Sunteți pe pagina 1din 35

UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

In Regarding

)

Chapter 11

)

PACIFIC ENERGY RESOURCES

)

Case No. 09-10785 (KJC)

LTD., et al.,

)

)

(Jointly Administered)

)

Debtors.

)

FEE AUDITOR’S FINAL REPORT REGARDING INTERIM FEE APPLICATION OF PACHULSKI STANG ZIEHL & JONES, LLP FOR THE THIRD INTERIM PERIOD

This is the final report of Warren H. Smith & Associates, P.C., acting in its capacity as fee

auditor in the above-captioned bankruptcy proceedings, regarding the Interim Fee Application of

Pachulski Stang Ziehl & Jones LLP, for the Third Interim Period (the “Application”).

BACKGROUND

  • 1. Pachulski Stang Ziehl & Jones LLP (“Pachulski”),was retained as counsel to the

debtors. In the Application, Pachulski seeks approval of fees totaling $647,227.00 and costs totaling

$64,948.55 for its services from September 1, 2009 through November 30, 2009 (the “Application

Period”).

  • 2. In conducting this audit and reaching the conclusions and recommendations

contained herein, we reviewed in detail the Application in its entirety, including each of the time and

expense entries included in the exhibits to the Application, for compliance with Local Rule 2016-2

of the Local Rules of the United States Bankruptcy Court for the District of Delaware, Amended

Effective February 1, 2010, and the United States Trustee Guidelines for Reviewing Applications

for Compensation and Reimbursement of Expenses Filed Under 11 U.S.C. § 330, Issued January 30,

FEE AUDITOR’S FINAL REPORT - Page 1 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

1996 (the “Guidelines”), as well as for consistency with precedent established in the United States

Bankruptcy Court for the District of Delaware, the United States District Court for the District of

Delaware, and the Third Circuit Court of Appeals. We served on Pachulski an initial report based

on our review, and received a response from Pachulski, portions of which response are quoted

herein.

DISCUSSION

  • 3. We noted a few instances in which multiple Pachulski professionals participated in

hearings and conference calls. See Exhibit A. Paragraph II.D.5. of the Guidelines provides that

“[i]f more than one professional from the applicant firm attends a hearing or conference, the

applicant should explain the need for multiple attendees.” Furthermore, Delaware Local Rule 2016-

2(d)(ix) states that “[t]he activity descriptions shall individually identify all meetings and hearings,

each participant, the subject(s) of the meeting or hearing, and the participant’s role.” We asked

Pachulski to provide additional information for each of these occasions. Pachulski’s response is

attached as Response Exhibit 1. We appreciate this response and have no objection to these fees.

  • 4. We noted the following airfare charges which are insufficient in explanation:

8/17/2009Air Fare [E110] - United 8/27 LAX/PHIL/LAX 1st class (discounted less than coach) IDK

$2,558.40

9/3/2009Air Fare [E110] - US Air LAX/PHIL/LAX 1st class (discounted; less than coach) IDK

$2,587.20

9/8/2009Air Fare [E110] - United LAX/PHIL 1st class (discounted; less than coach) IDK

$1,293.60

9/8/2009Air Fare [E110] - US Air PHIL/LAX 1st class (discounted; less than coach) IDK

$1,293.60

We asked Pachulski to provide additional information for these charges. Pachulski responded as

follows:

The Report (paragraph 4) requests further information as to the cost of fares “discounted; less than coach”. The Firm has researched these issues and understands that in some markets, when one pays a refundable full fare, it is the same as a

FEE AUDITOR’S FINAL REPORT - Page 2 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

discounted First class seat. Some airlines call it a Y-Up fare, however there is apparently no difference between a Y-Up and a Y fare. For example, based on information the Firm has been able to obtain, a sample refundable last minute roundtrip Coach fare from LAX to Philadelphia would be $2,917.40, whereas a refundable First Class ticket would be $2,737.40. Thus, certain First Class tickets are “discounted” and cost less than last minute coach fare. Thus, the first four items listed below, although denominated First Class, cost the estate less than last minute coach fares. In addition, full fare coach as previously researched by the Firm and related to prior interim applications, would cost $2,857.50: 1

8/17/2009 round trip air fare for IDK (Ira Kharasch) from LAX to Philadelphia:

Cost $2,558.40, less than refundable First Class or full fare Coach.

9/3/2009 round trip air fare for IDK (Ira Kharasch) from LAX to Philadelphia: Cost $2,587.20, less than refundable First Class or full fare Coach.

9/8/2009 one way trip air fare for IDK (Ira Kharsach) from LAX to Philadelphia:

$1,293.60 and 9/8/2009 one way trip air fare for IDK (Ira Kharasch) from Philadelphia to LAX: $1,293.60, for a total cost of $2,587.20, less than refundable First Class or full fare Coach

We appreciate this response. However, our research indicates refundable coach class round trip

fares are available from LAX to Philadelphia for approximately $1,448.00 2 with twenty-four hour

advance purchase. Therefore, we recommend a reduction of $1,110.40 for the first airfare

($2,558.40 minus $1,448.00); $1,139.20 for the second airfare ($2,587.20 minus $1,448.00); and

$1,139.20 ($2,587.20 minus $1,448.00) for the two one way fares. Thus we recommend a total

reduction for this paragraph 4 of $3,388.80 in expenses.

  • 5. We also noted the following airfare charges which require further explanation:

10/13/2009

Air Fare [E110] - United Air - LAX/ORD One-Way PHL/LAS (IDK)

2102.40

11/7/2009

Air Fare [E110] - US Airways - round trip Los Angeles; CA to Philadelphia; PA and change fee JKTH

1729.2

We asked Pachulski to provide further explanation regarding each of these charges.

Pachulski

  • 1 Certain of the one-way fares are combined for ease of discussion.

  • 2 All airfares found at www.aa.com.

FEE AUDITOR’S FINAL REPORT - Page 3 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

responded as follows:

10/13/2009 Air Fare LAX/ORD one-way PHL/LAS $2,102.40. The actual trip dates were October 29, 2009 through November 6, 2009. Mr. Kharasch (IDK) went to Syracuse on October 29, 2009, then to Delaware for a hearing on November 3, 2009. He intended to go to a business development function in Las Vegas but needed to stay longer in Delaware for a continued hearing on November 6, 2009. Mr. Kharasch appeared at a hearing on November 6, 2009 and met with clients and attorneys while in Delaware. A round trip ticket LAX/Philadelphia would cost $2,558.00, which is more than the cost of Mr. Kharasch’s fare.

11/7/2009 Air Fare Round trip Los Angeles CA to Philadelphia, PA and change fee JKTH $1,729.20. Coach fare. Mr. Hunter needed to be at a hearing to handle the examination of any witnesses in connection with asset abandonment.

Based upon the above explanations, PSZ&J submits that the air fares charged were incurred for the benefit of the Debtors and should be reimbursed to the Firm.

We appreciate Pachulski’s response. However, we do not believe that Pachulski has met the burden

of showing why the estate should reimburse for Mr. Kharasch’s airline tickets on October 29, 2009,

and November 6, 2009, given that both tickets (one to Syracuse and the other to Las Vegas) appear

to be unrelated to the Pacific Energy case. Thus, we recommend a reduction of $2,102.40 in

expenses.

  • 6. We noted the following airport parking charges which are insufficient in explanation:

9/1/2009

SFO Parking Central; airport parking; MBL

$99.00

9/12/2009

LAX Parking (IDK)

$60.00

11/6/2009

LAX Airport Parking expense

JKTH

$57.00

11/10/2009 LAX Airport parking expense

IDK

$154.44

We asked Pachulski to further explain these charges. Pachulski responded as follows:

These charges related to travel by attorneys of the Firm to Delaware to prepare for and attend hearings, and return.

9/1/2009 SFO parking. The $99.00 charge represents the charges for three days of parking at the San Francisco Airport by MBL (Max Litvak). By parking his car at the San Francisco Airport while traveling Mr. Litvak was able to avoid the

FEE AUDITOR’S FINAL REPORT - Page 4 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

costs for taxi and car service to and from the San Francisco Airport, thereby saving the estate money.

9/12/2009 LAX parking. The $60.00 charge represents the charges for two days of parking (September 10 and 11, 2009) at the Terminal Parking Garage at $30/day by IDK (Ira Kharasch). By parking his car at the Los Angeles Airport while traveling Mr. Kharasch was able to avoid the costs for taxi and car service to and from the Los Angeles Airport, thereby saving the estate money.

