Professional Documents
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1049,1050,1052,1053,1054,1055,1059,
1064 and 1065
REPLY TO RESPONSES AND OBJECTIONS TO DEBTORS' MOTION FOR AN ORDER: (A) VACATING THIS COURT'S ABANDONMENT ORDER IN PART FOR CERTAIN ALASKA ASSETS AND (B) AUTHORIZING THE DEBTORS TO SELL SUCH ASSETS TO COOK INLET ENERGY. LLC
The above-captioned debtors and debtors in possession (the "Debtors") hereby
reply to the various responses and objections fied to the Debtors' Motion for an Order (A)
Vacating This Court's Abandonment Order in Part
Authorizing the Debtors To Sell Such Assets To Cook Inlet Energy, LLC (the "Motion"). By the
Motion, the Debtors seek to (a) vacate this Court's Order Granting Alternative Motion of
the
in Alaska (Excluding Trading Bay) and Rejection of Exec.utory Contracts Relating Thereto
entered on September 11,2009 (the "Abandonment Order") (Docket No. 876) as it relates to
certain operated and exploratory Alaska assets (the "Sold Assets") that the Debtors now propose
i 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 the Debtors is ILL W. Ocean Boulevard, Si,ite 1240, Long Beach, CA 90802. mailng address for all of
to sell to Cook Inlet Energy, LLC (the "Buyer"); (b) approving the sale of
liens, claims, encumbrances and other interests (except for certain Assumed
Liabilties); and (c) assuming and assigning certain executory contracts and unexpired leases
relating to the Sold Assets pursuant to section 365 of
6006. Capitalized terms that are not expressly defined herein shall have the meanings ascribed to
such terms in the Motion.
Preliminary Statement
1. As stated in the Motion, the Debtors have a deal in place with the Buyer to
sell the Sold Assets. Although the Sold Assets have been abandoned, the paries to whom such
assets have been abandoned consent to the sale. In effect; each of the affected landowners,
including state and federal authorities and private paries,
ownership interests in the Sold Assets back to the Debtors' estates (by allowing the Court to vacate the Abandonment Order) so that the estates can then contemporaneously convey these
somewhat uncommon, but given the consent of all paries involved, there is no legal basis to
deny the Debtors the opportunity to realize material valU:e from the contemplated transaction
while also significantly reducing potential claims againstthe estates in the process.
2. The estates stand to benefit substaiitially from the proposed sale, including
(a) the receipt of $875,000 in sale proceeds;2 (b) payment of certain cure amounts to
2 The Debtors' investment banker Lazard Frres & Co. LLC ("Lazard") would be paid $250,000 of
the sale
proceeds. Lazard has agreed to reduce its minimum fee of $500,000 under its retention order to $250,000.
Consultant Milstream Energy, Inc. would also be paid an amount up to $50,000 from the sale proceeds.
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68773-002\DOCS _ SF:68301.2
counterparties to leases and contracts that wil be assumed by the Buyer; (c) relief from the
rejection claims of such counterparties; and (d) relief from the anticipated substantial claims of
the State of Alaska and others from the abandonment of the Sold Assets, which wil
likely
prospective buyers interested in acquiring the Sold Assets. Although no definitive agreements
have been reached, there is a possibility for the estates to realize even more value from the proposed sale if overbids are received and affected landowners consent to such alternative
buyers.
which preclude the relief sought. The Debtors address each response or objection in turn
below.
Reply
5. Union Oil Company of California ("Union"). Union has shown a
tendency in these cases to object to almost any substantive form of relief requested by the
estates, whether the matter at issue directly concerns Union or not. The instant Motion does not
touch upon issues that should be relevant to Union. The Sold Assets are not assets in which
Union has any interest whatsoever. Union has raised some questions about the descriptions of
property that the Debtors propose to convey. These items' have been addressed by corrections to
the exhibits and schedules to the sale agreement with the Buyer.
