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IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELA WARE

In re: ) Chapter 11
)

PACIFIC ENERGY RESOURCES LTD., et at., i ) Case No. 09-10785 (KJC)


)

Debtor. ) Related Docket Nos. 1382, 1383


)
Hearing Date: April

19, 2010 at 3:00 p.m.

OBJECTION OF DEBTOR PACIFIC ENERGY ALASKA OPERATING LLC TO THE ADMINISTRATIVE CLAIM STATEMENTS OF UNION OIL COMPANY OF CALIFORNIA FOR ABANDONMENT AND ENVIRONMENTAL REMEDIATION COSTS (DOCKET NO. 1383) AND OPERATING COSTS (DOCKET NO. 1382) PURSUANT TO 11 U.S.c. 502(b) AND FEDERAL RULE OF BANKRUPTCY PROCEDURE 3007
the above-

Pacific Energy Alaska Operating LLC ("PEAO" or "Movant"), one of

captioned debtors and debtors in possession (together, the "Debtors"), hereby files this objection
(the "Objection") pursuant to Bankuptcy Code section 502(b) and Federal Rule of

Bankruptcy

Procedure 3007 (the "Bankruptcy Rules") to the Administrative Claim Statements filed by Union

Oil Company of California ("Union" or "Claimant") for Abandonment and Environmental


Remediation Costs (Docket No. 1383) and Operating Costs (Docket No. 1382).

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. (5468). The mailing address for all of

the Debtors is

111 W. Ocean Boulevard, Suite 1240, Long Beach, CA 90802.

68773-002\DOCS _ LA:2 i 65529

JURISDICTION
1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 157

and 1334. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. This is a core proceeding
pursuant to 28 U.S.C. 157(b)(2)(B).

2. The statutory predicates for the relief requested herein are 11 U. S. C.


502(b) and Federal Rule of

Bankruptcy Procedure 3007.

BACKGROUND
3. On March 9, 2009 (the "Petition Date"), the Debtors commenced these

cases by each fiing a voluntary petition in this Court. The Debtors have continued in the
possession of

their property and have continued to operate and manage their business as debtors

in possession pursuant to sections 1107(a) and 1108 of

the Bankuptcy Code. No request has

been made for the appointment of a trustee or an examiner in these cases.


4. The Debtors are a group of independent energy companies that, prior to

the Petition Date, were engaged in the acquisition, development, and exploitation of oil and gas
properties in the western United States. As of

the Petition Date, PEAO and Union shared

working interests in certain oil and gas properties in Alaska. The two offshore properties that are
relevant for purposes of this Objection are commonly referred to as the Trading Bay Field

("TBF") and the Trading Bay Unit ("TBU") in Cook Inlet, Alaska (together, "Trading Bay").

These properties were leased from the State of Alaska. As of the Petition Date, PEAO had a
46.8% working interest and Union had a 53.2% working interest in each of

the properties in

Trading Bay.

68773-002\DOCS _ LA:2 i 6552.9

5. Union is the operator at Trading Bay. As of

the Petition Date, PEAO was

a party to various contracts with Union setting forth the relationship of the parties with respect to

Trading Bay (the "Contracts"), including both operating agreements detailing the sharing of
expenses relating to Trading Bay (the "Operating Agreements") and a fuel gas supply agreement
relating to the sharing of costs for fuel gas used in conjunction with Trading Bay field operations

(the "Fuel Gas Agreement").


6. Consistent with the terms of the Operating Agreements, Union both before

and after the Petition Date issued joint interest billings ("JIBs") detailing what Union claimed

were PEAO's share of operating expenses associated with Trading Bay. Union also charged PEAO for amounts that Union claimed were due under the Fuel Gas Agreement. Union asserts
that PEAO's outstanding obligation to Union under the JIBs and the Fuel Gas Agreement as of
the Petition Date total $29,553,822.06, and that the outstanding post-petition balances, including
professional fees, total $22,198,790.61, for a combined total of $51 ,268,105.27.

7. PEAO ceased to pay Union's "joint interest billings" or "JIBs" (except out
ofthe proceeds of oil production) well in advance of

the Petition Date. The Debtors also

communicated to Union both prior to the Petition Date and during these cases (as reflected in the
Debtors' postpetition financing budgets) that the Debtors did not intend to fund the ongoing
obligations associated with Trading Bay.
8. PEAO initially filed a motion to abandon its interests in Trading Bay on
June 16, 2009 (Docket No. 455). Union fied a limited objection to the motion on July 10, 2009

(Docket No. 572). The hearing on the abandonment motion was continued for some time, and

68773-002\DOCS_LA:2 i 6552.9

with Union's concurrence, in order to allow the Debtors to complete their efforts to sell PEAO's

interests in Trading Bay. Ultimately, no sale could be consummated.