11/6/2009 LAX parking. JKTH. $57.00. This charge was for two (2) days of parking at the LAX airport by JKTH (James Hunter), who appeared on November 6, 2009 at a hearing in Delaware. By parking his car at the Los Angeles Airport while traveling Mr. Hunter was able to avoid the costs for taxi and car service to and from the Los Angeles Airport, thereby saving the estate money. As previously mentioned, Mr. Kharasch was required to remain in Delaware longer than originally planned in order to attend a continued hearing.

11/10/2009 LAX parking. The $154.44 charge represents the charges for nine days of parking (October 29, 2009 to November 6, 2009) at Parking Spot by IDK (Ira Kharasch). By parking his car at the Los Angeles Airport while traveling Mr. Kharasch was able to avoid the costs for taxi and car service to and from the Los Angeles Airport, thereby saving the estate money. In addition, Mr. Kharasch used a travel agent discount coupon to reduce the cost to the estate.

Based on the above explanation, PSZ&J submits that the expenses incurred were reasonable and necessary and should be reimbursable.

We appreciate this response and have no objection to the parking charges on 9/1/2009, 912/2009 and

11/6/2009. However, as stated in the paragraph above, we do not believe Pachulski has met the

burden of showing why the estate should be liable for the parking for the full amount of Mr.

Kharasch’s nine-day travel expenses from October 29 through November 6, 2009, given that

portions of this itinerary appear unrelated to the Pacific Energy case. Pachulski’s response to

paragraph 5 above, indicates that Mr. Kharasch attended hearings in Delaware on November 3 rd and

6 th which would indicate that parking was needed for November 2 through November 6, 2009, or

5 days. The response indicates that this expense covered 9 days of parking and we recommend a

FEE AUDITOR’S FINAL REPORT - Page 5 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

reduction of the daily charges 3 for 4 days, for a reduction of $68.64 in expenses.

7.

We noted the following charges for secretarial overtime:

8/28/2009

Secretarial Overtime; O. Carpio

$18.54

8/29/2009

Secretarial Overtime; G. Downing

$107.54

10/6/2009

Secretarial Overtime; M. Wilson

$32.77

11/12/2009

Secretarial Overtime G. Downing

$28.68

We asked Pachulski to provide further information regarding these charges. Pachulski

responded as follows:

 

August 28, 2009. O. Carpio. $18.54. The Firm is unable to determine the matter worked on in sufficient detail and agrees to write off the $18.54 amount.

August 29, 2009. G. Downing. $107.54. Gini Downing needed to input proffers of testimony over the weekend for James Hunter so that he could work on them early Monday morning (August 31, 2009).

October 6, 2009. M. Wilson. $32.77. Megan Wilson helped prepare an opposition to the Donkel Motion for Shortened Time, and performed the work at approximately 11 p.m. in order for the Firm to meet an expedited deadline.

November 12, 2009. G. Downing. $28.68. Gini Downing performed work regarding a sale order so that the order would be ready for Ira Kharasch to submit to parties for approval on an expedited basis.

Based on the above explanation, PSZ&J submits that the expenses incurred were reasonable and necessary and should be reimbursable, except for the $18.54 that it has agreed to write-off.

We appreciate this response and thus recommend a reduction of $18.54 in expenses.

8.

We noted the following car service charges which require additional information.

3 ($154.44 ÷ 9 days = $17.16) 4 days x $17.16 = $68.64.

FEE AUDITOR’S FINAL REPORT - Page 6 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

8/3/2009 Auto Travel Expense [E109] - Eagle - 17285 - IDK from Phila airport to Hotel Dupont

$100.70

8/30/2009 Auto Travel Expense [E109] Eagle-17411-IDK from Phila airport to Hotel Dupont

$98.70

8/30/2009 Auto Travel Expense [E109] Eagle-17411- Gerry Tywoniuk from Phila airport to Hotel Dupont

$100.70

9/1/2009

Auto Travel Expense [E109] AMS Transportation; Inv. 147896; MBL

$158.72

9/1/2009

Auto Travel Expense [E109] AMS/Pacific Transportation; Inv. 147997; IDK

$102.00

9/2/2009

Auto Travel Expense [E109] AMS/Pacific Transportation; Inv. 147851; J. Arlington

$178.57

9/10/2009 Auto Travel Expense [E109] Eagle-17437-IDK from Phila airport to Hotel Dupont

$100.70

11/2/2009 Auto Travel Expense [E109] Eagle - 17653- Gerry Tywoniuk form Phila airport to Hotel Dupont

$98.70

We asked Pachulski to provide additional explanation for these charges. Pachulski responded:

(1)

August 3, 2009. Eagle. IDK from Phil. airport to Hotel Dupont. $100.70. Mr. Kharasch needed transportation to appear at a hearing in Delaware on August 4, 2009.

(2)

August 30, 2009. Eagle. IDK from Phil. airport to Hotel Dupont. $98.70. Mr. Kharasch appeared at a hearing on September 1, 2009.

(3)

August 30, 2009. Eagle. Gerry Tywoniuk from Phil. airport to Hotel Dupont. $100.70. Mr. Tywoniuk, acting CEO of one of the Debtors, was a key potential witness for the September 1, 2009 hearing and was also needed for negotiations.

(4)

September 1, 2009. AMS. MBL. $158.72. Mr. Litvak appeared at a hearing on September 1, 2009.

(5)

September 1, 2009. AMS. IDK. $102.00. Mr. Kharasch needed transportation from the Los Angeles airport following his flight back from a hearing in Delaware.

FEE AUDITOR’S FINAL REPORT - Page 7 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

(6)

September 2, 2009. AMS. J. Arlington. $178.57. Mr. Arlington was an employee of the Debtors with knowledge as to the Alaska assets and operations. He was a potential witness at the September 1, 2009 hearing.

(7)

September 10, 2009.

Eagle.

IDK from Phila. Airport to Hotel Dupont.

$100.70. Mr. Kharasch needed to appear at a hearing on September 11, 2009 in Delaware.

(8)

November 2, 2009. Eagle. Gerry Tywoniuk from Phil. airport to Hotel Dupont. $98.70. Mr. Tywoni uk, acting CEO of one of the Debtors, was a key potential witness at the November 3, 2009 hearing, and an actual witness at the November 6, 2009 sale hearing.

Regarding the car services for Gerry Tywoniuk, the CFO of the Debtors, and Mr. Arlington, the Debtors’ employee, the Firm was providing a service for individuals that were not with the Firm and simply passed through the charges to the Debtors. Such individuals were crucial actual and potential witnesses at various hearings. Car service was used to transport the Firm’s attorneys to and from the Philadelphia airport and Wilmington, Delaware for the hearings in these cases and to and from the airport in Los Angeles. Car service is used instead of taxi service because car service is more reliable than taxis. If an attorney has to wait for a taxi, the attorney time spent waiting will often amount to more costs that the additional small cost of using the car service. Also, the cars offer a better work environment than taxis.

PSZ&J believes the use of a car service is reasonable and justified under the circumstances and submits that the charges should be allowed.

We appreciate Pachulski’s response and recommend the following reductions:

8/3/2009 Auto Travel Expense- from Phila airport to Hotel Dupont $100.70: Our research indicates

that a taxi fare from the Philadelphia Airport to Wilmington would cost approximately $75.00 4 .

Thus we recommend a reduction of $25.70.

8/30/2009 Auto Travel Expense-IDK from Phila airport to Hotel Dupont $98.70: As indicated

above, this taxi fare would cost approximately $75.00 and we recommend a reduction of $23.70.

  • 4 Our research is based on the information found at www.taxifarefinder.com and includes taxes, tolls and tips.

FEE AUDITOR’S FINAL REPORT - Page 8 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

8/30/2009 Auto Travel Expense- Gerry Tywoniuk from Phila airport to Hotel Dupont $100.70: As

indicated above, this taxi fare would cost approximately $75.00 and we recommend a reduction of

$25.70.

9/1/2009 Auto Travel Expense Transportation; $158.72 and 9/2/2009 Auto Travel Expense

AMS/Pacific Transportation; J. Arlington $178.57: The response does not provide any information

regarding the origination or destination points for these fares and thus the information provided fails

to meet Pachulski’s burden of proving the necessity or reasonableness of the charges. Thus we

recommend reductions of $158.72 and $178.57.

9/1/2009 Auto Travel Expense AMS/Pacific Transportation; Inv. 147997; IDK $102.00: Although

the response indicates this charge was for travel from the Los Angeles Airport, without a destination

point, the response does not meet Pachulski’s burden of proving the reasonableness of this charge.

Thus, we recommend a reduction of $102.00.

9/10/2009 Auto Travel Expense-17437-IDK from Phila airport to Hotel Dupont $100.70: The cost

of a taxi fare for this itinerary is approximately $75.00 and thus we recommend a reduction of

$25.70.