3 The Debtors expressly reserve all rights to analyze and, if appropriate, to object to any claims that may be
6. Union has also taken the position that the postpetition Amended and
Restated Trading Bay Facilites Agreement, effective September 1, 2009 (the "Facilities
Agreement") between the Debtors and Union, may not be assigned without compliance with its
terms, The Debtors agree. Indeed, the Facilities Agreement was specifically drafted so that the
access rights provided under the agreement could be assigned to a buyer of
consent shall not be unreasonably withheld or delayed." Facilities Agreement at ii 10. The
Facilities Agreement goes on to provide that Union is deemed to consent to an assignment upon
entry of an order by this Court approving a sale. Id. Here, the Buyer wil step into the shoes of
the Debtors and wil succeed to all of
thereby.
7. More generally, Union argues that the entirety of
denied because the Court canot reconsider the Abandonment Order. First, the Cour has already
suggested that vacatur is the appropriate procedural mechanism for unwinding abandonment.
Second, there is ample authority cited in the Motion for the relief
BANKR. P. 9024 (incorporating FED. R. CIV. P. 60); Woods v. Kenan (In re Woods), 173 F.3d
770, 778 (10th Cir. 1999) (upholding decision to vacate prior order closing the case in order to
permit the sale of oil and gas wells even though the wells had been technically abandoned
pursuant to section 554(c) of the Bankptcy
649 (6th Cir. 2008) ("The banptcy court did not abuse its discretion in determining that the
equities weighed in favor of revoking the abandonment."). Third, even if
unwinding the
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68773-002\DOCS_SF:68301.2
Abandonment Order were impossible to achieve, the practical reality is that affected landowners
are wiling to reconvey certain property to the estates and the Debtors have made a calculated
business judgment to accept such property for the limited purpose of immediately sellng it to the
Buyer on terms that wil benefit the estates. Union offers no legitimate basis to prevent this
transaction from going forward.
8. Marathon Oil Company ("Marathon"). Like Union, Marathon has been an
active paricipant in these cases. Marathon objects to the Motion on the basis that the Debtors
have not filed schedules to the proposed asset purchase agreement. Of course, Marathon did not
request copies of the schedules prior to the fiing of its objection. (The schedules have now been
provided to Marathon.) There is only one contract in the context of
Marathon -- a postpetition agreement called the Fuel Gas Purchase and Exchange Agreement,
effective August 13, 2009 (the "Supply Agreement"). The Supply Agreement has expired by its
own terms. Hence, it is entirely within Marathon's discretion whether the Supply Agreement
may be amended or renegotiated with the Buyer. Aside from the assignment to the Buyer,
nothing in the Motion attempts to modify the terms of the Supply Agreement.
9. State of Alaska (the "State"). The State has objected to the amount of
certain cure payments proposed by the Debtors in conjunction with the sale. Specifically, the
State asserts that (a) approximately $250,000 in property
have been incurred by the State from and after the date of abandonment. As to any unpaid taxes,
the Debtors and the Buyer have agreed that the Buyer will be responsible for any taxes incurred
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68773-002\DOCS _ SF:6830 1.2
with respect to the Sold Assets from and after the date of entry of
the Debtors wil be responsible for any taxes incurred during the pre-abandonment period. With
respect to winterizing costs, the Debtors understand that the State and the Buyer are discussing a
methodology for addressing these claims. The Debtors are not wiling to assume these
obligations because they necessarily arose post-abandonment.
10. United States, on behalf of the Department of
Minerals Management Service and Bureau of Land Management (together, the "United States").
The United States has fied a limited objection to the proposed sale and the proposed cure
amounts payable to the United States. The Debtors understand that the United States and the
Buyer have resolved or wil resolve all issues raised in the objection.
11. Cook Inlet Region, Inc. ("CIRI"). CIRI supports the proposed sale,
subject to its arangements with the Buyer in terms of adequate assurance of future performance
and payment of appropriate cure amounts upon a complete reconciliation of amounts owed. The
Debtors have no dispute with CIRI on these points.
