-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HVglUMkxQlbwucCkA7IRvFLQnnOR2wHeSSC3I8jfGJr7fp9lZyPvoS+x/U6waLOZ lVm9G4zgqdJVLs8uVCGQbQ== 0001047469-04-025865.txt : 20040809 0001047469-04-025865.hdr.sgml : 20040809 20040809171624 ACCESSION NUMBER: 0001047469-04-025865 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC ENERGY PARTNERS LP CENTRAL INDEX KEY: 0001168397 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 680490580 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-31345 FILM NUMBER: 04962255 MAIL ADDRESS: STREET 1: 5900 CHERRY AVE CITY: LOS ANGELES STATE: CA ZIP: 90805 4405 10-Q 1 a2141701z10-q.htm FORM 10-Q

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TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

ý	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2004

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-313345

PACIFIC ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)

DELAWARE		68-0490580
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5900 Cherry Avenue
Long Beach, CA 90805-4408
(Address of principal executive offices)

(562) 728-2800
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

There were 19,069,948 of the registrant's Common Units and 10,465,000 of the registrant's Subordinated Units outstanding at June 30, 2004.

PACIFIC ENERGY PARTNERS, L.P.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements
		Condensed Consolidated Balance Sheets (Unaudited)—As of June 30, 2004 and December 31, 2003
		Condensed Consolidated Statements of Income (Unaudited)—For the Three and Six Months Ended June 30, 2004 and 2003
		Condensed Consolidated Statement of Partners' Capital (Unaudited)—For the Six Months Ended June 30, 2004
		Condensed Consolidated Statements of Comprehensive Income (Unaudited)—For the Three and Six Months Ended June 30, 2004 and 2003
		Condensed Consolidated Statements of Cash Flows (Unaudited)—For the Six Months Ended June 30, 2004 and 2003
		Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Item 4.		Controls and Procedures
PART II. OTHER INFORMATION
Item 1.		Legal Proceedings
Item 6.		Exhibits and Reports on Form 8-K

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

PACIFIC ENERGY PARTNERS, L.P. (Note 1)

CONDENSED CONSOLIDATED BALANCE SHEETS

			June 30, 2004		December 31, 2003
			(in thousands) (unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$	21,861	$	9,699
	Crude oil sales receivable			29,496		33,766
	Transportation and storage accounts receivable			27,970		16,828
	Crude oil inventory			10,588		2,272
	Spare parts inventory			1,637		1,644
	Prepaid expenses			3,249		4,182
	Other			1,196		405

		Total current assets		95,997		68,796
Property and equipment, net				705,048		567,954
Investment in Frontier (note 4)				6,817		6,886
Other assets				43,650		6,567

			$	851,512	$	650,203

LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
	Accounts payable and accrued liabilities		$	15,973	$	11,506
	Accrued crude oil purchases			29,331		31,602
	Due to related parties (note 8)			1,187		580
	Derivatives liability—current portion			704		4,986
	Other			3,043		1,317

		Total current liabilities		50,238		49,991
Senior notes and credit facilities, net of unamortized discount of $4,354 at June 30, 2004 (note 5)				335,735		298,000
Deferred income taxes				34,928		—
Derivatives liability				—		622
Other liabilities				8,172		6,523

Total liabilities and deferred income taxes				429,073		355,136

Commitments and contingencies (note 10)
Partners' capital (note 7):
	Common unitholders (19,069,948 and 14,441,763 units outstanding at June 30, 2004 and December 31, 2003, respectively)			366,938		246,952
	Subordinated unitholders (10,465,000 units outstanding at June 30, 2004 and December 31, 2003)			45,304		49,010
	General Partner interest			6,469		3,975
	Undistributed employee long-term incentive compensation			2,003		738
	Accumulated other comprehensive income (loss)			1,725		(5,608	)

		Net partners' capital		422,439		295,067

			$	851,512	$	650,203

See accompanying notes to condensed consolidated financial statements.

PACIFIC ENERGY PARTNERS, L.P. (Note 1)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

		Three Months Ended June 30,						Six Months Ended June 30,
		2004			2003			2004			2003
		(in thousands, except per unit amounts) (unaudited)
Pipeline transportation revenue		$	26,992		$	25,758		$	51,719		$	51,078
Storage and distribution revenue			9,259			—			19,382			—
Pipeline buy/sell transportation revenue			3,690			—			3,690			—
Crude oil sales, net of purchases of $94,382 and $88,408 for the three months ended June 30, 2004 and 2003 and $175,497 and $174,700 for the six months ended June 30, 2004 and 2003			6,056			4,979			10,868			10,609

Net revenue before operating expenses			45,997			30,737			85,659			61,687

Expenses:
	Operating		20,683			14,344			39,600			26,992
	Transition costs		184			—			184			397
	General and administrative		3,636			3,002			7,490			6,984
	Depreciation and amortization		5,713			4,205			10,955			8,386

			30,216			21,551			58,229			42,759
Share of net income of Frontier			391			386			784			727

Operating income			16,172			9,572			28,214			19,655
Interest expense			(4,383	)		(4,102	)		(8,509	)		(8,148	)
Write-off of deferred financing cost and interest rate swap termination expense (note 6)			(2,901	)		—			(2,901	)		—
Other income			226			156			387			247

Income before income taxes			9,114			5,626			17,191			11,754

Income tax benefit (expense):
	Current		(32	)		—			(32	)		—
	Deferred		46			—			46			—

			14			—			14			—

Net income		$	9,128		$	5,626		$	17,205		$	11,754

Net income for the general partner interest		$	183		$	112		$	344		$	235

Net income for the limited partner interests		$	8,945		$	5,514		$	16,861		$	11,519

Basic and diluted net income per limited partner unit		$	0.30		$	0.26		$	0.62		$	0.55
Weighted average limited partner units outstanding:
	Basic		29,479			20,930			27,239			20,930
	Diluted		29,632			21,086			27,402			21,065

See accompanying notes to condensed consolidated financial statements.

PACIFIC ENERGY PARTNERS, L.P. (Note 1)

CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL

												Undistributed Employee Long-Term Incentive Compensation
	Limited Partner Units		Limited Partner Amounts												Accumulated Other Comprehensive Income (Loss)
	Limited Partner Units		Limited Partner Amounts						General Partner Interest
	Common	Subordinated	Common			Subordinated			General Partner Interest									Total
	(in thousands) (unaudited)
Balance, December 31, 2003	14,442	10,465	$	246,952		$	49,010		$	3,975		$	738		$	(5,608	)	$	295,067
Net income	—	—		10,365			6,496			344			—			—			17,205
Distribution to partners	—	—		(16,337	)		(10,202	)		(542	)		—			—			(27,081	)
Issuance of common units, net of fees and offering expenses (note 7)	4,625	—		125,881			—			—			—			—			125,881
General partner contribution related to issuance of common units (note 7)	—	—		—			—			2,690			—			—			2,690
Undistributed employee compensation under long-term incentive plan	—	—		—			—			—			1,351			—			1,351
Issuance of common units pursuant to long-term incentive plan	3	—		77			—			2			(86	)		—			(7	)
Foreign currency translation adjustment	—	—		—			—			—			—			2,429			2,429
Change in fair value of hedging derivatives	—	—		—			—			—			—			4,904			4,904

Balance, June 30, 2004	19,070	10,465	$	366,938		$	45,304		$	6,469		$	2,003		$	1,725		$	422,439

See accompanying notes to condensed consolidated financial statements.

PACIFIC ENERGY PARTNERS, L.P. (Note 1)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended June 30,					Six Months Ended June 30,
	2004		2003			2004		2003
	(in thousands) (unaudited)
Net income	$	9,128	$	5,626		$	17,205	$	11,754
Change in fair value of hedging derivatives		9,140		(4,127	)		4,904		(4,988	)
Foreign currency translation adjustment		2,429		—			2,429		—

Comprehensive income	$	20,697	$	1,499		$	24,538	$	6,766

See accompanying notes to condensed consolidated financial statements.

PACIFIC ENERGY PARTNERS, L.P. (Note 1)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

			Six Months Ended June 30,
			2004			2003
			(in thousands) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income		$	17,205		$	11,754
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization		10,955			8,386
		Amortization of debt issue costs and accretion of bond discount		670			557
		Write-off of deferred financing cost		2,321			—
		Non-cash portion of employee compensation under long-term incentive plan		1,351			1,843
		Deferred tax expense (benefit)		(46	)		—
		Share of net income of Frontier		(784	)		(727	)
		Distributions from Frontier, net		668			1,333

				32,340			23,146
Net changes in operating assets and liabilities:
	Crude oil sales receivable			4,270			(9,894	)
	Transportation and storage accounts receivable			(8,757	)		(933	)
	Other current assets and liabilities			267			2,894
	Accounts payable and other accrued liabilities			4,284			(3,178	)
	Accrued crude oil purchases			(2,271	)		7,450
	Other non-current assets and liabilities			(261	)		(311	)

				(2,468	)		(3,972	)

NET CASH PROVIDED BY OPERATING ACTIVITIES				29,872			19,174

CASH FLOWS FROM INVESTING ACTIVITIES
	Acquisitions			(139,050	)		—
	Additions to property and equipment			(7,896	)		(1,191	)
	Other			—			47

NET CASH USED IN INVESTING ACTIVITIES				(146,946	)		(1,144	)

CASH FLOWS FROM FINANCING ACTIVITIES
	Issuance of common units, net of fees and offering expenses			125,881			—
	Capital contributions from the general partner			2,690			—
	Net proceeds from senior notes offering			241,086			—
	Repayment of term loan			(225,000	)		—
	Proceeds from bank credit facilities			154,168			—
	Repayment of bank credit facilities			(141,500	)		—
	Deferred bank financing costs			(1,008	)		—
	Distributions to partners			(27,081	)		(19,755	)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES				129,236			(19,755	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				12,162			(1,725	)
CASH AND CASH EQUIVALENTS, beginning of reporting period				9,699			23,873

CASH AND CASH EQUIVALENTS, end of reporting period			$	21,861		$	22,148

Supplemental disclosures:
	Cash paid for interest		$	8,896		$	7,536
	Non-cash financing and investing activities:
		Change in fair value of hedging derivatives	$	4,904		$	(4,988	)
		Foreign currency translation adjustment	$	2,429		$	—

See accompanying notes to condensed consolidated financial statements.

PACIFIC ENERGY PARTNERS, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

On July 26, 2002, Pacific Energy Partners, L.P. and its subsidiaries (the "Partnership") completed an initial public offering of common units representing limited partner interests. The Partnership, which was formed by The Anschutz Corporation ("TAC") in February 2002, and its subsidiaries are engaged principally in the business of gathering, transporting, storing and distributing crude oil and related products in California and the Rocky Mountain region of the U.S. and Canada. The Partnership generates revenue primarily by transporting crude oil on its pipelines and by leasing storage capacity. The Partnership also buys, blends and sells crude oil, activities that are complementary to the Partnership's pipeline transportation business. The Partnership operates primarily in California, Colorado, Montana, Wyoming and Utah in the United States and in Alberta, Canada and conducts its business through two regional operating units: West Coast operations and Rocky Mountain operations.

The Partnership owns 100% of Pacific Energy Group LLC ("PEG"), whose 100% owned subsidiaries consist of: (i) Pacific Pipeline System LLC ("PPS"), owner of Line 2000 and the Line 63 system, (ii) Pacific Terminals LLC ("PT"), owner of the Pacific Terminals storage and distribution system, (iii) Pacific Marketing and Transportation LLC ("PMT"), owner of the PMT gathering and blending system, (iv) Rocky Mountain Pipeline System LLC ("RMPS"), owner of various undivided interests in the pipelines that make up the Western Corridor system, and 100% of the Salt Lake City Core system and AREPI pipeline, and (v) Ranch Pipeline LLC ("RPL"), owner of a 22.22% partnership interest in Frontier Pipeline Company ("Frontier").

The Partnership owns 100% of PEG Canada GP LLC ("PEG Canada GP"), the general partner of PEG Canada, L.P. ("PEG Canada"), the operating company for the Partnership's Canadian subsidiaries. The Partnership owns 100% of the limited partner interests in PEG Canada, whose 100% subsidiaries consist of (i) Rangeland Pipeline Company ("RPC"), which owns 100% of Aurora Pipeline Company Ltd. ("APC") and a partnership interest in Rangeland Pipeline Partnership ("RPP"), (ii) Rangeland Northern Pipeline Company ("RNPC"), which owns the remaining partnership interest in RPP, and (iii) Rangeland Marketing Company ("RMC"). RPP owns all of the assets that make up the Rangeland and Mid-Alberta pipeline ("MAPL") systems except the Aurora pipeline, which is owned by APC.

The Partnership owns 100% of Pacific Energy Finance Corporation. Pacific Energy Finance Corporation was organized for the sole purpose of co-issuing the Partnership's 7.125% senior unsecured notes issued in June 2004.

PPS, PT and PMT comprise the West Coast segment. RMPS, RPL, PEG Canada, RPC, APC, RPP, RNPC and RMC comprise the Rocky Mountain segment. Certain costs of PEG are also included in each segment.

The general partner of the Partnership is Pacific Energy GP, Inc. ("General Partner"), a wholly owned, indirect subsidiary of TAC. In addition to the 2% general partner interest held by the General Partner, TAC owns 10,465,000 subordinated units of the Partnership.

On July 31, 2003, PT completed the acquisition of certain storage and pipeline distribution assets for a total purchase price of $173 million. The purchase was funded through $90 million of proceeds from the issuance of additional common units on August 25, 2003, and borrowings under the

Partnership's revolving credit facility. The consolidated financial statements reflect the ownership and results of operations of PT since the date of acquisition.

On May 11, 2004, subsidiaries of PEG Canada completed the acquisition of all of the outstanding capital stock of RPC, RMC and APC, which owned various components of the Rangeland Pipeline system, for an aggregate cash purchase cost of approximately $116 million. The purchase was funded through a combination of proceeds from the Partnership's March 30, 2004 equity offering and the Partnership's Canadian credit facility. The consolidated financial statements reflect the ownership and results of operations of Rangeland Pipeline system since the date of acquisition.

On June 30, 2004, a subsidiary of PEG Canada completed the acquisition of the Mid-Alberta Pipeline ("MAPL") pipeline for an aggregate purchase price of approximately $30 million, including capital expenditures of approximately US$3 million to be incurred in the first year for a new initiating pump station, tanks and pipeline connections. The purchase was funded principally from the Partnership's Canadian credit facility. The consolidated financial statements reflect the ownership and results of operations of MAPL pipeline since the date of acquisition.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and with Securities and Exchange Commission ("SEC") regulations. Accordingly, these statements have been condensed and do not include all of the information and footnotes required for complete financial statements. These statements involve the use of estimates and judgments where appropriate. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included. The results of operations for the three and six months ended June 30, 2004 and 2003 are not necessarily indicative of the results of operations for the full year. The financial data for the three and six months ended June 30, 2004 and 2003 is derived from the Partnership's unaudited condensed consolidated financial statements. The financial data as of December 31, 2003 is derived from the Partnership's audited consolidated financial statements. All significant intercompany balances and transactions have been eliminated during the consolidation process.

These financial statements should be read in conjunction with the Partnership's audited consolidated financial statements and notes thereto included in the Partnership's annual report on Form 10-K for the year ended December 31, 2003.

Management Estimates

Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that management make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date as well as the reported amounts of revenue and expenses during the reporting period. The actual results could differ significantly from those estimates.

The Partnership's most significant estimates involve the valuation of individual assets acquired in purchase transactions, the useful lives of property and equipment, the expected costs of environmental remediation, accounting for the potential impact of regulatory proceedings or other actions with shippers on the Partnership's pipelines, and the valuation of inventory, displacement oil and minimum tank inventories.

Revenue Recognition

Revenue from the Rangeland Pipeline system and the MAPL pipeline is recognized upon delivery of the crude oil, condensate and butane to the customer. Customers who wish to transport product on

the Rangeland pipelines may either: (i) sell product to RMC at the inlet to the pipeline without repurchasing product from RMC; or (ii) sell product to RMC at an inlet point and repurchase such product at agreed upon delivery points for the price paid at the inlet to the pipeline plus an established location differential on a pre-arranged basis.

Derivative Instruments

The Partnership uses, on a limited basis, certain derivative instruments (principally futures and options) to hedge its minimal exposure to market price volatility related to its crude oil inventory or future sales of crude oil. Derivatives used to hedge market price volatility related to inventory are generally designated as fair value hedges, and derivatives related to future sale of crude oil are generally designated as cash flow hedges. The Partnership does not engage in speculative derivative activities. Derivative instruments are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the Partnership's derivative instruments related to crude oil inventory are recognized in net income. "Crude oil sales, net of purchases" were net of $0.3 and $0.1 million for the three months ended June 30, 2004 and 2003, and $0.5 and $0.3 for the six months ended June 30, 2004 and 2003, respectively, reflecting changes in the fair value of PMT's derivative instruments held for its crude oil marketing activities. Changes in the fair value of the Partnership's derivative instruments related to the future sale of crude oil are deferred and reflected in "accumulated other comprehensive income," a component of partners' capital, until the related revenue is included in the consolidated statements of income. As of June 30, 2004, $0.7 million relating to the changes in the fair value of highly effective derivative instruments was included in "accumulated other comprehensive income" and is expected to be reclassified to earnings in 2004.

In August and September 2002, PEG entered into three interest rate swap agreements that were to mature in 2009, with notional amounts of $140.0 million, and two interest rate swap transactions that were to mature in 2007, with notional amounts of $30.0 million. The Partnership designated these swaps as a hedge of its exposure to variability in future cash flows attributable to the LIBOR interest payments due on $170.0 million outstanding under PEG's term loan facility. The average swap rate on this $170.0 million of debt was approximately 4.25%, resulting in an all-in interest rate on the $170.0 million of debt of approximately 6.50% (including the applicable margin of 2.25%). In June 2004, in conjunction with the issuance of the 7.125% Senior Notes and the repayment of the term loan, PEG bought back the swaps for a loss of $0.6 million.

In connection with the issuance of the 7.125% Senior Notes, the Partnership entered into interest rate swap agreements with an aggregate notional principal amount of $80.0 million to receive interest at a fixed rate of 7.125% and to pay interest at an average variable rate of six month LIBOR plus 1.6681% (set in advance or in arrears depending on the swap transaction). The interest rate swaps matures June 15, 2014 and are generally callable at the same dates and terms as the 7.125% Notes. The Partnership designated these swaps as a hedge of the change in the Senior Notes fair value attributable to changes in the six month LIBOR interest rate. Changes in fair values of the interest rate swaps are recorded into earnings each period. Similarly, changes in the fair value of the underlying $80.0 million of Senior Notes are recorded into earnings each period. The offsetting difference of recording the change in fair value of the interest rate swaps and the change in fair value of $80.0 million Senior Notes into earnings is not expected to have a material impact on earnings as movement in fair value of the interest rate swap and the underlying debt are expected to be highly correlated.

By using derivative financial instruments to hedge exposures related to changes in market prices and interest rates, the Partnership exposes itself to market risk and credit risk. Market risk is the risk of loss arising from the adverse effect on the value of a financial instrument that results from a change in market prices or interest rates. The market risk associated with price volatility is managed by established parameters that limit the types and degree of market risk that may be undertaken.

Credit risk is the risk of loss arising from the failure of the derivative agreement counterparty to perform under the terms of the derivative agreement. When the fair value of a derivative agreement is positive, the counterparty is liable to the Partnership, which creates credit risk for the Partnership. When the fair value of a derivative agreement is negative, the Partnership is liable to the counterparty and, therefore, it creates credit risk for the counterparty. As of June 30, 2004, the counterparties to the Partnership's crude oil hedging activities did not represent a credit risk to the Partnership as the fair value of each derivative agreement was negative.

Foreign Currency Translation

The financial statements of operating subsidiaries in Canada are measured using the Canadian dollar as the functional currency. Balance sheet amounts are translated at the end of period exchange rate and income statement and cash flow amounts are translated at the average exchange rate for the period. Adjustments from translating these financial statements into U.S. dollars are accumulated in the equity section of the balance sheet under the caption, "accumulated other comprehensive income (loss)."

Income Taxes

The Partnership and its U.S. subsidiaries are not taxable entities and are not subject to federal or state income taxes as the tax effect of operations is accrued to its unitholders. The Partnership's Canadian subsidiaries are taxable entities in Canada and are subject to Canadian federal and provincial income taxes. In addition, monies repatriated from Canada into the U.S. may be subject to withholding taxes.

Net income for financial statement purposes may differ significantly from taxable income reportable to unitholders as a result of differences between the tax bases and financial reporting bases of assets and liabilities and the taxable income allocation requirements under the Partnership's First Amended and Restated Agreement of Limited Partnership, as amended. Individual unitholders have different investment bases depending upon the timing and price of acquisition of partnership units. Further, each unitholder's tax accounting, which is partially dependent upon the unitholder's tax position, differs from the accounting followed in the condensed consolidated financial statements. Accordingly, the aggregate difference in the basis of the Partnership's net assets for financial and tax reporting purposes cannot be readily determined because information regarding each unitholder's tax attributes in the Partnership is not available to the Partnership.

In addition to federal and state income taxes, unitholders may be subject to other taxes, such as local, estate, inheritance or intangible taxes which may be imposed by the various jurisdictions in which the Partnership does business or owns property. Individual unitholders will generally have no responsibility to file Canadian tax returns.

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

Pursuant to FAS No. 109, "Accounting for Income Taxes", in the second quarter of 2004, the Partnership recorded a deferred tax liability of $33.9 million, representing the tax effect of the difference between the amounts paid for shares of RPC, RMC and APC, and the underlying tax basis of the assets.

Net Income per Unit

Basic net income per limited partner unit is determined by dividing net income after deducting the amount allocated to the general partner interest, by the weighted average number of outstanding limited partner units.

Diluted net income per limited partner unit is calculated in the same manner as basic net income per limited partners unit above, except that the weighted average number of outstanding limited partner units is increased to include the dilutive effect of outstanding options and restricted units by application of the treasury stock method. Following is a reconciliation of the basic weighted average outstanding limited partner units to diluted weighted average limited partner units.

	Three Months Ended June 30,		Six Months Ended June 30,
	2004	2003	2004	2003
	(in thousands) (unaudited)
Basic weighted average limited partner units	29,479	20,930	27,239	20,930
Effect of restricted units	140	147	148	129
Effect of options	13	9	15	6

Diluted weighted average limited partner units	29,632	21,086	27,402	21,065

Reclassifications

Certain prior year balances in the accompanying condensed consolidated financial statements have been reclassified to conform to the current year presentation.

Accounting Pronouncements

In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 (FIN46R). FIN46R requires companies to evaluate variable interest entities for specific characteristics to determine whether additional consolidation and disclosure requirements apply. The transition guidance requires the application of FIN 46R to all special-purpose entities (SPEs) no later than the end of the first reporting period ended after December 15, 2003 and immediately to all entities created after January 31, 2003. The adoption of FIN 46R did not have any impact on the Partnership's consolidated financial statements.

2. ACQUISITIONS

Rangeland

On May 11, 2004, the Partnership completed the acquisition of all of the outstanding shares of Rangeland Pipeline Company ("RPC"), Rangeland Marketing Company ("RMC") and Aurora Pipeline Company Ltd. ("APC"), the corporations that owned various components of the Rangeland Pipeline System from BP Canada Energy Company ("BP"). The Rangeland Pipeline System is located in the province of Alberta, Canada. The acquisition price for shares of RPC, RMC and APC was Cdn$130 million plus approximately Cdn$29 million for linefill, working capital, transaction costs and transition capital expenditures. The aggregate purchase cost was approximately U.S. $116 million and was funded through a combination of proceeds from our March 30, 2004 equity offering and a Cdn$45 million borrowing from a new Cdn$100 million revolving credit facility in Canada. The acquisition was accounted for as an acquisition of assets.

The majority of the Rangeland Pipeline System was constructed in 1966 with smaller portions being built as early as 1955 and certain pump stations built as late as 1971. The Partnership anticipates depreciating the pipeline over forty years from the purchase date.

Pursuant to a transportation service agreement between RMC, RPC and APC, RMC has contracted for the rights to the entire capacity of the Rangeland pipeline. Customers who wish to transport product on the Rangeland pipelines may, therefore, either: (i) sell product to RMC at the inlet to the pipeline without repurchasing product from RMC; or (ii) sell product to RMC at an inlet point and repurchase such product at agreed upon delivery points for the price paid at the inlet to the pipeline plus an established location differential. RMC owns the buy/sell contracts with customers, which were assumed with the purchase, but the marketing function was conducted by employees of BP to whom we were not able to and did not offer employment.

The Rangeland Pipeline System has historically been operated without regard to maximizing either pipeline throughput or profitability; rather, it was operated as an integral part of a larger marketing and trading oriented enterprise. Similarly the MAPL Pipeline, which the Partnership also purchased (see below), was not operated with regard to maximizing pipeline operations or profitability; it was operated as a cost center in a larger enterprise. The Partnership intends to make significant changes to the revenue-generating capability of both systems by combining and integrating fully all of its Canadian and U.S. Rocky Mountain pipeline systems under common management, by expanding the throughput capacity of the MAPL system and by connecting into other pipelines and establishing a new pump station and receiving terminal in Edmonton, Alberta. This new facility will be able to access additional sources of Canadian crude oil, which will allow the Partnership to participate in the projected increase in production of Canadian synthetic crude oil.

In effect, the Partnership is converting what has been primarily a gathering system for crude oil, condensate and butane in southern Alberta into a main line transportation system that will be able to transport multiple grades of conventional and synthetic crude oils from the Edmonton oil hub to U.S. Rocky Mountain refining centers.

Until April 2003, the assets comprising the Rangeland Pipeline System were held by three legal entities: BP, APC and BP Canada Energy Resources Company ("BPR"). In April 2003, in order to facilitate their sale, BPR formed RPC and RMC, and transferred their Rangeland pipeline and marketing related assets to the newly formed entities. APC, which contains only a short segment of pipeline and de minimis other assets, liabilities, revenues and expenses, remained unchanged. None of RPC, RMC or APC ever had any employees of their own. All operations and administrative and technical support functions associated with the Rangeland pipeline system, including field services and operations, executive management, marketing, engineering, environmental, risk management, payroll, treasury, human resources and legal remained with BPR and BP. These included services provided by approximately ninety BP employees who also provided varying amounts of support for BP's other pipelines.

Although the RPC and RMC legal entities were formed in April 2003, revenues, expenses, and other financial measures continued to be included within the financial statements of BPR and BP. Financial statements for RPC, RMC and Aurora were not maintained on a current basis.

Upon closing of the purchase transaction, BP terminated employees directly involved in the operation of the Rangeland pipeline, including field-level supervisors, and the Partnership hired those who accepted an offer of employment. Except for one former marketing person (who had not been directly involved with marketing of the Rangeland Pipeline System for several years), no members of senior management, and no financial, marketing or technical personnel who had been associated with the management and support of the Rangeland system were made available by BP for possible employment with the Partnership following the completion of this acquisition. Consequently, the Partnership hired its own marketing, accounting and technical staff, which are located in its new

Calgary office or in Olds, Alberta. The Partnership also utilizes its existing executive and support staff in Long Beach, California and Denver, Colorado to provide management oversight and administrative and technical support for the Alberta assets.

The Partnership also did not acquire accounting software or computer hardware with the purchase. The Partnership was able, however, to acquire as part of the transaction, the Supervisory Control and Data Acquisition (SCADA) system necessary to operate the pipeline. Subsequent to the closing, the Partnership acquired software associated with the complex task of volumetric and revenue accounting from the seller for no additional consideration. The Partnership will use its existing financial accounting software for other accounting functions.

Mid Alberta Pipeline

On June 30, 2004, the Partnership completed the acquisition of the MAPL Pipeline from Imperial Oil. The MAPL pipeline is located in Alberta, Canada. The acquisition price for MAPL was Cdn$31.5 million, of which Cdn$5.0 million will be payable in three years. In addition to MAPL pipeline, the Partnership acquired linefill for Cdn$5.0 million and expects to incur approximately Cdn$4.0 million for transaction costs and first-year capital expenditures. The aggregate purchase price, including linefill, transaction costs and first-year construction costs will be approximately U.S. $30.2 million, most of which, was funded from our existing Canadian credit facility.

The first section of MAPL pipeline was constructed in 1960 and other sections were constructed in 1985 and 1994. The Partnership anticipates depreciating the pipeline over forty years from the acquired date.

Imperial Oil did not make any of its employees available for possible employment with the Partnership following the completion of the acquisition. In connection with purchase, the Partnership entered into a two-year transitional services agreement with Imperial Oil whereby Imperial Oil will provide necessary services to operate the initiating pump station and the control center and software that control movements through the MAPL pipeline. The Partnership has the right to cancel the transitional services agreement at any time. The Partnership expects to assume all MAPL pipeline operations and transfer MAPL operations to the Partnership's Rangeland control center after its initiation facilities in Edmonton are constructed and operational.

The Partnership did not acquire accounting software or computer hardware with the purchase. The complex task of volumetric and revenue accounting will be consolidated with the accounting process currently in place for the Rangeland Pipeline system. The Partnership will use its existing financial accounting software for other accounting functions.

The acquisition of MAPL was accounted for as an acquisition of assets.

Purchase Price Allocations

The acquisitions of Rangeland and MAPL have been accounted for by the purchase method of accounting pursuant to Statement of Financial Accounting Standards ("FAS") No. 141, "Business Combinations" and, accordingly the consolidated statements of income include the results of Rangeland and MAPL from their acquisition dates. Based upon independent appraisals of the fair values of the acquired assets, the Partnership is completing its review and determination of the fair values of the assets acquired and liabilities assumed. Accordingly, the allocation of the purchase price is subject to revision. Based upon the preliminary estimates, the purchase price is being allocated to depreciable pipelines and related equipment, crude oil inventory, pipeline linefill, and rights of way, as well as to amortizable intangible assets. In addition to the cash purchase price and related acquisition costs, the Partnership assumed an environmental liability of approximately $2.2 million, and pursuant to FAS 109, Accounting for Income Taxes the Partnership recorded a deferred tax liability of $33.9 million,

representing the tax effect of the difference between the amounts paid for shares of RPC, RMC and APC, and the underlying tax basis of the assets.

4. INVESTMENT IN FRONTIER PIPELINE COMPANY

RPL owns a 22.22% partnership interest in Frontier, which is accounted for by the equity method of accounting. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to recognize the investor's share of distributions and net income or loss of the investee as they occur. Recognition of any such loss is generally limited to the total of the investor's investment in, advances to, commitments and guarantees for the investee.

The summarized balance sheets of Frontier at June 30, 2004 and December 31, 2003, and the statements of income for the three and six months ended June 30, 2004 and 2003 are presented below:

Balance Sheets

	June 30, 2004		December 31, 2003
	(in thousands) (unaudited)
Current assets	$	2,192	$	2,013
Net property, equipment and other assets		8,758		8,901

	$	10,950	$	10,914

Current liabilities	$	5,892	$	6,313
Other liabilities		2,089		2,159
Partners' capital		2,969		2,442

	$	10,950	$	10,914

Statements of Income

	Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
	(in thousands) (unaudited)
Revenue	$	2,959	$	2,408	$	5,560	$	4,538

Net income	$	1,756	$	1,735	$	3,527	$	3,271

The unamortized portion of the excess cost over the Partnership's share of net assets of Frontier is $6.8 million and $6.9 million at June 30, 2004 and December 31, 2003, respectively. This excess cost over the Partnership's share of net assets represents the difference between the historical cost and the fair value of property and equipment at acquisition dates. The Partnership is amortizing this excess cost over the life of the related property and equipment.

5. LONG-TERM DEBT

The Partnership's long-term debt obligations at June 30, 2004 and December 31, 2003 are shown below:

		June 30, 2004		December 31, 2003
		(in thousands) (unaudited)
Senior secured U.S. revolving credit facility		$	38,000	$	73,000
Senior secured Canadian revolving credit facility			48,731		—
Senior unsecured notes, net of unamortized discount of $4,354			245,777		—
Senior secured term loan			—		225,000
Future payment for MAPL assets			3,227		—

Total			335,735		298,000
	Less current portion		—		—

Long-term debt		$	335,735	$	298,000

Senior Secured U.S. Revolving Credit Facility and Term Loan

PEG is the borrower under the U.S. revolving credit facility. The revolving credit facility is a $200.0 million facility that is available for general partnership purposes, including working capital, letters of credit and distributions to unitholders, and to finance future acquisitions. Borrowings under the revolving credit facility are limited by various financial covenants in the credit agreement. The revolving credit facility also has a borrowing sublimit of $45.0 million for working capital, letters of credit and partnership distributions to unitholders. At June 30, 2004, $38.0 million was outstanding under the revolving credit facility. No letters of credit were issued as of that date.