11/2/2009 Auto Travel Expense- Gerry Tywoniuk form Phila airport to Hotel Dupont $98.70: The

cost of a taxi fare for this itinerary is approximately $75.00 and thus we recommend a reduction of

$23.70.

Thus for the ground transportation charges cited above, we recommend a total reduction of $563.79

in expenses.

  • 9. We noted the following group meal charges which are insufficient in explanation:

FEE AUDITOR’S FINAL REPORT - Page 9 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

8/4/2009

Business Meal [E111] - Urban Café - Working Breakfast - (13) Attys; Clients (8/4/09)

$120.00

9/11/2009 Business Meal [E111] Rodney Grill- Working Lunch

$111.44

(8) Attys; Clients (8/31/09) 9/11/2009 Business Meal [E111] Rodney Grill- Working Breakfast- (8) Attys; Clients (9/1/09)

$82.26

9/11/2009 Business Meal [E111] Urban Café- Working Breakfast for (8) Attys; Clients (8/31/09)

$80.00

9/25/2009 Business Meal [E111] Rodney Grill- Working Lunch (15) Attys; Clients (9/1/09)

$225.69

11/13/2009

Business Meal [E111] Rodney Grill- Working Breakfast $73.29 (8) Attys; Clients (11/3/09)

11/13/2009

Business Meal [E111] Rodney Grill- Working Breakfast $142.05 (15) Attys; Clients (11/6/09)

We asked Pachulski to provide further explanation regarding each of these charges. Pachulski

responded as follows:

(1)

August 4, 2009. Urban Café. Working Breakfast. $120.00. I met with Max Litvak, James O’Neill and others regarding strategy and coordination for a hearing.

(2)

September 11, 2009. Rodney Grill. Working Lunch. $111.44. This appears to be an item for a meal on August 31, 2009 rather than September 11, 2009. I met with the client, representatives of Lazard and others regarding sale issues.

(3)

September 11, 2009. Rodney Grill. Working Breakfast. $82.26. This appears to be an item for a meal on September 1, 2009. I met with Max Litvak and James Hunter regarding the preparation of testimony.

(4)

September 11, 2009. Urban Café. Working Breakfast. $80.00. This appears to be an item for a meal on August 31, 2009 rather than September 11, 2009. I met with Mr. Litvak and Mr. Hunter regarding coordination for a hearing and attending to evidentiary issues.

(5)

September 25, 2009. Rodney Grill. Working Lunch. $225.69. The Firm is able at this time to provide sufficient detail regarding this expense and

FEE AUDITOR’S FINAL REPORT - Page 10 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

therefore agrees to write off the $225.69 amount.

(6)

November 13, 2009. Rodney Grill. Working Breakfast. $73.29. This appears to be an item for a meal on November 3, 2009 rather than November 13, 2009. Meeting with client to prepare for hearing.

(7)

November 13, 2009. Rodney Grill. $142.05. Working Breakfast. This appears to be an item for a meal on November 6, 2009 rather than November 13, 2009. Meeting with client regarding continued auction preparation and bid issues.

A review of the meal invoices reveals that the food items purchased were relatively inexpensive items such as bagels, sandwiches and juices, and were reasonable for working day-time meals. Based on these facts, PSZ&J submits that the business meal charges are reasonable and necessary expenses that are reimbursable by the estates except for the $225.69 that it has agreed to write-off.

We appreciate this response and, thus recommend a reduction of $225.69 in expenses.

CONCLUSION

  • 10. Thus, we recommend approval of $647,227.00 in fees and costs in the amount of

$58,580.69 ($64,948.55 minus $6,367.86) for the services of Pachulski Stang Ziehl & Jones LLP

services for the Application Period.

FEE AUDITOR’S FINAL REPORT - Page 11 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

Respectfully submitted,

WARREN H. SMITH & ASSOCIATES, P.C.

By:

Respectfully submitted, WARREN H. SMITH & ASSOCIATES, P.C. By: Warren H. Smith Texas State Bar No.

Warren H. Smith Texas State Bar No. 18757050

325 N. St. Paul Street, Suite 1250 Republic Center Dallas, Texas 75201

214-698-3868

214-722-0081 (fax) whsmith@whsmithlaw.com

FEE AUDITOR

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing document has been served via First-Class United States mail to the attached service list on this 28 th day of May, 2010.

Respectfully submitted, WARREN H. SMITH & ASSOCIATES, P.C. By: Warren H. Smith Texas State Bar No.

Warren H. Smith

FEE AUDITOR’S FINAL REPORT - Page 12 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

SERVICE LIST

The Applicant

Laura Davis Jones, Esq. Ira D. Kharasch, Esq. Scotta E. McFarland, Esq. Robert M. Saunders, Esq. James E. O’Neill, Esq.

Kathleen P. Makowski, Esq. Pachulski Stang Ziehl & LLP

  • 919 North Market Street, 17 th Floor

P.O. Box 8705 Wilmington DE 19899-8705

United States Trustee

Office of the United States Trustee

  • 844 N. King Street, Room 2207

Lock Box 35

Wilmington, DE 19801

Counsel to the Debtors

Laura Davis Jones, Esq. Ira D. Kharasch, Esq. Scotta E. McFarland, Esq. Robert M. Saunders, Esq. James E. O’Neill, Esq. Kathleen P. Makowski, Esq.

Pachulski Stang Ziehl & LLP

  • 919 North Market Street, 17 th Floor

P.O. Box 8705 Wilmington DE 19899-8705

Counsel to the Debtors

Ian S. Fredericks, Esq. Skadden Arps, Slate, Meagher & Flom LLP One Rodney Square P.O. Box 636

Wilmington, DE 19899

FEE AUDITOR’S FINAL REPORT - Page 13 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

Special Counsel to the Debtors

Penelope Parmes, Esq.

Rutan & Tucker, LLP

  • 611 Anton Boulevard

    • 14 th Floor

Costa Mesa, CA 92626

Canadian Counsel to the Debtors

Jensen Lunny MacInnes Law Corp. H.C. Ritchie Clark, Q.C. P.O. Box 12077 Suite 2550

  • 555 West Hastings Street

Vancouver, BC V6B 4N5

Engineering Consultant to the Debtors

Mark A. Clemans Millstream Energy, LLC 4918 Menlo Park Drive Sugarland, TX 77479

Special Oil and Gas Transactional Counsel to the Debtors

Anthony C. Marino, Esq. Schully, Roberts, Slattery & Marino PLC

Energy Centre 1100 Poydras Street, Suite 1800, New Orleans, LA 70163

Financial Advisor to the Debtors

Curtis A. McClam

Deloitte Financial Advisory Services LLP

  • 350 South Grand Ave, Ste. 200

Los Angeles, CA 90071

Financial Advisor to the Debtors

John Rutherford

Lazard Freres & Co. LLC

  • 30 Rockefeller Plaza, 61 st Floor

New York, NY 10020

Co-Counsel to the Official Committee of Unsecured Creditors

David B. Stratton, Esq. James C. Carignan, Esq. Pepper Hamilton LLP

Hercules Plaza, Suite 1500

  • 1313 Market Street

Wilmington, DE 19899

Co-Counsel to the Official Committee of Unsecured Creditors

Filiberto Agusti, Esq. Steven Reed, Esq. Joshua Taylor, Esq. Steptoe & Johnson LLP

  • 1330 Connecticut Avenue NW

Washington, DC 20036

FEE AUDITOR’S FINAL REPORT - Page 14 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

Hearings:

Exhibit A

  • A. On 9/1/2009, there was a hearing which involved IDK (750), JKH (650), MBL (550), JEO (535) for total fees of $19,053.50 including travel time.

9/1/2009

IDK

Prepare for oral argument for all matters at hearing today (1.3); Meetings with client group; others; lenders; state of AK; Chevron prior to hearing to attempt to resolve numerous issues re Group 1 and 2 abandonment and Group 1 sale (1.5).

  • 2.8 $750.00

$2,100.00

9/1/2009

IDK

Nonworking travel from Delaware to LA from 9/1 omnibus. (billed at ½ normal rate)

  • 6.3 $375.00

$2,362.50

9/1/2009

IDK

Meet with client; CFO; Arlington; Hall re coordination of today's prep for hearings tomorrow (.5); Meet with same; M. Litvak; J. Hunter re outstanding issues for prep of testimony and update on sales re Group 1 and 2; and abandonment for same and transition if abandonment (1.5); Meetings with client; attorneys re prep issues and negotiations re hearing tomorrow (1.2).

  • 3.2 $750.00

$2,400.00

9/1/2009

IDK

Attend omnibus hearing and meet with all parties before and after re resolutions.

