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In Re) Chapter 11: For The District of Dela Ware
In Re) Chapter 11: For The District of Dela Ware
In re ) Chapter 11
PACIFIC ENERGY RESOURCES LTD., et al.,i ) Case No. 09-10785 (KJC)
) (Jointly Administered)
, --
OBJECTION OF THE DEBTORS TO COOK INLET REGION, INC.'S MOTION TO COMPEL PAYMENT OF ADMINISTRATIVE EXPENSES
The debtors and debtors in possession (together, the "Debtors") in the above-captioned
cases hereby object to the Motion to Compel Payment of Administrative Expenses (the
"Motion") fied by Cook Inlet Region, Inc. ("CIRI"). In support of
Preliminary Statement
1. As set forth in the Motion, CIRI is entitled to certain easement fees,
throughput fees and royalties payable by Pacific Energy Alaska Operating, LLC ("PEAO").
CIRI seeks immediate payment of the postpetition amounts owing on account of these
obligations.
2. The Debtors' position is simple: PEAO has paid CIRI all amounts that
have come due postpetition to date. In fact, as a result of accounting reconciliations based on
i The Debtors in these cases, along with the last four digits of each Debtor's federal tax identification number, are: Pacific Energy Resources Ltd. (3442); Petrocal Acquisition Corp. (6249); Pacific Energy Alaska Holdings LLC (tax J.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 address for all of the Debtors is III W. Ocean Boulevard, Suite 1240, Long Beach, CA.
pricing information recently obtained from the State of Alaska, it has been determined that
PEAO has overpaid CIRI by over $22,740.83 on account of
Backe:round
4. On March 9, 2009 (the "Petition Date"), the Debtors commenced these
cases by each filing 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
acquisition, development and exploitation of oil and gas properties in the western United States.
The Debtors' intent is to provide the operational focus necessary to their properties to exploit
their full potential, and are focused on applying their extensive engineering, operating, geologic,
and geophysical expertise to provide significant proved reserve and production growth.
B. The Debtors' Payment of CIRI's Administrative Expenses
throughput fees and royalties that continue to accrue postpetition with respect to PEAO's
operations in Alaska. Reduced to its simplest form, the amounts owed to CIRI fall into three
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distinct categories: (a) easement throughput; (b) easement annual fee; and (c) royalties under a
federal lease. Each of
post
throughput charges for July 2009. PEAO also estimates that the
sum of $8,483.63 is owed to CIRI for unpaid prepetition amounts
status. Hence, PEAO has not paid any portion of such fee.
c. Royalties. On July 1,2009, July 27, 2009, and August 6, 2009,
petition royalty
68773-002\DOCS_SF:670 12.1
made available by the State of Alaska, however, PEAO has determined that only $46,531.21 was owed to CIRI for this time
503(b) of
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).
8. 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 COLLIER ON BANKRUPTCY
~ 503.05(2), at 503-21 (15th ed. 2002); see also In re Commonwealth of Pennsylvania Dep 't of
Envtl. Resources, 178 F.3d 685,691 (3d. Cir. 1999) ("(T)hose who continue to transact business
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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 affrmatively assumed such risk").
9. "For a debt to qualify as an administrative expense, it must satisfy a two-
prong test: (1) it must have arisen from a transaction with the estate and (2) it must have benefited the estates in some demonstrable way." 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)).
10. The claimant caries 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
(emphasis added); see also In re Goody's Family Clothing, Inc., 401 B.R. 656, 663-664 (Bank.
D. DeL. 2009).
11.
Here, for the reasons outlined above, CIRI has failed to carry its burden of
establishing either an administrative claim in these cases beyond the amounts that PEAO has
already paid or cause to compel PEAO to pay any such claims on an expedited basis.
12. PEAO submits that it is current on all postpetition obligations to CIRI and,
indeed, has overpaid CIRI by over $22,740.83. The only material issue in dispute appears to be
the easement annual fee that came due prepetition. PEAO submits that this fee is a general
unsecured claim.
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13. CIRI attempts to construe the easement anual fee as something akin to an
obligation under an unexpired lease that can be pro-rated for the postpetition period. An
easement, however, is not an unexpired lease of
conveyance of a distinct interest in real property. See, e.g., Kent's Run Partn., Ltd. v. Glosser,
323 B.R. 408,422 (W.D. Pa. 2005), aff'd, 174 Fed.Appx. 34 (3d Cir. 2006) ("An easement is an
"interest in the land owned by another person, consisting in the right to use or control the land, or
an area above or below it, for a specific limited purpose.") (citing BLACK'S LAW DICTIONARY
527 (7th ed. 1999)). Although section 365 of
respect to "executory contracts" and "unexpired leases," the statute does not expressly cover
other vested interests in real property (i.e., easements), particularly those obtained through an
executed conveyance. Kent's Run Partn., 323 B.R. at 424.
14. Hence, while the Debtors acknowledge that CIRI may have a prepetition
claim against PEAO with respect to the unpaid easement annual fee, that is not a charge that can
be pro-rated or properly allowed as an administrative expense.