9. On September 2,2009, PEAO abandoned its interests in Trading Bay and
rejected the Contracts pursuant to an Order of

this Court (Docket No. 832) (the "Abandonment

Order") .

DISPUTED UNION CLAIMS


A. Claim 1383
10. On March 5, 2010, Union fied an Administrative Claim Statement for

Abandonment and Environmental Remediation Costs (Docket No. 1383) ("Claim 1383"). Claim
1101 seeks to recover "PEAO's share of

the costs associated with abandonment,

decommissioning and subsequent remediation of platforms, wells, pipelines, and other facilities,

property and structures associated with the production and marketing of oil from (Trading Bay)."
Claim 1101, p.2, lines 21-23. Union's current estimate ofPEAO's share of

such cost is "at least

$200,000,000." Id, p.3, lines 6-7.

B. Claim 1382
11. On March 5, 2010, Union filed an Administrative Claim Statement for

Operating Costs (Docket No. 1382) ("Claim 1382"). Claim 1382 seeks to recover "PEAO's
unpaid share of operating expenses, fuel gas costs, lease burdens, land rentals, and professional

fees incurred in connection with the development and management of (Trading Bay)." Claim

1382, p.l, ~ 1. Union claims that PEAO's accrued but unpaid share of costs was

68773-002\DOCS_LA:2 i 6552.9

$21,714,283.21, together with associated attorneys' fees of

$484,507.40, for a total of

$22,198,705.61. Id., ~ 6-8, Exhibit C.

RELIEF REQUESTED
12. PEAO objects to Claims 1383 and 1382 for the following reasons:
1. Claim 1383:

(a) should be disallowed in its entirety because it is a contingent claim of a


co-debtor under section 502(a) of

the Bankruptcy Code; and

(b) in any event, is not entitled to administrative priority because the estate

has abandoned its interests in Trading Bay and Union has yet to incur any decommissioning
costs relating thereto.2

2. Claim 1382:
(c) is not entitled to administrative priority because the amounts expended by

Union have not benefited the estate, but solely Union itself.3

13. PEAO seeks entry of an order pursuant to section 502(b) of the

Bankruptcy Code and Rule 3007 as follows: (a) with respect to Claim 1383, either disallowing
said claim in its entirety or, in the alternative, reclassifying the claim as general unsecured; and

(b) with respect to Claim 1382, determining that the claim is not entitled to administrative
priority.

With respect to Claim 1383, PEAO reserves the right to subsequently and separately contest the amount of Claim 1383 should that prove necessary. With respect to Claim 1382, PEAO reserves the right to subsequently and separately contest the amount of Claim 1382 should that prove necessary.

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BASIS FOR RELIEF


A. Claim 1383
1. Disallowance in Its Entirety

14. Section 502(e)(l)(B) of

the Bankruptcy Code provides in pertinent part:

(T)he court shall disallow any claim for reimbursement or


contribution of any entity that is liable with the debtor. .. to the

extent that - ...


(B) such claim for reimbursement or contribution is contingent at the time of allowance or disallowance of such claim for reimbursement or contribution.
the

11 U.S.C. 502(e)(l)(B). "For a claim to be disallowed under section 502(e)(l)(B) of

Bankuptcy Code, the claimant must assert a (i) contingent claim, (ii) for reimbursement of a
debt, (iii) for which the debtors and the claimant are co-liable. All three elements must be
satisfied for the claim to be disallowed." In re RNI Wind Down Corp., 369 B.R. 174, 181
(Bankr. D. DeL. 2007) (citing In re Pinnacle Brands Inc. 259 B.R. 46, 55 (Bank. D. DeL. 2001)).