The revolving credit facility matures on July 26, 2007, at which time all outstanding amounts will be due and payable.

Effective December 12, 2003, PEG and its lenders amended the interest rates and other fees under the credit facilities. Subject to certain limited exceptions, indebtedness under the revolving credit facility now bears interest at PEG's option, at either (i) the base rate, which is equal to the higher of the prime rate as announced by Fleet National Bank or the Federal Funds rate plus 0.50% or (ii) LIBOR plus an applicable margin ranging from 0.75% to 2.00%. The applicable margins are subject to change based on the credit rating of the revolving credit facility or, if is not rated, the credit rating of PEG. PEG incurs a commitment fee which ranges from 0.125% to 0.375% per annum on the unused portion of the revolving credit facility.

As of June 30, 2004, we had available but undrawn credit of $111 million under our U.S. revolving credit facility. This amount could be increased based on an acquired business's earnings before interest, taxes, depreciation and amortization ("EBITDA") with the acceptance of the administrative agent for our credit facilities.

The U.S. revolving credit facility is guaranteed by the Partnership and certain of PEG's U.S. operating subsidiaries, PEG Canada, PEG Canada GP LLC and Pacific Energy Finance Corporation (collectively, the "Guarantors"). The revolving credit facility is fully recourse to PEG and the guarantors, but non-recourse to the General Partner. Obligations under the revolving credit facility are secured by (i) the assets of the Partnership, (ii) pledges of membership interests in and the assets of PEG and certain of PEG's operating subsidiaries and PEG Canada GP LLC, (iii) pledges of partnership interests in and certain assets of PEG Canada and (iv) pledges of the shares in and the assets of Pacific Energy Finance Corporation; provided, however, that the collateral under the credit agreement does not include shares, partnership interests, limited liability company membership interests

or other ownership interest, if any, in or assets of Rangeland Pipeline Company, Rangeland Marketing Company, Rangeland Northern Pipeline Company, Rangeland Pipeline Partnership, Aurora Pipeline Company Ltd. or any other entity that is designated by PEG or the Partnership after the date hereof as an "Unrestricted Subsidiary" pursuant to the terms of the credit agreement.

On June 16, 2004, the Partnership repaid all amounts outstanding under the term loan. Amounts under the term loan that have been repaid may not be re-borrowed.

Under the credit agreement, PEG is prohibited from declaring dividends or distributions if any event of default, as defined in the credit agreement, occurs or would result from such declaration. In addition, the credit agreement contains certain financial covenants and covenants limiting the ability of PEG and the Guarantors to, among other things, incur or guarantee indebtedness, change ownership or structure, including mergers, consolidations, liquidations and dissolutions, sell or transfer their assets and properties, declare or pay dividends and enter into a new line of business. At June 30, 2004, PEG and Guarantors were in compliance with all such covenants.

Canadian Revolving Credit Facility

On May 11, 2004, Rangeland Pipeline Company entered into a Canadian revolving credit facility agreement which is guaranteed by certain subsidiaries of PEG Canada. The maximum amount available under the Canadian revolving credit facility is Cdn$75 million, which will be further increased to Cdn$100 million after certain other conditions are satisfied. The Canadian revolving credit facility is secured by liens on all of the property and assets of Rangeland Pipeline Company and of the guarantors of the Canadian revolving credit facility.

Indebtedness under the Canadian revolving credit facility bears interest, at Rangeland Pipeline Company's option, at either (i) the Canadian prime rate or the U.S. base rate (each plus an applicable margin ranging from 1.00% to 1.625%,) (ii) Bankers' Acceptance discount rates or LIBOR plus an applicable margin ranging from 2.00% to 2.65%. The applicable margins are subject to change based on certain financial ratios.

The Canadian revolving credit facility matures on May 11, 2007, at which time all outstanding amounts will be due and payable. Amounts outstanding under the credit facility may be repaid at any time prior to maturity.

The Canadian revolving credit facility is available for general corporate purposes and also provides for the issuance of letters of credit. Borrowings under this facility are limited by various financial covenants that are set forth in the Canadian credit agreement. As of June 30, 2004, Rangeland Pipeline Company was in compliance with all covenants under the Canadian agreement. At June 30, 2004, borrowings totaling Cdn$65.0 million (U.S.$48.7 million) and letters of credit totaling Cdn$5.0 million (U.S.$3.7 million) were outstanding under the Canadian revolving credit facility. As of June 30, 2004, we had available but undrawn credit of Cdn$5.0 million (U.S.$3.7 million) under our Canadian revolving credit facility.

Rangeland Pipeline Company incurs a commitment or standby fee which ranges from 25% to 35% of the applicable margin, based on the unused portion of the Canadian revolving credit facility. Under the Canadian credit agreement, Rangeland Pipeline Company is prohibited from declaring dividends or making any other distributions or payments to PEG Canada or its affiliates if any default or event of default, as defined in the Canadian credit agreement, occurs or would result from such declaration or payment, or if a material adverse effect, as defined in the Canadian credit agreement, would result from such declaration or payment, or if the distributions and payments would exceed certain limits. The Canadian credit agreement also contains covenants requiring Rangeland Pipeline Company, including its subsidiaries and affiliates, to maintain specified financial ratios. In addition, the Canadian credit agreement contains other restrictive covenants. As of June 30, 2004, Rangeland Pipeline Company was in compliance with all covenants under the Canadian credit agreement.

Senior Unsecured Notes

On June 16, 2004, the Partnership and its 100% owned subsidiary Pacific Energy Finance Corporation completed the sale of $250 million of 7.125% senior unsecured notes due June 15, 2014. The notes were issued at a discount of $4.4 million, resulting in an effective interest rate of 7.375%. Interest payments are due on June 15 and December 15 of each year, beginning on December 15, 2004. At any time prior to June 15, 2007, the Partnership will have the option to redeem up to 35% of the aggregate principal amount of notes at a redemption price of 107.125% of the principal amount with the net cash proceeds of one or more equity offering. The Partnership will have the option to redeem the notes, in whole or in part, at anytime on or after June 15, 2009 at the following redemption prices:

Year	Percentage
2009	103.563	%
2010	102.375	%
2011	101.188	%
2012 and thereafter	100.000	%

The notes are jointly and severally guaranteed by certain of the partnership's subsidiaries, including PEG, PMT, RMPS, RPL, PEG Canada GP and PEG Canada.

In addition, the indenture governing the notes contains certain covenants that, among other things, limit the Partnership's ability and the ability of its restricted subsidiaries to incur or guarantee indebtedness or issue certain types of preferred equity securities; sell assets; pay distributions on, redeem or repurchase Partnership units; consolidate, merge or transfer all or substantially all of its assets. At June 30, 2004, the Partnership was in compliance with all such covenants.

Net proceeds from the issuance of the Notes were $241.1 million after deducting the $4.4 million discount and offering expenses of $4.5 million. The net proceeds were used principally to repay the Partnership's $225 million term loan and to repay $14 million of indebtedness outstanding under our U.S. revolving credit facility.

In connection with the issuance of the 7.125% Senior Notes, the Partnership entered into interest rate swap agreements with an aggregate notional principal amount of $80 million to receive interest at a fixed rate of 7.125% and to pay interest at an average variable rate of six month LIBOR plus 1.6681% (set in advance or in arrears depending on the swap transaction). See "Note 1—Summary of Significant Accounting Policies" above for further discussion on these interest rate swaps.

Future Payment for MAPL Assets

In connection with the purchase of MAPL pipeline, the Partnership is obligated to pay the seller Cdn$5.0 million (U.S.$3.7 million) on June 30, 2007. The future payment was discounted at 5%. The carrying value of the future payment was Cdn$4.3 million (U.S.$3.2 million) at June 30, 2004.

6. WRITE OFF OF DEFERRED FINANCING COSTS AND INTEREST RATE SWAP TERMINATION EXPENSE

On June 11, 2004, in connection with the repayment of its term loan, the Partnership had a $2.3 million non-cash write-down of deferred financing costs and incurred a $0.6 million cash expense to terminate related interest rate swaps.

7. PARTNERS' CAPITAL

On March 30, 2004, the Partnership issued and sold 4,200,000 common units in an underwritten public offering at a price of $28.50. The common units sold in the offering were registered pursuant to the registration statement on SEC Form S-3 filed on August 1, 2003. Net proceeds from the offering,

including the General Partner's contribution of $2.4 million, totaled approximately $116.7 million after deducting underwriting fees and offering expenses of $5.4 million. The Partnership repaid approximately $10 million in borrowings under its U.S. revolving credit facilities, which were incurred in the first quarter of 2004 to fund the deposit on the Rangeland acquisition, and used approximately $76 million of the net proceeds to fund a portion of the aggregate purchase price of the Rangeland and Mid Alberta pipeline acquisitions. The Partnership utilized the remaining $31 million in net proceeds as follows: (i) $8 million to repay borrowings incurred in the second half of 2003 to fund growth capital expenditures, (ii) $10 million to repay borrowings under its U.S. revolving credit facility to increase availability under that facility to fund 2004 growth capital projects including pre-construction development activities for the Pier 400 Project and establishing a new connection between Frontier pipeline and the Salt Lake City Core System and other growth capital expenditures, and (iii) $13 million to repay borrowings to increase its available borrowing capacity to fund future growth capital projects.

On April 12, 2004, the underwriters exercised a portion of the over-allotment option granted in connection with the offering of common units on March 30, 2004 and purchased an additional 425,000 common units from the Partnership at a price of $28.50 per unit to cover over allotments. Including the related capital contribution of the General Partner of $247,000, the partnership received net proceeds of $11.8 million after underwriting fees. The Partnership used the $12 million in net proceeds from the exercise of the overallotment option to reduce the balance outstanding under its revolving credit facility pending future investment in capital projects.

8. RELATED PARTY TRANSACTIONS

In the ordinary course of its operations, the Partnership engages in various transactions with TAC and its affiliates. These transactions, which are more thoroughly described below, are summarized in the following table for the three and six months ended June 30, 2004 and 2003:

		Three Months Ended June 30,				Six Months Ended June 30,
		2004		2003		2004		2003
		(in thousands) (unaudited)
Pipeline transportation revenue:
	The Anschutz Corporation and affiliates	$	204	$	88	$	373	$	170
General and administrative expense:
	The Anschutz Corporation and affiliates	$	35	$	38	$	84	$	83

Related party balances at June 30, 2004 and December 31, 2003 were as follows:

		June 30, 2004		December 31, 2003
		(in thousands) (unaudited)
Amounts included in accounts receivable:
	The Anschutz Corporation and affiliates	$	156	$	155

Amounts included in due to related parties:
	Pacific Energy GP, Inc.	$	1,187	$	580
	The Anschutz Corporation and affiliates		6		—

	Total	$	1,193	$	580

Amounts included in undistributed long-term incentive compensation:
	Pacific Energy GP, Inc.	$	2,003	$	738

Revenue from Related Parties

A subsidiary of TAC was a shipper on Line 2000 and was charged the published tariff rates applicable to "participating shippers" until March 31, 2003, when an agreement between the TAC subsidiary and a third party, the performance of which required the TAC subsidiary to ship on Line 2000, was assigned to PMT for consideration equal to the value of inventory that was transferred to PMT. In addition, a subsidiary of TAC is a shipper on RMPS's pipeline systems and the AREPI pipeline and is charged published tariff rates.

RMPS serves as the contract operator for certain gas producing properties owned by a subsidiary of TAC in Wyoming and Utah, in exchange for which RMPS is reimbursed its direct costs of operation and is paid an annual fee of $0.3 million as compensation for the time spent by RMPS management and for other overhead services related to their activities. In addition, during 2003 and the first quarter of 2004, RMPS's trucking operation hauled water for a TAC subsidiary at rates equivalent to those charged to third parties.

RMPS also receives a management fee from Frontier Pipeline in connection with time spent by RMPS management and for other services related to the pipeline's activities. RMPS received $0.1 million for each of the three months ended June 30, 2004 and 2003 and $0.3 million for each of the six months ended June 30, 2004 and 2003.

Expenses Paid to Related Parties

General and Administrative Expense: In 2002, the Partnership began utilizing the financial accounting system owned and provided by TAC under a shared services arrangement. In addition, the Partnership from time to time utilizes the services of TAC's risk management personnel for acquiring the Partnership's insurance, and the Partnership's surety bonds are issued under TAC's bonding line. Beginning January 2003, TAC began charging the Partnership a fee of $0.1 million per year for these services and continues to charge the Partnership for any out-of-pocket costs it incurs. The fixed annual fee includes all license, maintenance and employee costs associated with the Partnership's use of the financial accounting system.

Beginning January 2003, and as amended in May 2004, the Partnership leases approximately 5,400 square feet of office space from an affiliate of TAC, for a term of five years at an annual cost of $0.1 million.

Cost Reimbursements: The General Partner employs all U.S. based employees. All employee expenses incurred by the General Partner on behalf of the Partnership are charged back to the Partnership.

The operating and general and administrative cost reimbursement amounts above exclude reimbursements for property, casualty and directors and officers' insurance premiums paid by TAC on behalf of the Partnership, until mid-2003. Beginning with the 2003-2004 insurance policy period, the Partnership incurred these costs directly. In addition, out-of-pocket costs incurred by TAC for the benefit of the Partnership for computer consultants and surety bonds were also reimbursed by the Partnership.

Other: The Partnership also reimburses TAC for transportation services, based on a cost-based formula. For the six months ended June 30, 2004, the Partnership reimbursed TAC $0.1 million. No amounts were incurred for the six months ended June 30, 2003.

9. SEGMENT INFORMATION

The Partnership's business and operations are organized into two regional operating units: West Coast operations and Rocky Mountain operations. The West Coast operations include PPS, PT and PMT (for the period from July 31, 2003 to June 30, 2004). Rocky Mountain operations include RMPS, RPL and PEG Canada and its Canadian subsidiaries (for the period from May 11, 2004 to June 30,

2004). The reporting units comprising each segment have been aggregated to reflect how the assets are operated and managed. General and administrative costs, which consist of executive management, accounting and finance, human resources, information technology, investor relations, legal, and marketing and business development, are not allocated to the individual segments. Information regarding these two operating units is summarized below:

			West Coast Operations		Rocky Mountain Operations		Intersegment and Intrasegment Eliminations			Total
			(in thousands) (unaudited)
Three months ended June 30, 2004
	Segment revenue:
		Pipeline transportation revenue	$	16,494	$	11,804	$	(1,306	)	$	26,992
		Storage and distribution revenue(1)		9,359		—		(100	)		9,259
		Pipeline buy/sell transportation revenue(2)		—		3,690					3,690
		Crude oil sales, net of purchases(3)	6,056		—					6,056
Net revenue			31,909		15,494					45,997
	Expenses:
		Operating		14,182		7,907		(1,406	)		20,683
		Transition costs		—		184					184
		Depreciation and amortization	3,635		2,078					5,713
		Total expenses	17,817		10,169					26,580
Share of net income of Frontier			—		391					391
Operating income from segments(4)			14,092		5,716					19,808
Identifiable assets(5)			$	501,424	$	317,209				$	818,633
Capital expenditures			$	2,294	$	3,185				$	5,479
Three months ended June 30, 2003
	Segment revenue:
		Pipeline transportation revenue	$	17,554	$	10,321	$	(2,117	)	$	25,758
		Storage and distribution revenue(1)		—		—					—
		Pipeline buy/sell transportation revenue(2)		—		—					—
		Crude oil sales, net of purchases(3)	4,979		—					4,979
Net revenue			22,533		10,321					30,737
	Expenses:
		Operating		10,377		6,084		(2,117	)		14,344
		Transition costs		—		—					—
		Depreciation	2,859		1,346					4,205
		Total expenses	13,236		7,430					18,549
Share of net income of Frontier			—		386					386
Operating income from segments(4)			9,297		3,277					12,574
Identifiable assets(5)			$	345,391	$	130,807				$	476,198
Capital expenditures			$	347	$	284				$	631

			West Coast Operations		Rocky Mountain Operations		Intersegment and Intrasegment Eliminations			Total
			(in thousands) (unaudited)
Six months ended June 30, 2004
	Segment revenue:
		Pipeline transportation revenue	$	32,185	$	22,347	$	(2,813	)	$	51,719
		Storage and distribution revenue(1)		19,582		—		(200	)		19,382
		Pipeline buy/sell transportation revenue(2)		—		3,690					3,690
		Crude oil sales, net of purchases(3)	10,868		—					10,868
Net revenue			62,635		26,037					85,659
	Expenses:
		Operating		28,888		13,725		(3,013	)		39,600
		Transition costs		—		184					184
		Depreciation and amortization	7,400		3,555					10,955
		Total expenses	36,288		17,464					50,739
Share of net income of Frontier			—		784					784
Operating income from segments(4)			26,347		9,357					35,704
Identifiable assets(5)			$	501,424	$	317,209				$	818,633
Capital expenditures			$	3,420	$	4,476				$	7,896
Six months ended June 30, 2003
	Segment revenue:
		Pipeline transportation revenue	$	34,888	$	19,720	$	(3,530	)	$	51,078
		Storage and distribution revenue(1)		—		—					—
		Pipeline buy/sell transportation revenue(2)		—		—					—
		Crude oil sales, net of purchases(3)	10,609		—					10,609
Net revenue			45,497		19,720					61,687
	Expenses:
		Operating		19,796		10,726		(3,530	)		26,992
		Transition costs		—		397					397
		Depreciation	5,681		2,705					8,386
		Total expenses	25,477		13,828					35,775
Share of net income of Frontier			—		727					727
Operating income from segments(4)			20,020		6,619					26,639
Identifiable assets(5)			$	345,391	$	130,807				$	476,198
Capital expenditures			$	717	$	474				$	1,191

(1): Includes the revenue of the PT storage and distribution system, which PT acquired on July 31, 2003.
(2): Includes the revenue of the Canadian subsidiaries, which were acquired on May 11, 2004.
(3): The above amounts are net of purchases of $94,382 and $88,408 for the three months ended June 30, 2004 and 2003 and $175,497 and $174,700 for the six months ended June 30, 2004, respectively.

(4): The following is a reconciliation of operating income as stated above to the statements of income:

		Three Months Ended June 30,						Six Months Ended June 30,
		2004			2003			2004			2003
		(in thousands) (unaudited)
Income Statement Reconciliation
Operating income from segments above:
	West Coast Operations	$	14,092		$	9,297		$	26,347		$	20,020
	Rocky Mountain Operations		5,716			3,277			9,357			6,619

Operating income			19,808			12,574			35,704			26,639
Less: General and administrative			3,636			3,002			7,490			6,984

Operating income			16,172			9,572			28,214			19,655
	Interest expense		(4,383	)		(4,102	)		(8,509	)		(8,148	)
	Loss on extinguishment of debt		(2,901	)		—			(2,901	)		—
	Other income		226			156			387			247

	Income before income taxes		9,114			5,626			17,191			11,754
	Income tax benefit		14			—			14			—

Net income		$	9,128		$	5,626		$	17,205		$	11,754

(5): Identifiable segment assets do not include assets related to the Partnership's corporate activity. As of June 30, 2004 and 2003, corporate related assets were $32,879 and $9,404, respectively.

10. COMMITMENTS AND CONTINGENCIES

On March 15, 2002, Sinclair Oil Corporation ("Sinclair") filed a complaint with the Wyoming Public Service Commission ("WPSC") alleging that RMPS's common stream rules and specifications and RMPS's refusal to prohibit certain types of crude oil diluents from the sour crude oil common stream, all in respect of the Big Horn segment of the Western Corridor system, are adverse to Sinclair and the public interest. On March 9, 2004, RMPS entered into a stipulation and agreement with Sinclair, Conoco Pipe Line Company and ConocoPhillips Company that provided for a resolution of Sinclair's complaint on terms that required RMPS to incur no material cost or expense, but the effectiveness of which was subject to the satisfaction of various conditions, such as the approval of certain tariff provisions by shippers and the Federal Energy Regulatory Commission ("FERC"). All of the conditions to the effectiveness of the stipulation and agreement were satisfied during the second quarter of 2004, thereby bringing this matter to a conclusion.

The Partnership is subject to numerous federal (U.S. and Canadian), state, provincial and local laws which regulate the discharge of materials into the environment or that otherwise relate to the protection of the environment. At June 30, 2004, the Partnership had accrued for future environmental remediation liabilities of $7.6 million, including a current portion of $0.4 million, and right-of-way liabilities of $1.0 million, resulting from various acquisitions, which liabilities are classified in the accompanying condensed consolidated balance sheets within "other liabilities." The actual future costs for environmental remediation activities will depend on, among other things, the identification of any additional sites, the determination of the extent of the contamination at each site, the timing and nature of required remedial actions, the technology available and required to meet the various existing legal requirements, the nature and extent of future environmental laws, inflation rates and the determination of the Partnership's liability at multi-party sites, if any, in light of uncertainties with respect to joint and several liability, and the number, participation levels and financial viability of other potentially responsible parties.

The Partnership is involved in various other regulatory disputes, litigation and claims arising out of its operations in the normal course of business. However, the Partnership is not currently a party to any legal or regulatory proceedings, the resolution of which it could be expected to have a material adverse effect on its business, financial condition or results of operations.

11. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Given that certain, but not all subsidiaries are guarantors of our 7.125% Senior Notes, the Partnership is required to present the following supplemental condensed consolidating financial information. For purposes of the following footnote, Pacific Energy Partners, L.P. and its predecessor are referred to as "Parent." Rocky Mountain Pipeline System LLC, Pacific Marketing and Transportation LLC, Ranch Pipeline LLC, PEG Canada GP LLC, PEG Canada, L.P. and Pacific Energy Group LLC are collectively referred to as the "Guarantor Subsidiaries" and Pacific Pipeline System LLC and Pacific Terminals LLC are referred to as "Non-Guarantor Subsidiaries."

The following supplemental condensed consolidating financial information reflects the Parent's separate accounts, the combined accounts of the Guarantor Subsidiaries, the combined accounts of the Parent's other non-guarantor subsidiaries, the combined consolidating adjustments and eliminations and the Parent's consolidated accounts for the dates and periods indicated. For purposes of the following condensed consolidating information, the Parent's investments in its subsidiaries and the Guarantor Subsidiaries' investments in their subsidiaries are accounted for under the equity method of accounting:

		Balance Sheet June 30, 2004
		Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
		(in thousands)
Assets:
	Current asssets	$	8,772	$	85,661	$	34,220	$	(32,656	)	$	95,997
	Property and equipment		—		128,925		576,123		—			705,048
	Equity investments		372,088		200,773		—		(566,044	)		6,817
	Intercompany notes receivable		295,487		330,952		—		(626,439	)		—
	Other assets		4,668		2,269		36,713		—			43,650

	Total assets	$	681,015	$	748,580	$	647,056	$	(1,225,139	)	$	851,512

Liabilities and partners' capital:
	Current liabilities	$	12,799	$	42,583	$	27,512	$	(32,656	)	$	50,238
	Long-term debt		245,777		38,000		51,958		—			335,735
	Deferred income taxes		—		—		34,928		—			34,928
	Intercompany notes payable		—		295,487		330,952		(626,439	)		—
	Other liabilities		—		422		7,750		—			8,172
	Total partners' capital		422,439		372,088		193,956		(566,044	)		422,439

	Total liabilities and partners' capital	$	681,015	$	748,580	$	647,056	$	(1,225,139	)	$	851,512

		Balance Sheet December 31, 2003
		Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating adjustments			Total
		(in thousands)
Assets:
	Current asssets	$	2,799	$	63,905	$	17,168	$	(15,076	)	$	68,796
	Property and equipment		—		126,216		441,738		—			567,954
	Equity investments		292,268		165,815		—		(451,197	)		6,886
	Intercompany notes receivable		—		276,400		—		(276,400	)		—
	Other assets		—		4,957		1,610		—			6,567

	Total assets	$	295,067	$	637,293	$	460,516	$	(742,673	)	$	650,203

Liabilities and partners' capital:
	Current liabilities	$	—	$	45,980	$	19,087	$	(15,076	)	$	49,991
	Long-term debt		—		298,000		—		—			298,000
	Intercompany notes payable		—		—		276,400		(276,400	)		—
	Other liabilities		—		1,045		6,100		—			7,145
	Total partners' capital		295,067		292,268		158,929		(451,197	)		295,067

	Total liabilities and partners' capital	$	295,067	$	637,293	$	460,516	$	(742,673	)	$	650,203

	Statement of Income Three Months Ended June 30, 2004
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
	(in thousands)
Operating revenues	$	—		$	17,859		$	29,544		$	(1,406	)	$	45,997
Operating expenses		—			(10,038	)		(12,235	)		1,406			(20,867	)
General and administrative expense(1)		—			(3,390	)		(246	)		—			(3,636	)
Depreciation and amortization expense		—			(1,648	)		(4,065	)		—			(5,713	)
Share of net income of Frontier		—			391			—			—			391

Operating income		—			3,174			12,998			—			16,172
Interest expense		(754	)		(3,294	)		(335	)		—			(4,383	)
Intercompany interest income (expense)		—			4,871			(4,871	)		—			—
Equity earnings		9,878			7,864			—			(17,742	)		—
Interest and other income		4			(2,737	)		58			—			(2,675	)
Income tax benefit		—			—			14			—			14

Net income	$	9,128		$	9,878		$	7,864		$	(17,742	)	$	9,128

(1): General and administrative expense is not currently allocated between guarantor and non-guarantor subsidiaries for financial reporting purposes.

	Statement of Income Three Months Ended June 30, 2003
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
	(in thousands)
Operating revenues	$	—		$	15,300		$	17,554		$	(2,117	)	$	30,737
Operating expenses and transition costs		—			(10,423	)		(6,038	)		2,117			(14,344	)
General and administrative expense(1)		(6	)		(2,972	)		(24	)		—			(3,002	)
Depreciation and amortization expense		—			(1,453	)		(2,752	)		—			(4,205	)
Share of net income of Frontier		—			386			—			—			386

Operating income		(6	)		838			8,740			—			9,572
Interest expense		—			(4,102	)		—			—			(4,102	)
Intercompany interest income (expense)		—			1,759			(1,759	)		—			—
Equity earnings		5,625			6,996			—			(12,621	)		—
Interest and other income		7			134			15			—			156

Net income	$	5,626		$	5,625		$	6,996		$	(12,621	)	$	5,626

(1): General and administrative expense is not currently allocated between guarantor and non-guarantor subsidiaries for financial reporting purposes.

	Statement of Income Six Months Ended June 30, 2004
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
	(in thousands)
Operating revenues	$	—		$	33,215		$	55,457		$	(3,013	)	$	85,659
Operating expenses and transition costs		—			(19,738	)		(23,059	)		3,013			(39,784	)
General and administrative expense(1)		—			(7,218	)		(272	)		—			(7,490	)
Depreciation and amortization expense		—			(3,243	)		(7,712	)		—			(10,955	)
Share of net income of Frontier		—			784			—			—			784

Operating income		—			3,800			24,414			—			28,214
Interest expense		(754	)		(7,420	)		(335	)		—			(8,509	)
Intercompany interest income (expense)		—			8,618			(8,618	)		—			—
Equity earnings		17,954			15,574			—			(33,528	)		—
Interest and other income		5			(2,618	)		99			—			(2,514	)
Income tax benefit		—			—			14			—			14

Net income	$	17,205		$	17,954		$	15,574		$	(33,528	)	$	17,205

(1): General and administrative expense is not currently allocated between guarantor and non-guarantor subsidiaries for financial reporting purposes.

	Statement of Income Six Months Ended June 30, 2003
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
	(in thousands)
Operating revenues	$	—		$	30,329		$	34,888		$	(3,530	)	$	61,687
Operating expenses and transition costs		—			(19,184	)		(11,735	)		3,530			(27,389	)
General and administrative expense(1)		(6	)		(6,927	)		(51	)		—			(6,984	)
Depreciation and amortization expense		—			(2,906	)		(5,480	)		—			(8,386	)
Share of net income of Frontier		—			727			—			—			727

Operating income		(6	)		2,039			17,622			—			19,655
Interest expense		—			(8,148	)		—			—			(8,148	)
Intercompany interest income (expense)		—			3,608			(3,608	)		—			—
Equity earnings		11,747			14,047			—			(25,794	)		—
Interest and other income		13			201			33			—			247

Net income	$	11,754		$	11,747		$	14,047		$	(25,794	)	$	11,754

(1): General and administrative expense is not currently allocated between guarantor and non-guarantor subsidiaries for financial reporting purposes.

	Statement of Comprehensive Income Three Months Ended June 30, 2004
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
	(in thousands)
Net income	$	9,128	$	9,878	$	7,864	$	(17,742	)	$	9,128
Change in fair value of hedging derivatives		9,140		9,140		—		(9,140	)		9,140
Foreign currency translation adjustment		2,429		2,423		6		(2,429	)		2,429

Comprehensive income	$	20,697	$	21,441	$	7,870	$	(29,311	)	$	20,697

	Statement of Comprehensive Income Three Months Ended June 30, 2003
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
	(in thousands)
Net income	$	5,626		$	5,625		$	6,996	$	(12,621	)	$	5,626
Change in fair value of hedging derivatives		(4,127	)		(4,127	)		—		4,127			(4,127	)

Comprehensive income	$	1,499		$	1,498		$	6,996	$	(8,494	)	$	1,499

	Statement of Comprehensive Income Six Months Ended June 30, 2004
	Parent		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
	(in thousands)
Net income	$	17,205	$	17,954	$	15,574	$	(33,528	)	$	17,205
Change in fair value of hedging derivatives		4,904		4,904		—		(4,904	)		4,904
Foreign currency translation adjustment		2,429		2,423		6		(2,429	)		2,429

Comprehensive income	$	24,538	$	25,281	$	15,580	$	(40,861	)	$	24,538

	Statement of Comprehensive Income Six Months Ended June 30, 2003
	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Consolidating Adjustments			Total
	(in thousands)
Net income	$	11,754		$	11,747		$	14,047	$	(25,794	)	$	11,754
Change in fair value of hedging derivatives		(4,988	)		(4,988	)		—		4,988			(4,988	)

Comprehensive income	$	6,766		$	6,759		$	14,047	$	(20,806	)	$	6,766

		Statement of Cash Flows Six Months Ended June 30, 2004
		Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
		(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	17,205		$	17,954		$	15,574		$	(33,528	)	$	17,205
Adjustments to reconcile net income to net cash provided by operating activities:
	Equity earnings		(17,954	)		(15,574	)		—			33,528			—
	Distributions from subsidiaries		27,081			22,927			—			(50,008	)		—
	Depreciation, amortization and other		22			7,401			7,712			—			15,135
Net changes in operating assets and liabilities			1,414			(8,619	)		(8,193	)		12,930			(2,468	)

NET CASH PROVIDED BY OPERATING ACTIVITIES			27,768			24,089			15,093			(37,078	)		29,872

CASH FLOWS FROM INVESTING ACTIVITIES
	Acquisitions		—			—			(139,050	)		—			(139,050	)
	Additions to property and equipment		—			(5,751	)		(2,145	)		—			(7,896	)
	Intercompany		(369,657	)		(91,155	)		—			460,812			—

NET CASH USED IN INVESTING ACTIVITIES			(369,657	)		(96,906	)		(141,195	)		460,812			(146,946	)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			343,915			81,184			127,871			(423,734	)		129,236

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			2,026			8,367			1,769			—			12,162
CASH AND CASH EQUIVALENTS, beginning of reporting period			746			8,603			350			—			9,699

CASH AND CASH EQUIVALENTS, end of reporting period		$	2,772		$	16,970		$	2,119		$	—		$	21,861

		Statement of Cash Flows Six Months Ended June 30, 2003
		Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total
		(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	11,754		$	11,747		$	14,047		$	(25,794	)	$	11,754
Adjustments to reconcile net income to net cash provided by operating activities:
	Equity earnings		(11,747	)		(14,047	)		—			25,794			—
	Distributions from subsidiaries		19,755			19,337			—			(39,092	)		—
	Depreciation, amortization and other		—			5,912			5,480			—			11,392
	Net changes in operating assets and liabilities		42			(2,147	)		(1,378	)		(489	)		(3,972	)

NET CASH PROVIDED BY OPERATING ACTIVITIES			19,804			20,802			18,149			(39,581	)		19,174

CASH FLOWS FROM INVESTING ACTIVITIES
	Acquisitions		—			—			—			—			—
	Additions to property, equipment and other		—			(685	)		(459	)		—			(1,144	)
	Intercompany		—			—			—			—			—

NET CASH USED IN INVESTING ACTIVITIES			—			(685	)		(459	)		—			(1,144	)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			(19,669	)		(22,380	)		(17,287	)		39,581			(19,755	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			135			(2,263	)		403			—			(1,725	)
CASH AND CASH EQUIVALENTS, beginning of reporting period			2,394			13,285			8,194			—			23,873

CASH AND CASH EQUIVALENTS, end of reporting period		$	2,529		$	11,022		$	8,597		$	—		$	22,148

11. SUBSEQUENT EVENT

On July 19, 2004, the Partnership announced a cash distribution of $0.4875 per limited partner unit, payable on August 13, 2004, to unitholders of record as of July 30, 2004.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

References in this quarterly report on Form 10-Q to "Pacific Energy Partners," "Partnership," "we," "ours," "us" or like terms refer to Pacific Energy Partners, L.P. and its subsidiaries.