B. CIRI is Not Entitled to Immediate Payment of Any Allowed Administrative Claim
15. CIRI also has failed to establish its entitlement to immediate payment of
any allowed administrative claim.
effectiveness of a plan, it is within the Court's discretion to determine the timing of payment. In
re HQ Global Holdings, Inc., 282 B.R. 169, 173 (Bank. D. DeL. 2002); In re Goody's Family
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Clothing, Inc., 392 B.R. 604,614 (Banr. D. DeL. 2008), aff'd, 401 B.R. 656 (D. DeL. 2009); In
re Global Home Prods., LLC, 2006 WL 3791955 at *3-4 (Ban. D. DeL. Dec. 21, 2006).
17. As stated by Judge Walrath in HQ Global:
The determination of the timing of payment of administrative expenses is a matter within the discretion of the bankptcy court. In making this determination, one of the chief factors courts
consider is bankptcy's goal of an orderly and equal distribution
among creditors and the need to prevent a race to the debtor's assets. Thus, distributions prior to confirmation of a plan are usually disallowed when the estate may not be able to pay all administrative expenses in fulL. Other factors include the particular needs of each administrative claimant and the length and expense
of
there is a necessity to pay and not merely that the Debtor has the ability to pay." Global Home,
2006 WL 3791955 at *3 (quoting In re Continental Airlines, Inc., 146 B.R. 520,531 (Bankr. D.
DeL. 1992)).
19. In the instant case, there is no compellng basis to require immediate
payment of any administrative claim asserted by CIRI beyond those claims that PEAO has
already paid (and indeed overpaid). Moreover, the Debtors' lenders are likely to assert
superpriority claims and liens on the Debtors' assets senior to any CIRI administrative claim.
Conclusion
20. For the reasons set forth above, the Debtors request that the Court deny the
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68773-002\DOCS _ SF:670 12. 1
Jam E. O'Neil (DE Bar No. 4042) Maxim B. Litvak (CA Bar No. 215852) 919 North Market Street, 17th Floor P.O. Box 8705 Wilmington, DE 19899-8705
Telephone: (302) 652-4100
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68773-002\DOCS_SF:67012.1
In re: )
STATE OF DELAWARE )
) ss:
)
)
Debtors. )
AFFIDAVIT OF SERVICE
Debtors in the above-captioned action, and that on the 25th day of August, 2009 she caused a
copy of
the following document(s) to be served upon the parties on the attached service lists in
~009
Notar Pu ic
i
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 J.D. # not available); Cameros Acquisition Corp. (5866); Pacific Energy Alaska Operating LLC (7021); San Pedro Bay Pipeline Company (1234); Cameros the Debtors is III W. Energy, Inc. (9487); and Gotland Oil, Inc. (5463). The mailng address for all of
Ocean Boulevard, Suite 1240, Long Beach, CA 90802.
DOCS_DE: 1 524 1 7. 1
05 - Hand Delivery
05 - Overnight Delivery
Hand Delivery (United States Attorney) Ellen W. Slights, Esq. United States Attorney's Offce District of Delaware
1007 N. Orange Street, Suite 700
Wilmington, DE 19801
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
Interoffce Pouch to Los Angeles
Hand Delivery (Counsel to Offcial Committee of Unsecured Creditors) David B. Stratton, Esquire James C. Carignan, Esquire Pepper Hamilton LLP
Hercules Plaza, Suite 1500
Counsel for Debtors) Robert M. Saunders, Esquire Ira D. Kharasch, Esquire Scotta E. McFarland, Esquire Pachulski Stang Ziehl & Jones LLP
10100 Santa Monica Blvd., 11 th Floor
Overnight Delivery (Counsel to Goldman Sachs, lAron & Company; DIP Administrative Agent) Jeffrey Sabin, Esquire Steven Wilamowsky, Esquire Scott K. Seamon, Esquire
Bingham McCutchen LLP
Wilmington, DE 19801
Hand Delivery (Copy Service)
Parcels, Inc.
Overnight Delivery (Counsel to PEA Collateral Agent, et al.) Seth E. Jacobson, Esquire Chris L. Dickerson, Esquire Skadden, Arps, Slate, Meagher & Flom LLP 333 West Wacker Drive, Suite 2100 Chicago, IL 60606
Francis J. Lawall, Esquire Pepper Hamilton LLP 3000 Two Logan Square Eighteenth & Arch Streets Philadelphia, P A 19103
Overnight Delivery (counsel to Official Committee of
Unsecured Creditors)
Joshua Taylor, Esquire Steptoe & Johnson LLP 1330 Connecticut Avenue NW Washington, DC 20036 Overnight Delivery (counsel to Official Committee of
U nsecured Creditors)
Robbin Itkin, Esquire Katherine Piper, Esquire Kelly Frazier, Esquire Steptoe & Johnson LLP 2121 Avenue of the Stars, 28th Floor Los Angeles, CA 90067