Further, section 502(e)(l)(B) applies to postpetition claims as well as prepetition claims. Juniper
Dev. Group v. Kahn (In re Hemmingway Transport, Inc.), 993 F.2d 915, 930 (lst Cir. 1993).
15. Here, Claim 1383 should be disallowed under section 502(e)(l)(B) as the

contingent claim of a codebtor (Union) for another creditor (State of Alaska). The State of

Alaska (the "State") fied claim number 449 against PEAO and amended claim number 465
against PERL,4 each of

which includes (among other claims) unliquidated claims for

Amended claim number 465 amended claim number 447 against PERL. In addition to claim number 449

against PEAO, the State fied claim number 448 against PEAO, which is an unliquidated claim for at least

$4,000,000 for environmental clean-up.

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decommissioning and abandonment liabilities of at least $40,000,000 to $80,000,000 and


contingent environmental claims. Although the Debtors believe that a portion of

the State's

claims have been satisfied through the sale of PEAO' s non-Trading Bay Alaska assets, the State

has informed the Debtors that it continues to assert all available claims as to Trading Bay.

Hence, all three elements (co-liability, contribution, and contingency) are met for disallowance
of Claim 486/1383 under section 502( e)(1 )(B) of the Bankruptcy Code.

16. First, Union and PEAO are co-liable to the State for decommissioning

expenses associated with Trading Bay. In Claim 1383, Union sets forth multiple sources
(contract, statute, and regulation) for Union's and PEAO's co-liability to the State for plugging

and abandonment ("P&A") obligations associated with Trading Bay. Claim 1383 ~ 5.
17. Second, Union admits that it has a "contribution" claim against PEAO for

the unpaid share of costs associated with abandonment, decommissioning, and subsequent
remediation of

Trading Bay. Claim 1383 ~ 5 ("Union has a claim against PEAO for PEAO's

share of

the costs associated with abandonment, decommissioning and subsequent remediation of

platforms, wells, pipelines, and other facilities, property and structures associated with the
production and marketing of

oil from the TBU and TBF.").

18. Third, Claim 1383 is contingent and unliquidated. Although Union argues

that its contribution claim is no longer "contingent" because PEAO has made its decision to
abandon its interests in Trading Bay, see Claim 1383 ~ 7, the fact remains that Union has yet to incur or pay any P&A liabilities relating to Trading Bay.

68773-002\DOCS _ LA:2 i 6552.9

19. The United States Bankuptcy Court for the District of Delaware has

found, in the context of section 503(3)(1 )(B), that "(a) claim is contingent where it 'has not yet

accrued and is ... dependent upon some future event that may never happen. ", RNI, 369 B.R. at
182. For instance, bankruptcy courts have concluded that environmental clean-up obligations are

contingent until actually incurred and funded. See, e.g., Norpak Corp. v. Eagle-Picher Indus., Inc. (In re Eagle-Picher Indus., Inc.), 177 B.R. 869, 871 (Bankr. S.D. Ohio 1995) (the debtor
remained obligated to the government for environmental clean-up even after paying a co-obligor
because the co-obligor might not actually do the clean-up or the co-obligor might do the clean-up
in a way that the government did not find satisfactory), aff'd, 131 F.3d 1185 (6th Cir. 1997);
RNI, 369 B.R. at 190 (purpose of section 502( e)(1 )(B) is to preclude double payment and is

directed at the difficulty of administering an estate while contingent claims exist); In re APCO

Liquidating Trust, 370 B.R. 625,636 (Bankr. D. DeL. 2007) (section 503(e)(I)(B) encourages
cleanup because contingent claim for contribution for debtor that is co-liable is disallowed unless
amounts are incurred); In re Kaiser Group Intl, 289 B.R. 597, 608 (Bankr. D. DeL.

2003)(creditor's "claim must be disallowed (under section 502(e)(I)) to the extent that it seeks to
recover future costs."). See also Juniper Dev. Group v. Kahn (In re Hemmingway Transport,

Inc.), 126 B.R. 656, 662 (D. Mass. 1991) (unpaid future response costs are contingent within the
meaning of section 502( e)(1 )(B) notwithstanding that the co-liable creditor received an agency

notice letter naming it as a potentially responsible party), aff'd in relevant part, 993 F.2d 915,
930 (1st Cir. 1993); Syntex Corp. v. Charter Co. (In re Charter Co.), 862 F.2d 1500, 1504 (1Ith

68773-002\DOCS_LA:216552.9

Cir. 1989) (section 502(e)(I)(B) encourages clean up under CERCLA because expenses need to
be paid for a claim to be allowed).
20. In APCO, Judge Shannon further elucidated the point as follows:

The law is clear that "(t)he contingency contemplated by (section) 502(e)(1)(B) relates to both payment and liability." Therefore, a claimant's "claim is contingent until their liability is established... and the co-debtor has paid the creditor."