12. Medema Family Trust ("Medema"). Medema's objection appears to be
filed on behalf of all holders of overriding royalty interests in the Sold Assets (the "ORRI
Holders") other than the Debtors' principal
subject to certain conditions. Medema seeks clarification that the Buyer wil assume royalties
owedto the ORR Holders going forward. Indeed, the sale agreement will provide that the
Buyer wil be responsible for royalties owed to the ORR Holders on account of any production
realized from the Sold Assets from and after the date of entry ofthe Abandonment Order. As to
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68773-002\DOCS_SF:6830 i.2
14. Finally, Donkel suggests that there may be impropriety in connection with
the negotiation of
the Buyer, is a
former employee of
the Debtors. Nothing could be further from the truth. The sale was
negotiated at ars length and by different parties on both sides. The Debtors' interests were
offer the estates as an alternative to the proposed sale, which wil yield substantial benefits in the
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68773-002\DOCS _SF:6830 1.2
the pool of
unsecured
claims.
16. Stellar Energy LLC ("Stellar"). Stellar is a prospective buyer of
the Sold
Assets. Stellar is not a material creditor in these cases. Stellar apparently obtained a nominal
claim in the amount of $452.54 for just this purpose of objecting to the Motion. This is not a
legitimate basis for standing in these cases, particularly given that Stellar's objection is clearly
based upon its position as a bidder on the assets at issue, and not as a creditor.
17. To the extent that the Court chooses to consider the objection, Stellar's
position is that it should be the buyer of the Sold Assets because it is wiling to pay more. The
Debtors certainly have no preference as between the Buyer, Stellar, or anyone else in terms of
who should purchase the Sold Assets. However, given that the Sold Assets have been
abandoned and do not currently constitute estate property, the Debtors require consent and
approval of
the State, the United States, CIRI and other affected landowners to the proposed sale.
Hence, if Stellar obtains such approvals, then the Debtors would be wiling to consider Stellar's
bid.
18. Informal Shareholder Objections. The Debtors have received informal
objections to the sale from at least two shareholders. Aside from complaining about the fate of
the Debtors' assets, these objectors have no legitimate basis to object to the Motion. As
shareholders, these parties are not entitled to any recovery until creditors have been paid in full, which is not likely to happen in these cases.
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68773-002\DOCS _ SF:6830 1.2
Conclusion
19. For the reasons set forth above, the Debtors respectfully request that the
Court grant the Motion, as modified hereby, and overrle any responses or objections thereto.
ld~
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68773-002\DOCS _ SF:6830 i.2
In re: )
STATE OF DELAWARE )
) ss:
) )
Debtors. )
AFFIDAVIT OF SERVICE
Pachulski Stang Ziehl & Jones LLP, attorneys for the Debtors in
the above-captioned action, and that on the 30th day of October, 2009 she caused a copy ofthe follo\ving document(s) to be served upon the parties on the attached service lists in the manner
indicated:
Reply to Responses and Objections to Debtors' Motion for Order (A) Vacating Court's Abandonment Order in Part for Certain Alaska Assets and ,Cook Inlet Energy, LLC
(B) Authorizing Debtors to Sell such Assets to
_ CO ex ~ 18. 201
i The Debtors in these cases, along with the last four digits of each:ofthe 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 mailng address for all ofthe Debtors is ILL W. Ocean Boulevard, Suite 1240, Long Beach, CA 90802.
Pacific Energy Resources Ltd. Special Service List - Shareholder/ Motion to Vacate Order)
Case No. 09-10785
Document No. 154390
01 - Express Mail
Express Mail
(Hugh E. Smith)
02 - Hand Delivery
02 - Overnight Delivery
Via Hand Delivery (counselfor Daniel K. Donkel) Charlene D. Davis, Esquire Jamie L. Edmonson, Esquire GianClaudio Finizio, Esquire
Bayard, P.A.