Forward-Looking Statements

The information in this quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are identified as any statements that do not relate strictly to historical or current facts, including statements that use terms such as "anticipate," "assume," "believe," "estimate," "expect," "forecast," "intend," "plan," "position," "predict," "project," or "strategy" or the negative connotation or other variations of such terms or other similar terminology. In particular, statements, express or implied, regarding our future results of operations or our ability to generate sales, income or cash flow or to make distributions to unitholders are forward-looking statements. Forward-looking statements are not guarantees of performance. Such statements are based on management's current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve risks and uncertainties. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond our ability to control or predict.

We caution you that the forward-looking statements in this quarterly report on Form 10-Q are subject to all of the risks and uncertainties, many of which are beyond our control, incident to gathering, transporting, storing, and distributing crude oil and other dark products and buying, gathering, blending and selling crude oil. For a more detailed description of these and other factors that may affect the forward-looking statements, please read "Risk Factors" contained in our universal shelf registration statement on Form S-3 (SEC File No.: 333-107609), filed August 1, 2003, and declared effective by the Securities and Exchange Commission ("SEC") on August 8, 2003, and our annual report on Form 10-K for the year ended December 31, 2003. The risk factors could cause our actual results to differ materially from those contained in any forward-looking statement. You should not put undue reliance on these forward-looking statements. We disclaim any obligation to announce publicly the result of any revision to any of the forward-looking statements to reflect future events or developments.

Introduction

The following discussion of the financial condition and results of operations of Pacific Energy Partners, L.P., the successor to Pacific Energy (Predecessor) (as defined below) should be read together with the condensed consolidated financial statements and the notes thereto set forth elsewhere in this report. The discussion set forth in this section pertains to the unaudited condensed consolidated balance sheet, statements of income and statements of cash flows of, as well as equity investment in, the Partnership and its 100% ownership interest in Pacific Energy Group LLC ("PEG"), whose subsidiaries consist of: (i) Pacific Pipeline System LLC ("PPS"), owner of Line 2000 and the Line 63 system, (ii) Pacific Terminals LLC ("PT"), owner of the Pacific Terminals storage and distribution system, (iii) Pacific Marketing and Transportation LLC ("PMT"), owner of the PMT gathering and blending system, (iv) Rocky Mountain Pipeline System LLC ("RMP"), owner of the Partnership's interest in various pipelines that make up the Western Corridor system, and the Salt Lake City Core system, and AREPI pipeline, and (v) Ranch Pipeline LLC ("RPL"), the owner of a 22.22% partnership interest in Frontier Pipeline Company ("Frontier").

The unaudited condensed consolidated balance sheet, statement of income and statements of cash flows of the Partnership also include our 100% ownership interest in PEG Canada GP LLC, the

general partner of PEG Canada, L.P. ("PEG Canada"), the operating company of our Canadian subsidiaries. We own 100% of the limited partner interests in PEG Canada, whose 100% subsidiaries consist of (i) Rangeland Pipeline Company ("RPC"), which owns 100% of Aurora Pipeline Company Ltd. ("APC") and a partnership interest in Rangeland Pipeline Partnership ("RPP"), (ii) Rangeland Northern Pipeline Company ("RNPC"), which owns the remaining partnership interest in RPP, and (iii) Rangeland Marketing Company ("RMC"). RPP owns all of the assets that make up the Rangeland and Mid-Alberta pipeline systems except the Aurora pipeline, which is owned by APC.

We also own 100% of Pacific Energy Finance Corporation, co-issuer on our 7.125% Senior Notes.

PPS, PT and PMT comprise our West Coast operations segment. RMPS, RPL, PEG Canada, RPC, APC, RPP, RNPC and RMC comprise our Rocky Mountain operations segment. Certain costs of PEG are also included in each segment.

The financial data included herein reflects the ownership and results of operations of the assets comprising the Pacific Terminals storage and distribution system for the period from July 31, 2003 to June 30, 2004; the ownership and results of operations of Rangeland Pipeline system for the period May 11, 2004 to June 30, 2004; and the ownership of MAPL for the last day of the period ended June 30, 2004.

This report on Form 10-Q should be read in conjunction with our universal shelf registration statement on Form S-3 (SEC File No.: 333-107609), filed August 1, 2003, and declared effective by the Securities and Exchange Commission ("SEC") on August 8, 2003, and our annual report on Form 10-K for the year ended December 31, 2003.

Overview

We are a publicly traded partnership engaged principally in the business of gathering, transporting, storing and distributing crude oil and related products in California and the Rocky Mountain region, including Alberta, Canada. We generate revenue primarily by charging tariff rates for transporting crude oil on our pipelines and by leasing storage capacity. We also buy, blend and sell crude oil, activities that are complementary to our pipeline transportation business. We operate primarily in California, Colorado, Montana, Wyoming and Utah in the United States and in Alberta, Canada and conduct our business through two regional operating units: West Coast operations and Rocky Mountain operations.

We are managed by our general partner, Pacific Energy GP, Inc., a wholly owned indirect subsidiary of The Anschutz Corporation.

West Coast Operations

Our West Coast operations are located in California and include the only common carrier pipelines that deliver crude oil produced in California's San Joaquin Valley and the two primary California Outer Continental Shelf ("OCS") producing fields, Point Arguello and the Santa Ynez Unit, to refineries and terminal facilities in the Los Angeles Basin and in Bakersfield. In addition, we own and operate storage and distribution assets servicing the Los Angeles Basin, which we believe strategically position us to benefit from the projected increase in marine imports of crude oil into this region. Our West Coast operations are headquartered in Long Beach, California, with a field office in Bakersfield.

Our West Coast operations are comprised of the following assets, all of which we operate and own 100%:

Line 2000: Line 2000 is an intrastate common carrier crude oil pipeline that consists of a 130-mile, insulated trunk pipeline with a permitted annual throughput capacity of 130,000 barrels per

day ("bpd") that transports crude oil produced in the San Joaquin Valley and California OCS to refineries and terminal facilities in the Los Angeles Basin.

Line 63 System: The Line 63 system is an intrastate common carrier crude oil pipeline system that consists of a 107-mile trunk pipeline with a throughput capacity of approximately 105,000 bpd, 60 miles of distribution pipelines, 156 miles of gathering pipelines, and 22 storage tanks with a total of approximately 1.2 million barrels of storage capacity. Most of these storage assets are located in the San Joaquin Valley and are primarily used to facilitate the transportation of crude oil on our pipelines.

Pacific Terminals Storage and Distribution System: The Pacific Terminals storage and distribution system is a storage and pipeline distribution system located in the Los Angeles Basin that consists of 70 miles of distribution pipelines in active service and 34 storage tanks with a total of approximately 9.0 million barrels of storage capacity. Of this total approximately 6.7 million barrels are in active commercial service, 0.4 million barrels are used primarily for throughput to other storage tanks and do not generate revenue independently, approximately 1.7 million barrels are idle but could be reconditioned and brought into service, and approximately 0.2 million barrels are in displacement oil service.

PMT Gathering and Blending System: The PMT gathering and blending system is a proprietary crude oil pipeline system located in the San Joaquin Valley that consists of 103 miles of gathering pipelines and five storage and blending facilities with a total of approximately 0.25 million barrels of storage capacity and up to 51,000 bpd of blending capacity. The PMT gathering and blending system is interconnected to our Line 63 system. Pacific Marketing and Transportation LLC buys, blends and sells crude oil, activities that are complementary to our pipeline transportation business.

Rocky Mountain Operations

Our Rocky Mountain operations consist of various interests in pipelines that transport crude oil produced in Canada and the U.S. Rocky Mountain region to refineries in Montana, Wyoming, Colorado and Utah. We deliver crude oil to these refineries directly through our pipelines or indirectly through connections with third-party pipelines. Our Rocky Mountain operations are headquartered in Denver, Colorado and Calgary, Alberta. We have five field offices in Wyoming and two in Alberta.

Our Rocky Mountain operations are comprised of the following assets, which form an integrated pipeline network:

Rangeland and MAPL System: The Rangeland system includes MAPL pipeline and the Rangeland Pipeline system. The MAPL pipeline is a 138-mile proprietary pipeline with a throughput capacity of approximately 50,000 bpd if transporting light crude oil. MAPL pipeline originates at Edmonton, Alberta and terminates in Sundre, Alberta, where it connects to the Rangeland Pipeline system. The Rangeland Pipeline system is a proprietary pipeline system that consists of approximately 800 miles of gathering and trunk pipelines and is capable of transporting crude oil, condensate and butane either north to Edmonton, Alberta via third-party pipeline connections or south to the U.S.-Canadian border near Cutbank, Montana where it connects to the Western Corridor system. The trunk pipeline from Sundre, Alberta to the U.S.-Canadian border consists of approximately 250 miles of trunk pipelines and has a current throughput capacity of approximately 85,000 bpd if transporting light crude oil. In 2003, approximately 47,000 barrels per day were transported on the trunk pipeline. The trunk system from Sundre, Alberta north to Rimbey, Alberta is a bi-directional system that consists of three parallel trunk pipelines for low sulfur crude oil, high sulfur crude oil, and for condensate and butane, each approximately 60 miles in length.

Over the next year, the Partnership will construct a new initiating terminal facility with multiple pipeline connections in Edmonton, Alberta. In the interim, current volumes of approximately 7,000 bpd are expected to continue being transported on MAPL pipeline. The Rangeland Pipeline system will

transport these volumes plus its current volumes of approximately 38,000 bpd for a total volume of 45,000 bpd south to the United States. In addition, approximately 20,000 bpd will continue to be gathered and transported north to Edmonton, Alberta.

In effect, the Partnership is converting what is now primarily a gathering system for crude oil, condensate and butane in southern Alberta into a main line transportation system, able to transport multiple grades of conventional and synthetic crude oils from the Edmonton oil hub to U.S. Rocky Mountain refining centers.

Western Corridor System: The Western Corridor system is an interstate and intrastate common carrier crude oil pipeline system that consists of 1,012 miles of pipelines extending from dual origination points at the U.S.-Canadian border near Cutbank, Montana, where it receives deliveries from the Rangeland system, and at Cutbank, Montana, where it receives deliveries from Cenex pipeline, and terminating at Guernsey, Wyoming with connections in Wyoming to Frontier pipeline, Suncor's pipeline, Platte pipeline and the Salt Lake City Core system. The Western Corridor system consists of three contiguous trunk pipelines: Glacier pipeline, Beartooth pipeline and Big Horn pipeline. We own various undivided interests in each of these three pipelines, which give us rights to a specified portion of each pipeline's throughput capacity. Glacier and Beartooth pipelines provide us with approximately 25,000 bpd of throughput capacity from the U.S.-Canadian border to Elk Basin, Wyoming. Big Horn pipeline provides us with approximately 33,900 bpd of throughput capacity from Elk Basin, Wyoming to Guernsey, Wyoming. We operate Beartooth and Big Horn pipelines. Conoco Pipe Line Company owns the remaining undivided interests in each pipeline and operates Glacier pipeline. We also own various undivided interests in 22 storage tanks that provide us with a total of approximately 1.3 million barrels of storage capacity.

Salt Lake City Core System: The Salt Lake City Core system is an interstate and intrastate common carrier crude oil pipeline system that consists of 914 miles of trunk pipelines with a combined throughput capacity of approximately 60,000 bpd to Salt Lake City, 209 miles of gathering pipelines, and 30 storage tanks with a total of approximately 1.5 million barrels of storage capacity. This system originates in Ft. Laramie, Wyoming, receives deliveries from the Western Corridor system at Guernsey, Wyoming, and terminates in Salt Lake City and in Rangely, Colorado. The Rangely terminus delivers to a ChevronTexaco pipeline that serves refineries in Salt Lake City. Of the 60,000 bpd delivery capacity into Salt Lake City, approximately 40,000 bpd is delivered directly through our pipelines and approximately 20,000 bpd is delivered indirectly through a connection to a ChevronTexaco pipeline. Upon completion of a new connection in July 2004, the Salt Lake City Core system also receives deliveries from Frontier pipeline at Frontier Station, Wyoming. We operate and own 100% of the Salt Lake City Core system.

Frontier Pipeline: Frontier pipeline is an interstate common carrier crude oil pipeline that consists of a 289-mile trunk pipeline with a throughput capacity of approximately 62,200 bpd and three storage tanks with a total of approximately 274,000 barrels of storage capacity. Frontier pipeline originates in Casper, Wyoming, receives deliveries from the Western Corridor system and terminates south of Evanston, Wyoming at Ranch Station, Utah. Frontier pipeline delivers crude oil to AREPI pipeline and to the Salt Lake City Core system (beginning July 2004) for ultimate delivery to Salt Lake City. We operate Frontier pipeline and own a 22.22% partnership interest in Frontier Pipeline Company, the general partnership that owns Frontier pipeline. Enbridge, Inc. owns the remaining partnership interest in Frontier Pipeline Company.

AREPI Pipeline: AREPI pipeline is an interstate common carrier crude oil pipeline that consists of a 42-mile trunk pipeline with a throughput capacity of approximately 52,500 bpd and three storage tanks with a total of approximately 0.1 million barrels of storage capacity. AREPI pipeline originates at Ranch Station, Utah, where it receives deliveries from Frontier pipeline, and terminates in Kimball

Junction, Utah, where it delivers to a ChevronTexaco pipeline that serves refineries in Salt Lake City. We own and operate 100% of AREPI pipeline.

Key Events in the Three and six Months Ended June 30, 2004

Canadian Acquisitions

Rangeland System Acquisition. On May 11, 2004, we completed the acquisition of the Rangeland Pipeline system from BP Canada Energy Company ("BP Canada"). The Rangeland Pipeline system is located in Alberta, Canada. The acquisition price for the Rangeland Pipeline system was Cdn$130 million plus approximately Cdn$29 million for linefill, working capital, transaction costs and transition capital expenditures for an aggregate purchase price of Cdn$159 million or US$116 million.

MAPL Pipeline Acquisition. On June 30, 2004, we completed the acquisition of the Mid Alberta Pipeline ("MAPL"), located in Alberta, Canada from Imperial Oil. The acquisition price for MAPL is Cdn$31.5 million, of which Cdn$5.0 million is payable in three years. In addition, we acquired linefill for Cdn$5.0 million and expect to incur approximately Cdn$4.0 million for first year capital expenditures, as noted below, and transaction costs. The aggregate purchase price including linefill, first year construction costs and transaction costs is approximately US$30.2 million and was funded principally from our Canadian credit facilities.

Integration and Transition. The Rangeland Pipeline system and MAPL pipeline have each historically been operated on a proprietary basis. We intend to make significant changes to the revenue-generating capability of these assets by combining and integrating fully all of our Canadian and U.S. Rocky Mountain pipeline assets under common management, by expanding the throughput capacity of MAPL pipeline by establishing connections with other pipelines, and by constructing a pump station and receiving terminal in Edmonton, Alberta. This new pump station and receiving terminal will be able to access multiple sources of Canadian crude oil, which will allow us to participate in the projected increase in production of synthetic crude oil. The construction of the new connections on MAPL pipeline and the new pump station and receiving terminal is expected to cost approximately Cdn$4.0 million, and is expected to be completed in the third quarter of 2005.

Financing. We funded the aggregate purchase price, including transaction costs, for the Rangeland Pipeline system and MAPL with a portion of the net proceeds from our March 2004 issuance of common units and Cdn$65 million in borrowings under our new Cdn$100 million revolving credit facility.

Pier 400

In February 2004, we completed a feasibility study for the development of a deepwater petroleum import terminal at Pier 400 and Terminal Island in the Port of Los Angeles ("POLA") to handle marine receipts of crude oil and refinery feedstocks. We are continuing to the next phase of development of the Pier 400 terminal, commencing with the environmental review, which is expected to be completed by late 2005. In connection with this next phase of development, we entered into a project development agreement with two subsidiaries of Valero Energy Corporation ("Valero") that defines the facilities that we are to construct in the POLA, and which is subject to the satisfaction of various conditions, including completion of a mutually satisfactory terminalling services agreement with a 30-year, 50,000-bpd volume commitment from Valero to support the terminal. In addition, we and the POLA have identified several possible sites for construction of storage facilities and have agreed to begin the review process required by the California Environmental Quality Act.

If the Pier 400 terminal receives the necessary governmental approvals and is successfully developed, a deepwater berth, transfer infrastructure and storage tanks will be constructed at Pier 400 and Terminal Island in the POLA and a pipeline distribution system will be constructed to connect the

terminal's storage tanks to Valero's Wilmington refinery and to our customers' facilities in the Los Angeles Basin through our Pacific Terminals storage and distribution system. We would construct the transfer infrastructure, including a large diameter pipeline system for receiving bulk petroleum liquids from marine vessels, storage tanks with an initial storage capacity of approximately 1.5 million barrels, and a pipeline distribution system, all at an estimated cost of approximately $130 million. The deepwater berth at Pier 400 would be constructed by the POLA.

The Pier 400 terminal would provide marine receipt facilities with water depth of approximately 81 feet, capable of handling some of the largest tankers, and with the capacity to efficiently accommodate increasing volumes of waterborne imported crude oil and refinery feedstocks. Initially, the Pier 400 terminal is expected to handle marine receipts of approximately 100,000 bpd. However, the receipt facilities are being designed, subject to permit limitations, to accommodate up to approximately 250,000 bpd. We expect construction of the Pier 400 terminal to be completed and placed in service in early 2007.

We have spent and capitalized approximately $1.8 million on the Pier 400 terminal in 2004 and $5.3 million in 2003. We expect to incur additional capital expenditures of approximately $1.2 million during the remainder of 2004. We anticipate funding pre-construction costs through mid-2005 from a portion of the proceeds from our March 2004 issuance of common units. Construction of the Pier 400 terminal is expected to be financed through a combination of debt and proceeds from the issuance of additional limited partner interests, including common units.

Salt Lake City Expansion Project

In July 2004, we completed the expansion of our pipelines serving Salt Lake City by establishing a new delivery connection from Frontier pipeline to the Salt Lake City Core system. The expansion cost approximately $3.1 million. Existing pipelines into Salt Lake City have recently been prorated, or limited by capacity, during the summer season. This connection increased delivery capacity to Salt Lake City refineries by approximately 9,000 bpd.

Equity and Debt Offerings

On March 30, 2004, we issued and sold 4,200,000 common units in an underwritten public offering at a price of $28.50 per common unit before underwriting fees and offering expenses. On April 12, 2004, the underwriters exercised a portion of the over-allotment option and purchased an additional 425,000 common units to cover over-allotments at a price of $28.50 per common unit before underwriting fees and offering expenses. Net proceeds received from the offering, including the general partner's contribution of $2.7 million, totaled approximately $128.5 million after deducting underwriting fees and offering expenses. We used $86 million of the net proceeds to finance the acquisition of the Rangeland system and the balance of the net proceeds to repay borrowings outstanding under our U.S. revolving credit facility.

On June 16, 2004, the Partnership and its 100% owned subsidiary Pacific Energy Finance Corporation completed the sale of $250 million of 7.125% senior unsecured notes due June 15, 2014. The notes were issued at a discount of $4.4 million, resulting in an effective interest rate of 7.375%. Net proceeds from the issuance of the Notes were $241.1 million after deducting the $4.4 million discount and offering expenses of $4.5 million. The net proceeds were used principally to repay the Partnership's $225 million term loan and to repay $14 million of indebtedness outstanding under our U.S. revolving credit facility.

In connection with the issuance of the notes, the Partnership entered into interest rate swap agreements with an aggregate notional principal amount of $80 million to receive interest at a fixed rate of 7.125% and to pay interest at an average variable rate of six month LIBOR plus 1.6681% (set in advance or in arrears depending on the swap transaction). The net impact of the notes offering, the

related interest rate swap and the term loan repayment is that the Partnership expects its interest expense to remain largely unchanged.

Business Fundamentals

Pipeline Transportation

We generate pipeline transportation revenue by charging tariff rates for transporting crude oil on our pipelines. The fundamental items impacting our pipeline transportation revenue are the volume of crude oil, or throughput, we transport on our pipelines and our tariff rates. Throughput on our pipelines fluctuates based on the volume of crude oil available for transport on our pipelines, the demand for refined products, refinery downtime and the availability of alternate sources of crude oil for the refineries we serve.

Our shippers determine the amount of crude oil we transport on our pipelines, but we influence these volumes through the level and type of service we provide and the rates we charge. Our rates need to be competitive to transportation alternatives, which are mostly other pipelines.

The availability of crude oil for transportation on our pipelines is dependent in part on the amount of drilling and enhanced recovery activity in the production fields we serve in our West Coast operations and in parts of our Rocky Mountain operations. With the passage of time, production of crude oil in an individual well naturally declines, which can in the short-term be offset in whole or in part by additional drilling or the implementation of recovery enhancement measures. In the San Joaquin Valley and in the California OCS, production is generally declining. The expected development of the Rocky Point field in the California OCS and, if it occurs, the closure of the Shell Bakersfield refinery, will, we believe, increase the supply of crude oil available to be transported by us to the Los Angeles Basin, offsetting some or all of the effects of production decline in the short-term. In addition, we acquired the Pacific Terminals storage and distribution assets and are developing the Pier 400 terminal to participate in the marine import business, which is growing as a result of local production decline. In the Rocky Mountains, our pipelines are connected to Canadian sources of crude oil, and we recently completed the acquisitions of pipeline systems giving us greater access to significant supplies of Canadian crude oil, including synthetic crude oil, which we believe will replace any Rocky Mountain production decline and meet growing demand in the Rocky Mountain region.

The tariff rates we charge on Line 2000 and the Line 63 system are regulated by the California Public Utilities Commission (the "CPUC"). Tariffs on Line 2000 are established based on market considerations, subject to certain contractual restraints. Tariffs on Line 63, which are cost-of-service based tariffs, are based upon the costs to operate and maintain the pipeline, as well as charges for the depreciation of the capital investment in the pipeline and the authorized rate of return. The tariff rates charged on our U.S. Rocky Mountain pipelines are regulated by either the FERC or the Wyoming Public Service Commission generally under a cost-of-service approach.

Storage and Distribution

We provide storage and distribution services to refineries in the Los Angeles Basin. The fundamental items impacting our storage and distribution revenue are the amount of storage capacity we have under lease, the lease rates for that capacity and the length of each lease. Demand for crude oil storage capacity tends to be more stable over time and leases for crude oil storage capacity are usually long term (more than one year). Demand for other dark products storage capacity is less stable than for crude oil storage and varies depending on, among other things, refinery production runs and maintenance activities. Leases for dark products storage capacity are usually short term (less that one year). One of our business goals is to convert a number of other dark products tanks to more flexible crude oil service (which can also accommodate other dark products); we currently await permit approvals for one such tank conversion.

While PT's rates are regulated by the CPUC, the CPUC has authorized PT to establish its rates based on market conditions through negotiated contracts.

Pipeline Buy/Sell Transportation Revenue

The Rangeland and MAPL system operates as a proprietary system, and accordingly we take title to the crude oil that is gathered and transported. Pursuant to a transportation service agreement between Rangeland Marketing Company and Rangeland Pipeline Company, Rangeland Marketing Company has contracted for the entire capacity of the Rangeland pipeline. Customers who wish to transport product on the Rangeland pipeline may either: (i) sell product to Rangeland Marketing Company at the inlet to the pipeline without repurchasing product from Rangeland Marketing Company; or (ii) sell product to Rangeland Marketing Company at an inlet point and repurchase such product at agreed upon delivery points for the price paid at the inlet to the pipeline plus an established location differential.

Most of the Rangeland and MAPL systems are subject to the jurisdiction of the Alberta Energy Utilities Board ("EUB"). The Canadian portion of the segment of the Rangeland system that connects to the Western Corridor system at the U.S.-Canadian border is subject to the Canadian National Energy Board ("NEB"). Neither the EUB nor the NEB will generally review rates set by a crude oil pipeline operator unless it receives a complaint.

Gathering and Blending

We purchase, gather, blend and resell crude oil in our PMT operations. Our PMT gathering and blending system in California's San Joaquin Valley is a proprietary intrastate operation, not regulated by the CPUC or the FERC. It is complementary to our West Coast pipeline transportation business. The gathering network effectively extends our pipeline network to capture additional supplies of crude oil for transportation to Los Angeles.

The contribution of our PMT gathering and blending operations is, for several reasons, a variable part of our income. First, it varies with the price differential between the cost of the varying grades of crude oil and natural gasoline it buys to blend and the price of the blended crude oil it sells. Costs and sales prices are impacted by crude oil prices generally, as well as local supply and demand forces, including regulations affecting refined product specifications. Second, it varies with the price differential between crude oil purchased on one price basis and sold on a different price basis. Finally, it varies with the volumes gathered and blended. We control these activities through our risk management policy, which provides specific guidelines for our crude oil marketing and hedging activities and requires oversight by our senior management.

Acquisitions and New Projects

We intend to continue to pursue acquisitions and new projects for development of additional midstream assets, including pipeline and storage and terminal facilities that are accretive to our cash flow and complement our existing business. We expect to fund acquisitions and new projects with a combination of debt and additional partnership units, including common units. We expect to maintain a debt to total capitalization ratio of approximately 50 percent over time.

Operating Expenses

A substantial portion of the operating expenses we incur, including the cost of field and support personnel, maintenance, control systems, telecommunications, rights-of-way and insurance, varies little with changes in throughput. Certain of our costs, however, do vary with throughput, the most material being the cost of power used to run the various pump stations along our pipelines. Major maintenance costs can vary with age and also with regulation requiring inspections at defined intervals. Unanticipated costs can include the costs of cleanup of any release of oil to the extent not covered by insurance.

Employees

We do not have any employees, except in Canada. Our general partner, which employs U.S. employees, and our Canadian subsidiaries employ approximately 300 employees who directly support our operations. Our general partner and our Canadian subsidiaries consider their employee relations to be good. None of these employees are subject to a collective bargaining agreement. Our general partner does not conduct any business other than with respect to the partnership. All expenses incurred by our general partner are charged to us.

Impact of Foreign Exchange Rates

The cash flow of our Canadian operations is based on the U.S. dollar equivalent of such amounts measured in Canadian dollars. Assets and liabilities of our Canadian subsidiaries are translated to U.S. dollars using the applicable exchange rate as of the end of a reporting period. Revenues, expenses and cash flow are translated using the average exchange rate during the reporting period. The results of our Canadian operations and distributions from our Canadian subsidiaries to our U.S. company may vary based on fluctuations in currency exchange rates irrespective of our Canadian subsidiaries underlying operating results.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions that affect the reported amounts of the assets and liabilities and disclosures of contingent assets and liabilities as of the date of the balance sheet as well as the reported amounts of revenue and expenses during the reporting period. We routinely make estimates and judgments about the carrying value of our assets and liabilities that are not readily apparent from other sources. Such estimates and judgments are evaluated and modified as necessary on an ongoing basis. We believe that of our significant accounting policies (see "Note 1—Summary of Significant Accounting Policies", to our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2003) and estimates, the following may involve a higher degree of judgment and complexity:

•: We routinely apply the provisions of purchase accounting when recording our acquisitions. Application of purchase accounting requires that we estimate the fair value of the individual assets acquired and liabilities assumed. The valuation of the fair value of the assets involves a number of judgments and estimates. In our major acquisitions to date, we have engaged an outside valuation firm to provide us with an appraisal report, which we utilize in determining the purchase price allocation. The allocation of the purchase price to different asset classes impacts the depreciation expense we subsequently record. The principal assets we have acquired to date are property, pipelines, storage tanks and equipment.
•: We depreciate the components of our property and equipment on a straight-line basis over the estimated useful lives of the assets. The estimates of the assets' useful lives require our judgment and our knowledge of the assets being depreciated. When necessary, the assets' useful lives are revised and the impact on depreciation is treated on a prospective basis.
•: We accrue an estimate of the undiscounted costs of environmental remediation for work at identified sites where an assessment has indicated it is probable that cleanup costs are or will be required and may be reasonably estimated. In making these estimates, we consider information that is currently available, existing technology, enacted laws and regulations, and our estimates of the timing of the required remedial actions. We use outside environmental consultants to assist us in making these estimates. In addition, generally accepted accounting principles in the United States of America require us to establish liabilities for the costs of asset retirement obligations

when the retirement date is determinable. We will record such liabilities only when such date is determinable.

•: From time to time, a shipper or group of shippers may initiate a regulatory proceeding or other action challenging the tariffs we charge or have charged. In such cases, we assess the proceeding on an ongoing basis as to its likely outcome and as to the dollar amounts involved in order to determine whether to accrue for a future expense. We use outside regulatory lawyers and financial experts to assist us in these assessments.
•: Our inventory of displacement oil, pipeline linefill and minimum tank volumes is carried in our accounts at the lower of cost and market value. This inventory is held for our long-term use and for the operation of our pipelines and storage facilities and as such is recorded in our property and equipment balance. We are exposed to the potential for a write-down to market value. A write-down will likely occur in future years as oil prices tend to be cyclical. However, such a write-down would be a non-cash expense but would not be realized, if at all, until we were to sell such inventory for a price less than our cost.

Results of Operations

Three Months Ended June 30, 2004 Compared to Three Months Ended June 30, 2003

Summary

		Three Months Ended June 30,
		2004			2003		Change		Percent
		(In thousands) (unaudited)
Net income		$	9,128		$	5,626	$	3,502	62	%
Net income per limited partner unit
	Basic and diluted	$	0.30		$	0.26	$	0.04	15	%
Recurring net income		$	12,029	(1)	$	5,626	$	6,403	114	%
Recurring net income per limited partner unit
	Basic and diluted	$	0.40		$	0.26	$	0.14	54	%

(1): Excludes expense of $2.9 million incurred in connection with the repayment of our term loan, including a $2.3 million non-cash write-off of deferred financing costs and a $0.6 million cash expense for related interest rate swap terminations.

Net income for the three months ended June 30, 2004 includes the operations of the Pacific Terminals storage and distribution system following the acquisition of these assets on July 31, 2003 and the operations of Rangeland Pipeline system after acquiring these assets on May 11, 2004. Net income also reflects a $2.9 million expense incurred in connection with the repayment of our term loan, including a $2.3 non-cash write-down of previously deferred financing costs and a $0.6 million to terminate interest rate swap agreements.

The increase in recurring net income reflects the benefit of (i) the operation, since July 31, 2003, of the Pacific Terminals storage and distribution system, (ii) higher margins in gathering and blending operations, (iii) higher volumes and revenue on the Rocky Mountain pipelines and (iv) the operations of the Rangeland Pipeline system acquired in May 2004. These increases were partially offset by lower volumes and revenue from the West coast pipelines. There were approximately 40% more limited partner units outstanding in the three months ended June 30, 2004 due to the sale of additional common units to partially fund the acquisitions of the Pacific Terminals storage and distribution system, the Rangeland Pipeline system and MAPL pipeline.