APCO Liquidating Trust, 370 B.R. at 636 (citations omitted). P&A obligations in particular
have been determined by at least one bankruptcy court as contingent obligations until actually
funded. In re Tri-Union Dev. Corp., 314 B.R. 611,617 (Bankr. S.D. Tex. 2004) ("Because the

(government) has yet to call on any of

the respondents to fund the P&A Obligations, the P&A

Obligations remain unfunded, and are thus contingent as envisioned by 502(e).").


21. Here, Union admits that it has not yet paid any P&A costs: "as the

abandonment costs have not yet been incurred, the claim is currently unliquidated." Claim 1383

~ 7. Claim 1383 is therefore contingent. Because the claim is also one for contribution (and
reimbursement) for which PEAO is co-liable, Union's claim must be disallowed in its entirety
under section 502( e)(1 )(B).
2. Alternative Reclassification as a General Unsecured Claim

22. At a minimum, the Court should reclassify Claim 1383 as general


unsecured. The allowance of an administrative expense claim is codified in section 503(b) of

the

Bankruptcy Code, which states in relevant part:

68773-002\DOCS_LA:216552.9

After notice and a hearing, there shall be allowed administrative expenses. . . including - (1 )(A) the actual, necessary costs and
expenses of preserving the estate. . .

11 U.S.C. 503(b)(1)(A).
23. The policy "behind granting administrative priority to the types of

expenses included under section 503(b)(1 )(A) is to provide an incentive for creditors and others

to continue or commence doing business with an insolvent entity." 4 Coller on Bankruptcy ~


503.05(2), at 503-21 (15th rev. ed. 2010). See Commonwealth of Pennsylvania Dep 't of Envt 'l

Resources v. Tri-State Clinical Laboratories, 178 F.3d 685, 691 (3d Cir. 1999) ("(T)hose who
continue to transact business with the debtor during the Chapter 11 case, and who would suffer financially as a result, are entitled to priority over other creditors who have not affirmatively
assumed such risk").
24. For a debt to qualify as an administrative expense, it must satisfy a two-

prong test: "the claimant must establish that its (1) expense arose from a postpetition transaction

with the debtor and (2) that the transaction accorded the estate an actual benefit." In re Insilco
Tech., Inc., 309 B.R. 111, 114 (Bankr. D. DeL. 2004) (citing Calpine Corp. v. O'Brien Envtl
Energy, Inc. (In re O'Brien Envtl Energy, Inc.)

, 181 F.3d 527, 532-533 (3d Cir. 1999); In re

Unidigital, Inc., 262 B.R. 283, 288 (Bankr. D. DeL. 2001)).


25. Under the express terms of section 503(b)(1)( a), for a postpetition liability

to be an administrative priority expense, it must be "actual" and "necessary." An actual expense


must have been paid and is not contingent. Hemmingway, 993 F.2d at 930. An expense is
"necessary" only to the extent that it benefits the estate. In re Garden Ridge Corp., 323 B.R.

68773-002\DOCS_LA:2 i 6552.9

10

136, 142 (Bankr. D. DeL. 2005) ("The value of the administrative claim is determined by the
amount of

post-petition benefit to the estate.") (citing In re CM Holdings, Inc., 264 B.R. 141,

149 (Bankr. D. DeL. 2000) (administrative expense claims are equitable in nature and are valued
at the amount of

benefit not necessarily by contract terms)).


26. The claimant carries the "heavy burden of demonstrating that the costs and

fees for which it seeks payment provided an actual benefit to the estate and that such costs and
expenses were necessary to preserve the value of

the estate assets." O'Brien, 181 F.3d at 533

(emphasis added); see also Goody's Family Clothing, Inc. v. Mountaineer Property Co. II (In re Goody's Family Clothing, Inc.), 401 B.R. 656,663-664 (Bankr. D. DeL. 2009). "Since the
affording of priority status to one creditor has an impact upon other creditors of

the debtor's

estate and conflicts with the goal of bankruptcy to provide creditors with an equal distribution of

a debtor's resources, ... administrative claims must be narrowly construed." In re Lease-a-Fleet,

Inc. 140 B.R. 840, 844 (Bank. E.D. Pa. 1992).