2

$750.00

$1,500.00

9/1/2009

JKH

Final preparation; attendance at hearing regarding group 1 abandonment (3.5); preparation of email to objecting counsel regarding protocol deviation (.2).

  • 3.7 $650.00

$2,405.00

9/1/2009

JKH

Return travel to Los Angeles from group 1 abandonment hearing. (billed at ½ normal rate)

  • 8.5 $325.00

$2,762.50

9/1/2009

MBL

Prepare for hearing (1.0); meet with creditor constituencies and client before and after hearing (2.0).

3

$550.00

$1,650.00

9/1/2009

MBL

Attend hearing on abandonment issues.

1.5

$550.00

$825.00

9/1/2009

MBL

Travel from DE following hearing. (billed at ½ normal rate)

7

$275.00

$1,925.00

9/1/2009

JEO

Preparation for hearing

1

$535.00

$535.00

FEE AUDITOR’S FINAL REPORT - Page 15 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

9/1/2009

JEO

Attend omnibus hearing

1.1

$535.00

$588.50

B.

On 9/11/2009, there was a hearing involving IDK (750), MBL (550) and JEO (535) for total fees of $7,137.50 including travel time.

9/11/200

IDK

Nonworking travel from Delaware to Los Angeles;

7.5

$375.00

$2,812.50

9

including 3.5 delay re weather. (billed at ½ normal rate)

 

9/11/200

IDK

Meet with AK counsel and Committee counsel re

3

$750.00

$2,250.00

9

upcoming hearing today and open issues re order and sales (.7); Office conferences with J. O'Neill re same and orders to be presented and issues at hearing (.3); Attend hearing and meet with parties at court re sales and abandonment (2.0).

 

9/11/200

MBL

Emails and calls re abandonment and sale; preparation

1.5

$550.00

$825.00

9

for hearing.

9/11/2009

MBL

Attend hearing by phone.

1.3

$550.00

$715.00

 

9/11/2009

JEO

Prepare for and attend omnibus hearing

1

$535.00

 

$535.00

C.

On 11/3/2009, there was a hearing. Please explain why IDK (750), MBL (550) and RMS (495) all attended this hearing for total fees of $7,948.00.

11/3/2009

IDK

Prepare for today's hearing on motion to vacate and 3.1 sell re CIE (1.0); Meet with client for prep of hearing and prep for meeting; and call with buyers; lenders and others prior to hearing to determine best bid for today's hearing (.6); Meet with buyers; others re same prior to hearing (1.5).

 

750

2325

11/3/2009

IDK

Attend initial Omnibus hearing; mostly on motion to vacate and sell; including parties at Court after initial hearing re process for next hearing later today (2.0); Attend later continued hearing today re same and scheduling issues for 11/6 hearing (1.5).

3.5

0.8

750

2625

11/3/2009

MBL

[CIE] Attend continued sale hearing by phone.

550

440

11/3/2009

MBL

[CIE] Attend sale hearing by phone.

1.5

550

825

FEE AUDITOR’S FINAL REPORT - Page 16 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

11/3/2009

RMS

Telephonic appearance at hearing

2.5

495

1238

11/3/2009

RMS

Telephonic appearance at resumed hearing

0.6

495

297

11/3/2009

RMS

Preparation for hearing

0.4

495

198

D.

On 11/6/2009, there was a hearing. Please explain why JKH (650), IDK (750), MBL (550) and JEO (535) all participated and attended this hearing for total fees of $24,423.00 including Travel Time charged at Half of the normal rate.

11/5/2009

JKH

Travel to Delaware for hearing on motion to vacate 8 abandonment. (Billed at ½ normal rate)

325

2600

11/6/2009

IDK

Non-working travel from Delaware to LA from 11/6 omnibus hearing. (Billed at ½ normal rate)

6

375

2250

11/6/2009

IDK

Prepare for continued auction this morning; including meetings with client re same and communications with AK re qualifications of CIE Redoubt bid; how to set price at auction (.8); Prepare for hearing today; including analysis of new caselaw cited by Union in objection and oral arguments re same (1.2); Meeting with client re status of Donkel settlement and timing re finalization (.5); Attend auction for Group 1; including meetings during same and after with client; lenders and bidders re auction issues and process re hearing (2.0).

  • 4.5 750

3375

11/6/2009

IDK

Attend continued omnibus hearing; all on CIE sale and reconsideration (4.4); Telephone conferences

  • 4.7 750

3525

11/6/2009

JKH

and e-mails re result of same and next steps re order and PSA (.3). Travel from Delaware to Los Angeles following hearing on motion to vacate abandonment. (Billed at ½ normal rate)

  • 8.1 325

2633

11/6/2009

JKH

Final preparation; attendance at; hearing on motion 5.6 to vacate abandonment.

650

3640

11/6/2009

MBL

[CIE] Revisions to sale order; emails and calls with 0.5 team before hearing.

550

275

FEE AUDITOR’S FINAL REPORT - Page 17 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

11/6/2009

MBL

[CIE] Attend sale hearing by phone.

4

550

2200

11/6/2009

MBL

[CIE] Further revisions to sale order following hearing.

1.3

550

715

11/6/2009

JEO

Prepare for reconsideration/sale hearing

1

535

535

11/6/2009

JEO

Attend reconsideration sale hearing

4

535

2140

11/6/2009

JEO

Follow up from reconsideration sale hearing

1

535

535

Conference Calls:

A.

On 9/17/2009, there was a conference call involving IDK (750), JKH (650), SEM (525), MBL (550), RMS (495) for total fees of $1,961.00.

 

9/17/200

IDK

Emails with client re coordination of weekly all hands

1.1

$750.00

$825.00

9

call today on all issues (.2); Review of client’s agenda re same (.1); Attend same all hands conference call with client; others on numerous case issues and coordination of same (.8).

9/17/200

JKH

Emails from; to Paddock; Cervi regarding Noble

  • 0.4 $650.00

$260.00

9

escrow amount (.1); participate in weekly teleconference regarding update regarding adversaries (.2); review Aera limited objections regarding assumption (.1).

9/17/200

SEM

Participate in call with client and orther professionals in 0.3

$525.00

$157.50

9

order to update them on matters for which I am responsible and to keep up to date on the status of the case and other matters

9/17/200

SEM

Participating in all hands call with Debtors and other

  • 0.3 $525.00

$157.50

9

professionals to discuss status of pending matters. I participated in order to give the status of matters for which I am responsible and to stay up to date on all other matters pending

9/17/200

MBL

Attend weekly team call.

0.3

$550.00

$165.00

9

9/17/200

RMS

Weekly client call

0.8

$495.00

$396.00

9

B.

On 9/24/2009, IDK (750), JKH (650) and RMS (495) participated in a conference

 

call for total fees of $1,440.00.

FEE AUDITOR’S FINAL REPORT - Page 18 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

9/24/200

IDK

Review and consider emails from client re today’s all

1

$750.00

$750.00

9

hands weekly call on all issues; including review of agenda (.2); Attend conference call with client; others re same (.8).

 

9/24/200

JKH

Participate in weekly conference call regarding

  • 0.3 $195.00

$650.00

9

adversaries' status (.1); office conference with Scotta E. McFarland regarding Medema Trust settlement issues

(.2).

9/24/200

RMS

Weekly client call

0.8

$495.00

$396.00

9

9/24/200

RMS

Emails regarding weekly client call to M Litvak and J

  • 0.1 $49.50

$495.00

9

Hunter

9/24/200

RMS

Email exchange with S McFarland regarding weekly

  • 0.1 $49.50

$495.00

9

client call

C.

On 10/22/2009, IDK (750), JKH (650), SEM (525) and RMS (495) attended a conference call for fees totaling $2,384.50.

 

10/22/2009 IDK

Review materials disseminated from client re Board meeting today and prep for same (.3); Attend Board meeting on all significant issues; including group 1 sale; Beta negotiations (.7); Telephone conferences with Conn Ryan re case status and asset background re potential offers on Beta and Redoubt (.4); Review of agenda for all hands call with client on numerous open case issues; and prep for call (.2); Emails with M. Litvak re same and status of Nov 3 omnibus issues re administrative claim motions (.2); Attend conference call with client; others re same (.6).

750

  • 2.4 1800

10/22/2009 JKH Attend all hands teleconference regarding adversaries status 0.2 update.