Segment Information

		Three Months Ended June 30,
*West Coast*		2004		2003		Change			Percent
		(In thousands) (unaudited)
Operating income		$	14,092	$	9,297	$	4,795		52	%
Operating data:
	Pipeline throughput (bpd)		139.5		156.5		(17.0	)	-11	%

The increase in West Coast operating income was primarily due to the acquisition of the Pacific Terminals storage and distribution system and higher margins in the gathering and blending operations, partially offset by a reduction in pipeline transportation revenue as average daily pipeline throughput decreased to 139,500 barrels per day for the three months ended June 30, 2004, compared to 156,500 barrels per day for the corresponding period of the prior year. Throughput volumes during the second quarter of this year were adversely affected by refinery maintenance as well as by reduced California Outer Continental Shelf ("OCS") volumes due to third party field maintenance and natural decline.

		Three Months Ended June 30,
*Rocky Mountains*		2004		2003		Change		Percent
		(In thousands) (unaudited)
Operating income		$	5,716	$	3,277	$	2,439	74	%
Operating data (bpd):
Rangeland pipeline system
	Sundre—North		21.2		—		n.a.	n.a.
	Sundre—South		48.8		—		n.a.	n.a.
Western Corridor system			19.8		17.6		2.2	13	%
Salt Lake City Core system			73.0		64.7		8.3	13	%
AREPI pipeline			46.2		41.4		4.8	12	%
Frontier pipeline			50.0		41.0		9.0	22	%

Operating income increased due to higher volumes on the Western Corridor system, and increased volumes on the systems that transport oil into the Salt Lake City area. The increase into Salt Lake City reflects increased demand compared to the prior quarter due to refinery turnarounds last year. In addition, the Rangeland Pipeline system was acquired on May 11, 2004.

Statement of Income—Discussion and Analysis

	Three Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Pipeline transportation revenue	$	26,992	$	25,758	$	1,234	5	%

Lower West Coast pipeline revenues due to refinery maintenance activities in California, coupled with a decline of California OCS volumes, were more than offset by higher Rocky Mountain pipeline

revenues due to higher volumes on the Western Corridor system and increased demand by Salt Lake City area refineries, as well as by higher tariffs in California.

	Three Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Storage and distribution revenue	$	9,259	$	—	$	9,259	—

The acquisition of the Pacific Terminals storage and distribution system on July 31, 2003 resulted in storage and distribution revenue of $9.3 million for the three months ended June 30, 2004.

	Three Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Pipeline buy/sell transportation revenue	$	3,690	$	—	$	3,690	—

Pipeline buy/sell transportation revenues of $3.7 million relate to the operations of the Rangeland pipeline system which was acquired on May 11, 2004.

	Three Months Ended June 30,
	2004			2003			Change		Percent
	(In thousands) (unaudited)
Crude oil sales	$	100,438		$	93,387		$	7,051	8	%
Crude oil purchases		(94,382	)		(88,408	)		5,974	7	%

Crude oil sales, net of purchases	$	6,056		$	4,979		$	1,077	22	%

The increase in net crude oil sales for the three months ended June 30, 2004 was primarily the result of higher margin blending activities offset by lower blending volumes as a result of change in refined products specifications. We consider this activity to be complementary to our pipeline transportation operations.

	Three Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Operating expenses	$	20,683	$	14,344	$	6,339	44	%

The increase in operating expense was related primarily to the acquisition of the Pacific Terminals storage and distribution assets in July 2003 and the Rangeland pipeline system in May 2004. We also experienced higher maintenance and power costs in the Rocky Mountains as a result of the timing of

internal line inspections and increased power costs as a result of higher volumes and increased natural gas prices.

	Three Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Transition costs	$	184	$	—	$	184	—

Transition costs were incurred for transition services provided by the seller, as well as for consulting and other out-of-pocket costs incurred in connection with the integration of the Rangeland pipeline system.

	Three Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
General and administrative expense	$	3,636	$	3,002	$	634	21	%

The increase in general and administrative expense was mainly attributable to higher personnel costs associated with growth of the Partnership and increased consulting and outside services associated with statutory compliance activities.

	Three Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Depreciation and amortization	$	5,713	$	4,205	$	1,508	36	%

The increase in depreciation and amortization includes $0.9 million for depreciation on the Pacific Terminals storage and distribution system and $0.5 million for depreciation on the Rangeland pipeline system.

	Three Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Share of net income of Frontier	$	391	$	386	$	5	1	%

Our increased share of Frontier net income was attributable to increased volumes on Frontier pipeline, offset by increased expenses for flow improver, power and legal services.

	Three Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Interest expense	$	4,383	$	4,102	$	281	7	%

The increase in interest expense was mainly due to an increase in borrowings incurred to partially fund the acquisition of Pacific Terminals storage and distribution system and the Rangeland pipeline system. Our weighted average borrowings during the three months ended June 2004 were $273 million

compared to $225 million in the corresponding period in 2003. However, the increase in borrowings was offset by a lower weighted average interest rate of 6.0% for the three months ended June 30, 2004 compared to a weighted average interest rate of 7.3% in 2003. The decrease in the average interest rate was due in part to renegotiation of interest rates in December 2003 under our credit facilities, and also to lower market interest rates.

	Three Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Write-off of deferred financing costs and interest rate swap termination expense	$	2,901	$	—	$	2,901	—

The amount relates to the write-off of deferred financing costs of $2,324 incurred in connection with the repayment of our term loan and $577 of expense incurred to terminate related interest rate swaps.

	Three Months Ended June 30,
	2004			2003	Change			Percent
	(In thousands) (unaudited)
Income tax expense (benefit):
Current	$	32		—	$	32		—
Deferred		(46	)	—		(46	)	—

	$	(14	)	—	$	(14	)	—

The income taxes relate to the Canadian income of the Rangeland pipeline system acquired in May 2004.

Six Months Ended June 30, 2004 Compared to Six Months Ended June 30, 2003

Summary

		Six Months Ended June 30,
		2004			2003		Change		Percent
		(In thousands) (unaudited)
Net income		$	17,205		$	11,754	$	5,451	46	%
Net income per limited partner unit
	Basic and diluted	$	0.62		$	0.55	$	0.07	13	%
Recurring net income		$	20,106	(1)	$	11,754	$	8,352	71	%
Recurring net income per limited partner unit
	Basic and diluted	$	0.72		$	0.55	$	0.17	31	%

(1): Excludes expense of $2.9 million incurred in connection with the repayment of our term loan, including a $2.3 million non-cash write-off of deferred financing costs and a $0.6 million cash expense for related interest rate swap terminations.

Net income for the six months ended June 30, 2004 includes the operations of the Pacific Terminals storage and distribution system following the acquisition of these assets on July 31, 2003 and

the operations of Rangeland Pipeline system after acquiring these assets on May 11, 2004. Net income also reflects a $2.9 million expense incurred in connection with the repayment of our term loan, including a $2.3 non-cash write-down of previously deferred financing costs and a $0.6 million to terminate interest rate swap agreements.

The increase in recurring net income reflects the benefit of (i) the operation, since July 2003, of Pacific Terminals storage and distribution system, (ii) higher volumes and revenue on the Rocky Mountain pipelines, (iii) the operations of the Rangeland Pipeline system acquired in May 2004, and (iii) increased gathering and blending margins. These increases were partially offset by lower volumes and revenue from the West coast pipelines. There were approximately 30% more limited partner units outstanding in the six months ended June 30, 2004 due to the sale of additional common units to partially fund the acquisitions of the Pacific Terminals storage and distribution system, the Rangeland Pipeline system and MAPL pipeline.

Segment Information

		Six Months Ended June 30,
*West Coast*		2004		2003		Change			Percent
		(In thousands) (unaudited)
Operating income		$	26,347	$	20,020	$	6,327		32	%
Operating data:
	Pipeline throughput (bpd)		136.6		157.9		(21.3	)	-13	%

The increase in West Coast operating income was primarily due to the acquisition of the Pacific Terminals storage and distribution system. In addition, we experienced higher margins in our gathering and blending operations. This increase was partially offset by a reduction in pipeline transportation revenue as average daily pipeline throughput decreased to 136,600 barrels per day for the six months ended June 30, 2004, compared to 157,900 barrels per day for the corresponding period of the prior year. Throughput volumes during the first six months of this year were adversely affected by refinery maintenance activities. In addition, OCS volumes were lower due to natural field decline.

			Six Months Ended June 30,
*Rocky Mountains*			2004		2003		Change		Percent
			(In thousands) (unaudited)
Operating income			$	9,357	$	6,619	$	2,738	41	%
Operating data (bpd):
	Rangeland pipeline system
		Sundre—North		21.2		—		n.a.	n.a.
		Sundre—South		48.8		—		n.a.	n.a.
	Western Corridor system			18.0		15.6		2.4	15	%
	Salt Lake City Core system			67.9		64.7		3.2	5	%
	AREPI pipeline			45.1		38.5		6.6	17	%
	Frontier pipeline			47.0		38.2		8.8	23	%

The increase in Rocky Mountains operating income was primarily due to increased demand by refineries in the Salt Lake City area this year, compared to 2003 when demand was lower due to refinery turnarounds. In addition, we acquired the Rangeland pipeline system on May 11, 2004.

Statement of Income—Discussion and Analysis

	Six Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Pipeline transportation revenue	$	51,719	$	51,078	$	641	1	%

Higher Rocky Mountain pipeline revenues due to increased demand by Salt Lake City area refineries were mostly offset by lower West Coast pipeline revenues due to refinery maintenance activities in California.

	Six Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Storage and distribution revenue	$	19,382	$	—	$	19,382	—

The acquisition of the Pacific Terminals storage and distribution system on July 31, 2003 resulted in storage and distribution revenue of $19.4 million for the six months ended June 30, 2004.

	Six Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Pipeline buy/sell transportation revenue	$	3,690	$	—	$	3,690	—

Pipeline buy/sell transportation revenues of $3.7 million relate to the operations of the Rangeland pipeline system which was acquired on May 11, 2004.

	Six Months Ended June 30,
	2004			2003			Change		Percent
	(In thousands) (unaudited)
Crude oil sales	$	186,365		$	185,309		$	1,056	1	%
Crude oil purchases		(175,497	)		(174,700	)		797	1	%

Crude oil sales, net of purchases	$	10,868		$	10,609		$	259	2	%

The increase in net crude oil sales for 2004 was primarily the result of higher margin blending activities offset by lower blending volumes as a result of change in refined products specifications. We consider this activity to be complementary to our pipeline transportation operations.

	Six Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Operating expenses	$	39,600	$	26,992	$	12,608	47	%

The increase in operating expense was related primarily to the acquisition of the Pacific Terminals storage and distribution assets and the Rangeland pipeline system. We also experienced higher maintenance and power costs in the Rocky Mountains as a result of increased expenditure on flow

improvers and increased volumes and natural gas prices, respectively. This was offset by lower maintenance expenses in the West Coast.

	Six Months Ended June 30,
	2004		2003		Change			Percent
	(In thousands) (unaudited)
Transition costs	$	184	$	397	$	(213	)	(54	)%

Transition costs in 2003 consisted of employee transition bonus payments related to our purchase of the Western Corridor and Salt Lake City Core systems in 2002. Transition costs were incurred for transition services provided by the seller, as well as for consulting and other out-of-pocket costs incurred in connection with the integration of the Rangeland pipeline system.

	Six Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
General and administrative expense	$	7,490	$	6,984	$	506	7	%

The increase in general and administrative expense was in part due to the acquisition of the Rangeland pipeline system in May 2004, increased personnel costs related to company growth and increased costs for regulatory compliance.

	Six Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Depreciation and amortization	$	10,955	$	8,386	$	2,569	31	%

The increase in depreciation and amortization includes $1.7 million for depreciation on the Pacific Terminals storage and distribution system and $0.5 million for depreciation on the Rangeland pipeline system.

	Six Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Share of net income of Frontier	$	784	$	727	$	57	8	%

Our increased share of Frontier net income was attributable to increased volumes on Frontier pipeline, offset by increased expenses for flow improver, power and legal services.

	Six Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Interest expense	$	8,509	$	8,148	$	361	4	%

Interest expense increased due to an increase in borrowings incurred to partially fund the acquisition of Pacific Terminals storage and distribution system and the Rangeland pipeline system. Our

weighted average borrowings during the six months ended June 2004 were $289 million compared to $225 million in the corresponding period in 2003. However, the increase in borrowings was offset by a lower weighted average interest rate of 5.7% for the first six months in 2004 compared to a weighted average interest rate of 7.2% in 2003. The decrease in the average interest rate was due in part to renegotiation of interest rates in December 2003 under our credit facilities, and also to lower market interest rates.

	Six Months Ended June 30,
	2004		2003		Change		Percent
	(In thousands) (unaudited)
Write-off of deferred financing costs and interest rate swap termination expense	$	2,901	$	—	$	2,901	—

	Six Months Ended June 30,
	2004			2003	Change			Percent
	(In thousands) (unaudited)
Income tax expense (benefit):
Current	$	32		—	$	32		—
Deferred		(46	)	—		(46	)	—

	$	(14	)	—	$	(14	)	—

The income taxes relate to the Canadian income of the Rangeland pipeline system acquired in May 2004.

Liquidity and Capital Resources

We believe that cash generated from operations, together with our cash balance and our unutilized borrowing capacity, will be sufficient to meet our planned distributions, our working capital requirements, anticipated sustaining capital expenditures and scheduled debt payments in the next three years.

The financing plan for the construction of our proposed Pier 400 Project is under development, but will likely include both proceeds from debt and the issuance of additional units. The final structure will depend on market conditions.

On August 1, 2003, the Partnership, PEG and certain subsidiaries of PEG filed a universal shelf registration statement on Form S-3 with the SEC to register the issuance and sale, from time to time and in such amounts as determined by the market conditions and needs of the Partnership, of up to $550.0 million of common units of the Partnership and debt securities of both the Partnership and PEG. The SEC declared the registration statement effective on August 8, 2003. During the six months ended June 30, 2004, we issued 4.6 million partnership units pursuant to the registration statement. At June 30, 2004, we have approximately $280 million of remaining availability under this registration statement.

We intend to draw down on this shelf registration statement and use proceeds from borrowings under our existing and planned revolving credit facilities to finance our future acquisitions and

development projects, including the Pier 400 Project. We expect to maintain a debt to total capitalization ratio of approximately 50 percent over time.

Our ability to satisfy our debt service obligations, fund planned capital expenditures, make acquisitions, develop projects and pay distributions to our unitholders will depend upon our future operating performance. Our operating performance is primarily dependent on crude oil transported through our pipelines and capacity leased in our storage tanks as described in "Overview" above. Our operating performance is also affected by prevailing economic conditions in the crude oil industry and financial, business and other factors, some of which are beyond our control, which could significantly impact future results.

Operating, Investing and Financing Activities

	Six Months Ended June 30,
	2004			2003			Change
	(In thousands) (unaudited)
Net cash provided by operating activities	$	29,872		$	19,174		$	10,698
Net cash used in investing activities		(146,946	)		(1,144	)		145,802
Net cash provided by (used in) financing activities		129,236			(19,755	)		148,991

Net cash provided by operating activities

The increase in the net cash from operating activities of $10.7 million, or 56%, was the result of higher operating income, together with a decrease in cash used for working capital.

Net cash used in investing activities

The amount in 2004 relates primarily to our acquisition and development activities. The 2004 period includes $139.1 million related to the acquisition of the Rangeland Pipeline and MAPL Pipeline systems. Capital expenditures were $7.9 million in 2004, of which $0.7 million related to sustaining capital projects, $0.8 million related to the primarily to the transition of the Pacific Terminals storage and distribution system and our Canadian assets, and $4.6 million related to expansion. Additionally, we continue to develop the Pier 400 Project, for which, we capitalized $1.8 million for the six months ended June 30, 2004. In 2003, capital expenditures were $1.2 million, of which $0.7 million related to sustaining capital projects, $0.1 million related to transition projects, and $0.4 million related to expansion.

Net cash provided by and used in financing activities

The amount in 2004 of $129.2 million includes net proceeds of $128.6 million from our equity offerings completed in March and April, 2004, which were used principally to partly fund our Rangeland Pipeline and MAPL Pipeline acquisitions, $241.1 million net proceeds from our 7.125% unsecured senior notes offering which were used, in part, to repay our $225 million term loan, net proceeds of $11.7 million under our revolving credit facilities, and $27.1 million in distributions to the limited and general partner interests. The cash used in financing activities of $19.8 million in 2003 consisted only of distributions to the limited and general partner interests.

Capital Requirements

Generally, our crude oil transportation and storage operations require investment to upgrade or enhance existing operations and to meet environmental and operational regulations. Our capital requirements consist primarily of:

•: sustaining capital expenditures to replace partially or fully depreciated assets in order to maintain the existing operating capacity or efficiency of our assets and extend their useful lives;
•: transitional capital expenditures to integrate acquired assets into our existing operations; and
•: expansion capital expenditures to expand or increase the efficiency of the existing operating capacity of our assets, whether through construction or acquisition, such as placing new storage tanks in service to increase our storage capabilities and revenue, and adding new pump stations or pipeline connections to increase our transportation throughput and revenue.

We have forecasted total capital expenditures of $16.5 million in 2004, including $10 million for expansion projects, $3 million for transition capital projects and $3.5 million for sustaining capital projects.

Debt Obligations

At June 30, 2004, our debt obligations include: (i) $38.0 million on our U.S. revolving credit facility (ii) Cdn$65 million (U.S.$48.7 million) on our senior secured Canadian revolving credit facility, (iii) $245.8 million on our 7.125% senior unsecured notes, and (iv) Cdn$4.3 million (U.S.$3.2 million) payable to the seller of the MAPL assets. For further discussion of these debt obligations see "Footnote 5—Long-term Debt" to the financial statements for a complete discussion of our debt obligations.

Off-Balance Sheet Arrangements

The Partnership has no off-balance sheet arrangements.

Accounting Pronouncements

See discussion of newly issued accounting pronouncements in "Note 1—Summary of Significant Accounting Policies" in the accompanying condensed consolidated financial statements.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risks to which we are exposed are interest rate risk, crude oil price risk and currency exchange rate risk. We utilize various derivative instruments to manage our exposure to our principal market risk. Our risk management policies and procedures are designed to monitor interest rates, currency exchange rates, NYMEX and over-the-counter commodity positions, and physical volumes, grades, locations and delivery schedules to ensure that our hedging activities address our market risks.

We have interest rate swap agreements with an aggregate notional principal amount of $80.0 million to receive interest at a fixed rate of 7.125% and to pay interest at an average variable rate of six month LIBOR plus 1.6681% (set in advance or in arrears depending on the swap transaction). The interest rate swaps matures June 15, 2014 and are generally callable at the same dates and terms as the 7.125% Notes. We elected to apply hedge accounting to account for the interest rate swaps. Changes in fair values of the interest rate swaps are recorded into earnings each period. Similarly, changes in the fair value of $80 million of the Senior Notes are recorded into earnings each period. The offsetting difference of recording the change in fair value of the interest rate swaps and the change in fair value of $80 million into earnings is not expected to have a material impact on earnings

as movement in fair value of the interest rate swap and the underlying debt are expected to be highly correlated.

We are subject to risks resulting from interest rate fluctuations as the interest cost on $166.7 million of our outstanding debt is based on variable rates. If the LIBOR or Canadian Bankers' Acceptance discount rates were to increase 1.0% for the remainder of 2004, our interest expense would increase $0.8 million based on the outstanding debt at June 30, 2004.

We use, on a limited basis, certain derivative instruments (principally futures and options) to hedge our minimal exposure to market price volatility related to our inventory or future sales of crude oil. We do not enter into speculative derivative activities of any kind. Derivative instruments are included in other assets in the accompanying condensed consolidated balance sheets. Although we generally do not own the crude oil that we transport in our pipelines, in our PMT operations we purchase crude oil for subsequent blending, transportation and resale primarily in the Los Angeles Basin. Changes in the fair value of our derivative instruments related to crude oil inventory are recognized in net income. For the six months ended June 30, 2004 and 2003, "crude oil sales, net of purchases" were net of $0.5 million and $0.3 million, respectively, reflecting changes in the fair value of PMT's derivative instruments for its marketing activities. In addition, changes in the fair value of our derivative instruments related to the future sale of crude oil are deferred and reflected in "accumulated other comprehensive income," a component of partners' capital, until the related revenue is reflected in the consolidated statements of income. As of June 30, 2004, $0.7 million relating to the changes in the fair value of derivative instruments was included in "accumulated other comprehensive income."

ITEM 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the quarterly period ended June 30, 2004, Irvin Toole, Jr., Chief Executive Officer of our General Partner, and Gerald A. Tywoniuk, Chief Financial Officer of our General Partner, evaluated the effectiveness of our disclosure controls and procedures. Based on these evaluation, they believe that:

•: our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 was recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms; and
•: our disclosure controls and procedures were effective in ensuring that material information required to be disclosed by us in the report we file or submit under the Securities Exchange Act of 1934 was accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer of our General Partner, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There has not been any change in our internal control over financial reporting that occurred during our quarterly period ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

See discussion of legal proceedings in "Note 10—Commitments and Contingencies" in the accompanying condensed consolidated financial statements.

ITEM 6. Exhibits and Reports on Form 8-K

(a): Exhibits

The following documents are filed as exhibits to this quarterly filing:

Exhibit Number		Description
*Exhibit 4.2		Indenture dated June 16, 2004, by and among Pacific Energy Partners, L.P. and Pacific Energy Finance Corporation, the guarantors, and Wells Fargo Bank, National Association, as trustee of the 7.125% Notes due 2014
*Exhibit 4.3		Registration Rights Agreement dated June 16, 2004 by and among Pacific Energy Partners, L.P. and Pacific Energy Finance Corporation, the guarantors and the Initial Purchasers of the 7.125% Notes due 2014
Exhibit 10.1		Canadian Credit Agreement dated May 11, 2004, between RPC Acquisition Company and Royal Bank of Canada and other lenders (incorporated by reference to Exhibit 10.2 to Form 8-K filed May 26, 2004)
*Exhibit 10.2		Fourth Amendment to U.S. Credit Agreement dated May 28, 2004 between Pacific Energy Group LLC and Fleet National Bank and other lenders
Exhibit 10.3		Agreement of Purchase and Sale dated June 1, 2004, by and among Imperial Oil and Rangeland Northern Pipeline Company and Pacific Energy Partners L.P. (incorporated by reference to Exhibit 10.1 to Form 8-K filed July 15, 2004)
*Exhibit 31.1		Certification of Principal Executive Officer of Pacific Energy GP, Inc., General Partner of Pacific Energy Partners, L.P., as required by Rule 13a-14(a) of the Securities Exchange Act of 1934
*Exhibit 31.2		Certification of Principal Financial Officer of Pacific Energy GP, Inc., General Partner of Pacific Energy Partners, L.P., as required by Rule 13a-14(a) of the Securities Exchange Act of 1934
†Exhibit 32.1		Certification of Chief Executive Officer of Pacific Energy GP, Inc., General Partner of Pacific Energy Partners, L.P., pursuant to 18 U.S.C. §1350
†Exhibit 32.2		Certification of Chief Financial Officer of Pacific Energy GP, Inc., General Partner of Pacific Energy Partners, L.P., pursuant to 18 U.S.C. §1350

*: Filed herewith.
†: Not considered to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

(b): Reports on Form 8-K

The Partnership filed the following reports on Forms 8-K during the three months ended June 30, 2004:

Date of Event Reported	Item(s) Reported	Description
April 28, 2004	Items 7, 9 & 12*	Filed in connection with the Partnership's second quarter 2004 earnings release dated April 28, 2004.
May 11, 2004	Items 7 & 9*	Filed in connection with the Partnership's press release dated May 11, 2004 announcing the closing of the Rangeland Pipeline system acquisition.
May 11, 2004	Items 2 & 7	Filed in connection with the Partnership's closing of the acquisition of the Rangeland Pipeline system.
June 1, 2004	Items 7 & 9*	Filed in connection with Partnership's press release dated June 1, 2004 announcing its intent to offer $240 million of senior unsecured notes due 2014 in a private placement.
June 2, 2004	Items 7 & 9*	Filed in connection with the Partnership's press release dated June 2, 2004 announcing the signing of an agreement to purchase the Mid Alberta Pipeline.
June 10, 2004	Items 7 & 9*	Filed in connection with the Partnership's press release dated June 10, 2004 announcing the pricing of the private offering of $250 million principal amount of Senior Notes due 2014.
June 30, 2004	Items 7 & 9*	Filed in connection with the Partnership's press release dated June 30, 2004, announcing the closing of the Mid Alberta Pipeline acquisition.

*: The information in the Forms 8-K furnished pursuant to Item 9 is not considered to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EXHIBIT INDEX

Exhibit Number		Description
*Exhibit 4.2		Indenture dated June 16, 2004, by and among Pacific Energy Partners, L.P. and Pacific Energy Finance Corporation, the guarantors, and Wells Fargo Bank, National Association, as trustee of the 7.125% Notes due 2014
*Exhibit 4.3		Registration Rights Agreement dated June 16, 2004 by and among Pacific Energy Partners, L.P. and Pacific Energy Finance Corporation, the guarantors and the Initial Purchasers of the 7.125% Notes due 2014
Exhibit 10.1		Canadian Credit Agreement dated May 11, 2004, between RPC Acquisition Company and Royal Bank of Canada and other lenders (incorporated by reference to Exhibit 10.2 to Form 8-K filed May 26, 2004)
*Exhibit 10.2		Fourth Amendment to U.S. Credit Agreement dated May 28, 2004 between Pacific Energy Group LLC and Fleet National Bank and other lenders
Exhibit 10.3		Agreement of Purchase and Sale dated June 1, 2004, by and among Imperial Oil and Rangeland Northern Pipeline Company and Pacific Energy Partners L.P. (incorporated by reference to Exhibit 10.1 to Form 8-K filed July 15, 2004)
*Exhibit 31.1		Certification of Principal Executive Officer of Pacific Energy GP, Inc., General Partner of Pacific Energy Partners, L.P., as required by Rule 13a-14(a) of the Securities Exchange Act of 1934
*Exhibit 31.2		Certification of Principal Financial Officer of Pacific Energy GP, Inc., General Partner of Pacific Energy Partners, L.P., as required by Rule 13a-14(a) of the Securities Exchange Act of 1934
†Exhibit 32.1		Certification of Chief Executive Officer of Pacific Energy GP, Inc., General Partner of Pacific Energy Partners, L.P., pursuant to 18 U.S.C. §1350
†Exhibit 32.2		Certification of Chief Financial Officer of Pacific Energy GP, Inc., General Partner of Pacific Energy Partners, L.P., pursuant to 18 U.S.C. §1350

*: Filed herewith.
†: Not considered to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

EX-4.2 2 a2141701zex-4_2.htm EXHIBIT 4.2

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TABLE OF CONTENTS

Exhibit 4.2

PACIFIC ENERGY PARTNERS, L.P.,

PACIFIC ENERGY FINANCE CORPORATION

AND

THE GUARANTORS NAMED ON THE SIGNATURE PAGE HEREOF

7¹/8 % SENIOR NOTES DUE 2014

INDENTURE

Dated as of June 16, 2004

WELLS FARGO BANK, NATIONAL ASSOCIATION

As Trustee

[N.B. Coupon is a "plug" number intended
to simplify finalizing this draft.]

TABLE OF CONTENTS


ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
	Section 1.01.	Definitions
	Section 1.02.	Other Definitions
	Section 1.03.	Incorporation by Reference of Trust Indenture Act
	Section 1.04.	Rules of Construction
ARTICLE 2 THE NOTES
	Section 2.01.	Form and Dating
	Section 2.02.	Execution and Authentication
	Section 2.03.	Registrar and Paying Agent
	Section 2.04.	Paying Agent to Hold Money in Trust
	Section 2.05.	Noteholder Lists
	Section 2.06.	Transfer and Exchange
	Section 2.07.	Replacement Notes
	Section 2.08.	Outstanding Notes
	Section 2.09.	Temporary Notes
	Section 2.10.	Cancellation
	Section 2.11.	Defaulted Interest
	Section 2.12.	CUSIP Numbers
	Section 2.13.	Issuance of Additional Notes
ARTICLE 3 REDEMPTION AND PREPAYMENT
	Section 3.01.	Notices to Trustee
	Section 3.02.	Selection of Notes to Be Redeemed
	Section 3.03.	Notice of Redemption
	Section 3.04.	Effect of Notice of Redemption
	Section 3.05.	Deposit of Redemption Price
	Section 3.06.	Notes Redeemed in Part
	Section 3.07.	Optional Redemption
	Section 3.08.	Mandatory Redemption
	Section 3.09.	Offer to Purchase by Application of Excess Proceeds
ARTICLE 4 COVENANTS
	Section 4.01.	Payment of Notes
	Section 4.02.	Maintenance of Office or Agency
	Section 4.03.	Reports
	Section 4.04.	Compliance Certificate
	Section 4.05.	Taxes
	Section 4.06.	Stay, Extension and Usury Laws
	Section 4.07.	Limitation on Restricted Payments
	Section 4.08.	Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
	Section 4.09.	Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock
	Section 4.10.	Limitation on Asset Sales
	Section 4.11.	Limitation on Transactions with Affiliates
	Section 4.12.	Limitation on Liens
	Section 4.13.	Additional Subsidiary Guarantees
	Section 4.14.	Corporate Existence
	Section 4.15.	Offer to Repurchase Upon Change of Control

	Section 4.16.	Permitted Business Activities
	Section 4.17.	Sale and Leaseback Transactions
	Section 4.18.	Covenant Termination
	Section 4.19.	Designation of Restricted and Unrestricted Subsidiaries
ARTICLE 5 SUCCESSORS
	Section 5.01.	Merger, Consolidation, or Sale of Assets
	Section 5.02.	Successor Substituted
ARTICLE 6 DEFAULTS AND REMEDIES
	Section 6.01.	Events of Default
	Section 6.02.	Acceleration
	Section 6.03.	Other Remedies
	Section 6.04.	Waiver of Past Defaults
	Section 6.05.	Control by Majority
	Section 6.06.	Limitation on Suits
	Section 6.07.	Rights of Holders of Notes to Receive Payment
	Section 6.08.	Collection Suit by Trustee
	Section 6.09.	Trustee May File Proofs of Claim
	Section 6.10.	Priorities
	Section 6.11.	Undertaking for Costs
ARTICLE 7 TRUSTEE
	Section 7.01.	Duties of Trustee
	Section 7.02.	Rights of Trustee
	Section 7.03.	Individual Rights of Trustee
	Section 7.04.	Trustee's Disclaimer
	Section 7.05.	Notice of Defaults
	Section 7.06.	Reports by Trustee to Holders of the Notes
	Section 7.07.	Compensation and Indemnity
	Section 7.08.	Replacement of Trustee
	Section 7.09.	Successor Trustee by Merger, etc
	Section 7.10.	Eligibility; Disqualification
	Section 7.11.	Preferential Collection of Claims Against Issuers
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
	Section 8.01.	Option to Effect Legal Defeasance or Covenant Defeasance
	Section 8.02.	Legal Defeasance and Discharge
	Section 8.03.	Covenant Defeasance
	Section 8.04.	Conditions to Legal or Covenant Defeasance
	Section 8.05.	Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions
	Section 8.06.	Repayment to Issuers
	Section 8.07.	Reinstatement
	Section 8.08.	Discharge.
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
	Section 9.01.	Without Consent of Holders of Notes
	Section 9.02.	With Consent of Holders of Notes
	Section 9.03.	Compliance with Trust Indenture Act
	Section 9.04.	Revocation and Effect of Consents
	Section 9.05.	Notation on or Exchange of Notes

	Section 9.06.	Trustee to Sign Amendments, etc
ARTICLE 10 GUARANTEES OF NOTES
	Section 10.01.	Subsidiary Guarantees
	Section 10.02.	Guarantors May Consolidate, etc., on Certain Terms
	Section 10.03.	Releases of Subsidiary Guarantees
	Section 10.04.	Limitation on Guarantor Liability
	Section 10.05.	"Trustee" to Include Paying Agent
ARTICLE 11 MISCELLANEOUS
	Section 11.01.	Trust Indenture Act Controls
	Section 11.02.	Notices
	Section 11.03.	Communication by Holders of Notes with Other Holders of Notes
	Section 11.04.	Certificate and Opinion as to Conditions Precedent
	Section 11.05.	Statements Required in Certificate or Opinion
	Section 11.06.	Rules by Trustee and Agents
	Section 11.07.	No Personal Liability of Directors, Officers, Employees and Unitholders
	Section 11.08.	Governing Law
	Section 11.09.	No Adverse Interpretation of Other Agreements
	Section 11.10.	Successors
	Section 11.11.	Severability
	Section 11.12.	Table of Contents, Headings, etc
	Section 11.13.	Counterparts

iii

APPENDIX AND ANNEXES

RULE 144A/REGULATION S APPENDIX		App.-1
	EXHIBIT 1 Form of Initial Note
	EXHIBIT A Form of Exchange Note or Private Exchange Note
ANNEX A	Form of Supplemental Indenture	A-1
ANNEX B	Form of Registration Rights Agreement	B-1
ANNEX C	Certain Agreements	C-1

CROSS REFERENCE TABLE*

Trust Indenture Act Section		Indenture Section
310	(a) (1)	7.10
	(a) (2)	7.10
	(a) (3)	N/A
	(a) (4)	N/A
	(a) (5)	7.10
	(b)	7.10
	(c)	N/A
311	(a)	7.11
	(b)	7.11
	(c)	N/A
312	(a)	2.05
	(b)	11.03
	(c)	11.03
313	(a)	7.06
	(b) (1)	7.06
	(b) (2)	7.06, 7.07
	(c)	7.06, 11.02
	(d)	7.06
314	(a)	4.03
	(a) (4)	11.05
	(b)	N/A
	(c) (1)	N/A
	(c) (2)	N/A
	(c) (3)	N/A
	(d)	N/A
	(e)	11.05
	(f)	N/A
315	(a)	N/A
	(b)	N/A
	(c)	N/A
	(d)	N/A
	(e)	N/A
316	(a)(last sentence)	2.08
	(a) (1)(A)	N/A
	(a) (1)(B)	N/A
	(a) (2)	N/A
	(b)	N/A
	(c)	N/A
317	(a) (1)	N/A
	(a) (2)	N/A
	(b)	N/A
318	(a)	N/A
	(b)	N/A
	(c)	11.01

N/A means not applicable.
*This Cross-Reference Table is not part of the Indenture.