27. As the Third Circuit stated in O'Brien: "'For a claim in its entirety to be

entitled to first priority under (503(b)(1)(A)), the debt must arise from a transaction with the
debtor-in-possession ... (and) the consideration supporting the right to payment (must be)
beneficial to the debtor-in-possession in the operation of

the business.'" 181 F.3d at 532-533.

28. Here, given that Union's estimated future P&A costs have yet to be

incurred or spent, no "actual benefit" has been afforded to PEAO's estate, which in and of itself precludes such costs from being awarded administrative expense status. See Insilco, 309 B.R. at
114 n.8 (concluding that the mere fact costs had not been actually expended "alone could be a

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2 i 6552.9

11

sufficient ground upon which to deny administrative expense status to the... claim for future
investigation andfuture remediation work").
29. Further, as noted by this Court in Insilco: "(i)n general, only those costs

incurred to cleanup property which an estate has an interest in or owns may qualify as
administrative expenses." 309 B.R. at 114. Here, PEAO has no interest in Trading Bay by
virtue of

the Abandonment Order. See In re Kent, 411 B.R. 743, 752 (Bankr. M.D. Fla. 2009)

(property that is abandoned under section 554 of

the Bankruptcy Code ceases to be property of

the estate and rights to the property are treated as if no bankuptcy petition was filed).
30. Moreover, the law is settled that an administrative claim must arise from a

postpetWon transaction with the debtor. '" It is only when the debtor-in-possession' s actions
themselves. . . give rise to a legal liability that the claimant is entitled to the priority of a cost

and expense of administration.'" Bachman v. Commercial Fin Servs., Inc. (In re Commercial
Fin. Servs., Inc.), 246 F.3d 1291, 1294 (10th Cir. 2001) (quoting Cramer v. Mammoth Mart, Inc.

(In re Mammoth Mart, Inc.), 536 F.2d 950, 954 (1 st Cir. 1976)). "'A debt is not entitled to

priority simply because the right to payment arises after the debtor in possession has begun
managing the estate.'" In re Mid-Amer. Waste Sys., Inc., 228 B.R. 816, 821 (Bankr. D. DeL.
1999).

31. PEAO took no action whatsoever on a postpetition basis to incur the

claims that Union now asserts as administrative expenses. PEAO's potential liability for future
P&A costs arose long before the Petition Date at the time PEAO acquired its interests in Trading
Bay.

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32. In sum, it stretches credibility for Union to assert P&A liabilities

associated with abandoned assets as potential administrative expenses ofPEAO's estate,


particularly at a figure in excess of $200 milion. If

the claims are not disallowed entirely, in the

alternative they should be reclassified as general unsecured with the amounts of such claims to
be reserved for later adjudication.

B. Claim 1382
1. Reclassification as a General Unsecured Claim

33. Although asserted as an administrative expense, the Court should


reclassify Claim 1382 as general unsecured. Claim 1382 relates to the unpaid share of PEAO's

operational expenses associated with Trading Bay. PEAO ceased to pay Union's "joint interest
bilings" or "JIBs" (except out of the proceeds of oil production) well in advance of the Petition

Date. The Debtors also communicated to Union both prior to the Petiton Date and during these
cases (as reflected in the Debtors' post

petiton financing budgets) that the Debtors did not intend

to fund the ongoing obligations associated with Trading Bay.

5 Union is basically asserting a

claim for an involuntary and unauthorized extension of credit out of the ordinary course of
business to a debtor in violation of section 364(b) of the Bankruptcy Code.6

Union has told this Court that "PEAO has not 'asked' Union to provide benefits...." Docket No. 372 ~ 8.
"The practical effect of PEAO's current course of action is to turn Union into an involuntary DIP lender without allowing Union the additional priority voluntary DIP lenders typically require.... Further the Debtors are asking the Court to essentially require Union to continue to provide maintenance services on credit by its motion to deny Union's Executory Contract Motion.... The Debtors' 'tight budgetary constraints' should not be loosened by making Union an involuntary DIP lender." Union Oil Company o/California 's Reply to Debtors' Objection and the Objection o/the Unsecured Creditors' Committee and J Aron & Co. to (I) Motion 0/ Union Oil Company 0/ California to Compel Payment 0/ Administrative Expenses; and (II) Motion o/Union Oil Company o/California to
Compel

Immediate Assumption or Rejection o/Certain Executory Contracts fied June 1,2009 (Docket No. 372)

("Reply") n 5,9 and 15.

