the Debtors to Sell Such Assets to Cook Inlet Energy, LLC (Docket No. 998) on October 14, 2009 (the "Non-Trading Bay Sale Motion"), seeking an order of the Bankruptcy Court vacating the Non-Trading Bay Abandonment Order to the extent it applied to assets that Cook Inlet Energy, LLC ("CIE") wanted to purchase, as defined in the Non-Trading Bay Sale Motion (the "Sold Assets"), and to approve the sale of the Sold Assets to CIE. WHEREAS, on November 25, 2009, the Bankruptcy Court entered the Conditional Order (a) Vacating This Courts Abandonment Order In Part for Certain Alaska Assets and (b) Authorizing the Debtors to Sell Certain Alaska Assets (Docket No. 1157) (the Notice of

"Non-Trading Bay Sale Order") and on December 14, 2009, the Debtors filed the

Effective Date of Conditional Order (a) Vacating this Courts Abandonment Order in Part for Certain Alaska Assets and (b) Authorizing the Debtors to Sell Certain Alaska Assets and Closing on Sale Agreement (Docket No. 1211). WHEREAS, under the Non-Trading Bay Sale Order, CIE assumed certain liabilities related to the Sold Assets, including the plugging, abandonment, and decommissioning obligations, and the Debtors estates were released from such liabilities. WHEREAS, Alaska filed six claims in these chapter 11 cases as follows: (a) Claim No. 7 in the amount of $7,380.79 against Pacific Energy Resources, Ltd. ("PERL"); (b) Claim No. 447 in the amount of $5,400,000.00 plus an unliquidated amount of not less than $40,000,000.00 against PERL; DOCSSF:74039.2 3
ny-9393 14

Claim No. 448 in unliquidated amounts of not less than (c) $4,000,000.00 against Pacific Energy Alaska Holdings, LLC; Claim No. 449 in unliquidated amounts of not less than (d) $40,000,000.00 against PEAO; Claim No. 465 in the amount of $5,707,809.40, plus unliquidated (e) amounts of no less than $40,000,000.00 against PERL; and (f) Claim No. 503 in the amount of $0.00 against PERL.

WHEREAS, the Bankruptcy Court deemed Claim No. 7 satisfied under the Order Granting Debtors Motion for Order Deeming Certain Claims to Have Been Satisfied (Docket No. 1434) entered on March 24, 2010. WHEREAS, the Bankruptcy Court disallowed Claim No. 447, which was amended by Claim No. 465, as an amended claim under the Order Approving Reorganized Debtors Second Omnibus Objection (Non-Substantive to Certain (a) Duplicate Claims; (b) Claims That Have Been Amended and Superseded, (c) Claims That Were Filed Against the Wrong Debtor, and (d) Claims for Which There Is Insufficient Documentation 1454) entered on March 29, 2010. WHEREAS, Claim Nos. 448, 449 and 465 are subject to the Debtors Third Motion for Order Deeming Certain Claims to Have Been Satisfied Paid Claims") (Docket No. 1549) filed on April 27, 2010. WHEREAS, no objection yet has been formally raised to Claim No. 503. WHEREAS, although Alaska has not filed a formal objection to the Third Motion regarding Paid Claims, it raised informal objections to that motion with the Debtors. WHEREAS, the Debtors assert that PEAO has credits due from Alaska in the amount of $2,869,468.16 for over-payment of royalty due to a change in royalty rate related to
DOCSSF:74039.2 ny-9393 14

(Docket No.

(the "Third Motion regarding

the Trading Bay Interests (the "Royalty Credit") and in the amount of $5,666,807.00 related to production tax credits (the "Tax Credits," and together with the Royalty Credit, the "Credits"). The Debtors have filed an application for the production Tax Credits, and Alaska is reviewing that Application. WHEREAS, Alaska has applied the Royalty Credit to PEAO s plugging, abandonment, decommissioning and other obligations under the Leases, state statutes and regulations under the doctrine of recoupment. WHEREAS, the parties entered into negotiations in an attempt to resolve all claims asserted by Alaska against the Debtors and have reached agreement related to all these claims. WHEREFORE, the parties stipulate and agree as follows: 1. 2. Claim No. 448 is disallowed. Claim No. 449 is allowed as a general unsecured claim against PEAO in

the amount of $40,000,000.00 solely on account of PEAOs share of plugging, abandonment, and decommissioning obligations relating to the Spun Platform Interests and the Trading Bay Interests. The agreement to reduce the amount of Alaskas claim is the result of a compromise and settlement, as Alaska believes that PEAOs share of plugging, abandonment and decommissioning obligations relating to the Spun Platform Interests and the Trading Bay Interests is significantly greater than $40,000,000.00.