This Indenture, dated as of June 16, 2004, is among Pacific Energy Partners, L.P., a Delaware limited partnership (the "Company"), Pacific Energy Finance Corporation, a Delaware corporation ("Finance Corp." and, together with the Company, the "Issuers"), the guarantors listed on the signature page hereof (each, a "Guarantor" and, collectively, the "Guarantors") and Wells Fargo Bank, National Association, a New York banking corporation, as trustee (the "Trustee").

The Issuers, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Issuers' Initial Notes, Exchange Notes, Private Exchange Notes and Additional Notes:

ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE

Section 1.01. Definitions.

"Acquired Debt" means, with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other Person was merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person, but excluding Indebtedness which is extinguished, retired or repaid in connection with such Person merging with or becoming a Subsidiary or such specified Person; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

"Additional Interest" means all Additional Interest then owing pursuant to Section 6 of the Registration Rights Agreement referred to in clause (1) of the definition of "Registration Rights Agreement" in the Appendix. Unless the context indicates otherwise, all references to "interest" in this Indenture or the Notes shall be deemed to include any Additional Interest.

"Additional Notes" means, subject to the Company's compliance with Section 4.09, 7¹/8% Senior Notes due 2014 issued from time to time after the Initial Issuance Date under the terms of this Indenture (other than pursuant to Section 2.06, 2.07, 2.09 or 3.06 of this Indenture and other than Exchange Notes or Private Exchange Notes issued pursuant to an exchange offer for other Notes outstanding under this Indenture).

"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control by the other Person; and provided, further, that any third Person which also beneficially owns 10% or more of the Voting Stock of a specified Person shall not be deemed to be an Affiliate of either the specified Person or the other Person merely because of such common ownership in such specified Person. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings.

"Agent" means any Registrar or Paying Agent.

"Agent Members" has the meaning provided in the Appendix.

"Applicable Law," except as the context may otherwise require, means all applicable laws, rules, regulations, ordinances, judgments, decrees, injunctions, writs and orders of any court or governmental or congressional agency or authority and rules, regulations, orders, licenses and permits of any United States federal, state, municipal, regional, or other governmental body, instrumentality, agency or authority.

"Asset Sale" means:

(1) the sale, lease, conveyance or other disposition of any properties or assets (including by way of a Sale and Leaseback Transaction); provided that the disposition of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of Section 4.15 and/or the provisions of Section 5.01 and not by the provisions of Section 4.10; and

(2) the issuance of Equity Interests in any of the Company's Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries.

Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:

(1) any single transaction or series of related transactions that involves properties or assets having a fair market value of less than $5.0 million or results in net cash proceeds to the Company or a Restricted Subsidiary not in excess of $5.0 million;

(2) a transfer of assets between or among any of the Company and its Restricted Subsidiaries;

(3) an issuance or sale of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary;

(4) the sale, lease or other disposition of equipment, inventory, accounts receivable or other properties or assets, including line fill, in the ordinary course of business;

(5) the sale or other disposition of cash or Cash Equivalents, Hedging Obligations or other financial instruments in the ordinary course of business;

(6) a Restricted Payment that is permitted by Section 4.07 or a Permitted Investment;

(7) any trade or exchange by the Company or any Restricted Subsidiary of properties or assets of any type for properties or assets of any type owned or held by another Person, including any disposition of some but not all of the Equity Interests of a Restricted Subsidiary in exchange for assets or properties and after which the Person whose Equity Interests have been so disposed of continues to be a Restricted Subsidiary, provided that the fair market value of the properties or assets traded or exchanged by the Company or such Restricted Subsidiary (together with any cash or Cash Equivalent together with liabilities assumed) is reasonably equivalent to the fair market value of the properties or assets (together with any cash or Cash Equivalent together with liabilities assumed) to be received by the Company or such Restricted Subsidiary, and provided further that any cash received must be applied in accordance with the provisions of Section 4.10;

(8) the creation or perfection of a Lien that is not prohibited by Section 4.12;

(9) dispositions in connection with Permitted Liens;

(10) surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind; and

(11) the grant in the ordinary course of business of any non-exclusive license of patents, trademarks, registrations therefor and other similar intellectual property.

"Attributable Debt" in respect of a Sale and Leaseback Transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP. As used in the preceding sentence, the "net rental payments"

under any lease for any such period shall mean the sum of rental and other payments required to be paid with respect to such period by the lessee thereunder, excluding any amounts required to be paid by such lessee on account of maintenance and repairs, insurance, taxes, assessments, water rates or similar charges. In the case of any lease that is terminable by the lessee upon payment of penalty, such net rental payment shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated.

"Available Cash" has the meaning assigned to such term in the Partnership Agreement, as in effect on the date of the indenture.

"Bankruptcy Law" means Title 11, United States Code, as may be amended from time to time, or any similar federal or state law for the relief of debtors.

"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have correlative meanings.

"Board of Directors" means:

(1) with respect to Finance Corp., the board of directors of Finance Corp.;

(2) with respect to the Company, the Board of Directors of the General Partner or any authorized committee thereof; and

(3) with respect to any other Person, the board or committee of such Person serving a similar function.

"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the applicable Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

"Business Day" means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York or another place of payment are authorized or required by law to close.

"Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.

"Capital Stock" means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

"Cash Equivalents" means:

(1) United States or Canadian dollars or, in an amount up to the amount necessary or appropriate to fund local operating expenses, other currencies;

(2) securities issued or directly and fully guaranteed or insured by the government of the United States of America or any other country whose sovereign debt has a rating of at least A3 from Moody's and at least A- from S&P or any agency or instrumentality of any such government (provided that the full faith and credit of such government is pledged in support thereof), in each case having maturities of not more than one year from the date of acquisition; securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than six months from the date of acquisition;

(3) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year demand and overnight bank deposits, in each case, with any lender party to a Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better;

(4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

(5) commercial paper having one of the two highest ratings obtainable from Moody's or S&P and in each case maturing within six months after the date of acquisition; and

(6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.

"Change of Control" means the occurrence of any of the following:

(1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets (including Capital Stock of the Restricted Subsidiaries) of the Company and its Restricted Subsidiaries taken as a whole, to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act), which occurrence is followed by a Rating Decline within 90 days of the consummation of such transaction;

(2) the adoption of a plan relating to the liquidation or dissolution of the Company or the removal of the General Partner by the limited partners of the Company;

(3) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as that term is used in Section 13(d)(3) of the Exchange Act), excluding the Qualifying Owners identified in clause (1) of the definition of Qualifying Owners, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the General Partner, measured by voting power rather than number of shares, which occurrence is followed by a Rating Decline within 90 days thereof; or

(4) the first day on which a majority of the members of the Board of Directors of the General Partner are not Continuing Directors, which occurrence is followed by a Rating Decline within 90 days thereof.

"Clearstream" means Clearstream Banking, société anonyme, or any successor securities clearing agency.

"Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.

"Commission" or "SEC" means the Securities and Exchange Commission.

"Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus:

(1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale or any other asset disposition, to the extent such losses were deducted in computing such Consolidated Net Income; plus

(2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

(3) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings), and net of the effect of all payments made or received pursuant to interest rate Hedging Obligations, to the extent that any such expense was deducted in computing such Consolidated Net Income; plus

(4) depreciation and amortization (including amortization of intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period), impairment and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation and amortization, impairment and other non-cash expenses were deducted in computing such Consolidated Net Income; plus

(5) unrealized non-cash losses resulting from foreign currency balance sheet adjustments required by GAAP to the extent such losses were deducted in computing such Consolidated Net Income; plus

(6) all extraordinary, unusual or non-recurring items of gain or loss, or revenue or expense; minus

(7) non-cash items increasing such Consolidated Net Income for such period, other than items that were accrued in the ordinary course of business,

in each case, on a consolidated basis and determined in accordance with GAAP.

"Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that:

(1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included, but only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person;

(2) the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that

Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, partners or members;

(3) the cumulative effect of a change in accounting principles will be excluded; and

(4) unrealized losses and gains under derivative instruments included in the determination of Consolidated Net Income, including, without limitation those resulting from the application of Statement of Financial Accounting Standards No. 133 will be excluded.

"Consolidated Net Tangible Assets" means, with respect to any Person at any date of determination, the aggregate amount of total assets included in such Person's most recent quarterly or annual consolidated balance sheet prepared in accordance with GAAP less applicable reserves reflected in such balance sheet, after deducting the following amounts: (a) all current liabilities reflected in such balance sheet, and (b) all goodwill, trademarks, patents, unamortized debt discounts and expenses and other like intangibles reflected in such balance sheet.

"Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the General Partner who:

(1) was a member of such Board of Directors on the date of this Indenture; or

(2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

"Corporate Trust Office of the Trustee" means the principal office of the Trustee in the City of Los Angeles at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 707 Wilshire Blvd., 17th Floor, Los Angeles, CA 90017, Attention: Corporate Trust Department or such other address in the City of Los Angeles as the Trustee may designate from time to time by notice to the Holders and the Issuers, or the principal corporate trust office in the City of Los Angeles of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Issuers).

"Credit Agreement" means (i) that certain Credit Agreement, dated as of July 19, 2002, among the Company, the Operating Company, as Borrower, the banks parties thereto and Fleet National Bank, N.A., as administrative agent, consisting of a revolving credit facility and letter of credit sub-facility, and (ii) that certain Credit Agreement, dated as of May 11, 2004, among Rangeland Pipeline Company (as successor to RPC Acquisition Company), as borrower, Royal Bank of Canada, as agent, and others as lenders, consisting of a revolving credit facility, including a letter of credit availability, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, restated, modified, renewed, refunded, replaced or refinanced from time to time.

"Credit Facilities" means one or more debt facilities (including, without limitation, the Credit Agreement), commercial paper facilities or secured capital markets financings, in each case with banks or other institutional lenders or institutional investors providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables), letters of credit or secured capital markets financings, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced (including refinancing with any capital markets transaction) in whole or in part from time to time.

"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law.

"Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

"Depository" has the meaning provided in the Appendix.

"Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase or redeem such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07.

"Domestic Subsidiary" means any Restricted Subsidiary of the Company other than a Foreign Subsidiary.

"Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

"Equity Offering" means any public or private sale of Equity Interests (other than Disqualified Stock) made for cash on a primary basis by the Company after the date of this Indenture.

"Exchange Notes" means the notes issued in a Registered Exchange Offer pursuant to this Indenture.

"Euroclear" means Euroclear Bank S.A./N.V. or any successor securities clearing agency.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exchange Notes" has the meaning specified in the Appendix.

"Fitch" means Fitch, Inc. or any successor to the rating agency business thereof.

"Fixed Charge Coverage Ratio" means with respect to any specified Person for any four-quarter reference period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital or revolving credit borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the applicable four-quarter reference period and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of such period.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

(1) acquisitions of Person or assets that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, subsequent to the commencement of the applicable four-quarter reference period and on or prior to the Calculation Date will be given pro forma effect as if they had occurred on the first day of such period, including any Consolidated Cash Flow and any pro forma expense and cost reductions that have occurred or are reasonably expected to occur, in the

reasonable judgment of the chief financial or accounting officer of the Company (regardless of whether those cost savings or operating improvements could then be reflected in pro forma financial statements in accordance with Regulation S-X promulgated under the Securities Act or any other regulation or policy of the Commission related thereto);

(2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded;

(3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date; and

(4) interest income reasonably anticipated by such Person to be received during the applicable four-quarter period from cash or Cash Equivalents held by such Person or any Restricted Subsidiary of such Person, which cash or Cash Equivalents exist on the Calculation Date or will exist as a result of the transaction giving rise to the need to calculate the Fixed Charge Coverage Ratio may be added on a pro forma basis to Net Income for such period.

"Fixed Charges" means, with respect to any specified Person for any period, (A) the sum, without duplication, of:

(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings), and net of the effect of all payments made or received pursuant to interest-rate Hedging Obligations; plus

(2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus

(3) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such guarantee or Lien is called upon; plus

(4) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock or preferred securities, other than distributions on any outstanding General Partner Interest and Limited Partner Interest as defined in the Partnership Agreement, of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, less;

(B) to the extent included in (A) above, write-off of non-recurring deferred financing costs of such Person and its Restricted Subsidiaries during such period and any charge related to, or any premium or penalty paid in connection with, paying any such Indebtedness of such Person and its Restricted Subsidiaries prior to its Stated Maturity.

in each case, on a consolidated basis and in accordance with GAAP.

"Foreign Subsidiary" means any Restricted Subsidiary of the Company that was not formed under the laws of the United States or any state of the United States or the District of Columbia and that conducts substantially all of its operations outside the United States.

"GAAP" means generally accepted accounting principles in the United States, which are in effect on the date of this Indenture.

"General Partner" means Pacific Energy GP, Inc., a Delaware corporation, and its successors and permitted assigns as general partner of the Company or as the business entity with the ultimate authority to manage the business and operations of the Company.

"Global Note" has the meaning provided in the Appendix.

"Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged.

The term "guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. When used as a verb, "guarantee" has a correlative meaning.

"Guarantors" means each of:

(1) the Operating Company and the other Persons executing the Indenture as initial Guarantors; and

(2) any other Restricted Subsidiary of the Company that becomes a Guarantor in accordance with Section 4.13 or 10.02 hereof and their respective successors and assigns of such Restricted Subsidiaries, as required under Article 10 hereof, in each case until such time as any such Restricted Subsidiary shall be released and relieved of its obligations pursuant to Section 8.02, 8.03 or 10.03 hereof.

"Hedging Obligations" means, with respect to any specified Person, the obligations of such Person incurred in the normal course of business and consistent with past practices and not for speculative purposes under:

(1) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements entered into with one of more financial institutions and designed to reduce costs of borrowing or to protect the Person or any of its Restricted Subsidiaries entering into the agreement against fluctuations in interest rates with respect to Indebtedness incurred;

(2) foreign exchange contracts and currency protection agreements entered into with one of more financial institutions and designed to protect the Person or any of its Restricted Subsidiaries entering into the agreement against fluctuations in currency exchanges rates;

(3) any commodity futures contract, commodity option or other similar agreement or arrangement designed to protect against fluctuations in prices; and

(4) other agreements or arrangements designed to protect such Person or any of its Restricted Subsidiaries against fluctuations in interest rates, commodity prices or currency exchange rates.

"Holder" or "Noteholder" means a Person in whose name a Note is registered.

"Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:

(1) in respect of borrowed money;

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof), other than letters of credit issued by such Person in the ordinary course of business, to the extent not drawn;

(3) in respect of bankers' acceptances;

(4) representing Capital Lease Obligations;

(5) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or

(6) representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP but excluding amounts recorded in accordance with Statement of Financial Accounting Standards No. 133. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the guarantee by the specified Person of any Indebtedness of any other Person.

The amount of any Indebtedness outstanding as of any date will be:

(1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;

(2) in the case of any Hedging Obligation, the termination value of the agreement or arrangement giving rise to such Hedging Obligation that would be payable by such Person at such date; and

(3) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness.

"Indenture" means this Indenture, as amended or supplemented from time to time.

"Initial Issuance Date" means June 16, 2004.

"Initial Notes" has the meaning provided in the Appendix.

"Initial Purchasers" has the meaning provided in the Appendix.

"Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's, BBB- (or the equivalent) by S&P and BBB- (or the equivalent) by Fitch.

"Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including guarantees of Indebtedness), advances or capital contributions (excluding (1) commission, travel and similar advances to officers and employees made in the ordinary course of business and (2) advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of the lender), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary

of the Company, the Company will be deemed to have made an Investment on the date of any such sale or disposition in an amount equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.07. The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person will be deemed to be an Investment made by the Company or such Subsidiary in such third Person in an amount equal to the fair market value of the Investment held by the acquired Person in such third Person on the date of any such acquisition in an amount determined as provided in the final paragraph of Section 4.07.

"Joint Venture" means any Person that is not a direct or indirect Subsidiary of the Company in which the Company or any of its Restricted Subsidiaries makes any Investment.

"Legal Holiday" means any calendar day other than a Business Day. If a payment date is a Legal Holiday, payment may be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under Applicable Law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other than a precautionary financing statement respecting a lease not intended as a security agreement.

"Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof.

"Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however:

(1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries; and

(2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss).

"Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of:

(1) the direct costs relating to such Asset Sale and direct costs associated with the sale or disposition of any such non-cash consideration, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale,

(2) taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements,

(3) amounts required to be applied to the repayment of Indebtedness secured by a Lien on the properties or assets that were the subject of such Asset Sale and all distributions and payments required to be made to minority interest holders in Restricted Subsidiaries as a result of such Asset Sale, and

(4) any amounts to be set aside in any reserve established in accordance with GAAP or any amount placed in escrow, in either case for adjustment in respect of the sale price of such properties or assets or for liabilities associated with such Asset Sale and retained by the Company or any of its Restricted Subsidiaries until such time as such reserve is reversed or such escrow arrangement is terminated, in which case Net Proceeds shall include only the amount of the reserve so reversed or the amount returned to the Company or its Restricted Subsidiaries from such escrow arrangement, as the case may be.

"Non-Recourse Debt" means Indebtedness:

(1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) is the lender;

(2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and

(3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries except as contemplated by clause (9) of the definition of Permitted Liens.

For purposes of determining compliance with Section 4.09, in the event that any Non-Recourse Debt of any of the Company's Unrestricted Subsidiaries ceases to be Non-Recourse Debt of such Unrestricted Subsidiary, such event will be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company.

"Notes" means the Initial Notes, the Exchange Notes, the Private Exchange Notes and the Additional Notes, treated as a single class.

"Notes Custodian" has the meaning specified in the Appendix.

"Obligations" means any principal, premium, if any, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages, guarantees, and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereto.

"Offering Memorandum" means the offering memorandum of the Issuers dated June , 2004 relating to the offering of the Initial Notes.

"Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Assistant Secretary or any Vice President of such Person or, in the case of the Company, its Managing General Partner.

"Officers' Certificate" means a certificate signed on behalf of each of the Company and Finance Corp. by two of its Officers, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Managing General Partner or Finance Corp., as the case may be, that meets the requirements of Section 11.05 hereof.

"Operating Company" means Pacific Energy Group LLC, a Delaware limited liability company, and its successors.

"Operating Surplus" has the meaning assigned to such term in the Partnership Agreement, as in effect on the date of this Indenture.

"Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 11.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee.

"Pari Passu Indebtedness" means, with respect to any Excess Proceeds from Asset Sales, Indebtedness of an Issuer or any Guarantor that ranks equally in right of payment with the Notes or the Subsidiary Guarantees, as the case may be, and the terms of which require the Company or any of its Restricted Subsidiaries to apply such Excess Proceeds to offer to repurchase such Indebtedness.

"Partnership Agreement" means the First Amended and Restated Agreement of Limited Partnership of Pacific Energy Partners, L.P., dated as of July 26, 2002, as such may be further amended, modified or supplemented from time to time.

"Permitted Business" means either (1) marketing, gathering, transporting (by barge, pipeline, ship, truck or other modes of hydrocarbon transportation), terminalling, storing, producing, acquiring, developing, exploring for, exploiting, producing, processing, dehydrating and otherwise handling crude oil, gas, casinghead gas, drip gasoline, natural gasoline, condensates, distillates, liquid hydrocarbons, gaseous hydrocarbons and all other constituents, elements, compounds or products refined or processed from any of the foregoing, which activities shall include, for the avoidance of doubt, constructing pipeline, platform, dehydration, processing and other energy-related facilities, and activities or services reasonably related or ancillary thereto including entering into purchase and sale agreements, supply agreements and Hedging Obligations related to these businesses, or (2) any other business that generates gross income at least 90% of which constitutes "qualifying income" under Section 7704(d) of the Code.

"Permitted Business Investments" means Investments by the Company or any of its Restricted Subsidiaries in any Unrestricted Subsidiary of the Company or in any Joint Venture, provided that:

(1) either (a) at the time of such Investment and immediately thereafter, the Company could incur $1.00 of additional Indebtedness under the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 or (b) such Investment does not exceed the aggregate amount of Incremental Funds (as defined in Section 4.07) not previously expended at the time of making such Investment;

(2) if such Unrestricted Subsidiary or Joint Venture has outstanding Indebtedness at the time of such Investment, either (a) all such Indebtedness is Non-Recourse Debt or (b) any such Indebtedness of such Unrestricted Subsidiaries or Joint Venture that is recourse to the Company or any of its Restricted Subsidiaries (which shall include, without limitation, all Indebtedness of such Unrestricted Subsidiary or Joint Venture for which the Company or any of its Restricted Subsidiaries may be directly or indirectly, contingently or otherwise, obligated to pay, whether pursuant to the terms of such Indebtedness, by law or pursuant to any guarantee, including, without limitation, any "claw-back," "make-well" or "keep-well" arrangement) could, at the time such Investment is made, be incurred at that time by the Company and its Restricted Subsidiaries under the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and

(3) such Unrestricted Subsidiary's or Joint Venture's activities are not outside the scope of the Permitted Business.

"Permitted Investments" means:

(1) any Investment in the Company or in a Restricted Subsidiary of the Company;

(2) any Investment in Cash Equivalents;

(3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment:

(a) such Person becomes a Restricted Subsidiary of the Company; or

(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its properties or assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company;

(4) any Investment made as a result of the receipt of non-cash consideration from:

(a) an Asset Sale that was made pursuant to and in compliance with Section 4.10; or

(b) pursuant to clause (7) of the items deemed not to be Asset Sales under the definition of "Asset Sale;"

(5) any Investment in any Person solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company;

(6) any Investments received in compromise of obligations of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer, or as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment in default;

(7) Hedging Obligations permitted to be incurred under the "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant;

(8) loans to officers and employees made in the ordinary course of business in an aggregate amount not to exceed $1.0 million at anyone time outstanding;

(9) any Investments in prepaid expenses, negotiable instruments held for collection and lease, utility, workers' compensation and performance and other similar deposits and prepaid expenses made in the ordinary course of business;

(10) Permitted Business Investments;

(11) the repurchase, redemption or other acquisition or retirement for value of any Equity Interest of the Company to satisfy awards under the General Partner's Long Term Incentive Plan, dated July 22, 2002, provided such repurchases do not exceed an aggregate of $2.5 million during any calendar year; and

(12) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (12) that are at the time outstanding, not to exceed the greater of $15.0 million and 3.0% of the Company's Consolidated Net Tangible Assets.

"Permitted Liens" means:

(1) Liens securing any Indebtedness under any of the Credit Facilities and all Obligations and Hedging Obligations relating to such Indebtedness;

(2) Liens in favor of the Company or the Guarantors;

(3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not

extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary;

(4) Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition;

(5) any interest or title of a lessor to the property subject to a Capital Lease Obligation or an operating lease;

(6) Liens on any property or asset acquired, constructed or improved by the Company or any of its Restricted Subsidiaries (a "Purchase Money Lien"), which (a) are in favor of the seller of such property or assets, in favor of the Person developing, constructing, repairing or improving such asset or property, or in favor of the Person that provided the funding for the acquisition, development, construction, repair or improvement cost, as the case may be, of such asset or property, (b) are created within 360 days after the acquisition, development, construction, repair or improvement, (c) secure the purchase price or development, construction, repair or improvement cost, as the case may be, of such asset or property in an amount up to 100% of the fair market value (as determined by the Board of Directors of the General Partner) of such acquisition, construction or improvement of such asset or property, and (d) are limited to the asset or property so acquired, constructed or improved (including the proceeds thereof, accessions thereto and upgrades thereof);

(7) Liens existing on the date of this Indenture other than Liens securing the Credit Facilities;

(8) Liens to secure the performance of tenders, bids, statutory obligations, surety or appeal bonds, government contracts, performance bonds or other obligations of a like nature incurred in the ordinary course of business;

(9) Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary or any Joint Venture owned by the Company or any Restricted Subsidiary of the Company to the extent securing Non-Recourse Debt or other Indebtedness of such Unrestricted Subsidiary or Joint Venture otherwise permitted by the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09;

(10) Liens upon specific items of inventory, receivables or other goods or proceeds of the Company or any of its Restricted Subsidiaries securing such Person's obligations in respect of bankers' acceptances or receivables securitizations issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory, receivables or other goods and permitted by Section 4.09;

(11) Liens securing Obligations of the Issuers or any Guarantor under the Notes or the Subsidiary Guarantees, as the case may be;

(12) Liens securing any Indebtedness equally and ratably with all Obligations due under the Notes or any Subsidiary Guarantee pursuant to a contractual covenant that limits Liens in a manner substantially similar to Section 4.12;

(13) Liens in favor of collecting or payor banks having a right of setoff, revocation, refund or chargeback with respect to money or instruments of the Company or any of its Restricted Subsidiaries on deposit with or in possession of such bank;

(14) Liens to secure performance of Hedging Obligations of the Company or any of its Restricted Subsidiaries;

(15) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $10.0 million at any one time outstanding; and

(16) any Lien renewing, extending, refinancing or refunding a Lien permitted by clauses (1) through (15) above; provided that (a) the principal amount of the Indebtedness secured by such Lien does not exceed the principal amount of such Indebtedness outstanding immediately prior to the renewal, extension, refinance or refund of such Lien, plus all accrued interest on the Indebtedness secured thereby and the amount of all fees, expenses and premiums incurred in connection therewith, and (b) no assets encumbered by any such Lien other than the assets permitted to be encumbered immediately prior to such renewal, extension, refinance or refund are encumbered thereby.

"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

(1) the principal amount of such Permitted Refinancing Indebtedness does not exceed the principal amount of the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all fees and expenses and premiums incurred in connection therewith);

(2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;

(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes or the Subsidiary Guarantees, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Notes or the Subsidiary Guarantees on terms at least as favorable to the Holders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and

(4) such Indebtedness is not incurred by a Restricted Subsidiary of the Company if the Company is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.

Notwithstanding the preceding, any Indebtedness incurred under Credit Facilities pursuant to Section 4.09 shall be subject only to the refinancing provision in the definition of Credit Facilities and not pursuant to the requirements set forth in the definition of Permitted Refinancing Indebtedness.

"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

"Private Exchange" has the meaning provided in the Appendix.

"Private Exchange Notes" has the meaning provided in the Appendix.

"Purchase Agreement" has the meaning provided in the Appendix.

"QIB" means a "qualified institutional buyer" as defined in Rule 144A under the Securities Act.

"Qualifying Owners" means (1) the significant owners of the ultimate parent company of the General Partner on the date of the indenture, consisting of The Anschutz Corporation and its affiliates; and (2) any transferee of any of the foregoing to the extent such transferee is approved by a majority

of the ownership interests of the then-existing Qualifying Owners (other than the transferor) or any Affiliate of any of the foregoing.

"Rating Categories" means:

(1) with respect to S&P, any of the following categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories); and

(2) with respect to Moody's, any of the following categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories).

"Rating Decline" means a decrease in the rating of the Notes by either Moody's or S&P by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories, namely + or—for S&P, and 1, 2, and 3 for Moody's, will be taken into account; for example, in the case of S&P, a rating decline either from BB+ to BB or BB- to B+ will constitute a decrease of one gradation.

"Registered Exchange Offer" has the meaning provided in the Appendix.

"Registration Rights Agreement" has the meaning provided in the Appendix.

"Regulation S" has the meaning provided in the Appendix.

"Responsible Officer," when used with respect to the Trustee, means any officer within the corporate trust department of the Trustee having direct responsibility for the administration of this Indenture.

"Restricted Global Note" has the meaning provided in the Appendix.

"Restricted Investment" means an Investment other than a Permitted Investment.

"Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. Notwithstanding anything in this Indenture to the contrary, Finance Corp. and the Operating Company shall be Restricted Subsidiaries of the Company.

"Rule 144A" has the meaning provided in the Appendix.

"S&P" refers to Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor to the rating agency business thereof.

"Sale and Leaseback Transaction" means an arrangement relating to property owned by the Company or a Restricted Subsidiary on the Initial Issuance Date or thereafter acquired by the Company or a Restricted Subsidiary whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person.

"SEC" or "Commission" means the Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933, as amended.

"Senior Debt" means

(1) all Indebtedness of the Company or any Restricted Subsidiary outstanding under Credit Facilities and all Hedging Obligations with respect thereto;

(2) any other Indebtedness of the Company or any Restricted Subsidiary permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the notes or any Subsidiary Guarantee; and

(3) all Obligations with respect to the items listed in the preceding clauses (1) and (2).

Notwithstanding anything to the contrary in the preceding sentence, Senior Debt will not include:

(a) any intercompany Indebtedness of the Company or any of its Restricted Subsidiaries to the Company or any of its Affiliates; or

(b) any Indebtedness that is incurred in violation of this Indenture.

For the avoidance of doubt, "Senior Debt" will not include any trade payables or taxes owed or owing by the Company or any Restricted Subsidiary.

"Shelf Registration Statement" has the meaning provided in the Appendix.

"Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture.

"Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

"Subsidiary" means, with respect to any specified Person:

(1) any corporation, association or other business entity (other than a partnership or limited liability company) of which more than 50% of the total voting power of Voting Stock is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

(2) any partnership (whether general or limited) or limited liability company (a) the sole general partner or managing member of which is such Person or a Subsidiary of such Person, or (b) if there are more than a single general partner or member, either (x) the only general partners or managing members of which are such Person or one or more Subsidiaries of such Person (or any combination thereof) or (y) such Person owns or controls, directly or indirectly, a majority of the outstanding general partner interests, member interests or other Voting Stock of such partnership or limited liability company, respectively.

"Subsidiary Guarantee" means any guarantee by a Guarantor of the Issuers' Obligations under the indenture and on the Notes.

"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) and the rules and regulations thereunder, as in effect on the date on which this Indenture is qualified under the TIA (except as provided in Section 9.01(i) and 9.03 hereof).

"Transfer Restricted Securities" has the meaning provided in the Appendix.

"Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

"Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time.

"Unrestricted Subsidiary" means any Subsidiary of the Company (other than Finance Corp. or the Operating Company) that is designated by the Board of Directors of the General Partner as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary:

(1) has no Indebtedness other than Non-Recourse Debt;

(2) except as permitted in (4) and (5) of Section 4.11, is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;

(3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and

(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries.

All Subsidiaries of an Unrestricted Subsidiary shall be also Unrestricted Subsidiaries. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09, the Company will be in default of such covenant.

"Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors of such Person.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

(2) the then outstanding principal amount of such Indebtedness.

Section 1.02. Other Definitions.