650

130

10/22/2009 SEM All hands conference call regarding various pending matters

  • 0.3 157.5

525

10/22/2009 RMS

Weekly client call

0.6

495

297

FEE AUDITOR’S FINAL REPORT - Page 19 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

Response Exhibit 1

  • I. Participation of Multiple Attorneys During Four Hearings (Par. 3, Exh. A)

As stated in paragraph 3 of the Report and the attached Exhibit A, PSZ&J billed $58,562.00 for 115.5 hours of professional services rendered by multiple attorneys attending the September 1, 2009, September 11, 2009, November 3, 2009 and November 6, 2009 hearings (collectively, the “Hearings”). Below is a brief description of the major matters at issue during the Hearings and the facts that necessitated the participation of more than one attorney from PSZ&J on behalf of the Debtors. PSZ&J believes that this description establishes the bases for why multiple attorneys attended the Hearings in order to properly represent the Debtors and protect the Debtors’ interests for the benefit of their estates and all of their creditor constituencies.

The September 1, 2009 Hearing (Par. 3, Exh. A, Subsect. A)

The September 1, 2009 Notice of Agenda originally covered sixteen (16) matters:

(1)

Debtors’ Motion for an Order Authorizing Abandonment of Interests in the Spurr

Platform Located in Alaska and Rejection of Executory Contracts Relating Thereto (continued to

October 6, 2009);

(2)

Cook Inlet Region, Inc.’s Motion to Compel Payment of Administrative Expenses

(continued to October 6, 2009);

(3)

Debtors’ Motion for an Order (A) Approving Sale of Debtors’ Beta Assets Free

and Clear of All Liens, Claims, Encumbrances and Other Interests Pursuant to Section 363(b), (f)

and (m) of the Bankruptcy Code, (II) Assuming and Assigning Certain Executory Contracts and Unexpired Leases; and (III) Granting Related Relief (continued to October 6, 2009);

(4)

Debtors’ Motion for Order (A) Dismissing the Chapter 11 Case of San Pedro Bay

Pipeline Company Conditioned Upon Sale of Stock by Pacific Energy Resources Ltd. And (B)

Approving Releases of Claims between San Pedro Bay Pipeline Company and the Other Debtors (continued to October 6, 2009);

(5)

Motion of Cook Inlet Pipe Line Company to Compel Payment of Administrative

Expenses (continued to October 6, 2009);

(6)

Pre-Trial Conference regarding Complaint for Declaratory Judgment and for

Damages: Marathon Oil Company v. Pacific Energy Resources, Ltd., et al. (continued to October

6, 2009);

(7)

Pre-Trial Conference regarding Complaint: Union Oil Company of California v.

Pacific Energy Alaska Operating, LLC and Silver Point Finance, LLC (continued to October 6,

2009);

FEE AUDITOR’S FINAL REPORT - Page 20 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

(8)

Application of Debtors Pursuant to Sections 105(a), 327(a), 328 and 330 of the

Bankruptcy Code and Rules 2014 and 2016 of the Bankruptcy Rules for an Order Authorizing the Debtors to Retain, Employ and Compensate Loeb & Loeb as Special Tax Counsel nunc pro tunc to June 26, 2009 (uncontested);

(9)

Motion of Schully, Slattery & Marino PLC for Authority to Apply Prepetition

Retain to Unpaid Prepetition Fees (uncontested);

(10)

Motion of Debtors for Authority for Pacific Energy Alaska Operating LLC to

Enter into (A) a Gas Purchase and Exchange Agreement with Marathon Alaska Production LLC and (B) an Asset Exchange Agreement with Union Oil Company of California and Marathon Oil Company (uncontested);

(11)

Motion of Debtors for an Order Approving a Supplemental Employee Incentive

Plan to Facilitate an Orderly Abandonment of Alaska Assets (uncontested);

(12)

Motion of Debtors to File under Seal Exhibit A to Motion for an Order Approving

Supplemental Employee Incentive Plan to Facilitate an Orderly Abandonment of Alaska Assets (uncontested);

(13)

Alternative Motion of Pacific Energy Operating LLC for an Order Authorizing

Abandonment of Interests in Oil and Gas Properties at Trading Bay, Alaska and Rejection of Executory Contracts Relating Thereto;

(14)

Alternative Motion of Pacific Energy Alaska Operating LLC 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;

(15)

Debtors’ Motion for an Order (A) Approving Sale of Debtors’ Alaska Assets Free

and Clear of Liens, Claims, Encumbrances and other Interests Pursuant to Sections 363(b), (f) and

(m) of the Bankruptcy Code, (II) Assuming and Assigning Certain Executory Contracts and Unexpired Leases; and (III) Granting Related Relief; and

(16)

Pre-Trial Conference regarding Complaint: Noble Energy, Inc. v. Pacific Energy

Resources, Ltd;

James O’Neill, James Hunter, Max Litvak and I appeared at this Hearing. The Court hearing transcript noted the appearances of approximately 25 other attorneys. The Firm was prepared to go forward with a contested hearing, involving witnesses. Due to last-minute negotiations, most issues were resolved consensually, at least for purposes of this particular hearing.

Mr. O’Neill handled the agenda for the hearing and responded to the questions of the Court regarding various motions, including the Loeb & Loeb application, the Marathon

FEE AUDITOR’S FINAL REPORT - Page 21 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

agreement motion, the motion addressing the Key Employee Incentive Plan, and the Noble Energy adversary pre-trial conference. Mr. O’Neill was also the attorney present with a license to practice law in Delaware as required by Rule 9010-1© of the Local Rules for the United States Bankruptcy Court for the District of Delaware. Mr. Litvak (having previously handled the hearing on the post-petition financing, which was a contested final hearing on the complex matter of approval of the $100,000,000 debtor in possession financing, and handled the two contested Union motions, which affected some of the Debtors’ major assets located in Alaska) addressed the Court regarding the terms of a negotiated order with Union Oil and the lenders.

I am the lead attorney responsible for representing the Debtors in these Cases. I updated the Court regarding the sale and abandonment process, including issues relating to the Group 1 assets sale motion, continued abandonment motion regarding Group 1 assets, and the continued

Group 2 assets abandonment motion.

I was prepared to go forward with a contested evidentiary

hearing on the abandonment of the Group 1 assets, and we had brought witnesses to the hearing. I spoke to the Court regarding making such witnesses available for examination, so that they would not have to return. Mr. Hunter spoke to the Court regarding pipeline abandonment issues. Mr. Hunter was also present as a litigator in order to be able to handle the examination of any witnesses in connection with the abandonment motion.

Accordingly, I submit that the attendance of Mr. O’Neill, Mr. Litvak, Mr. Hunter and myself at the September 1, 2009 hearing was appropriate and that the time entries are compensable.

The September 11, 2009 Hearing (Par. 3, Exh. A, Subsect. B)

This Hearing related to a contested sale motion as follows:

(1)

Debtors’ Motion for an Order (A) Approving Sale of Debtors’ Alaska Assets Free

and Clear of All Liens, Claims, Encumbrances and Other Interests Pursuant to Section 363(b), (f)

and (m) of the Bankruptcy Code, (II) Assuming and Assigning Certain Executory Contracts and Unexpired Leases; and (III) Granting Related Relief.

Mr. O’Neill and I appeared at this Hearing. Mr. Max Litvak and Mr. Robert Saunders appeared telephonically at this Hearing.

There were many complex issues associated with the Debtors’ assets and various objections and replies had been filed. Mr. Litvak and Mr. Saunders appeared telephonically, thus reducing travel time and expenses. Mr. O’Neill presented the agenda to the Court and was also the attorney present with a license to practice law in Delaware as required by Rule 9010-1© of the Local Rules for the United States Bankruptcy Court for the District of Delaware.

This matter had been continued from September 9, 2009. The Debtors were not able to find a buyer and therefore the Hearing issues related to a proposed abandonment, and disputes relating to an abandonment order. I addressed the Court regarding such issues, and regarding

FEE AUDITOR’S FINAL REPORT - Page 22 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

contract issues, the objection of Mr. Donkel, and marketing issues. Mr. Litvak assisted me regarding preparation for this hearing. Mr. Litvak had specialized knowledge of issues that had arisen during a long series of hearings relating to sale and abandonment, and was available to deal with issues that might arise in this very fluid case. Based on past hearings the Firm required his potential knowledge, and even though he did not speak, a surprise last-minute objection was indeed made at the hearing to the proposed abandonment. Mr. Litvak and Mr. Saunders had specialized knowledge regarding the history of this case and the Debtors’ assets. For example, Mr. Saunders had worked on the motion to vacate abandonment and sell Alaska assets to Cook Inlet Energy and had knowledge that could have been important at the hearing. Mr. Litvak had knowledge of the various positions of interested parties, including lenders. Accordingly, I submit that my attendance along with the attendance of Mr. Litvak, Mr. O’Neill, and Mr. Saunders at the September 11, 2009 hearing was appropriate and that the time entries are compensable.