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This settlement of Claim No. 449 is without prejudice to any claims that Alaska may have against any third parties, including predecessors-in-interest, as a result of the agreement to reduce its claims, relating to the Spurr Platform Interests and Trading Bay Interests. 4. Claim No. 465 is disallowed. Claim No. 503 is disallowed. Alaska is allowed an administrative claim against PEAO in the amount of $301,140.35 for post-petition 2009 property taxes, including penalties and interest, which administrative claim PEAO has fully paid and satisfied. 7. Alaska is allowed a priority tax claim against PEAO in the amount of

$68,561.57 for pre-petition 2009 property taxes, including penalties and interest through October 1, 2010, which claim PEAO shall pay within fourteen (14) days following approval of this Stipulation by the Bankruptcy Court. 8. Alaska is allowed an administrative claim against PEAO in the amount of

$2,046.60 for the use of easements on the King Salmon platform pipelines during the period March 9, 2009 through September 2, 2009, which administrative claim PEAO shall pay within fourteen (14) days following approval of this Stipulation by the Bankruptcy Court. 9. 10. The Royalty Credit is deemed validly applied by Alaska. The Debtors, on behalf of their estates, hereby release all of their rights to

the Credits and will not pursue recovery of the Credits. 11. Alaska will not assert or be allowed any claims against any of the Debtors

estates other than as specifically set forth above in this Stipulation.

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12.

Effective upon the entry of a final, non-appealable order approving this

Stipulation, the Debtors, for themselves and each and all of their respective estates, successors and assigns, and anyone claiming by, through or under them, hereby release Alaska and each and all of its successors, assigns, present and former representatives and agents (collectively referred to herein as the "Alaska Releasees") of and from any and all claims, demands, debts, payments, liabilities, accounts, reckonings, obligations, costs, expenses, liens, actions, and causes of action, of every kind and nature whatsoever, including claims under Chapter

5 of the Bankruptcy Code,

whether known or unknown, matured or unmatured, absolute or contingent that exist as of the date this release becomes effective (collectively, "Claims"), that the Debtors, or any of them, may now have, own, or at any time heretofore have ever had, owned, or held against the Alaska Releasees, or any of them. For the avoidance of doubt, nothing in this Section 12 is deemed to release, discharge or otherwise affect any Claims the Debtors may have against the Alaska Releasees under the terms and provisions of this Stipulation. Further, nothing herein is deemed to release or discharge any claims of any nature of the Debtors against any third parties. 13. Effective upon the entry of a final, non-appealable order approving this

Stipulation, Alaska, for itself, its agencies, and each and all of its respective successors, assigns, and anyone claiming by, through or under it, hereby releases the Debtors estates and each and all of the Debtors respective successors, assigns, present and former representatives and agents (collectively referred to herein as the "Debtor Releasees"), of and from any and all Claims that Alaska may now have, own, or at any time heretofore have ever had, owned, or held against the Debtor Releasees, except for the claims allowed in Sections 2, 6, 7, and 8 above. For the
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avoidance of doubt, nothing in this Section 13 is deemed to release, discharge or otherwise affect any Claims that Alaska may have against any of the Debtor Releasees under the terms and provisions of this Stipulation. Further, nothing herein is deemed to release or discharge any claims of any nature of Alaska against any third parties, including the Debtors predecessors-ininterest. 14. Nothing in this Stipulation affects the right of the Debtors or any of them

to object to any claim related to the Spun Interests, the Trading Bay Interests, the Non-Trading Bay Interests or any other claim asserted by any other party. 15. Alaskas claims or rights against any non-Debtor third parties, including

any predecessors-in-interest to any of the Debtors in any properties located in Alaska, are not affected in any way by this Stipulation or any order approving this Stipulation. 16. This Stipulation is in settlement of disputed claims. Nothing herein is

deemed to be an admission or can be used as evidence against the Claimant or the Debtors in any other proceeding. The parties have negotiated the terms of this Stipulation, which must not be construed against any party hereto. Each party has (1) carefully read and understands the scope and effect of each provision, and (2) consented to and executed this Stipulation freely and without fraud, coercion, duress or undue influence. Each party shall bear its own costs and expenses, including attorneys fees, in connection with the negotiation, preparation and performance of this Stipulation. 17. This Stipulation will not be affected by the Debtors chapter 11 plan or the

confirmation order approving the Debtors chapter 11 plan.

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18.