Term		Defined in Section
"Affiliate Transaction"		4.11
"Appendix"		2.01
"Asset Sale Offer"		3.09
"Change of Control Offer"		4.15
"Change of Control Payment"		4.15
"Change of Control Purchase Date"		4.15
"Covenant Defeasance"		8.03
"Discharge"		8.08
"Event of Default"		6.01
"Excess Proceeds"		4.10
"Incremental Funds"		4.07
"incur"		4.09
"Legal Defeasance"		8.02
"Offer Amount"		3.09
"Offer Period"		3.09
"Paying Agent"		2.03
"Payment Default"		6.01
"Permitted Debt"		4.09
"Registrar"		2.03
"Restricted Payments"		4.07
"Settlement Date"		3.09
"Termination Date"		3.09

Section 1.03. Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. Any terms incorporated in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them.

Section 1.04. Rules of Construction.

Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3) "or" is not exclusive;

(4) words in the singular include the plural, and in the plural include the singular;

(5) provisions apply to successive events and transactions;

(6) references to sections of or rules under the Securities Act or the Exchange Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time; and

(7) "herein," "hereof" and other words of similar import refer to this Indenture as a whole (as amended or supplemented from time to time) and not to any particular Article, Section or other subdivision

ARTICLE 2
THE NOTES

Section 2.01. Form and Dating.

Provisions relating to the Initial Notes, the Private Exchange Notes and the Exchange Notes are set forth in the Rule 144A/Regulation S Appendix attached hereto (the "Appendix"), which is hereby incorporated in and expressly made part of this Indenture. The Initial Notes and the Trustee's certificate of authentication therefor shall be substantially in the form of Exhibit 1 to the Appendix which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Notes, the Private Exchange Notes and the Trustee's certificate of authentication therefor shall be substantially in the form of Exhibit A to the Appendix, which is hereby incorporated in and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which an Issuer is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Note shall be dated the date of its authentication. The terms of the Notes set forth in the Appendix are part of the terms of this Indenture.

Section 2.02. Execution and Authentication.

An Officer shall sign the Notes on behalf of each Issuer by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

On the Initial Issuance Date, the Trustee shall authenticate and deliver $250 million principal amount of 7¹/8% Senior Notes due 2014 and, at any time and from time to time thereafter, the Trustee shall authenticate and deliver Notes for original issue in an aggregate principal amount specified in such order, in each case upon a written order of the Issuers. Such order shall specify the amount of the Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and, in the case of an issuance of Additional Notes pursuant to Section 2.13 after the Initial Issuance Date, shall certify that such issuance is in compliance with Section 4.09.

The Trustee may appoint an authenticating agent reasonably acceptable to the Issuers to authenticate the Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

Section 2.03. Registrar and Paying Agent.

The Issuers shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Notes may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Issuers may have one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar, and the term "Paying Agent" includes any additional paying agent.

The Issuers shall enter into an appropriate agency agreement with any Registrar or Paying Agent not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Issuers shall notify the

Trustee of the name and address of any such agent. If the Issuers fail to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any Subsidiary may act as Paying Agent or Registrar.

The Issuers initially appoint the Trustee as Registrar and Paying Agent in connection with the Notes.

Section 2.04. Paying Agent to Hold Money in Trust.

Prior to 11:00 a.m. New York City time, on each due date of the principal and interest on any Note, an Issuer shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Issuers shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Noteholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Notes and shall notify the Trustee of any default by the Issuers in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Issuers at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee.

Section 2.05. Noteholder Lists.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Noteholders. If the Trustee is not the Registrar, the Issuers shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Noteholders.

Section 2.06. Transfer and Exchange.

The Notes shall be issued in registered form and shall be transferable only upon the surrender of a Note for registration of transfer. When a Note is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of this Indenture and Section 8-401(a) of the Uniform Commercial Code are met. When Notes are presented to the Registrar with a request to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. The Issuers may require payment of a sum sufficient to cover any taxes, assessments or other governmental charges in connection with any transfer or exchange pursuant to this Section (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Section 3.06, 4.10, 4.15 or 9.05).

Section 2.07. Replacement Notes.

If a mutilated Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Issuers, such Holder shall furnish an indemnity bond sufficient in the judgment of the Issuers and the Trustee to protect the Issuers, the Subsidiary Guarantors, the Trustee, the Paying Agent and the Registrar from any loss which any of them may suffer if a Note is replaced. The Issuers and the Trustee may charge the Holder for their expenses in replacing a Note.

Every replacement Note is an additional obligation of the Issuers.

Section 2.08. Outstanding Notes.

Notes outstanding at any time are all Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Except as otherwise provided in TIA §316(a), a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note.

If a Note is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Issuers receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser.

If the Paying Agent segregates and holds in trust, in accordance with this Indenture, by 11:00 a.m. New York time, on a redemption date or other maturity date money sufficient to pay all principal, premium, if any, interest and Additional Interest, if any, payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest and Additional Interest, if any, on them cease to accrue.

Section 2.09. Temporary Notes.

Until definitive Notes are ready for delivery, the Issuers may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Issuers consider appropriate for temporary Notes. Without unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate definitive Notes and deliver them in exchange for temporary Notes.

Section 2.10. Cancellation.

An Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel (subject to the record retention requirements of the Exchange Act) all Notes surrendered for registration of transfer, exchange, payment or cancellation. Upon written request, the Trustee will deliver a certificate of such cancellation to the Issuers unless the Issuers direct the Trustee to deliver canceled Notes to the Issuers instead. The Issuers may not issue new Notes to replace Notes they have redeemed, paid or delivered to the Trustee for cancellation.

Section 2.11. Defaulted Interest.

If the Issuers default in a payment of interest on the Notes, the Issuers shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Issuers may pay the defaulted interest to the Persons who are Noteholders on a subsequent special record date. The Issuers shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Noteholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid.

Section 2.12. CUSIP Numbers.

The Issuers in issuing the Notes may use "CUSIP" numbers and corresponding "ISINs" (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers and corresponding "ISINs" in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers.

Section 2.13. Issuance of Additional Notes.

The Issuers shall be entitled, subject to their compliance with Section 4.09 (if applicable), to issue an unlimited amount of Additional Notes under this Indenture which shall have identical terms as the Initial Notes issued on the Initial Issuance Date, other than with respect to the date of issuance and issue price. The Initial Notes issued on the Initial Issuance Date, any Additional Notes and all Exchange Notes or Private Exchange Notes issued in exchange therefor shall be treated as a single class for all purposes under this Indenture.

With respect to any Additional Notes, the Issuers shall set forth in an Officers' Certificate, which shall be delivered to the Trustee, the following information:

(1) the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture;

(2) the issue price, the issue date and the CUSIP number and any corresponding ISIN of such Additional Notes; and

(3) whether such Additional Notes shall be Transfer Restricted Securities and issued in the form of Initial Notes as set forth in Exhibit 1 to the Appendix to this Indenture or shall be issued in the form of Exchange Notes as set forth in Exhibit A to the Appendix.

ARTICLE 3
REDEMPTION AND PREPAYMENT

Section 3.01. Notices to Trustee.

If the Issuers elect to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, they shall furnish to the Trustee, at least five Business Days (unless a shorter period shall be agreeable to the Trustee) before the date of giving notice of the redemption pursuant to Section 3.03, an Officers' Certificate setting forth (i) the clause of Section 3.07 pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed, (iv) the redemption price, and (v) whether it requests the Trustee to give notice of such redemption. Any such notice may be cancelled at any time prior to the mailing of notice of such redemption to any Holder and shall thereby be void and of no effect.

Section 3.02. Selection of Notes to Be Redeemed.

If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed among the Holders of the Notes as follows: (1) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or (2) if the Notes are not listed on any national securities exchange, on a pro rata basis. In the event of partial redemption other than on a pro rata basis, the particular Notes to be redeemed shall be selected, not less than five (5) Business Days (unless a shorter period shall be agreeable to the Trustee) prior to the giving of notice of the redemption pursuant to Section 3.03, by the Trustee from the outstanding Notes not previously called for redemption.

The Trustee shall promptly notify the Issuers in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption.

The provisions of the two preceding paragraphs of this Section 3.02 shall not apply with respect to any redemption affecting only a Global Note, whether such Global Note is to be redeemed in whole or

in part. In case of any such redemption in part, the unredeemed portion of the principal amount of the Global Note shall be in an authorized denomination.

Section 3.03. Notice of Redemption.

Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a Legal Defeasance, Covenant Defeasance or Discharge, the Issuers shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address.

The notice shall identify the Notes to be redeemed and shall state:

(a) the redemption date;

(b) the redemption price;

(c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in a principal amount equal to the unredeemed portion shall be issued in the name of the Holder upon cancellation of the original Note;

(d) the name and address of the Paying Agent;

(e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(f) that, unless the Issuers default in making such redemption payment, interest and Additional Interest, if any, on Notes called for redemption cease to accrue on and after the redemption date and the only remaining right of the Holders of such Notes is to receive payment of the redemption price upon surrender to the Paying Agent of the Notes redeemed;

(g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and

(h) that no representation is made as to the correctness or accuracy of the CUSIP or ISIN number, if any, listed in such notice or printed on the Notes.

If any of the Notes to be redeemed is in the form of a Global Note, then the Issuers shall modify such notice to the extent necessary to accord with the procedures of the Depository applicable to redemption.

At the Issuers' request, the Trustee shall give the notice of redemption in the Issuers' names and at their expense; provided, however, that the Issuers shall have delivered to the Trustee, as provided in Section 3.01, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the second preceding paragraph.

Section 3.04. Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional.

Section 3.05. Deposit of Redemption Price.

Prior to 11:00 a.m. New York time on the redemption date, the Issuers shall deposit with the Paying Agent (or, if the Company or a Subsidiary thereof is acting as its own Paying Agent, segregate and hold in trust as provided in Section 2.04 hereof) money sufficient in same day funds to pay the

redemption price of and accrued interest and Additional Interest, if any, on all Notes to be redeemed on that date. The Paying Agent shall promptly return to the Issuers any money deposited with the Paying Agent by an Issuer in excess of the amounts necessary to pay the redemption price of and accrued interest and Additional Interest, if any, on all Notes to be redeemed.

If the Issuers comply with the provisions of the preceding paragraph, on and after the redemption date, interest and Additional Interest, if any, shall cease to accrue on the Notes or the portions of Notes called for redemption whether or not such Notes are presented for payment, and the only remaining right of the Holders of such Notes shall be to receive payment of the redemption price upon surrender to the Paying Agent of the Notes redeemed. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of an Issuer to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful, on any interest and Additional Interest, if any, not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

Section 3.06. Notes Redeemed in Part.

Upon surrender of a Note that is redeemed in part, the Issuers shall issue in the name of the Holder and the Trustee shall authenticate for the Holder at the expense of the Issuers a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

Section 3.07. Optional Redemption.

(a) Except as set forth in clause (b) of this Section 3.07, the Issuers shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to June 15, 2009. On or after June 15, 2009, the Issuers shall have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Interest, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below:

YEAR	PERCENTAGE
2009	103.563	%
2010	102.375	%
2011	101.188	%
2012 and thereafter	100.000	%

(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at any time prior to June 15, 2007, the Issuers may on one or more occasions redeem up to 35% of the aggregate principal amount of Notes (including any Additional Notes) issued under this Indenture at a redemption price of 107.125% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings, provided that:

(1) at least 65% of the aggregate principal amount of Notes (including any Additional Notes) issued under this Indenture remains outstanding immediately after the occurrence of each such redemption (excluding any Notes held by the Company and its Subsidiaries); and

(2) each such redemption occurs within 120 days of the date of the closing of each such Equity Offering.

(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through Section 3.06 hereof.

Section 3.08. Mandatory Redemption.

Except as set forth under Sections 4.10 and 4.15 hereof, the neither of the Issuers shall be required to make mandatory redemption or sinking fund payments with respect to the Notes or to repurchase the Notes at the option of the Holders.

Section 3.09. Offer to Purchase by Application of Excess Proceeds.

In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below.

The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by Applicable Law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Settlement Date"), the Company shall purchase and pay for the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes validly tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the manner prescribed in the Notes.

Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state:

(a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open, including the time and date the Asset Sale Offer will terminate (the "Termination Date");

(b) the Offer Amount and the purchase price;

(c) that any Note not tendered or accepted for payment shall continue to accrue interest and Additional Interest, if any;

(d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest and Additional Interest, if any, after the Settlement Date;

(e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased;

(f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company or a Paying Agent at the address specified in the notice, before the Termination Date;

(g) that Holders shall be entitled to withdraw their election if the Company or the Paying Agent, as the case may be, receives, prior to the Termination Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

(h) that, if the aggregate principal amount of Notes surrendered by Holders, and Pari Passu Indebtedness surrendered by holders or lenders, collectively, exceeds the amount the Company is required to repurchase, the Trustee shall select the Notes and Pari Passu Indebtedness to be

purchased on a pro rata basis on the basis of the aggregate principal amount of tendered Notes and Pari Passu Indebtedness (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and

(i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).

If any of the Notes subject to an Asset Sale Offer is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depository applicable to repurchases.

Promptly after the Termination Date, the Company shall, to the extent lawful, accept for payment Notes or portions thereof tendered pursuant to the Asset Sale Offer in the aggregate principal amount required by Section 4.10 hereof, and prior to the Settlement Date it shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09 and Section 4.10. On the Settlement Date, the Company or the Paying Agent, as the case may be, shall mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall issue a new Note, and the Trustee shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on or before the Settlement Date.

ARTICLE 4
COVENANTS

Section 4.01. Payment of Notes.

The Issuers shall pay or cause to be paid the principal of, premium, if any, interest and Additional Interest, if any, on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, interest and Additional Interest, if any, shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 11:00 a.m. New York time on the due date money deposited by an Issuer or a Guarantor in immediately available funds and designated for and sufficient to pay all principal, premium, if any, interest and Additional Interest, if any, then due.

The Issuers shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to the interest rate on the Notes to the extent lawful; and they shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any (without regard to any applicable grace period), at the same rate to the extent lawful.

Section 4.02. Maintenance of Office or Agency.

The Issuers shall maintain an office or agency (which may be an office of the Trustee or an affiliate of the Trustee) where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuers in respect of the Notes and this Indenture may be served. The Issuers shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuers shall fail to maintain any such required office or agency or shall fail to furnish

the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

The Issuers may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. Further, if at any time there shall be no such office or agency in the City of New York where the Notes may be presented or surrendered for payment, the Issuers shall forthwith designate and maintain such an office or agency in the City of New York, in order that the Notes shall at all times be payable in the City of New York. The Issuers shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

The Issuers hereby designate the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03.

Section 4.03. Reports.

(a) Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, so long as any Notes are outstanding, the Company will file with the SEC (unless the SEC will not accept such a filing) for public availability within the time periods specified in the SEC's rules and regulations under the Exchange Act and, within five Business Days of filing, or attempting to file, the same with the SEC, furnish to the Trustee and, upon its prior request, to any of the Holders or Beneficial Owners of the Notes:

(1) all quarterly and annual financial and other information with respect to the Company and its Subsidiaries that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; and

(2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports.

The Company shall at all times comply with TIA § 314(a).

(b) The Company and the Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the Holders and Beneficial Owners of the Notes and to securities analysts and prospective investors in the Notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

(c) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, and if the aggregate cash flow of such Unrestricted Subsidiaries constitute more that 10% of the cash flow of the Company on a consolidated basis, then the quarterly and annual financial information required by paragraph (a) of this Section 4.03 will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and Restricted Subsidiaries, separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company.

Section 4.04. Compliance Certificate.

(a) The Issuers shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing

Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments of interest on the Notes are prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.

(b) The Issuers shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any of their respective Officers becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.

Section 4.05. Taxes.

The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes.

Section 4.06. Stay, Extension and Usury Laws.

Each of the Issuers and each of the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and each Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.07. Limitation on Restricted Payments.

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:

(1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or payable to the Company or a Restricted Subsidiary of the Company);

(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company;

(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness that is subordinated to the Notes or the Subsidiary Guarantors, except a payment of interest or principal within one month of the Stated Maturity thereof; or

(4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"),

unless, at the time of and after giving effect to such Restricted Payment, no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment and either:

(1) if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available at the time of such Restricted Payment is not less than 1.75 to 1.0, such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries (excluding Restricted Payments permitted by clauses (2), (3), (4) and (5) of the next succeeding paragraph) with respect to the quarter for which such Restricted Payment is made, is less than the sum, without duplication, of:

(a) Available Cash from Operating Surplus with respect to the Company's preceding fiscal quarter, plus

(b) 100% of the aggregate net cash proceeds received by the Company (including the fair market value of any Permitted Business or long-term assets that are used or useful in a Permitted Business to the extent acquired in consideration of Equity Interests of the Company (other than Disqualified Stock)) since the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Restricted Subsidiary of the Company), plus

(c) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or Cash Equivalent or otherwise liquidated or repaid for cash or Cash Equivalent, the lesser of (i) the return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment, plus

(d) the net reduction in Restricted Investments resulting from dividends, repayments of loans or advances, or other transfers of assets in each case to the Company or any of its Restricted Subsidiaries from any Person (including, without limitation, Unrestricted Subsidiaries) or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries, to the extent such amounts have not been included in Available Cash from Operating Surplus for any period commencing on or after the date of the indenture (items (b), (c) and (d) being referred to as "Incremental Funds"), minus

(e) the aggregate amount of Incremental Funds previously expended pursuant to this clause (1) and clause (2) below; or

(2) if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available at the time of such Restricted Payment is less than 1.75 to 1.00, such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries (excluding Restricted Payments permitted by clauses (2), (3), (4) and (5) of the next succeeding paragraph) with respect to the quarter for which such Restricted Payment is made (such Restricted Payments for purposes of this clause (2) meaning only distributions on limited partnership interests of the

Company, plus the related distribution on the general partner interest), is less than the sum, without duplication, of:

(a) $70 million less the aggregate amount of all Restricted Payments made by the Company and its Restricted Subsidiaries pursuant to this clause (2)(a) during the period ending on the last day of the fiscal quarter immediately preceding the date of such Restricted Payment and beginning on the date of this Indenture, plus

(b) Incremental Funds to the extent not previously expended pursuant to this clause (2) or clause (1) above.

So long as no Default or Event of Default has occurred and is continuing or would be caused thereby (except (i) with respect to clause (1) below under which the payment of a distribution or dividend is permitted, and (ii) a dividend or distribution by a non-Guarantor Subsidiary under clause (4)), the preceding provisions will not prohibit:

(1) the payment of any dividend or distribution within 60 days after the date of its declaration, if at the date of declaration the payment would have complied with the provisions of this Indenture;

(2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent (a) contribution (other than from a Restricted Subsidiary of the Company) to the equity capital of the Company or (b) sale (other than to a Restricted Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock), with a sale being deemed substantially concurrent if such redemption, repurchase, retirement, defeasance or acquisition occurs not more than 120 days after such sale; provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition will be excluded or deducted from the calculation of Available Cash from Operating Surplus and Incremental Funds;

(3) the defeasance, redemption, repurchase, retirement or other acquisition of subordinated Indebtedness of the Company or any Guarantor with the net cash proceeds from an incurrence of, or in exchange for, Permitted Refinancing Indebtedness;

(4) the payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis; or

(5) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any current or former director or employee of the General Partner, the Company or any of the Company's Restricted Subsidiaries pursuant to any director or employee equity subscription agreement or plan, stock or unit option agreement or similar agreement or plan; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $2.0 million in any twelve-month period.

The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant will be determined, in the case of amounts under $10.0 million, by an officer of the General Partner and, in the case of amounts over $10.0 million, by the Board of Directors of the General Partner, whose determination shall be evidenced by a Board Resolution. For purposes of determining compliance with this Section 4.07, in the event that a Restricted Payment meets the criteria of more than one of the

categories of Restricted Payments described in the preceding clauses (1) - (5), the Company will be permitted to classify (or later classify or reclassify in whole or in part in its sole discretion) such Restricted Payment in any manner that complies with this Section 4.07.

Section 4.08. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries.

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or pay any Indebtedness or other obligations owed to the Company or any of its Restricted Subsidiaries;

(2) make loans or advances to the Company or any of its Restricted Subsidiaries; or

(3) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.

However, the preceding restrictions of this Section 4.08 will not apply to encumbrances or restrictions existing under or by reason of:

(1) agreements as in effect on the date of this Indenture, including the Credit Agreement, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements or the Indebtedness to which they relate, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend, distribution and other payment restrictions than those contained in those agreements on the date of this Indenture;

(2) this Indenture, the Notes and the Subsidiary Guarantees;

(3) Applicable Law;

(4) any instrument governing Indebtedness or Equity Interest of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition, which encumbrance or restriction is not applicable to any Person or its Subsidiaries, or the properties or assets of any Person, other than the Person or its Subsidiaries, or the property or assets of the Person its Subsidiaries, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred;

(5) customary non-assignment provisions in transportation agreements or purchase and sale or exchange agreements or similar operational agreements or in licenses or leases, in each case entered into in the ordinary course of business;

(6) Capital Lease Obligations, mortgage financings or purchase money obligations, in each case for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (3) of the preceding paragraph;

(7) any agreement for the sale or other disposition of a Restricted Subsidiary of the Company that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;

(8) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

(9) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of Section 4.12 that limit the right of the debtor to dispose of the assets subject to such Liens;

(10) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business;

(11) any agreement or instrument relating to any property or assets acquired after the date of this Indenture, so long as such encumbrance or restriction relates only to the property or assets so acquired and is not and was not created in anticipation of such acquisitions;

(12) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;

(13) any agreement or instrument governing Indebtedness permitted to be incurred under this Indenture, provided that the terms and conditions of any such restrictions and encumbrances, taken as a whole, are not materially more restrictive than those contained in this Indenture, taken as a whole; and

(14) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements, including clawback, "make-well" or "keep-well" agreements, to maintain financial performance or results of operations of a joint venture entered into in the ordinary course of business.

Section 4.09. Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock.

The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company will not issue any Disqualified Stock, the Company will not permit any Restricted Subsidiary to issue any Disqualified Stock and the Company will not permit any of its other Restricted Subsidiaries to issue any preferred securities; provided, however, that the Issuers and any Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period.

The first paragraph of this Section 4.09 will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"):

(1) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness (including letters of credit) under one or more Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder) not to exceed the greater of $275.0 million and 15% of Consolidated Net Tangible Assets;

(2) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes issued and sold on the Initial Issuance Date and the related Subsidiary Guarantees to be issued on the date of this Indenture and the Exchange Notes and the related Subsidiary Guarantees issued pursuant to any Registration Rights Agreement;

(3) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of

construction or improvement of property, plant or equipment used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness incurred pursuant to this clause (3), not to exceed $20.0 million at any time outstanding;

(4) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness that was permitted by this Indenture to be incurred under the first paragraph of this covenant or clause (2) of this Section 4.09;

(5) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that:

(a) if the Company is the obligor on such Indebtedness and a Guarantor is not the obligee, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, or if a Guarantor is the obligor on such Indebtedness and neither the Company nor another Guarantor is the obligee, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Subsidiary Guarantee of such Guarantor; and

(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (ii) any sale or other transfer of any such Indebtedness to a Person that is neither the Company, nor a Restricted Subsidiary of the Company, nor a creditor to secure Indebtedness incurred either pursuant to the first paragraph of this covenant or to secure Permitted Debt, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (5).

(6) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations;

(7) the guarantee by the Company or any of its Restricted Subsidiaries of Indebtedness of the Company or any of its Restricted Subsidiaries that was permitted to be incurred by another provision of this Section 4.09;

(8) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of bid, performance, surety and similar bonds issued for the account of the Company and any of its Restricted Subsidiaries in the ordinary course of business, including guarantees and obligations of the Company or any of its Restricted Subsidiaries with respect to letters of credit supporting such obligations (in each case other than an obligation for money borrowed); and

(9) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount at any time outstanding, not to exceed the greater of $30.0 million and 3% of Consolidated Net Tangible Assets.

For purposes of determining compliance with this Section 4.09, (a) in the event that an item of Indebtedness (including Acquired Debt) meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (9) above, or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company will be permitted to classify (or later classify or reclassify in whole or in part in its sole discretion) such item of Indebtedness in any manner that complies with this Section 4.09; and (b) Indebtedness outstanding in currencies other than US dollars shall be converted on the date of incurrence.

The accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09.

Section 4.10. Limitation on Asset Sales.

The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:

(1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of;

(2) the fair market value is determined by (a) an executive officer of the General Partner if the value is less than $15.0 million and evidenced by an Officer's Certificate delivered to the Trustee, or (b) the General Partner's Board of Directors if the value is $15.0 million or more and evidenced by a resolution of the Board of Directors set forth in an Officer's Certificate delivered to the Trustee; and

(3) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following will be deemed to be cash:

(a) any liabilities, as shown on the Company's or such Restricted Subsidiary's most recent balance sheet, of the Company or any Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the transferee of any such assets pursuant to an agreement that releases the Company or such Subsidiary from further liability; and

(b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are, within 180 days after the Asset Sale, converted by the Company or such Subsidiary into cash, to the extent of the cash received in that conversion.

Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company or any such Restricted Subsidiary may apply (or enter into a definitive agreement for such application within such 360-day period, provided that such Net Proceeds are in fact applied within 45 days after the end of such 360-day period) those Net Proceeds at its option to any combination of the following:

(I) to repay Senior Debt;

(II) to acquire all or substantially all of the properties or assets of a Person primarily engaged in a Permitted Business;

(III) to acquire a majority of the Voting Stock of a Person primarily engaged in a Permitted Business;

(IV) to make capital expenditures; or

(V) to acquire other assets that are used or useful in a Permitted Business.

Pending the final application of any Net Proceeds, the Company or any such Restricted Subsidiary may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph will constitute "Excess Proceeds."

On the 361st day after the Asset Sale (or, at the Company's option, any earlier date), if the aggregate amount of Excess Proceeds then exceeds $20.0 million, the Company will make an offer (an "Asset Sale Offer") to all Holders, and all holders of other Indebtedness that is Pari Passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets, to purchase the maximum principal amount of Notes and such other Pari Passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of principal amount plus accrued and unpaid interest, if any, to the Settlement Date, subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the Settlement Date, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture, including, without limitation, the repurchase or redemption of Indebtedness that is subordinated to the Notes or, in the case of any Subsidiary Guarantee, the guarantee of such Guarantor. If the aggregate principal amount of Notes and other Pari Passu Indebtedness tendered in such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and such other Pari Passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.10, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under such provisions by virtue of such conflict.

Section 4.11. Limitation on Transactions with Affiliates.

The Company will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:

(1) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person or, if there is no such comparable transaction, on terms that are fair and reasonable to the Company or such Restricted Subsidiary; and

(2) the Company delivers to the Trustee:

(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15.0 million, a resolution of the Board of Directors of the General Partner set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this Section 4.11 and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and

(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $50.0 million, a written opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph of this Section 4.11:

(1) any employment, equity award, equity option or equity appreciation agreement or plan entered into by the Company or any of its Restricted Subsidiaries or the General Partner in the ordinary course of business;

(2) transactions between or among any of the Company and its Restricted Subsidiaries;

(3) transactions with a Person that is an Affiliate of the Company solely because the Company owns an Equity Interest in such Person;

(4) transactions effected in accordance with the terms of (a) corporate sharing agreements identified in this Indenture that are with The Anschutz Corporation and its subsidiaries with respect to general overhead and other administrative matters and (b) other agreements disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2003 (including the exhibits thereto) that are also identified in Annex C to this Indenture, in each case as such agreements are in effect on the date of this Indenture, and any amendment or replacement of any of such agreements so long as such amendment or replacement agreement is no less advantageous to the Company in any material respect than the agreement so amended or replaced;

(5) customary compensation, indemnification and other benefits made available to officers, directors or employees of the Company, a Restricted Subsidiary of the Company or the General Partner, including reimbursement or advancement of out-of-pocket expenses and provisions of officers' and directors' liability insurance;

(6) sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Company;

(7) in the case of gathering, transportation, marketing, hedging, production handling, operating, construction, storage, platform use, or other operational contracts, any such contracts are entered into in the ordinary course of business on terms substantially similar to those contained in similar contracts entered into by the Company or any Restricted Subsidiary and third parties or, if neither the Company nor any Restricted Subsidiary has entered into a similar contract with a third party, that the terms are no less favorable than those available from third parties on an arm's-length basis, as determined by the Board of Directors of the General Partner; and

(8) Restricted Payments that are permitted by Section 4.07 hereof.

Section 4.12. Limitation on Liens.

The Company will not and will not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) securing Indebtedness or Attributable Debt upon any of their property or assets, now owned or hereafter acquired, unless the Notes or any Subsidiary Guarantee of such Restricted Subsidiary, as applicable, is secured on an equal and ratable basis (or on a senior basis to, in the case of obligations subordinated in right of payment to the Notes or such Subsidiary Guarantee, as the case may be) with the obligations so secured until such time as such obligations are no longer secured by a Lien (other than Permitted Liens).

Section 4.13. Additional Subsidiary Guarantees.

If, after the date of this Indenture, any Domestic Subsidiary of the Company that is not already a Guarantor (including, without limitation, any Domestic Subsidiary acquired or created after the date of the indenture) guarantees any other Indebtedness of either of the Issuers or any Indebtedness of the Operating Company, or the Operating Company, if not then a Guarantor, guarantees any other Indebtedness of either of the Issuers or incurs any Indebtedness under any Credit Facility, then in

either case that Subsidiary will become a Guarantor by executing a supplemental indenture substantially in the form of Annex A hereto and delivering it to the Trustee within ten (10) Business Days of the date on which it guaranteed or incurred such Indebtedness, as the case may be, together with any Officers' Certificate or Opinion of Counsel required by Section 9.06; provided, however, that the preceding shall not apply to Subsidiaries of the Company that have properly been designated as Unrestricted Subsidiaries in accordance with this Indenture for so long as they continue to constitute Unrestricted Subsidiaries. Notwithstanding the preceding, any Guarantee of a Restricted Subsidiary that was incurred pursuant to this Section 4.13 as a result of a guarantee of any other Indebtedness shall provide by its terms that it shall be automatically and unconditionally released upon the release or discharge of the guarantee that resulted in the creation of such Restricted Subsidiary's Guarantee, except a discharge or release by, or as a result of payment under, such Guarantee.

Section 4.14. Corporate Existence.

Except as otherwise permitted pursuant to the terms hereof (including consolidation and merger permitted by Section 5.01), the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its partnership existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary; provided, however, that the Company shall not be required to preserve the existence of any of its Restricted Subsidiaries (except Finance Corp.) if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole and that the loss thereof is not adverse in any material respect to the Holders of the Notes.

Section 4.15. Offer to Repurchase Upon Change of Control.

(1) Within 30 days following the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of each Holder's Notes at a purchase price (the "Change of Control Payment") in cash equal to 101% of the aggregate principal amount of Notes outstanding, plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase, subject to the right of Holders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the Change of Control Purchase Date. Within 30 days following a Change of Control, the Company shall mail a notice of the Change of Control Offer to each Holder and the Trustee describing the transaction that constitutes the Change of Control and stating:

(a) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes validly tendered and not withdrawn will be accepted for payment;

(b) the purchase price and the purchase date, which shall be no earlier than 30 days but no later than 60 days from the date such notice is mailed (the "Change of Control Purchase Date");

(c) that the Change of Control Offer will expire as of the time specified in such notice on the Change of Control Purchase Date and that the Company shall pay the Change of Control Purchase Price for all Notes purchased as of the Change of Control Purchase Date promptly thereafter on the Change of Control Purchase Date;

(d) that any Note not tendered will continue to accrue interest and Additional Interest, if any;

(e) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest and Additional Interest, if any, after the Change of Control Purchase Date;

(f) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, properly endorsed for transfer, together with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed and such customary documents as the Company may reasonably request, to the Paying Agent at the address specified in the notice prior to the termination of the Change of Control Offer on the Change of Control Purchase Date;

(g) that Holders will be entitled to withdraw their election if the Paying Agent receives, prior to the termination of the Change of Control Offer, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing its election to have the Notes purchased; and

(h) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof.

If any of the Notes subject to a Change of Control Offer is in the form of a Global Note, then the Company shall modify such notice to the extent necessary to accord with the procedures of the Depository applicable to repurchases. Further, the Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.15, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under such provisions by virtue of such conflict.

(2) On the Change of Control Purchase Date, the Company shall, to the extent lawful, accept for payment all Notes or portions thereof (in integral multiples of $1,000) properly tendered pursuant to the Change of Control Offer. Promptly thereafter on the Change of Control Purchase Date the Company shall:

(a) deposit with the Paying Agent by 11:00 a.m., New York City time, an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered; and

(b) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company.