Overnight Delivery (Daniel K. Donkel) Mr. Daniel K. Donkel 1906 Kohinoor Place Golden, CO 80401
Overnight Delivery (counsel for Daniel K. Donkel) Patrick J. Russell, Esquire Allen & Vellone, P.C.
1600 Stout Street, Ste 1100
Denver, CO 80202
07 - Hand Delivery
06 - Overnight Delivery
Hand Delivery (Counsel for State of Alaska) Joseph H. Huston, Jr., Esquire Maria Aprile Sawczuk, Esquire Stevens & Lee PC 1105 N. Market Street, Ste 700 Wilmington, DE 19801 Hand Delivery (Counsel for Stellar Energy, LLC) Brian E. Farnan, Esquire David A. Bilson, Esquire Philips, Goldman & Spence, P.A. 1200 North Broom Street Wilmington, DE 19801
Hand Delivery (United States Attorney) Ellen W. Slights, Esq. United States Attorney's Office District of Delaware
1007 N. Orange Street, Suite 700
Wilmington, DE 19801
Hand Delivery (Counsel for Union Oil Company of California, a California Corporation) Norman M. Monhait, Esquire Rosenthal, Monhait & Goddess, P A
Citzens Bank Center, Suite 1401
Via Overnight Delivery (Counsel for Union Oil Company of California) Richard L. Epling, Esquire David A. Crichlow, Esquire Roger Elder, Esquire
Pilsbur Winthrop Shaw Pittman LLP
(Counsel for Daniel K. Donkel) Christopher M. Brecht, Esquire Bankston Gronning O'Hara, P.C. 60 1 West Fifth Avenue, Ste 900 Anchorage, AK 99501
Via Overnight Delivery (Counsel for Medema Family Trust & ORR Holders)
John C. Siemers, Esquire
Bur, Pease & Kurtz
Wilmington, DE 19801
Hand Delivery (Counsel for Medema Family Trust & ORRI Holders) Wiliam E. Chipman, Jr., Esquire Landis Rath & Cobb LLP 919 Market Street, Ste 1800 Wilmington, DE 19801
Via Overnight Delivery (Counsel for United States) E. Kathleen Shahan, Esquire U.S. Department of Justice P.O. Box 875, Ben Franklin Station Washington, DC 20044
Overnight Delivery (Counsel for State of Alaska) Lorenzo Marinuzzi, Esquire Samantha Marin, Esquire Morrison & Foerster LLP
1290 Avenue of
the Americas
68773-002\DOCS_DE: 154388.1
14 - Hand Delivery
44 - First Class Mail 02 - FOREIGN First Class Mail
Hand Delivery (United States Attorney) Ellen W. Slights, Esq. United States Attorney's Office District of Delaware
1007 N. Orange Street, Suite 700
Wilmington, DE 19801
Hand Delivery (Counsel for Silver Point Finance) Ian S. Fredericks, Esquire Skadden Arps, Slate, Meagher & Flom LLP One Rodney Square P.O. Box 636 Wilmington, DE 19899
Hand Delivery (Counsel for J. Aron & Company) Don A. Beskrone, Esquire Amanda M. Winfree, Esquire Ashby & Geddes, P.A.
500 Delaware Avenue, 8th Floor
(Counsel for Debtors) Laura Davis Jones, Esquire James E. O'Neil, Esquire Kathleen P. Makowski, Esquire Pachulski Stang Ziehl & Jones LLP 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705
Wilmington, DE 19899
Hand Delivery (Counsel for Union Oil Company of California, a California Corporation) Norman M. Monhait, Esquire Rosenthal, MonhaIt & Goddess, P A
Citi~ens Bank Center, Suite 1401
Wilmington, DE 19801
Hand Delivery (Copy Service)
Parcels, Inc.