This Stipulation inures to the benefit of and binds, the successors and

assigns of the parties, and each of them. No amendment of any provision of this Stipulation will be effective unless it is in writing and signed by the parties, and no waiver of any provision of this Stipulation, and no consent to any variation thereof, will be effective unless it is in writing and signed by the party against whom the waiver is asserted, and then the waiver or consent will be effective only in the specific instance and for the specific purpose for which given. 19. This Stipulation sets forth the entire agreement and understanding between

the parties relating to the matters covered herein and supersedes all other prior agreements, discussions and documents, if any, related to the subject matter hereof. No party is bound by any terms, conditions, definitions, understandings or representations with respect to the subject matter hereof, other than as expressly provided for herein, except as may hereafter be agreed to in a writing signed by the applicable parties. The recitals are incorporated into and made part of this Stipulation. This Stipulation may be signed in counterpart originals, which, when fully executed, constitutes a single original. Any signature delivered by a party by facsimile transmission or by electronic means will be deemed an original signature hereto.

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20.

The effectiveness of this Stipulation is conditioned upon its approval by

the Bankruptcy Court. The Bankruptcy Court will retain jurisdiction to resolve any disputes or controversies arising from or related to this Stipulation. Dated: September 21, 2010 STATE OF ALASKA, ON BEHALF OF ITS VARIOUS AGENCIES By:
/5/

Lorenzo Marinuzzi Morrison & Foerster LLP Counsel for the State of Alaska

Dated: September 21, 2010

PACIFIC ENERGY RESOURCES LTD.

LIM

Is Gerry Tywoniuk Acting Chief Executive Officer

Dated: September 21, 2010

PACIFIC ENERGY ALASKA HOLDINGS, LLC

Gerry Tywoniuk Acting Chief Executive Officer

Dated: September 21, 2010

PACIFIC ENERGY ALASKA OPERATING LLC

Gerry Tywoniuk Acting Chief Executive Officer

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iEI

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Dated: September 21, 2010

PETROCAL ACQUISITION CORP.

Gerry Tywoniuk Acting Chief Executive Officer

Dated: September 21, 2010

CARNEROS ACQUISITION CORP.

USA

Gerry Tywoniuk Acting Chief Executive Officer

Dated: September 21, 2010

CARNEROS ENERGY, INC.

Gerry Tywoniuk Acting Chief Executive Officer

Dated: September 21, 2010

GOTLAND OIL, INC.

Gerry Tywoniuk Acting Chief Executive Officer

DOCSSF:74039.2

11

ny-939314

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: PACIFIC ENERGY RESOURCES LTD., et al., Debtors. )
)

Chapter 11 Case No. 09-10785(KJC) (Jointly Administered)

RELATED TO DOCKET NO.

1 )
)

ORDER APPROVING STIPULATION RESOLVING CLAIMS OF THE STATE OF ALASKA AGAINST THE DEBTORS Upon consideration of the motion (the "Motion") 2 of the above-captioned debtors and debtors in possession (the "Debtors"), seeking entry of an order under sections 363 and 502(b) of the Bankruptcy Code and Rule 9019 of the Bankruptcy Rules for entry an order approving the Stipulation Resolving Claims of the State ofAlaska Against the Debtors (the "Stipulation"); and it appearing that the relief requested is in the best interests of the Debtors estates and creditors; and it appearing that this Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and it appearing that this proceeding is a core proceeding pursuant to 28 U.S.C. 1408 and 1409; and adequate notice of the Motion having been given; and it

The Debtors in these cases, along with the last four digits of each of the Debtors federal tax identification number, are: Pacific Energy Resources Ltd. (3442); Petrocal Acquisition Corp. (6249); Pacific Energy Alaska Holdings, LLC (tax I.D. # not available); Cameros Acquisition Corp. (5866); Pacific Energy Alaska Operating LLC (7021); Cameros Energy, Inc. (9487); and Gotland Oil, Inc. (5463). The mailing address for all of the Debtors is Ill W. Ocean Boulevard, Suite 1240, Long Beach, CA 90802. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Motion.

68773-002\DOCS_LA:225364. I

appearing that no other notice need be given; and after due deliberation and sufficient cause appearing therefore, it is hereby: ORDERED that the Motion is granted; and it is further ORDERED that the Stipulation is hereby approved; and it is further ORDERED that this Order is effective immediately; and it is further ORDERED that this Court shall retain jurisdiction to hear and determine all matters arising from the implementation of this Order.

Dated: October_, 2010 The Honorable Kevin J. Carey Chief United States Bankruptcy Judge

68773 -002\DOCS_LA:225364. 1