On the Change of Control Purchase Date, the Paying Agent shall mail to each Holder of Notes properly tendered the Change of Control Payment for such Notes (or, if all the Notes are then in global form, make such payment through the facilities of the Depository) and the Trustee shall authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided, however, that each such new Note will be in a principal amount of $1,000 or an integral multiple of $1,000. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date.

(3) The Change of Control provisions described above shall be applicable whether or nor any other provisions of this Indenture are applicable.

(4) The Company shall not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the time and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes properly tendered and not withdrawn under such Change of Control Offer.

Section 4.16. Permitted Business Activities.

The Company will not, and will not permit any Restricted Subsidiary to, engage in any business other than a Permitted Business, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole.

Finance Corp. may not incur Indebtedness unless (1) the Company is a co-obligor or guarantor of such Indebtedness or (2) the net proceeds of such Indebtedness are loaned to the Company, used to acquire outstanding debt securities issued by the Company or used to repay Indebtedness of the Company as permitted under Section 4.09. Finance Corp. may not engage in any business not related directly or indirectly to obtaining money or arranging financing for the Company or its Restricted Subsidiaries.

Section 4.17. Sale and Leaseback Transactions.

The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction; provided that the Company or any Guarantor may enter into a Sale and Leaseback Transaction if:

(1) the Company or that Guarantor, as applicable, could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such Sale and Leaseback Transaction under the Fixed Charge Coverage Ratio test in the first paragraph of Section 4.09 and (b) incurred a Lien to secure such Indebtedness pursuant to Section 4.12;

(2) the gross cash proceeds of that Sale and Leaseback Transaction are at least equal to the fair market value, as determined in good faith by the Board of Directors of the General Partner and set forth in an Officers' Certificate delivered to the Trustee, of the property that is the subject of that Sale and Leaseback Transaction; and

(3) the transfer of assets in that Sale and Leaseback Transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 4.10.

Section 4.18. Covenant Termination.

If at any time (a) the rating assigned to the Notes by at least two of S&P, Moody's or Fitch is an Investment Grade Rating and (b) no Default has occurred and is continuing under this Indenture, the Company and its Restricted Subsidiaries will no longer be subject to the provisions of Sections 4.07, 4.08, 4.09, 4.11, 4.16, 4.17(1)(a), 4.17(2), 4.17(3), 4.19 and clause (4) of Section 5.01 of this Indenture. However, the Company and its Restricted Subsidiaries will remain subject to all of the other provisions of this Indenture.

Section 4.19. Designation of Restricted and Unrestricted Subsidiaries.

The Board of Directors of the General Partner may designate any Restricted Subsidiary of the Company to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary of the Company is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly designated will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the first paragraph of Section 4.07 or represent Permitted Investments, as determined by the Company; provided that any designation of a Restricted Subsidiary as an Unrestricted Subsidiary will only be permitted if the Investment would be permitted at that time and if the Subsidiary so designated otherwise meets the definition of an Unrestricted Subsidiary.

The Board of Directors of the General Partner may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation will only be permitted if (1) such Indebtedness is permitted under Section 4.09, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (2) no Default or Event of Default would be in existence following such designation.

ARTICLE 5
SUCCESSORS

Section 5.01. Merger, Consolidation, or Sale of Assets.

Neither of the Issuers may, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not such Issuer is the survivor); or (2) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the properties or assets of the Issuers and the Restricted Subsidiaries, taken as a whole, in one or more related transactions, to another Person; unless:

(1) either: (a) such Issuer is the survivor; or (b) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made is a Person organized or existing under the laws of the United States, any state of the United States or the District of Columbia; provided, however, that Finance Corp. may not consolidate or merge with or into any Person other than a corporation satisfying such requirement so long as the Company is not a corporation;

(2) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition has been made to assume all the obligations of such Issuer under the Notes, this Indenture and the Registration Rights Agreement pursuant to a supplemental indenture or other agreement in a form reasonably satisfactory to the Trustee;

(3) immediately after such transaction no Default or Event of Default exists;

(4) in the case of a transaction involving the Company and not Finance Corp., the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made will, (a) on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; or (b) have a Fixed Charge Coverage Ratio, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, not less than the Fixed Charge Coverage Ratio of the Company immediately prior to such transaction; and

(5) such Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or disposition and such supplemental indenture (if any) comply with this Indenture provided that clause (4) shall not apply to any sale of assets of a Restricted Subsidiary to the Company or another Restricted Subsidiary or the merger, or consolidation of a Restricted Subsidiary into any Restricted Subsidiary or the Company.

Notwithstanding the preceding paragraph of this Section 5.01, the Company is permitted to reorganize as any other form of entity in accordance with the following procedures provided that:

(1) the reorganization involves the conversion (by merger, sale, contribution or exchange of assets or otherwise) into a form of entity other than a limited partnership formed under Delaware law;

(2) the entity so formed by or resulting from such reorganization is an entity organized or existing under the laws of the United States, any state thereof or the District of Columbia;

(3) the entity so formed by or resulting from such reorganization assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee;

(4) immediately after such reorganization no Default or Event of Default exists; and

(5) such reorganization is not materially adverse to the Holders or Beneficial Owners of the Notes (for purposes of this clause (5) a reorganization will not be considered materially adverse to the Holders or Beneficial Owners of the Notes solely because the successor or survivor of such reorganization (a) is subject to federal or state income taxation as an entity or (b) is considered to be an "includable corporation" of an affiliated group of corporations with the meaning of Section 1504(b)(i) of the Code or any similar state or local law).

Section 5.02. Successor Substituted.

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of an Issuer in accordance with Section 5.01 hereof, the successor formed by such consolidation or into or with which such Issuer is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and may exercise every right and power of, such Issuer under this Indenture with the same effect as if such successor had been named as such Issuer herein and shall be substituted for such Issuer (so that from and after the date of such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" or "Finance Corp.," as the case may be, shall refer instead to the successor and not to the Company or Finance Corp., as the case may be); and thereafter, if an Issuer is dissolved following a transfer of all or substantially all of its properties or assets in accordance with this Indenture, it shall be discharged and released from all obligations and covenants under this Indenture and the Notes. The Trustee shall enter into a supplemental indenture to evidence the succession and substitution of such successor and such discharge and release of such Issuer.

ARTICLE 6
DEFAULTS AND REMEDIES

Section 6.01. Events of Default.

An "Event of Default" occurs if one of the following shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be involuntary or be effected by operation of law):

(a) default for 30 days in the payment when due of interest on the Notes;

(b) default in payment when due of the principal of, or premium, if any, on the Notes;

(d) failure by the Company for 60 days after written notice to comply with any of the other agreements in this Indenture;

(e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Initial Issuance Date, if such default:

(i) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "Payment Default"); or

(ii) results in the acceleration of such Indebtedness prior to its Stated Maturity,

and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $20.0 million or more; provided that if any such default is cured or waived or any such acceleration rescinded, or such Indebtedness is repaid, within a period of 30 days from the continuation of such default beyond the applicable grace period or the occurrence of such acceleration, as the case may be, such Event of Default and any consequential acceleration of the Notes shall be automatically rescinded, so long as such rescission does not conflict with any judgment or decree;

(f) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $20.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;

(g) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee;

(h) the Company, Finance Corp., any of the Company's Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company pursuant to or within the meaning of Bankruptcy Law:

(i) commences a voluntary case,

(ii) consents in writing to the entry of an order for relief against it in an involuntary case,

(iii) consents in writing to the appointment of a Custodian of it or for all or substantially all of its property,

(iv) makes a general assignment for the benefit of its creditors, or

(v) admits in writing it generally is not paying its debts as they become due; or

(i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against the Company, Finance Corp., any of the Company's Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company in an involuntary case;

(ii) appoints a Custodian of the Company, Finance Corp., any of the Company's Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company or for all or substantially all of the property of the Company, Finance Corp., any of the Company's Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company, that, taken together, would constitute a Significant Subsidiary of the Company; or

(iii) orders the liquidation of the Company, Finance Corp., any of the Company's Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company;

and the order or decree remains unstayed and in effect for 60 consecutive days.

Section 6.02. Acceleration.

If any Event of Default occurs and is continuing, the Trustee, by notice to the Issuers, or the Holders of at least 25% in principal amount of the then outstanding Notes, by notice to the Issuers and the Trustee, may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately, together with all accrued and unpaid interest, Additional Interest, if any, and premium, if any, thereon. Notwithstanding the preceding, if an Event of Default specified in clause (h) or (i) of Section 6.01 hereof occurs with respect to the Company, Finance Corp., any of the Company's Restricted Subsidiaries that is a Significant Subsidiary of the Company or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary of the Company, all outstanding Notes shall become due and payable without further action or notice, together with all accrued and unpaid interest, Additional Interest, if any, and premium, if any, thereon. The Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except with respect to nonpayment of principal, interest, premium or Additional Interest, if any, that have become due solely because of the acceleration) have been cured or waived.

In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes on or after June 15, 2009 pursuant Section 3.07(a) hereof, an equivalent premium will also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to June 15, 2009 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to that date, then the premium specified in Section 3.07 with respect to the first year that the Notes may be redeemed at the Issuers' option pursuant to Section 3.07(a) will also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes.

Section 6.03. Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of and premium, interest and Additional Interest, if any, on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy

or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

Section 6.04. Waiver of Past Defaults.

Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of or premium, interest or Additional Interest, if any, on the Notes (including in connection with an offer to purchase). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 6.05. Control by Majority.

Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability.

Section 6.06. Limitation on Suits.

A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if:

(a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default;

(b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy;

(c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity or security satisfactory to the Trustee against any loss, liability or expense;

(d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and

(e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request.

A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note.

Section 6.07. Rights of Holders of Notes to Receive Payment.

Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal of and premium, interest and Additional Interest, if any, on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

Section 6.08. Collection Suit by Trustee.

If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuers and the Guarantors for the whole amount of principal of, premium, interest and Additional Interest, if any, remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest

and Additional Interest, if any, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09. Trustee May File Proofs of Claim.

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Issuers (or any other obligor upon the Notes), their creditors or their property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10. Priorities.

If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order:

First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the Trustee's costs and expenses of collection;

Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, interest and Additional Interest, if any, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, interest and Additional Interest, if any, respectively; and

Third: to the Issuers or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.

Section 6.11. Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to

Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes.

ARTICLE 7
TRUSTEE

Section 7.01. Duties of Trustee.

(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

(b) Except during the continuance of an Event of Default:

(i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.

(e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with an Issuer. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02. Rights of Trustee.

(a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from an Issuer shall be sufficient if signed by an Officer of such Issuer.

(f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holder shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.

(g) The Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article 4 hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except: (1) any Event of Default occurring pursuant to Section 6.01(a) or 6.01(b) hereof; or (2) any Default or Event of Default of which a Responsible Officer shall have received written notification or obtained actual knowledge.

(h) The permissive right of the Trustee to act hereunder shall not be construed as a duty.

Section 7.03. Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuers, any Guarantor or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest (as defined in the TIA) after a Default has occurred and is continuing, it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.

Section 7.04. Trustee's Disclaimer.

The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for either Issuer's use of the proceeds from the Notes or any money paid to an Issuer or upon either Issuer's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.

Section 7.05. Notice of Defaults.

If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of or premium, if any, interest or Additional Interest, if any, on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes.

Section 7.06. Reports by Trustee to Holders of the Notes.

Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief

report dated as of such reporting date that complies with TIA § 313(a) (but if no event described in TIA § 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA § 313(b)(2) and § 313(b)(1). The Trustee shall also transmit by mail all reports as required by TIA § 313(c).

A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Issuers and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA § 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange.

Section 7.07. Compensation and Indemnity.

The Issuers shall pay to the Trustee from time to time such reasonable compensation as the Issuers and the Trustee may agree in writing for the Trustee's acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuers shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.

The Issuers and the Guarantors shall indemnify the Trustee, jointly and severally, against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Issuers and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by an Issuer, any Guarantor or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence, bad faith or willful misconduct. The Trustee shall notify the Issuers and the Guarantors promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuers and the Guarantors shall not relieve the Issuers or the Guarantors of their obligations hereunder. The Issuers and the Guarantors shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Issuers and the Guarantors shall pay the reasonable fees and expenses of such counsel; provided that the Issuers and the Guarantors will not be required to pay such fees and expenses if they assume the Trustee's defense with counsel acceptable to and approved by the Trustee (such approval not to be unreasonably withheld) and there is no conflict of interest between the Issuers and the Trustee in connection with such defense. The Issuers and the Guarantors need not pay for any settlement made without their consent, which consent shall not be unreasonably withheld. Neither the Issuers nor the Guarantors need reimburse the Trustee for any expense or indemnity against any liability or loss of the Trustee to the extent such expense, liability or loss is attributable to the negligence, bad faith or willful misconduct of the Trustee.

The obligations of the Issuers and the Guarantors under this Section 7.07 shall survive the satisfaction and discharge of this Indenture.

To secure the Issuers' and the Guarantors' payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture.

When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

The Trustee shall comply with the provisions of TIA § 313(b)(2) to the extent applicable.

Section 7.08. Replacement of Trustee.

A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section.

The Trustee may resign in writing upon 30 days notice at any time and be discharged from the trust hereby created by so notifying the Issuers. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Issuers in writing and may appoint a successor trustee with the consent of the Issuers. The Issuers may remove the Trustee if:

(a) the Trustee fails to comply with Section 7.10 hereof;

(b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(d) the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuers shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuers.

If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10 hereof, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuers. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuers' and the Guarantors' obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee.

Section 7.09. Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. As soon as practicable, the successor Trustee shall mail a notice of its succession to the Issuers and the Holders of the Notes.

Section 7.10. Eligibility; Disqualification.

There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition.

This Indenture shall always have a Trustee who satisfies the requirements of TIA § 310(a)(1), (2) and (5). The Trustee is subject to TIA § 310(b).

Section 7.11. Preferential Collection of Claims Against Issuers.

The Trustee is subject to TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.

The Issuers may, at the option of their respective Boards of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, exercise their rights under either Section 8.02 or 8.03 hereof with respect to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.

Section 8.02. Legal Defeasance and Discharge.

Upon the Issuers' exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Issuers shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have discharged their obligations with respect to the Notes and this Indenture, and each Guarantor shall be deemed to have discharged its obligations with respect to its Subsidiary Guarantee, on the date the conditions set forth in Section 8.04 below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Issuers shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, and each Guarantor shall be deemed to have paid and discharged their Subsidiary Guarantee (which in each case shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below) and to have satisfied all its other obligations under such Notes or Subsidiary Guarantee and this Indenture (and the Trustee, on demand of and at the expense of the Issuers, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of and premium, if any, interest and Additional Interest, if any, on such Notes when such payments are due, (b) the Issuers' obligations with respect to such Notes under Sections 2.03, 2.04, 2.07, 2.09 and 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuers' and the Guarantors' obligations in connection therewith and (d) the Legal Defeasance provisions of this Article 8. Subject to compliance with this Article 8, the Issuers may exercise their option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

If the Issuers exercise their Legal Defeasance option, each Guarantor will be released and relieved of any obligations under its Subsidiary Guarantee and any security for the Notes (other than the trust) will be released.

Section 8.03. Covenant Defeasance.

Upon the Issuers' exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Issuers shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Article 4 (other than those in Sections 4.01, 4.02, 4.06 and 4.14) and in clause (d) of Section 5.01 hereof on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuers and any Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Issuers' exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(e) through 6.01(g) hereof shall not constitute Events of Default.

If the Issuers exercise their Covenant Defeasance option, each Guarantor will be released and relieved of any obligations under its Subsidiary Guarantee and any security for the Notes (other than the trust) will be released.

Section 8.04. Conditions to Legal or Covenant Defeasance.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(a) the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of and premium, interest and Additional Interest, if any, on the Notes on the date of fixed maturity or on the applicable redemption date, as the case may be, and the Issuers must specify whether the Notes are being defeased to the date of fixed maturity or to a particular redemption date;

(b) in the case of an election under Section 8.02 hereof, the Issuers shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that:

(1) the Issuers have received from, or there has been published by, the Internal Revenue Service a ruling; or

(2) since the Initial Issuance Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(c) in the case of an election under Section 8.03 hereof, the Issuers shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the

same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default described in clause (h) or (i) of Section 6.01 are concerned, at any time in the period ending on the 91st day after the day of deposit;

(e) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound;

(f) the Issuers must have delivered to the Trustee an Opinion of Counsel (which may be based on such solvency certificates or solvency opinions as counsel deems necessary or appropriate) to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law or any comparable provision of applicable law;

(g) the Issuers must have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Issuers with the intent of preferring the Holders over any other creditors of the Issuers or with the intent of defeating, hindering, delaying or defrauding creditors of the Issuers or others; and

(h) the Issuers must have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.

Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee pursuant to Section 8.04 or 8.08 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company or any of its Subsidiaries acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, interest and Additional Interest, if any, but such money need not be segregated from other funds except to the extent required by law.

The Issuers shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 or 8.08 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuers from time to time upon the written request of the Issuers any money or non-callable Government Securities held by it as provided in Section 8.04 or 8.08 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance, Covenant Defeasance or Discharge, as the case may be.

Section 8.06. Repayment to Issuers.

Subject to applicable escheat and abandoned property laws, any money deposited with the Trustee or any Paying Agent, or then held by an Issuer, in trust for the payment of the principal of or premium, interest or Additional Interest, if any, on any Note and remaining unclaimed for two years after such principal, premium, interest or Additional Interest, if any, has become due and payable shall be paid to the Issuers on their written request or (if then held by an Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured creditor, look only to the Issuers for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuers as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuers cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Issuers.

Section 8.07. Reinstatement.

If the Trustee or Paying Agent is unable to apply any money or non-callable Government Securities in accordance with Section 8.05 hereof, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuers' obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.05 hereof; provided, however, that, if an Issuer makes any payment of principal of or premium, interest, Additional Interest, if any, on any Note following the reinstatement of its obligations, such Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

Section 8.08. Discharge.

This Indenture shall be satisfied and discharged and shall cease to be of further effect as to all Notes issued hereunder (except for (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in clause (b) of this Section 8.08, and as more fully set forth in such clause (b), payments in respect of the principal of and premium, if any, interest and Additional Interest, if any, on such Notes when such payments are due, (b) the Issuers' obligations with respect to such Notes under Sections 2.03, 2.04, 2.07, 2.09 and 4.02 hereof and (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuers' obligations in connection therewith), when:

(1) either:

(a) all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust and thereafter repaid to the Issuers, have been delivered to the Trustee for cancellation; or

(b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable or will become due and payable within one year by reason of the mailing of a notice of redemption or otherwise, and the Issuers or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for

principal, premium, if any, and accrued interest and Additional Interest, if any, to the date of fixed maturity or redemption;

(2) no Default or Event of Default has occurred and is continuing on the date of the deposit or will occur as a result of the deposit and the deposit will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(3) the Issuers or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture;

(4) the Issuers have delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at fixed maturity or the redemption date, as the case may be; and

(5) the Issuers have delivered an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge of this Indenture ("Discharge") have been satisfied.

ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01. Without Consent of Holders of Notes.

Notwithstanding Section 9.02 of this Indenture, the Issuers, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note:

(a) to cure any ambiguity, defect or inconsistency;

(b) to provide for uncertificated Notes in addition to or in place of certificated Notes;

(c) to provide for the assumption of an Issuer's or Guarantor's obligations to the Holders of the Notes pursuant to Article 5 hereof;

(d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or surrender any right or power conferred upon the Issuers or the Subsidiary Guarantors by the Indenture that does not adversely affect the legal rights hereunder of any Holder, provided that any change to conform this Indenture to the Offering Memorandum shall not be deemed to adversely affect the legal rights hereunder of any Holder;

(e) to secure the Notes or the Subsidiary Guarantees pursuant to the requirements of Section 4.12 or otherwise;

(f) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture;

(g) to add any additional Guarantor with respect to the Notes or to evidence the release of any Guarantor from its Subsidiary Guarantee in accordance with Article 10 hereof;

(h) to comply with the requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA;

(i) to evidence or provide for the acceptance of appointment under this Indenture of a successor Trustee; or

(j) provide for the issuance of exchange securities which shall have terms substantially identical in all respects to the Notes (except that transfer restrictions contained in the Notes shall

be modified or eliminated as appropriate) and which shall be treated, together with any outstanding notes, as a single class of securities.

Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Issuers and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise.

Section 9.02. With Consent of Holders of Notes.

Except as provided above in Section 9.01 and below in this Section 9.02, the Issuers, the Guarantors and the Trustee may amend or supplement this Indenture and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default or compliance with any provision of this Indenture, the Notes or any other agreement or documents delivered to the Trustee pursuant to the terms of this Indenture, may be waived with the consent of the Holders of a majority in principal amount of the Notes outstanding (including consents obtained in connection with a purchase of, tender offer or exchange offer for Notes).

Upon the request of the Issuers accompanied by Board Resolutions authorizing their execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Issuers and the Guarantors in the execution of such amended or supplemental indenture, unless such amended or supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental indenture.

It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof and to the last paragraph of this Section 9.02, the Holders of a majority in principal amount of the Notes then outstanding may waive compliance in a particular instance by the Issuers with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment, supplement or waiver may not (with respect to any Notes held by a non-consenting Holder):

(a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(b) reduce the principal of or change the fixed maturity of any Note or alter any of the provisions with respect to the redemption or repurchase of the Notes (except as provided in Sections 3.09, 4.10 and 4.15 hereof);

(d) waive a Default or Event of Default in the payment of principal of or premium, interest or Additional Interest, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);

(e) make any Note payable in money other than that stated in the Notes;

(f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or premium, interest or Additional Interest, if any, on the Notes (except as permitted in clause (g) below);

(g) waive a redemption or repurchase payment with respect to any Note (other than a payment required by Sections 3.09, 4.10 and 4.15 hereof);

(h) release any Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture; or

(i) make any change in the preceding amendment, supplement and waiver provisions.

Section 9.03. Compliance with Trust Indenture Act.

Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect.

A consent to any amendment, supplement or waiver under this Indenture by any Holder given in connection with a purchase, tender or exchange of such Holder's Notes shall not be rendered invalid by such purchase, tender or exchange.

Section 9.04. Revocation and Effect of Consents.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment or waiver or revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No consent shall be valid or effective for more than 90 days after such record date except to the extent that the requisite number of consents to the amendment, supplement or waiver have been obtained within such 90-day period or as set forth in the next paragraph of this Section 9.04.

After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of clauses (a) through (i) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same indebtedness as the consenting Holder's Note.

Section 9.05. Notation on or Exchange of Notes.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Issuers, in exchange for all Notes, may issue and the Trustee shall authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

Section 9.06. Trustee to Sign Amendments, etc.

The Trustee shall sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture.

ARTICLE 10
GUARANTEES OF NOTES

Section 10.01. Subsidiary Guarantees.

Subject to this Article 10, each of the Guarantors hereby, jointly and severally, unconditionally guarantee, on a senior unsecured basis, to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes held thereby and the Obligations of the Issuers hereunder and thereunder, that: (a) the principal of and premium, interest and Additional Interest, if any, on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at Stated Maturity, by acceleration, upon repurchase or redemption or otherwise, and interest on the overdue principal of and premium, (to the extent permitted by law) interest and Additional Interest, if any, on the Notes, and all other payment Obligations of the Issuers to the Holders or the Trustee hereunder or thereunder will be promptly paid in full and performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other Obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at Stated Maturity, by acceleration, upon repurchase or redemption or otherwise. Failing payment when so due of any amount so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under the Subsidiary Guarantees, and shall entitle the Holders to accelerate the obligations of the Guarantors hereunder in the same manner and to the same extent as the Obligations of the Issuers.

The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against an Issuer, any action to enforce the same or any other circumstance (other than complete performance) which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor further, to the extent permitted by law, hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of an Issuer, any right to require a proceeding first against an Issuer, protest, notice and all demands whatsoever and covenants that its Subsidiary Guarantee will not be discharged except by complete performance of the Obligations contained in the Notes and this Indenture.

If any Holder or the Trustee is required by any court or otherwise to return to an Issuer, the Guarantors, or any Custodian, Trustee or other similar official acting in relation to any of the Issuers or the Guarantors, any amount paid by an Issuer or any Guarantor to the Trustee or such Holder, the Subsidiary Guarantees, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to, and hereby waives, any right of subrogation in relation to the Holders in respect of any Obligations guaranteed hereby.

Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (a) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of its Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed thereby, and (b) in the event of any declaration of acceleration of such Obligations as provided in Article 6 hereof, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purpose of its Subsidiary Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantees.

Section 10.02. Guarantors May Consolidate, etc., on Certain Terms.

(a) No Guarantor shall sell or otherwise dispose of all or substantially all of its properties or assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person (other than the Company or another Guarantor), unless, (i) either (1) the Person acquiring the properties or assets in any such sale or other disposition or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture, substantially in the form of Annex A hereto, under the Notes, this Indenture and its Subsidiary Guarantee on terms set forth therein, or (2) the Net Proceeds of such sale or other disposition are applied in accordance with the provisions of Section 4.10, and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists.

(b) In the case of any such consolidation or merger and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and substantially in the form of Annex A hereto, of the Subsidiary Guarantee and the due and punctual performance of all of the covenants of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor.

Section 10.03. Releases of Subsidiary Guarantees.

The Subsidiary Guarantee of a Guarantor shall be released: (1) in connection with any sale or other disposition of all or substantially all of the properties or assets of such Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Company, if the sale or other disposition complies with Section 4.10; (2) in connection with any sale or other disposition of all of the Capital Stock of such Guarantor to a Person that is not (either before or after giving effect to such transaction) a Restricted Subsidiary of the Company, if the sale or other disposition complies with Section 4.10; (3) if the Company designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of this Indenture; (4) upon Legal Defeasance or Covenant Defeasance or Discharge in accordance with Article 8; (5) in the case of any Guarantor other than the Operating Company, at such time as such Guarantor ceases to guarantee any other Indebtedness of either of the Issuers and any Indebtedness of the Operating Company; or (6) in the case of the Operating Company, at such time as the Operating Company ceases to guarantee any other

Indebtedness of either of the Issuers, provided that it is then no longer an obligor with respect to any Indebtedness under any Credit Facility.

Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect that any of the conditions described in the foregoing clauses (1) - (6) has occurred, the Trustee shall execute any documents reasonably requested by the Company in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and premium, interest and Additional Interest, if any, on the Notes and for the other obligations of such Guarantor under this Indenture as provided in this Article 10.

Section 10.04. Limitation on Guarantor Liability.

The obligations of each Guarantor under its Subsidiary Guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under this Indenture, result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law and not otherwise being void or voidable under any similar laws affecting the rights of creditors generally.

Section 10.05. "Trustee" to Include Paying Agent.

In case at any time any Paying Agent other than the Trustee shall have been appointed and be then acting hereunder, the term "Trustee" as used in this Article 10 shall in each case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully and for all intents and purposes as if such Paying Agent were named in this Article 10 in place of the Trustee.

ARTICLE 11
MISCELLANEOUS

Section 11.01. Trust Indenture Act Controls.

If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA §318(c), such TIA-imposed duties shall control.

Section 11.02. Notices.

Any notice or communication by an Issuer, any Guarantor or the Trustee to the others is duly given if in writing (in the English language) and delivered in person or mailed by first class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the others' address:

If to any of the Issuers or the Guarantors:

Pacific Energy Partners, L.P.
5900 Cherry Avenue
Long Beach, California 90805-4405
Attention: Chief Financial Officer
Fax No.: (562) 728-2823

with a copy to:

Vinson & Elkins L.L.P.
666 Fifth Avenue
26^th Floor
New York, New York 10109
Attention: Alan P. Baden
Fax No.: (212) 237-0100

If to the Trustee:

Wells Fargo Bank, National Association
707 Wilshire Blvd.
17th Floor
Los Angeles, CA 90017
Attention: Corporate Trust Department
Fax No.: (213) 614-3355

An Issuer, any of the Guarantors or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications.

All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery in each case to the address shown above.

Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA § 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.

If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

If either of the Issuers mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.

Section 11.03. Communication by Holders of Notes with Other Holders of Notes.

Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Issuers, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

Section 11.04. Certificate and Opinion as to Conditions Precedent.

Upon any request or application by an Issuer to the Trustee to take any action under this Indenture, such Issuer shall furnish to the Trustee:

(a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and

(b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.

Section 11.05. Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA § 314(a)(4)) shall comply with the provisions of TIA § 314(e) and shall include:

(a) a statement that the person making such certificate or opinion has read such covenant or condition;

(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(c) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and

(d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been satisfied.

Section 11.06. Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

Section 11.07. No Personal Liability of Directors, Officers, Employees and Unitholders.

No past, present or future director, officer, partner, member, employee, incorporator, manager or unitholder or other owner of Equity Interest of the Issuers, the General Partner, or any Guarantor, as such, will have any liability for any obligations of the Issuers or any Guarantor under the Notes, this Indenture or the Subsidiary Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

Section 11.08. Governing Law.

THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Section 11.09. No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 11.10. Successors.

All agreements of the Issuers and the Guarantors in this Indenture and the Notes shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors.

Section 11.11. Severability.

In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 11.12. Table of Contents, Headings, etc.

The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

Section 11.13. Counterparts.

This Indenture may be signed in counterparts and by the different parties hereto in separate counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument.

[Signatures on following page]

SIGNATURES

PACIFIC ENERGY PARTNERS, L.P.
By:	Pacific Energy GP, Inc., its general partner
	By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk, Senior Vice President, Chief Financial Officer and Treasurer
PACIFIC ENERGY FINANCE CORPORATION
By:

Name:

PACIFIC ENERGY GP, INC.
By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk, Senior Vice President, Chief Financial Officer and Treasurer
PACIFIC ENERGY GROUP LLC
By:	Pacific Energy Partners, L.P., its sole member
	By:	Pacific Energy GP, Inc., its general partner
	By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk, Senior Vice President, Chief Financial Officer and Treasurer
PEG CANADA GP LLC
By:	Pacific Energy Partners, L.P., its sole member
	By:	Pacific Energy GP, Inc., its general partner
	By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk, Senior Vice President, Chief Financial Officer and Treasurer

PEG CANADA, L.P.
By:	PEG Canada GP LLC, its general partner
	By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk, Senior Vice President, Chief Financial Officer and Treasurer
ROCKY MOUNTAIN PIPELINE SYSTEM LLC,
By:	Pacific Energy Group LLC, its sole member
	By:	Pacific Energy Partners, L.P., its sole member
		By:	Pacific Energy GP, Inc., its general partner
		By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk, Senior Vice President, Chief Financial Officer and Treasurer

RANCH PIPELINE LLC,
By:	Pacific Energy Group LLC, its sole member
	By:	Pacific Energy Partners, L.P., its sole member
		By:	Pacific Energy GP, Inc., its general partner
		By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk, Senior Vice President, Chief Financial Officer and Treasurer
PACIFIC MARKETING AND TRANSPORTATION LLC
By:	Pacific Energy Group LLC, its sole member
	By:	Pacific Energy Partners, L.P., its sole member
		By:	Pacific Energy GP, Inc., its general partner
		By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk, Senior Vice President, Chief Financial Officer and Treasurer

		WELLS FARGO BANK, NATIONAL ASSOCIATION, AS TRUSTEE
		By:		/s/ JEANIE MAR
		Name:		Jeanie Mar
		Title:		Vice President

EX-4.3 3 a2141701zex-4_3.htm EXHIBIT 4.3
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Exhibit 4.3

REGISTRATION RIGHTS AGREEMENT

AMONG

PACIFIC ENERGY PARTNERS, L. P.,

PACIFIC ENERGY FINANCE CORPORATION,

THE GUARANTORS

AND

THE INITIAL PURCHASERS

7¹/8% Senior Notes due 2014

Dated: June 16, 2004

PACIFIC ENERGY PARTNERS, L.P.
(a Delaware limited partnership)

PACIFIC ENERGY FINANCE CORPORATION
(a Delaware corporation)

$250,000,000
7¹/8% Senior Subordinated Notes due 2014

REGISTRATION RIGHTS AGREEMENT

June 16, 2004

LEHMAN BROTHERS INC.
BANC OF AMERICA SECURITIES LLC
CITIGROUP GLOBAL MARKETS INC.
BNP PARIBAS SECURITIES CORP.
SCOTIA CAPITAL (USA) INC.
WACHOVIA CAPITAL MARKET, LLC

c/o LEHMAN BROTHERS INC.
745 Seventh Avenue
New York, New York 10019

Dear Sirs:

Pacific Energy Partners, L.P., a Delaware limited partnership (the "Partnership"), Pacific Energy Finance Corporation, a Delaware corporation ("Finance Corp." and together with the Partnership, the "Issuers"), and the Guarantors listed on the signature page hereto (the "Guarantors"), propose to issue and sell to you (the "Initial Purchasers"), upon the terms set forth in a purchase agreement dated June 10, 2004 (the "Purchase Agreement"), $250,000,000 aggregate principal amount of their 7¹/8% Senior Notes due 2014 (the "Initial Securities"). The Initial Securities will be issued pursuant to an Indenture, to be dated as of the date hereof (the "Indenture"), among the Issuers, the Guarantors and Wells Fargo Bank, N.A. as trustee (the "Trustee"). The Issuers and the Guarantors are collectively referred to herein as the "Company." To satisfy a condition to the obligations of the Initial Purchasers under the Purchase Agreement, the Issuers agree with the Initial Purchasers, for the benefit of the Initial Purchasers and the subsequent holders of the Securities (as defined below) (collectively the "Holders"), as follows:

1.: Registered Exchange Offer. Unless not permitted by applicable law (after the Company has complied with the ultimate paragraph of this Section 1), the Company shall prepare and, not later than 90 days (such 90th day being a "Filing Deadline") after the date on which the Initial Purchasers purchase the Initial Securities pursuant to the Purchase Agreement (the "Closing Date"), file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the Holders of Transfer Restricted Securities (as defined in Section 6 hereof), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of debt securities of the Issuers issued under the Indenture, identical in all material respects to the Initial Securities and registered under the Securities Act (the "Exchange Securities"). The Company shall (i) use commercially reasonable efforts to cause such Exchange Offer Registration Statement to become effective under the Securities Act within 270 days after the Closing Date (such 270th day being an "Effectiveness Deadline") and (ii) keep the Exchange Offer Registration Statement effective for not less than 30

days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period").