The November 3, 2009 Hearing (Par. 3, Exh. A, Subsect. C)

The November 3, 2009 Notice of Agenda originally covered eleven (11) matters:

(1)

Cook Inlet Region, Inc.’s Motion to Compel Payment of Administrative Expenses

(continued to December 8, 2009);

(2)

Debtors’ Motion for an Order (A) Approving Sale of Debtors’ Beta Assets Free

and Clear of All Liens, Claims, Encumbrances and Other Interests Pursuant to Section 363(b), (f)

and (m) of the Bankruptcy Code, (II) Assuming and Assigning Certain Executory Contracts and Unexpired Leases; and (III) Granting Related Relief (continued to December 8, 2009);

(3)

Debtors’ Motion for Order (A) Dismissing the Chapter 11 Case of San Pedro Bay

Pipeline Company Conditioned Upon Sale of Stock by Pacific Energy Resources Ltd. And (B) Approving Releases of Claims between San Pedro Bay Pipeline Company and the Other Debtors (continued to December 8, 2009);

(4)

Motion of Cook Inlet Pipe Line Company to Compel Payment of Administrative

Expenses (continued to December 8, 2009);

(5)

Pre-Trial Conference regarding Complaint: Union Oil Company of California v.

Pacific Energy Alaska Operating, LLC and Silver Point Finance, LLC (continued to December 8,

2009);

(6)

Debtors’ Second Motion for Order Pursuant to 11 U.S.C. Section 1121(d)

Extending the Time Periods During which the Debtors Have the Exclusive Right to File a Plan

and Solicit Acceptances Thereto (certification of no objection filed);

(7)

Debtors’ Third Motion for Order under Section 365(a) of the Bankruptcy Code

Authorizing the Debtors to Reject Certain Executory Contracts and Unexpired Leases

(uncontested);

FEE AUDITOR’S FINAL REPORT - Page 23 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

(8)

Debtors’ Fourth Motion for Order under Section 365(a) of the Bankruptcy Code

Authorizing the Debtors to Reject Certain Executory Contracts and Unexpired Leases

(uncontested);

(9)

Emergency Motion of Daniel K. Donkel for a Stay Pending Appeal of 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 and the Order Denying (I) Emergency Motion of Daniel K. Donkel for Reconsideration to Stay the Effective Date for the Abandonment Order and (II) Emergency Motion for Immediate Approval of Sale of Debtors’ West Foreland Lease to Donkel Oil & Gas, LLC or, in the Alternative, to Enjoin the Shutting In of West Foreland Well No. 1 Pending Approval of the Sale;

(10)

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; and

(11)

Debtors’ Motion for an Order Approving the Sale of Certain Office Furniture Free

and Clear of Liens, Claims, Interests and Encumbrances Pursuant to Notices of Proposed Sales

Previously Filed.

Mr. O’Neill and I appeared at this Hearing. Mr. Max Litvak and Mr. Robert Saunders appeared telephonically at this Hearing.

There were many complex issues associated with the Debtors’ assets and various objections and replies had been filed. Mr. Litvak and Mr. Saunders appeared telephonically, thus reducing travel time and expenses. Mr. O’Neill presented the agenda to the Court and was also the attorney present with a license to practice law in Delaware as required by Rule 9010-1© of the Local Rules for the United States Bankruptcy Court for the District of Delaware. Mr. O’Neill also updated the Court regarding continued matters, and the status of the exclusivity motion extension, contract rejection motions, and regarding deferring various items pending a resolution of the Debtors’ sale motion. I appeared regarding the Debtors’ sale motion. The sale motion covered some assets were also the subject of an abandonment order, then on appeal.

The sale and abandonment issues were quite complex and the history of the proceedings and negotiations equally complicated. Among other things, I addressed jurisdictional issues raised by the Court that had not been addressed in the pleadings. Such surprise “twists and turns” have been common during this case and are one of the several reasons that multiple attorneys, each with different knowledge as to portions of this case, often need to be available at the various key hearings concerning sale and abandonment, at least until the major case issues can be permanently resolved.

During recesses during the Hearing the Debtors’ attorneys performed legal research regarding jurisdiction issues and negotiated regarding a stipulation to bifurcate appeal, and

FEE AUDITOR’S FINAL REPORT - Page 24 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

regarding an agreed continuance to allow an auction. The issues were complex procedurally and also complicated by the appearance of so many parties with different interests. In addition, new potential buyers for estate assets had surfaced. The Debtors and other parties worked on resolving notice and scheduling issues, and terms of a proposed auction.

As set forth previously, Mr. Litvak and Mr. Saunders had specialized knowledge regarding the history of this case and the Debtors’ assets which made it appropriate to have them appear telephonically and be prepared to assist depending on which way the hearing turned. For example, Mr. Saunders had worked on the motion to vacate abandonment and sell Alaska assets to Cook Inlet Energy and had knowledge that could have been important at the hearing. Mr. Litvak had knowledge of the various positions of interested parties, including lenders. This was a key hearing to effectuate a sale of assets and the hearing involved many constituents and unprecedented legal issues. Mr. Litvak had been involved in putting the transaction together and therefore appeared. Since Mr. Saunders and Mr. Litvak appeared telephonically, their appearances saved the estate money through reduced travel time and expenses. Accordingly, I submit that the attendance of Mr. Litvak, Mr. O’Neill, and Mr. Saunders and my attendance at the November 3, 2009 Hearing was appropriate and that the time entries are compensable.

The November 6, 2009 Hearing

The November 6, 2009 Notice of Agenda originally covered eleven (11) matters:

(1)

Cook Inlet Region, Inc.’s Motion to Compel Payment of Administrative Expenses

(continued to December 8, 2009);

(2)

Debtors’ Motion for an Order (A) Approving Sale of Debtors’ Beta Assets Free

and Clear of All Liens, Claims, Encumbrances and Other Interests Pursuant to Section 363(b), (f) and (m) of the Bankruptcy Code, (II) Assuming and Assigning Certain Executory Contracts and Unexpired Leases; and (III) Granting Related Relief (continued to December 8, 2009);

(3)

Debtors’ Motion for Order (A) Dismissing the Chapter 11 Case of San Pedro Bay

Pipeline Company Conditioned Upon Sale of Stock by Pacific Energy Resources Ltd. And (B) Approving Releases of Claims between San Pedro Bay Pipeline Company and the Other Debtors (continued to December 8, 2009);

(4)

Motion of Cook Inlet Pipe Line Company to Compel Payment of Administrative

Expenses (continued to December 8, 2009);

(5)

Pre-Trial Conference regarding Complaint: Union Oil Company of California v.

Pacific Energy Alaska Operating, LLC and Silver Point Finance, LLC (continued to December 8,

2009);

(6)

Debtors’ Second Motion for Order Pursuant to 11 U.S.C. Section 1121(d)

Extending the Time Periods During which the Debtors Have the Exclusive Right to File a Plan

FEE AUDITOR’S FINAL REPORT - Page 25 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

and Solicit Acceptances Thereto (certification of no objection filed);

(7)

Debtors’ Third Motion for Order under Section 365(a) of the Bankruptcy Code

Authorizing the Debtors to Reject Certain Executory Contracts and Unexpired Leases (uncontested);

(8)

Debtors’ Fourth Motion for Order under Section 365(a) of the Bankruptcy Code

Authorizing the Debtors to Reject Certain Executory Contracts and Unexpired Leases

(uncontested);

(9)

Emergency Motion of Daniel K. Donkel for a Stay Pending Appeal of 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 and the Order Denying (I) Emergency Motion of Daniel K. Donkel for Reconsideration to Stay the Effective Date for the Abandonment Order and (II) Emergency Motion for Immediate Approval of Sale of Debtors’ West Foreland Lease to Donkel Oil & Gas, LLC or, in the Alternative, to Enjoin the Shutting In of West Foreland Well No. 1 Pending Approval of the Sale;

(10)

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; and

(11)

Debtors’ Motion for an Order Approving the Sale of Certain Office Furniture Free

and Clear of Liens, Claims, Interests and Encumbrances Pursuant to Notices of Proposed Sales

Previously Filed.

Mr. O’Neill, Mr. Hunter and I appeared at this hearing. Mr. Max Litvak and Mr. Robert Saunders (per the hearing transcript) appeared telephonically at this hearing. The record indicates that approximately 25 other attorneys appeared for 13 other (Non-Debtor) parties. This hearing was a continued effort from prior hearings to finally dispose of the Debtors’ assets. I informed the Court of the efforts the parties had made to resolve jurisdictional issues, including a detailed letter stipulation executed the night before the hearing. Pursuant to the agreed deal Mr. Donkel would receive certain royalty interests and agree to dismiss a pending appeal. I also discussed the timing of a sale closing and the status of a sale order, and the situation regarding the pending objection of Union Oil.