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34. The Debtors' estates have not benefitted from Union's continued

operation and maintenance of

the facilities at Trading Bay. Instead, Union, as operator, is

responsible for Trading Bay operations and is the direct beneficiary thereof. "An incidental
benefit is not enough to justify administrative priority." 2 Norton Bankr. Law & Prac. 42: 16 at
42-94 (2d. ed. 2010). See In re Continental Airlines, Inc., 146 B.R. 520,527 (Bankr. D. DeL.

1992) ("Movant must establish a benefit to the estate to receive priority payment ahead of the

other general unsecured claims."). The benefit to the debtor's estate must be direct and
substantiaL. See Employee Transfer Corp. v. Grigsby (In re White Motor Corp)., 831 F.2d 106,
11 0 (6th Cir. 1987).

35. As stated by one court in the Third Circuit:

Neither potential benefit to the estate nor mere possession will satisfy the actual and necessary costs provision of 503(b)(1 )(A). A creditor's efforts undertaken solely to further its own selfinterest are not compensable.

In re Molnar Bros., 200 B.R. 555,559 (Bankr. D.NJ. 1996) (citations omitted); see also Ford
Motor Credit Co. v. Dobbins, 35 F.3d 860, 867 (4th Cir. i 994) ("there is a critical distinction
between an actual benefit to the estate resulting from the actual postpetition use of collateral and

a potential benefit to the estate resulting from a debtor's mere possession of collateral").
36. Presumably, Union wil argue (as it has before) that Union's claims should
be afforded administrative priority because Union preserved the value of

the estate's interest in

Trading Bay for a potential sale (Docket No. 372 at 6).7 Two United States Courts of Appeal,
Under the Abandonment Order, PEAO abandoned its interests in Trading Bay and such interests exist apart from PEAO's estate as ifno bankruptcy petition was fied: "upon abandonment under section 554, the trustee is the estate. Thus, abandonment constitutes a the propert because it is no longer part of simply divested of control of

68773-002\DOCS_LA:2 i 6552.9

14

however, have denied administrative priority where the potential benefit to the estate was the

preservation of value pending a sale that did not actually occur. The Eleventh Circuit found:
That which is thought to have some potential benefit in that it makes a business more likely salable, may be a benefit but is too speculative to be allowed as an "actual, necessary cost and expense of preserving the estate."
Broadcast Corp. v. Broadfoot (In re Subscription Television), 789 F.2d 1530, 1532 (1Ith Cir.
1986). The Second Circuit held that:

(Creditor) has failed to demonstrate his entitlement to administrative-expense priority because his post-petition trading did not benefit the bankruptcy estate. Any effect post-petition trading had on the debtor's value to potential buyers was not beneficial to the estate because the anticipated sale never took place and, thus, the preservation of the debtor's value was only a
potential benefit.

Palley v. Refco, Inc. (In re Refco, Inc.), 331 Fed. Appx. 12, 13 (2d Cir. 2009) (unpublished)8

(citing General Am. Trans. Corp. v. Martin (In re Mid Region Petroleum, Inc.), 1 F.3d 1130,
1133 (10th Cir. 1993) (trustee must use property not merely possess it for there to be an
administrative expense)).

all of the estate's interests in the propert. Property abandoned under section 554 reverts to the debtor, and the debtor's rights to the propert are treated as ifno bankruptcy petition was fied. Although section 554 does not specify to whom propert is abandoned, propert may be abandoned by the trustee to any part with a possessory interest in it. Normally, the debtor is the part with a possessory interest. However, in some cases, it divesture of may be some other party, such as a secured creditor who has possession of

the propert when the trustee abandons

the estate's interest." Coller on Bankruptcy ii 554.02(3) (footnotes omitted). The Abandonment Order expressly
states that such order does not determine the identity of

the party or parties that have title to the propert after

abandonment or have obligations arising under or connection with the abandoned propert (other than to state that

titled shall not vest in the Debtors' lenders). Abandonment Order at 2-3.
A Second Circuit local rule provides that: "(i)n a document fied with this court, a part may cite a

summary order issued on or after January 1,2007." 2d Cir. R. 32.1.1(b)(1) (available at


http://www.ca2.uscourts.gov/clerk!Rules/LR/Local Rule 32 1 l.htm).