Hand Delivery (Counsel for Oxy Long Beach Inc.) David L. Finger, Esquire
Finder, Slanina Liebesman, LLC
Hand Delivery (C~unsel for Ammadon Limited and Catherwood Limited) Mark E. Felger, Esquire Cozen O'Connor 1201 N. Market Street, Suite 1400 Wilmington, DE 19801
Hand Delivery (Counsel for Forest Oil Corporation) Robert J. Dehney, Esquire Curtis S. Miler, Esquire Morris Nichols Arsht & Tunell LLP 1201 N. Market Street Wilmington, DE 19899
Hand Delivery
(Official Committee of
Unsecured
Creditors) David B. Stratton, Esquire James C. Carignan, Esquire Pepper Hamilton LLP
Hercules Plaza, Suite 1500
13 13 Market Street
Wilmington, DE 19899
Hand Delivery (Counsel for Marathon Oil Company) Kevin J. Mangan, Esquire Womble Carlyle Sandridge & Rice, PLLC 222 Delaware Avenue, Suite 1501 Wilmington, DE 19801 Hand Delivery (Counsel for Cook Inlet Region, Inc.) Eric Lopez Schnabel, Esquire Dorsey & Whitney (Delaware) LLP
1105 North Market Street, Suite 16th Floor
Wilmington, DE 19801
Washington, DC 20220
District Director Internal Revenue Service 31 Hopkins Plaza, Room 1150 Baltimore, MD 21201
California Franchise Tax Board Bankrptcy, BE MSA 345 P.O. Box 2952 Sacramento, CA 95812-2952
Bakersfield, CA 93311-1164
SWEPI LP
Washington, DC 20554
LINE
Fir~t Class Mail (Counsel to Goldman Sachs and J.Aron & CoJipany) Jeffrey Sabin, Esquire Steven Wilamowsky, Esquire Scott K. Seamon, Esquire Bingham McCutchen LLP
399 Park Avenue
Nev~:York, NY 10022
E. Kathleen Shahan, Esquire U.s. Department of Justice 1100 L Street, NW Wa~pington, D.C. 20005
Bankptcy Coordinator
MMS I Denver Federal Center
P 0 Sox 25165 Mail Stop 370B2
First, Class Mail (Copnsel for Westchester Fire Insurance Company) Robert McL. Boote, Esquire Ballard Spahr Andrews & Ingersoll, LLP
173'5 Market Street, 51 st Floor
,-
Denver, CO 80225
Philadelphia, P A 19103
Baltimore, MD 21209
Greenwich, CT 06830
Creditors) Francis J. Lawall, Esquire Pepper Hamilton LLP 3000 Two Logan Square Eighteenth & Arch Streets Philadelphia, P A 19103
Martin A. Mooney, Esquire Deily, Mooney & Glastetter, LLP 8 Thurlow Terrace Alb~ny, NY 12203
Unsecured
(Counsel for Aera Energy LLC) Steven E. Rich, Esquire Maver Brown LLP
35 South Grand Avenue, 25th Floor
Joshua Taylor, Esquire Steptoe & Johnson LLP 1330 Connecticut Avenue NW Washington, DC 20036
Unsecured
P.O:'.Box 579
Creditors) Robbin Itkin, Esquire Katherine Piper, Esquire Kelly Frazier, Esquire Steptoe & Johnson LLP
2121 Avenue of
Bakersfield, CA 93302
Anchorage, AK 99501
(Counsel for Union Oil Company of California) Richard L. Epling, Esquire David A. Crichlow, Esquire Roger Elder, Esquire Pilsbury Winthrop Shaw Pittman LLP 1540 Broadway New,York, NY 10036
Reg.ipn
755'Parfet Street, Suite 151
Lak~wood, CO 80215
Class Mail (Counsel for Forest Oil Corporation) Steven M. Abramowitz, Esquire Ronald L. Oran, Esquire Vinson & Elkins
First