As I informed the Court in more detail, the auction of estate assets had actually been held the morning of the hearing. As a result of overbids, the estate was able to obtain a bid from Cook Inlet of $2.25 million, with a back-up bid from Ramshorn of $2.15 million—and this for assets that the Debtors initially had been forced to try and abandon. I also responded to issues raised by numerous parties at the hearing, including the issues of administrative claims, budgets and potential change in lender positions in the case. I also dealt with various prejudice, finality, and jurisdictional issues raised by Union Oil. I also explained the status of a facilities agreement

FEE AUDITOR’S FINAL REPORT - Page 26 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

relative to abandonment.

Mr. Hunter was present as a litigator in order to be able to handle the examination of any witnesses at the hearing. Mr. Hunter also handled certain sale-related issues. Mr. Hunter presented a proffer of Mr. Gerald A. Tywoniuk, Chief Executive Officer of Pacific Energy Resources, Ltd, and witness for the Debtors regarding the proposed sale of assets, marketing and financing issues, good faith and business judgment, and the request to vacate the abandonment of certain assets and approve their sale and approve assumption and assignment of certain associated contracts and leases. Mr. Hunter monitored the cross-examination of Mr. Tywoniuk and answered Court questions about the Debtors’ evidentiary plans regarding the hearing. Mr. Hunter also monitored the questioning of other witnesses related to the sale and the presentation of other evidence, and made appropriate objections to such questioning.

As set forth previously, Mr. Litvak and Mr. Saunders had specialized knowledge regarding the history of this case and the Debtors’ assets which made it appropriate to have them appear telephonically and be prepared to assist. For example, Mr. Saunders had worked on the motion to vacate abandonment and sell Alaska assets to Cook Inlet Energy and had knowledge that could have been important at the hearing. Mr. Litvak had knowledge of the various positions of interested parties, including lenders. This was a key hearing to effectuate a sale of assets and the hearing involved many constituents and unprecedented legal issues. Mr. Litvak had been involved in putting the transaction together and therefore appeared. Since Mr. Saunders and Mr. Litvak appeared telephonically, their appearances saved the estate money through reduced travel time and expenses.

Accordingly, I submit that the attendance of Mr. O’Neill, Mr. Hunter and myself, and the telephonic appearances of Mr. Litvak and Mr. Saunders, at the November 6, 2009 hearing were appropriate and that the time entries are compensable.

II.

The Participation of Multiple Attorneys in Conference Calls (Par. 3, Exh. A)

The Report in paragraph 3 of the Report and Exhibit A thereto questions why multiple PSZ&J attorneys participated in three (3) conference calls, specifically conference calls on September 17 and 24, and October 22, 2009. Initially, it should be noted that these Cases are large and complex. There were and are many discrete issues, including, but not limited to, reporting requirements, executory contracts and leases, the rights of parties claiming royalty, overriding royalty and production payment interests, the rights of oil and gas operators, employment agreements, insurance renewals, sale of oil and gas assets and abandonment of same, that involved bankruptcy law and the overlay of bankruptcy law and oil and gas law of California and Alaska. In order to efficiently and effectively handle the many issues involved in these Cases and to avoid duplications of efforts, the Debtors’ professionals determined that a weekly conference call was necessary to discuss the status of pending matters and to strategize regarding the best way to address these matters. In addition, in order to efficiently and effectively keep track of the status of all the matters for which the Firm had responsibility, I determined that

FEE AUDITOR’S FINAL REPORT - Page 27 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

regular internal PSZ&J conference calls were necessary.

As previously stated, I, as the lead attorney for the Debtors, have general responsibility for all matters and I supervise everything that happens in the cases. Mr. Litvak is responsible for and specifically deals with the debtor in possession financing facility (which was very complicated given the size of these cases, the multiple prepetition debt obligations, the separate sets of collateral, and the contemplation of a roll-up). Mr. Litvak also handles issues related to the motion for relief from stay filed by Union Oil of California and other matters related to asset disposition, including, abandonment of assets located in Alaska and sale related matters. Mr. Saunders and Ms. McFarland are responsible for research projects, drafting pleadings, including motions, oppositions and replies, and other miscellaneous matters. Ms. McFarland was responsible for the drafting of many of the motions filed and in the claims resolution process. Mr. Hunter is primarily a litigator who works on various adversarial and contested matters in this case. Mr. Hunter attended a portion of the teleconferences to discuss the litigation matters which he was handling. The weekly calls, among other things, were for the purpose of giving the status of all pending matters, discussing strategy of such matter, assuring that the client was up to date on the status of the matters, and assuring that the professionals understood what they were to do. PSZ&J believes that the participation by multiple attorneys on the conference calls noted in the Report was necessary in order to properly represent the Debtors and protect the Debtors’ interests for the benefit of their estates and all of their creditor constituencies due to the size and the complexity of the cases.

It should also be noted that my October 22, 2009 time entry includes substantial time relating to a Board of Directors meeting, which was distinct from the conference call in which Mr. Hunter, Mr. Saunders and Ms. McFarland and I participated on that date.

Accordingly, I submit that the participation of multiple attorneys from PSZ&J, considering the breadth of the Firm’s responsibilities in the Case, was appropriate and that the time entries are compensable.

FEE AUDITOR’S FINAL REPORT - Page 28 pac FR Pachulski Stang 3rd int 9 -11.09.wpd

WSJ

One travel benefit of the economic crisis

http://www.ewatravel.com/wsj.premium.seats.march2009.htm

WSJ

One travel benefit of the economic crisis: It's easier

than ever to upgrade.

With sales of premium seats drying up, airlines have lots of empty first- and business-class seats to fill. Some carriers are stepping up efforts to sell upgrades to fliers at the airport, while others are making it easier to use miles to buy better seats. In addition, airlines are slashing prices on premium seats to unheard-of levels.

Last week, United Airlines offered a $236 round-trip first-class fare between Boston and Miami; British Airways and other carriers are offering a $1,800 (before taxes and fees) round-trip business-class fare between New York and London with a 14-day advance purchase requirement. That's 84% below the standard $11,172 fare.

"Those kinds of prices have never existed before," said British Airways spokesman John Lampl. "Premium fares have come down a lot more, percentage-wise, than economy fares."

Several airlines say they are expanding upgrade opportunities because of the overall decline in business travel and because corporations are aggressively requiring employees to fly coach. United and US Airways Group Inc. have been actively selling upgrades at the airport, typically priced at $50 to $250, depending on the length of the flight, with international upgrades usually priced between $500 and $1,000 one-way. As the surplus of unsold first-class and business-class seats grows, United has both upped the number of available upgrades and cut prices. Recently, United offered coach customers traveling between Washington, D.C., and London an upgrade to a flat-bed business class seat for $493. Just last month, Continental Airlines Inc. began selling upgrades on domestic flights and on international trips to destinations served with narrow-body aircraft that don't have its fancier "BusinessFirst" cabins.

Even international carriers like British Airways have been discreetly offering upgrades at the airport. British Airways' revenue-management department in London selects certain flights in certain markets for upgrade sales on days when bookings in premium cabins are light. (Don't expect it on heavily trafficked routes like New York-London, however.)

"It's a good idea in all economies, but particularly successful in weaker economies because front-cabin purchases are going down and the number of elites traveling is going down," said Mark Bergsrud, Continental's senior vice president of marketing programs and distribution.

To be sure, the upgrade frenzy may be short-lived if airlines cut schedules or demand for tickets picks up. Some are refraining

WSJ

One travel benefit of the economic crisis

http://www.ewatravel.com/wsj.premium.seats.march2009.htm

from selling upgrades -- which they worry may foment discontent among full-fare first-class fliers. In addition to grounding airplanes to reduce capacity, some airlines are re-arranging seats in planes to reflect the new economy. Lufthansa says it is taking 14 business-class seats out of its Boeing 747-400s, for example, and replacing them with 36 additional economy seats. But for the moment, upgrades are as plentiful as ever -- though travelers may not always know when they're available.

Savvy travelers always ask about upgrades, both when checking in and at the gate. A seat may become available right before departure if a customer doesn't show up, for example. Some airlines, including US Airways, pay their airport agents bonuses for selling upgrades, making them eager to get the word out. Elsewhere, upgrade opportunities may go unmentioned by harried or uninterested agents.

Use of so-called "Y-Up" fares -- coach tickets that come with an instant upgrade -- is growing as well, airlines say. These fares allow corporate travelers who are restricted to buying only coach tickets to comply with their company's travel policy and still ride up front.

Round-trip Y-Up fares generally run $500 to $1,200 -- several hundred dollars more than a typical coach ticket, but significantly less than a first-class fare. Northwest Airlines, a unit of Delta, recently offered a $577 round-trip Y-Up fare between New York and Detroit, according to FareCompare.com, a site that allows travelers to search available Y-Up fares. American and Delta both offered a Y-Up fare at $1,070 between Los Angeles and Hartford, Conn.