68773-002\DOCS_LA:2 i 6552.9

15

37. Although the Debtors sought to sell their interests in Trading Bay, no sale

occurred; instead, the Debtors abandoned their interests by order of this Court. As such, Claim
1382 is not entitled to administrative status.

RESERVATION OF RIGHTS
38. The Movant expressly reserves the right to amend, modify, or supplement

this Objection, and to file additional objections to any other claims (fied or not) that may be
asserted against the Debtor. Should one or more of

the grounds of objection stated in this

Objection be overruled, the Movant reserves its right to object to the Claimant's claims in this

bankuptcy case on any other ground that bankruptcy and nonbankruptcy law permits.
39. Further, notwithstanding anything contained in this Objection shall be

construed as a waiver of any rights that PEAO or its estate may have (a) to bring avoidance
actions under the applicable sections of the Bankruptcy Code, including, but not limited to, 11
U.S.C. 547, against Union, or (b) to exercise PEAO's right of setoff

against Union relating to

such avoidance actions.

68773-002\DOCS_LA2 i 6552.9

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WHEREFORE, the Movant respectfully requests that the Court enter an order
disallowing or reclassifying Union's claims as set forth herein.

Dated: March 24, 2010

PACHULSKI STANG ZIEHL & JONES LLP

. Kharasch (CA Bar No. 109084)


J es K.T. Hunter (CA Bar No. 73369)

W~

Maxim B. Litvak (CA Bar No. 215852)


James E. O'Neil (Bar No. 4042)

919 North Market Street, 17th Floor

P.O. Box 8705 Wilmington, DE i 9899-8705 (Courier 1980 I)


Telephone: (302) 652-4100
Facsimile: (302) 652-4400

EmaIl: ikharaschpszilaw.com

ihunterpszilaw.com
mlitvakpszi law.com

i oneillpszi law.com

Counsel for the Debtors and Debtors in Possession

68773-002\DOCS_LA:2 i 6552.9

17

IN THE UNITED STATES BANKRUPTCY COURT


FOR THE DISTRICT OF DELA WARE

In re: ) Chapter 11
)

PACIFIC ENERGY RESOURCES LTD., et aI., i ) Case No. 09-10785 (KJC)


)

Debtor. ) Related Docket Nos. 1382,1383


)
Hearing Date: April

19, 2010 at 3:00 p.m.

NOTICE OF HEARING ON UNION OIL COMPANY OF CALIFORNIA'S ADMINISTRA TIVE CLAIM STATEMENTS FOR ABANDONMENT AND ENVIRONMENTAL REMEDIATION COSTS (DOCKET NO. 1383) AND OPERATING COSTS rDOCKET NO. 13821

TO: The United States Trustee for the District of Delaware, all affected claimants, and all
parties on the Rule 2002 Service List.

Pacific Energy Alaska Operating LLC, one of the above-captioned debtors and

debtors in possession, has fied the attached Objection of Debtor Pacifc Energy Alaska
Operating LLC to the Administrative Claim Statements of Union Oil Company of California

for Abandonment an Environmental Remediation Costs Docket No. 13831 and Operating
Costs Docket No. 13821 Pursuant to 11 U.S.c. 502(B) and Federal Rule of Bankruptcy
Procedure 3007.

The hearing on Union Oil Company of California's Administrative Claim

Statements for Abandonment and Environmental Remediation Costs (Docket No. 1383) and

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
(702 I); 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.

68773-002\DOCS _ LA:

2 i 66 i 4.3

Operating Costs (Docket No. 1382) is scheduled to be held on April

19, 2010 at 3:00 p.m. (ET),

in the courtroom of the Honorable Kevin 1. Carey, Judge of the United States Bankptcy Court

for the District of Delaware, 824 N. Market Street, 5th Floor, Courtroom No.5, Wilmington,
Delaware 19801.

Dated: March 1!, 2010

PACHULSKI STANG ZIEHL & JONES LLP '.

Ira . Kharasch (CA Bar No. 109084)

James K.T. Hunter (CA Bar No. 73369) Maxim B. Litvak (CA Bar No. 215852)
James E. O'Neil (Bar No. 4042)

919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705 (Courier 19801)
Telephone: (302) 652-4100
Facsimile: (302) 652-4400

Email: ikharaschpszilaw.com

ihunterpszilaw.com mlitvakpszi law.com


i oneillpszi law. com

Counsel for the Debtors and Debtors in Possession

68773-002\DOCS_LA:2 i 66 i 4.3

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