And some carriers are making it easier to upgrade with miles. ExpertFlyer.com, a Web site that lets road warriors search the inventory of frequent-flier awards and various fare classes, says airlines are offering more first-class awards and upgrades using miles than they've seen before. Travelers can request alerts from ExpertFlyer when certain awards and upgrades become available, and the site says a growing number of those requests are successful.

Lufthansa will soon introduce a promotion to make upgrading with miles more attractive, says Donald Bunkenburg, Lufthansa's heard of corporate sales for North America. In December, Continental loosened restrictions on buying upgrades with miles and a cash co-payment. Previously, nonelite members of the airline's frequent-flier program weren't allowed to buy upgrades when they were flying on low-fare tickets.

"In a weak economy, there are customers who prefer to spend miles rather than dollars, and we are seeing some increase in demand," says Continental's Mr. Bergsrud.

US Airways, an early adopter of selling upgrades at the airport and offering Y-Up coach fares, says sales of upgrades rose in January. While it's too early to declare a trend statistically, Andrew Nocella, senior vice president of marketing and planning, thinks scoring upgrades may get easier as fewer front-cabin seats are claimed by ticket-buyers and elite-level frequent fliers.

WSJ

One travel benefit of the economic crisis

http://www.ewatravel.com/wsj.premium.seats.march2009.htm

"There will definitely be more opportunities for people to take advantage of those programs," said Mr. Nocella.

Even with the increased upgrade activity, industry consultants are urging airlines to further expand upgrade opportunities, especially if the recession deepens for airlines faster than they can reduce capacity. ruce Speechley, travel and hospitality practice leader at IBM Corp.'s consulting division, was riding in coach to India on a client airline when he saw that the business-class cabin was virtually empty. He asked a flight attendant if he could pay extra to move to business-class. After checking, the flight attendant said no.

"This is a time to retain customers by doing smart things," Mr. Speechley said. "I would have paid $500 to $1,000 out of my own pocket to upgrade on a 10-hour flight."

He thinks airlines should use customer data to spot frequent fliers who used to purchase business-class tickets but now only buy coach, and target those travelers to fill empty premium seats.

According to the International Air Transport Association, the number of travelers flying on premium tickets was 13.3% lower world-wide in December than a year earlier after an 11.5% decline in November. January's results, due out today, likely will show a significant decline. Some airlines are reluctant to sell international business-class upgrades at the airport for fear of angering customers who paid $8,000 or more for a ticket.

"Customers tell us they don't appreciate paying full fare and then receiving the same service as those who have not," said James Boyd, a spokesman for Singapore Airlines, which doesn't sell upgrades. Singapore has slashed prices on some flights, such as a $5,999 business-class fare between Newark, N.J., and Singapore round-trip, a ticket that normally costs more than

$8,000.

Of course, airlines haven't worried too much about widely disparate pricing in the coach cabin, where $200 passengers routinely sit next to customers who paid $1,000 to $2,000 for domestic trips. Airlines that do sell upgrades say the last-minute purchase doesn't undercut sales of full-price seats because customers willing to pay thousands of dollars for international business class want the certainty of having the seat.

"These are different products," said Mr. Nocella. "One doesn't cannibalize the other."

http://online.wsj.com/article/SB114653336888641120.html



MAY 2, 2006

How to Buy a Cheap Seat in First Class

Obscure Class of Coach Fares Guarantees Seats Up Front; Search for 'Q-Up' or 'Y-Up'

By EVAN PEREZ

As major airlines ground planes and eliminate flights to shrink the industry's losses, upgrading to a seat in first class is a long shot for travelers who aren't in the top tier of a frequent-flier program. Or you could sneak your way to the front, as Julie Vrdoljak did on a December flight to Washington, D.C., from Los Angeles. The special-education teacher stumbled onto an obscure category of discounted coach fares that actually guaranteed her a first-class seat and frequent-flier credit on UAL Corp.'s United Airlines -- but cost hundreds of dollars less than a standard first-class ticket.

Ms. Vrdoljak bought a particular type of coach fare called "Q-up." Other airlines use codes such as "Y-up" and "Z." They represent little-known but surprisingly big bargains on thousands of first-class seats a day throughout the U.S. And often they can be much cheaper than last-minute coach seats. Why would airlines encourage passengers to slip into first class -- and on the cheap? Most people sitting in first-class seats on domestic flights aren't paying first-class prices. Instead, many passengers are cashing in frequent-flier miles or buying upgrades, meaning those seats generate little extra revenue for the airlines. Q-up fares help carriers increase the number of paying passengers in first class.

Airlines won't disclose exactly how many Q-up, Y-up or Z fares are available. That is partly to avoid raising the ire of frequent fliers: The lure of upgrading from a cramped middle seat near the back of the plane to first class is one of the few perks these travelers still have following industry belt-tightening. The U.S. airline industry has lost more than $42 billion since the start of 2001, according to the Air Transport Association, an industry trade group.

Hidden Bargains

See some of the coach-class airfares that get the buyer a bargain seat in first class. Between New York and Miami, AMR Corp.'s American Airlines recently offered a one-way Y-up fare of $319 -- 66% lower than the $999 price of a regular first- class seat. The Y-up fare costs less than half the priciest walk-up seat in the coach section, though American also offered a restricted discounted round-trip coach fare for $333. Recently, it cost $284 for a one-way Q-up seat on Delta Air Lines flights to Washington, D.C., from Atlanta compared with $604 for the most- expensive one-way coach fare and $704 each way for a typical seat in first class. Delta also sells a restricted discount round-trip fare for $438 on the same route. The Q-up and Y-up fares are usually the cheapest sure way to get into first class. That is because in recent years many airlines have changed their policies to restrict fliers who buy the least-expensive coach seats from jumping into first class by using miles or buying $50 or $75 upgrades. But, even when buyers of cheap seats aren't explicitly barred from making the jump, first class often fills up before they get a chance to buy an upgrade or use miles. Elite frequent fliers and buyers of higher coach fares are first in line to snare available upgrades. Rick Seaney, chief executive of FareCompare LP, a Dallas firm that analyzes airfares, says airlines typically offer a few deep-discount first-class seats on U.S. flights, while making sure to save some upgrades for elite frequent fliers. The bargain fares are most appealing on routes heavily used by business travelers,

since competition to use upgrades is fiercest on those flights. The number of bargain first-class seats varies by plane type, seat configuration and competition with other airlines. Jim Whitehurst, chief operating officer at Delta, says airlines also use the fares to help their most loyal business travelers avoid roughing it in coach, where empty seats are scarce. Because these fares technically buy a coach-class seat, they allow travelers to maneuver around any corporate-travel department rules against first-class tickets. "In other industries, they take their best product and sell it for the most money," says Scott Nason, vice president of revenue management for American Airlines. "We take our best product and use it as a lure to [get people to] buy on us, period." These obscure fares have been available for the past few years but are attracting more buzz lately as the U.S. airline industry shrinks and planes become more crowded. Total available seat miles, a measure of industry capacity, declined 1.2% in March compared with a year earlier, the ATA says. Last month, American Airlines said it would ground 27 MD-80 planes by July 1, and Delta and Northwest Airlines are using bankruptcy protection to ditch unwanted aircraft. Q-up, Y-up and Z fares aren't hard to find or buy, requiring just a few extra clicks of a computer mouse. Online travel Web sites such as FareCompare, Expedia Inc.'s Expedia.com, Sabre Holdings Corp.'s Travelocity and Cendant Corp.'s Orbitz let users search by specific fare type. While known as Q-up or Y-up fares, the codes airlines use to identify them sometimes contain additional airline- specific characters, as in one recent Delta fare labeled QUPBV. At FareCompare, for example, bargain hunters can click "Trip Search," then enter the desired route and "business/first class." Using Expedia, select "Additional Options" and then check the box to search for seats in business class or first class. Both sites search for the lowest fare in the chosen seating cabin.

If a discounted first-class seat is available, "QUP" or "YUP" will pop up in the fare-class box shown by FareCompare. Otherwise, regular first-class codes such as "F," "A" and "P" will appear on the screen. Expedia's Q-up fares can be seen by clicking on "Rules and Restrictions." Ms. Vrdoljak, the teacher in Los Angeles, says she hopes to turn the extra miles she earned from sneaking into first-class into a future ticket for one of her annual summer dream trips to Europe. Now that she knows how to look for Q-up fares, "I plan on buying them exclusively if I can, for the comfort of first class with a much lower price," she says. Write to Evan Perez at evan.perez@wsj.com