If the Company commences the Registered Exchange Offer, the Company (i) will be entitled to consummate the Registered Exchange Offer 30 days after such commencement (provided that the Company has accepted all the Initial Securities theretofore validly tendered in accordance with the terms of the Registered Exchange Offer) and (ii) will be required to consummate the Registered Exchange Offer as soon as practicable after the date on which the Exchange Offer Registration Statement is declared effective but no later than the 40th Business Day after such effectiveness date (the "Consummation Deadline").

As soon as practicable after the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Securities electing to exchange the Initial Securities for Exchange Securities (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Securities in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Exchange Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States.

The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Initial Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and (c) Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Securities (as defined below) acquired in exchange for Initial Securities constituting any portion of an unsold allotment, is required to deliver a prospectus containing the information required by Item 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale.

The Company shall use commercially reasonable efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided, however, that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Securities held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 180-days after the consummation of the Registered Exchange Offer.

If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Initial Securities acquired by it as part of its initial distribution, the Company, simultaneously with the

delivery of the Exchange Securities pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the "Private Exchange") for the Initial Securities held by such Initial Purchaser, a like principal amount of debt securities of the Issuers issued under the Indenture and identical in all material respects to the Initial Securities (the "Private Exchange Securities"). The Initial Securities, the Exchange Securities and the Private Exchange Securities are herein collectively called the "Securities."

In connection with the Registered Exchange Offer, the Company shall:

a.: mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal;
b.: keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders;
c.: utilize the services of a depositary for the Registered Exchange Offer, which may be the Trustee or an affiliate of the Trustee;
d.: permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and

otherwise comply with all applicable laws.

As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall:

(x): accept for exchange all the Securities validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; and
(y): cause the Trustee to deliver promptly to each Holder of the Initial Securities, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Initial Securities of such Holder so accepted for exchange.

The Indenture will provide that the Exchange Securities will not be subject to the transfer restrictions set forth in the Indenture and that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter.

Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Securities surrendered in exchange therefor or, if no interest has been paid on the Initial Securities, from the date of original issue of the Initial Securities.

Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Initial Securities or the Exchange Securities within the meaning of the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company or if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities and (v) if such Holder is a broker-dealer, that it will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of

market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities.

Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

If following the date hereof there has been announced a change in Commission policy with respect to exchange offers that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Registered Exchange Offer is permitted by applicable federal law, the Company will seek a no-action letter or other favorable decision from the Commission allowing the Company to consummate the Registered Exchange Offer. The Company will pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effectuate a change of SEC policy. In connection with the foregoing, the Company will take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (i) participating in telephonic conferences with the Commission, (ii) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that the Registered Exchange Offer should be permitted and (iii) diligently pursuing a resolution (which need not be favorable) by the Commission staff.

2.

Shelf Registration. If, (i) because of any change in law or in applicable interpretations thereof by the staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) any Initial Purchaser so requests within 90 days following consummation of the Registered Exchange Offer with respect to the Initial Securities (or the Private Exchange Securities) not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iii) any Holder (other than an Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer or, in the case of any Holder (other than an Exchanging Dealer) that participates in the Registered Exchange Offer, such Holder does not receive freely tradable Exchange Securities on the date of the exchange and any such Holder so requests and the prospectus contained in the Exchange Offer Registration Statement is not available for resales by such Holder, the Company shall take the following actions (the date on which any of the conditions described in the foregoing clauses (i) through (iii) occur, including in the case of clause (iii) the receipt of the required notice, being a "Trigger Date"):

a.: The Company shall (but in no event more than 75 days after the Trigger Date (such 75th day being a "Shelf Filing Deadline")) file with the Commission and thereafter use commercially reasonable efforts to cause to be declared effective on or prior to the 150th day after the Trigger Date (such 150th day being an "Effectiveness Deadline") a registration statement (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, a "Registration Statement") on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided,

however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder.

b.: The Company shall use its commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the date of its effectiveness or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer subject to restrictions on resale pursuant to Rule 144 under the Securities Act, or any successor rule thereof. The Company shall be deemed not to have used commercially reasonable efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law; provided, however, if such Shelf Registration Statement fails to remain effective solely because of the making, by the Company or any of its subsidiaries, of a material acquisition that requires financial statements to be filed with the Commission, the Company shall be deemed to have used commercially reasonable efforts to keep the Shelf Registration Statement effective during the requisite period so long as the period of time such Shelf Registration Statement is not effective does not exceed sixty (60) days.
c.: Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

3.

Registration Procedures. In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply:

a.: The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, the Company shall use commercially reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Item 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the

beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Securities received by such broker-dealer in the Registered Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Company based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders who propose to sell Securities pursuant to the Shelf Registration Statement as selling securityholders.

b.

The Company shall give written notice to the Initial Purchasers, the Holders of the Securities (with respect to any Shelf Registration Statement) and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made):

i.: when the Registration Statement or any amendment thereto has been filed with the Commission;
ii.: when the Registration Statement or any post-effective amendment thereto has become effective;
iii.: of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information;
iv.: of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose;
v.: of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and
vi.: of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading.

c.

The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time, of any order suspending the effectiveness of the Registration Statement.

d.

The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).

e.

The Company shall deliver to each Exchanging Dealer and each Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference).

f.: The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement.
g.: The Company shall deliver to each Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Securities covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement.
h.: Prior to any public offering of the Securities pursuant to any Shelf Registration Statement the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Shelf Registration Statement; provided, however, that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject.
i.: The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends.
j.: Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Securities and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known

Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j).

k.: Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, and provide the applicable trustee with certificates for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company.
l.: The Partnership will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Partnership's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period.
m.: The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.
n.: The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, including requiring the Holder to properly complete and execute such selling Security Holder notice and questionnaires, and any amendments or supplements thereto, as the Company may reasonably deem necessary or appropriate, and the Company may exclude from such registration the Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request.
o.: The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration.
p.: In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Initial Purchasers by Lehman Brothers Inc. and on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof.

q.: In the case of any Shelf Registration, the Company, if requested by any Holder of Securities covered thereby, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the incorporation, organization or formation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations, limited partnerships or limited liability companies; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; except as otherwise disclosed in the prospectus, the absence of material legal or governmental proceedings involving the Company and its subsidiaries; except as otherwise disclosed in the prospectus, the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in light of the circumstances existing at the time that such documents were filed with the Commission under the Securities Act or the Exchange Act); (ii) its officers to execute and deliver all customary documents and certificates and updates thereof requested by any underwriters of the applicable Securities and (iii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Shelf Registration Statement to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72.
r.: If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Company shall mark, or caused to be marked, on the Initial Securities so exchanged that such Initial Securities are being canceled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall the Initial Securities be marked as paid or otherwise satisfied.
s.: In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Rules") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such

Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules.

t.: The Company shall use commercially reasonable efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby.

4.

Registration Expenses.

a.

All expenses incident to the Company's performance of and compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement is ever filed or becomes effective, including without limitation;

i.: all registration and filing fees and expenses;
ii.: all fees and expenses of compliance with federal securities and state "blue sky" or securities laws;
iii.: all expenses of printing (including printing of prospectuses), messenger and delivery services and telephone;
iv.: all fees and disbursements of counsel for the Company; and
v.: all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance).

The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company.

b.: In connection with any Registration Statement required by this Agreement, the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Initial Securities in the Registered Exchange Offer and/or selling or reselling Securities pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Vinson & Elkins L.L.P. unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared.

5.

Indemnification.

a.: The Company agrees to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or

are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final prospectus if the Company had previously furnished copies thereof to such Holder or Participating Broker-Dealer; provided further, however, that this indemnity agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party.

b.: Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons.

c.: Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
d.: If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such

indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company.

e.: The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

6.

Additional Interest Under Certain Circumstances.

a.

By way of liquidated damages, additional interest (the "Additional Interest") with respect to the Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iv) below being herein called a "Registration Default"):

i.: any Registration Statement required by this Agreement is not filed with the Commission on or prior to the Filing Deadline or Shelf Filing Deadline, as applicable;
ii.: any Registration Statement required by this Agreement is not declared effective by the Commission on or prior to the applicable Effectiveness Deadline;
iii.: the Registered Exchange Offer has not been consummated on or prior to the Consummation Deadline; or
iv.: any Registration Statement required by this Agreement has been declared effective by the Commission but (A) such Registration Statement thereafter ceases to be effective or (B) such Registration Statement or the related prospectus ceases to be usable in connection with resales of Transfer Restricted Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder.

Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission.

Additional Interest shall accrue on the Securities over and above the interest set forth in the title of the Securities from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at a rate of 0.25% per annum (the "Additional Interest Rate") for the first 90-day period immediately following the occurrence of such Registration Default. The Additional Interest Rate shall increase by an additional 0.25% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum Additional Interest Rate of 1.0% per annum.

b.: A Registration Default referred to in Section 6(a)(iv) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related

prospectus or (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured (1) in any case, if such Registration Default occurs for a continuous period in excess of 30 days or (2) solely in the case of a material acquisition by the Company or any of its subsidiaries requiring financial statements to be filed with the Commission, if such Registration Default occurs for a continuous period in excess of sixty (60) days.

c.: Any amounts of Additional Interest due pursuant to Section 6(a) will be payable in cash on the regular interest payment dates with respect to the Securities. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest Rate by the principal amount of the Securities and further multiplied by a fraction, the numerator of which is the number of days such Additional Interest Rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360.
d.: "Transfer Restricted Securities" means each Security until (i) the date on which such Security has been exchanged by a person other than a broker-dealer for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of an Initial Security for an Exchange Security, the date on which such Exchange Security is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

7.: Rules 144 and 144A. The Company shall use its best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder of Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Initial Securities identified to the Company by the Initial Purchasers upon request. Upon the request of any Holder of Initial Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act.
8.: Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("Managing Underwriters") will be selected, with the reasonable approval of the Company, by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering.

No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any

underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

9.

Miscellaneous.

a.

Remedies. Each of the parties hereto acknowledges and agrees that the payment of Additional Interest as provided in Section 6 hereof shall be the exclusive remedy for any failure by the Company to comply with its obligations under Sections 1 and 2 hereof.

b.

No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof.

c.

Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consent. Without the consent of the Holder of each Security, however, no modification may change the provisions relating to the payment of Additional Interest.

d.

Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery:

(1): if to a Holder of the Securities, at the most current address given by such Holder to the Company;
(2): if to the Initial Purchasers, to them in care of:

Lehman Brothers Inc.
745 Seventh Avenue
New York, NY 10019
Attention: Syndicate Department
(Fax: (212) 526-6588)

with a copy to:

Office of the General Counsel
Lehman Brothers Inc.
399 Park Avenue
New York, NY 10022
Attention: Director of Litigation
(Fax: (646) 758-5203)

(3): if to the Company at its address as follows:

25 Pacific Energy Partners, L.P.
5900 Cherry Avenue
Long Beach, California 90805
Attention Lynn T. Wood
(Fax (562) 728-2318)

with a copy to:

Vinson & Elkins L.L.P.
666 Fifth Avenue, 26th Floor
New York, NY 10103
Attention: Alan P. Baden
(Fax: (917) 849-5337)

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

e.: Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.
f.: Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns.
g.: Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
h.: Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
i.: Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
j.: Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
k.: Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.
l.: Submission to Jurisdiction. By the execution and delivery of this Agreement, the Company submits to the nonexclusive jurisdiction of the competent Federal and state courts in the Borough of Manhattan in the City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become

a binding agreement among the several Initial Purchasers and the Company in accordance with its terms.

Very truly yours,
PACIFIC ENERGY PARTNERS, L.P.
By:	Pacific Energy GP, Inc., its general partner
	By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk Senior Vice President, Chief Financial Officer and Treasurer
PACIFIC ENERGY FINANCE CORPORATION
	By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk Senior Vice President, Chief Financial Officer and Treasurer
PACIFIC ENERGY GP, INC.
	By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk Senior Vice President, Chief Financial Officer and Treasurer
PACIFIC ENERGY GROUP LLC
By:	Pacific Energy Partners, L.P., its sole member
	By:	Pacific Energy GP, Inc., its general partner
		By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk Senior Vice President, Chief Financial Officer and Treasure
PEG CANADA GP LLC
By:	Pacific Energy Partners, L.P., its sole member
	By:	Pacific Energy GP, Inc., its general partner
		By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk Senior Vice President, Chief Financial Officer and Treasurer
PEG CANADA, L.P.
By:	PEG Canada GP LLC, its general partner
	By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk, Senior Vice President, Chief Financial Officer and Treasurer

ROCKY MOUNTAIN PIPELINE SYSTEM LLC
By:	Pacific Energy Group LLC, its sole member
	By:	Pacific Energy Partners, L.P., its sole member
		By:	Pacific Energy GP, Inc., its general partner
			By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk Senior Vice President, Chief Financial Officer and Treasurer
RANCH PIPELINE LLC
By:	Pacific Energy Group LLC, its sole member
	By:	Pacific Energy Partners, L.P., its sole member
		By:	Pacific Energy GP, Inc., its general partner
			By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk Senior Vice President, Chief Financial Officer and Treasurer
PACIFIC MARKETING AND TRANSPORTATION LLC
By:	Pacific Energy Group LLC, its sole member
	By:	Pacific Energy Partners, L.P., its sole member
		By:	Pacific Energy GP, Inc., its general partner
			By:	/s/ GERALD A. TYWONIUK Gerald A. Tywoniuk Senior Vice President, Chief Financial Officer and Treasurer

The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written.

LEHMAN BROTHERS INC.
BANK OF AMERICA SECURITIES LLC
CITIGROUP GLOBAL MARKETS INC.
BNP PARIBAS SECURITIES CORP.
SCOTIA CAPITAL (USA) INC.
WACHOVIA CAPITAL MARKETS, LLC

By:		LEHMAN BROTHERS INC., as Authorized Representative
		By:		/s/ MICHAEL KONISBERG Name: Michael Konisberg Title:

ANNEX A

Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution."

ANNEX B

Each broker-dealer that receives Exchange Securities for its own account in exchange for Initial Securities, where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution."

ANNEX C

PLAN OF DISTRIBUTION

Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until, 200 , all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus.

The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the

Securities) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

ANNEX D

If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

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Exhibit 4.3

EX-10.2 4 a2141701zex-10_2.htm EXHIBIT 10.2
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Exhibit 10.2

FOURTH AMENDMENT TO CREDIT AGREEMENT

THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (herein called the "Fourth Amendment") dated as of the 28th day of May, 2004, by and among PACIFIC ENERGY GROUP LLC, a Delaware limited liability company ("Borrower"), PACIFIC ENERGY PARTNERS, L.P., a Delaware limited partnership ("Pacific Energy Partners"), and FLEET NATIONAL BANK, as administrative agent (in such capacity, "Administrative Agent"), and the Lenders referred to below.

W I T N E S S E T H:

WHEREAS, Borrower, Pacific Energy Partners, Administrative Agent, the Syndication Agent, Co-Documentation Agents, Arrangers party thereto and the lenders party thereto ("Lenders") have entered into that certain Credit Agreement dated as of July 19, 2002, as amended by a First Amendment to Credit Agreement dated July 18, 2003, a Second Amendment to Credit Agreement dated December 20, 2003 and a Third Amendment to Credit Agreement dated as of April 23, 2004 (as so amended, the "Original Agreement") for the purpose and consideration therein expressed, whereby Lenders became obligated to extend credit to Borrower as therein provided;

WHEREAS, Pacific Energy Partners intends to sell certain senior notes and use the net cash proceeds of such sale to repay in full the Term Loans and for other general corporate purposes permitted by the terms of the Original Agreement; and

WHEREAS, Pacific Energy Partners has requested, and the Majority Lenders have agreed, to certain additional amendments to the Original Agreement to permit the sale of the senior notes;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and in the Original Agreement and in consideration of the loans and other credit that may hereafter be extended by Lenders to Borrower, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I.—DEFINITIONS AND REFERENCES

Section 1.1. Terms Defined in the Original Agreement. Unless the context otherwise requires or unless otherwise expressly defined herein, the terms defined in the Original Agreement shall have the same meanings whenever used in this Fourth Amendment.

ARTICLE II.—AMENDMENTS TO ORIGINAL AGREEMENT

Section 2.1. Definitions.

(a) The definition of "Guaranty Obligation" is amended to add the following at the end of the current proviso therein:

"; provided further that the subordination by a Restricted Person of Indebtedness or other obligations owed by the primary obligor to such Restricted Person that are Investments permitted under clause (e) or (f) of the definition of Permitted Investments to Indebtedness or other obligations owed by such primary obligor to another Person shall not be considered a Guaranty Obligation."

(b) The definition of "Senior Indebtedness" is amended to revise clause (v) thereof to read as follows:

"(v) Indebtedness described in Section 7.1(e), (f) or (g)."

(c) The definitions of "Finance Entity", "PEG Canada LP" and "PEG Canada GP" are added to Section 1.1 of the Original Agreement in appropriate alphabetical order to read as follows:

"Finance Entity' means any Restricted Subsidiary of Pacific Energy Partners that (a) is not also a Subsidiary of Borrower and (b) is formed solely for the purpose of issuing Indebtedness specifically permitted by Section 7.1(f).

"PEG Canada LP" means PEG Canada, L.P., a Delaware limited partnership.

"PEG Canada GP" means PEG Canada GP LLC, a Delaware limited liability company."

Section 2.2. Indebtedness. Clause (f) of Section 7.1 of the Original Agreement is hereby deleted and replaced with the following:

"(f) Indebtedness evidenced by senior or subordinated notes issued by Pacific Energy Partners and/or Finance Entity and guaranties thereof by one or more of Borrower and the Subsidiary Guarantors (excluding any PUC Restricted Subsidiary that has not delivered a full Guaranty); provided that (i) such Indebtedness is unsecured, (ii) such notes are issued in a public offering under a registration statement, or are issued to accredited institutional investors pursuant to Rule 144A or Regulation S of the Securities Exchange Commission with an agreement to exchange such notes for substantially identical notes offered under such a registration statement (and the issuance of such registered notes upon such exchange shall not be considered a new incurrence of Indebtedness under this Section 7.1(f)), (iii) at the time of such issuance and after giving effect thereto on a pro forma basis, Pacific Energy Partners and Borrower shall comply with the requirements of Sections 7.10, 7.11, 7.12 and 7.15, (iv) no principal amount of such Indebtedness matures earlier than two (2) years after the Revolving Loan Maturity Date as such date exists as of the date of issuance of the notes, (v) at the time of such issuance and after giving effect thereto, no Default or Event of Default shall exist or would occur, (vi) Pacific Energy Partners and Borrower shall have complied with and caused each of the Subsidiary Guarantors to comply with Section 6.16(d), and (vii) Pacific Energy Partners and Borrower shall have delivered to the Administrative Agent a certificate in reasonable detail reflecting compliance with each of the foregoing requirements of this Section 7.1(f), including calculations with supporting detail regarding each of the requirements of Sections 7.10, 7.11, 7.12 and 7.15, together with such other evidence of compliance with the foregoing requirements of this Section 7.1(f) as the Administrative Agent may reasonably request; and"

Section 2.3. Hedging Contracts. Section 7.3 of the Original Agreement is hereby amended to add the following clause (d) thereto:

"(d) Hedging Contracts entered into by Pacific Energy Partners, Borrower or any Guarantor with the purpose and effect of hedging the risk of foreign currency fluctuations."

Section 2.4. Sale of Property. The following proviso is added to the end of the last sentence of Section 7.5:

"; provided that the subordination of indebtedness or other obligations that are Investments permitted under clause (e) or (f) of the definition of Permitted Investments shall not be considered a sale, pledge or other disposition of such Indebtedness or other obligations."

Section 2.5. Prohibited Contracts

(a) The introductory clause of the first sentence of Section 7.9 (which reads "Except as expressly provided for in the Loan Documents and as described in the Disclosure Schedule,") is hereby deleted in its entirety and the following inserted in lieu thereof:

"Except (i) as expressly provided for in the Loan Documents, (ii) as described in the Disclosure Schedule or (iii) under agreements evidencing the Indebtedness permitted under Section 7.1(f),"

(b) The second sentence of Section 7.9 is hereby deleted in its entirety and the following inserted in lieu thereof:

"Except under agreements evidencing Permitted Liens (but then only with respect to the property subject to such Permitted Lien), no Restricted Person will, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on its ability or the ability of any other Restricted Person to grant Liens to the Administrative Agent for the benefit of the Lenders."

Section 2.6. Limitation on Investments and New Businesses.

(a) Clause (a) of Section 7.7 is hereby deleted in its entirety and the following inserted in lieu thereof:

"(a) except as provided below with respect to Finance Entity, engage directly or indirectly in any business or conduct any operations except in connection or incidental to its Present and Related Businesses,"

(b) The third sentence of Section 7.7 is hereby deleted in its entirety and the following two sentences inserted in lieu thereof:

"Pacific Energy Partners will not engage in any material business other than the ownership of the Borrower, the ownership of PEG Canada LP and PEG Canada GP, the ownership of Finance Entity, and the ownership of Unrestricted Subsidiaries. Finance Entity may act as issuer or co-issuer of Indebtedness specifically permitted by Section 7.1(f) but otherwise will not engage in any business (other than as is incidental to such issuance) and will not own any assets."

Section 2.7. Transactions with Affiliates. Clause (d) of Section 7.8 is hereby deleted in its entirety and the following inserted in lieu thereof:

"(d) Investments in Unrestricted Subsidiaries and guaranties by Pacific Energy Partners, PEG Canada LP, or PEG Canada GP of liabilities of Unrestricted Subsidiaries, in each case subject to compliance with Sections 6.17 and 6.18, and"

Section 2.8. Subsidiaries; Unrestricted Subsidiaries. The first sentence following clause (h) of Section 6.17 is deleted in its entirety and replaced with the following inserted in lieu thereof:

"Pacific Energy Partners, PEG Canada LP and PEG Canada GP (but not other Restricted Persons) may provide unsecured guaranties (which guaranties may not be guarantied by any Restricted Person) of (i) trade obligations (but not Indebtedness) of their respective Unrestricted Subsidiaries from time to time and (ii) general and administrative expenses (but not Indebtedness) incurred in the ordinary course of business of their respective Unrestricted Subsidiaries (such as motor vehicle leases and employee credit card expenses) from time to time so long as the aggregate amount of such obligations and expenses (or the specified limit of the applicable guaranties, if less) outstanding on any day under preceding clauses (i) and (ii) does not exceed the amount of additional Indebtedness that is available to be incurred on such day under Section 7.1(g)."

Section 2.9. Limitation on Mergers, Issuances of Securities. The third sentence of Section 7.4 is amended to add the following proviso to the end thereof:

"; provided, however, that Finance Entity may be an issuer or co-issuer of Indebtedness specifically permitted by Section 7.1(f)."

Section 2.10. Section References. All references in the Original Agreement to Section 7.10 shall be deemed to refer to Section 7.10 and to Section 7.15.

ARTICLE III.—CONDITIONS OF EFFECTIVENESS

Section 3.1. Effective Date. This Fourth Amendment shall become effective, and is expressly conditioned, upon (a) the payment in full of all principal of and interest on the Term Loans, (b) Pacific Energy Partners and Borrower complying with each of the provisions of Sections 6.13, 6.16 and 6.17 (including, with respect to any Unrestricted Subsidiaries to be designated as Restricted Subsidiaries) to the extent specified by Administrative Agent and (c) the receipt by Administrative Agent, at Administrative Agent's office, of a counterpart of this Fourth Amendment executed and delivered by Borrower and Majority Lenders. Pacific Energy Partners, Borrower and Majority Lenders agree that the execution and delivery of this Fourth Amendment by Majority Lenders is made effective immediately upon the payment in full of all principal of and interest on the Term Loans.

ARTICLE IV.—REPRESENTATIONS AND WARRANTIES

Section 4.1. Representations and Warranties. In order to induce Administrative Agent and Majority Lenders to enter into this Fourth Amendment, Pacific Energy Partners and Borrower represent and warrant to each Lender that:

(a) The representations and warranties contained in Article V of the Original Agreement are true and correct at and as of the time of the effectiveness hereof (except to the extent that the facts on which such representations and warranties are based have been changed by the extension of credit under the Original Agreement or to the extent that such representation or warranty was made as of a specific date or updated, modified or supplemented, as of a subsequent date with the consent of Majority Lenders).

(b) Each of Pacific Energy Partners and Borrower is duly authorized to execute and deliver this Fourth Amendment, Borrower is and will continue to be duly authorized to borrow monies under the Credit Agreement, and each of Pacific Energy Partners and Borrower is and will continue to be duly authorized to perform its obligations under the Credit Agreement. Pacific Energy Partners and Borrower have duly taken all action necessary to authorize the execution and delivery of this Fourth Amendment and to authorize the performance of the obligations of Pacific Energy Partners and Borrower hereunder.

(c) The execution and delivery by each Related Person of this Fourth Amendment, the performance by each Related Person of its obligations hereunder and the consummation of the transactions contemplated hereby and thereby do not and will not conflict with any provision of law, statute, rule or regulation or of the organizational documents of any Related Person, or of any material agreement, judgment, license, order or permit applicable to or binding upon any Related Person, or result in the creation of any lien, charge or encumbrance upon any assets or properties of any Related Person. Except for those which have been obtained, no consent, approval, authorization or order of any court or governmental authority or third party is required in connection with the execution and delivery by any Related Person of this Fourth Amendment or the consummation by any Related Person of the transactions contemplated hereby.

(d) When duly executed and delivered, each of this Fourth Amendment, and the Credit Agreement will be a legal and binding obligation of Pacific Energy Partners and Borrower enforceable

in accordance with its terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and by equitable principles of general application.

ARTICLE V.—MISCELLANEOUS

Section 5.1. Ratification of Agreements. The Original Agreement as hereby amended is hereby ratified and confirmed in all respects. Any reference to the Credit Agreement in any Loan Document shall be deemed to be a reference to the Original Agreement as hereby amended. The execution, delivery and effectiveness of this Fourth Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Lenders or Administrative Agent under the Credit Agreement, the Notes, or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement, the Notes or any other Loan Document.

Section 5.2. Survival of Agreements. All representations, warranties, covenants and agreements of Pacific Energy Partners and Borrower herein shall survive the execution and delivery of this Fourth Amendment and the performance hereof, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by any Related Person hereunder or under the Credit Agreement to Administrative Agent or any Lender shall be deemed to constitute representations and warranties by, and agreements and covenants of, Pacific Energy Partners and Borrower under this Fourth Amendment and under the Credit Agreement.

Section 5.3. Loan Documents. This Fourth Amendment is a Loan Document, and all provisions in the Credit Agreement pertaining to Loan Documents apply hereto.

Section 5.4. Governing Law. This Fourth Amendment shall be governed by and construed in accordance with the laws applicable to the Credit Agreement.

Section 5.5. Counterparts. This Fourth Amendment may be separately executed in counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Fourth Amendment.

THIS FOURTH AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, this Fourth Amendment is executed as of the date first written above.

BORROWER:	PACIFIC ENERGY GROUP LLC
	By:	/s/ GERRY TYWONIUK Gerry Tywoniuk, Senior Vice President, Chief Financial Officer and Treasurer
PACIFIC ENERGY PARTNERS:	PACIFIC ENERGY PARTNERS, L.P.
	By:	PACIFIC ENERGY GP, INC. its general partner
		By:	/s/ GERRY TYWONIUK Gerry Tywoniuk, Senior Vice President, Chief Financial Officer
	FLEET NATIONAL BANK, Administrative Agent, LC Issuer and a Lender
	By:	/s/ TERRENCE RONAN Terrence Ronan, Managing Director

Signature Page to Fourth Amendment
To Credit Agreement

In Witness Whereof, the undersigned Lender hereby enters into the Fourth Amendment to Credit Agreement dated as of May 28, 2004 among Pacific Energy Group LLC, Pacific Energy Partners, L.P., Fleet National Bank, as administrative agent, and the Lender's signatory thereto.

Signature Page to Fourth Amendment
To Credit Agreement

BNP Paribas Name of Lender
By:	/s/ J. ONISCHUK
	Name:	J. Onischuk
	Title:	Director
By:	/s/ MARK A. COX
	Name:	Mark A. Cox
	Title:	Director

Signature Page to Fourth Amendment
To Credit Agreement

Signature Page to Fourth Amendment
To Credit Agreement

Fortis Capital Corp Name of Lender
By:	/s/ DARRELL W. HOLLEY
	Name:	Darrell W. Holley
	Title:	Managing Director
By:	/s/ CASEY LOWARY
	Name:	Casey Lowary
	Title:	Senior Vice President

Signature Page to Fourth Amendment
To Credit Agreement

CONSENT AND AGREEMENT

The undersigned each hereby consents to the provisions of this Fourth Amendment and the transactions contemplated herein and hereby (a) ratifies and confirms the Guaranty dated as of July 19, 2002, made by it in favor of FLEET NATIONAL BANK, as administrative agent (in such capacity), and the other Loan Documents to which it is a party and (b) agrees that its obligations and covenants thereunder are unimpaired hereby and shall remain in full force and effect.

		PACIFIC MARKETING AND TRANSPORTATION LLC ROCKY MOUNTAIN PIPELINE SYSTEM LLC RANCH PIPELINE LLC
		By:		/s/ LYNN T. WOOD Lynn T. Wood, Vice President of each above-named limited liability company

CONSENT AND AGREEMENT

The undersigned hereby consents to the provisions of this Fourth Amendment and the transactions contemplated herein and hereby (a) ratifies and confirms the Guaranty dated as of July 19, 2002, made by it in favor of FLEET NATIONAL BANK, as administrative agent (in such capacity), and the other Loan Documents to which it is a party and (b) agrees that its obligations and covenants thereunder are unimpaired hereby and shall remain in full force and effect.

PACIFIC ENERGY PARTNERS, L.P.
By:	PACIFIC ENERGY GP, INC., its general partner
	By:	/s/ LYNN WOOD Lynn Wood, Vice President

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Exhibit 10.2

EX-31.1 5 a2141701zex-31_1.htm EXHIBIT 31.1
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Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Irvin Toole, Jr., certify that:

1.

I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 30, 2004 of Pacific Energy Partners, L.P.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a): Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b): Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c): Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a): All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b): Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 4, 2004

/s/ IRVIN TOOLE, JR.

Irvin Toole, Jr.
President and Chief Executive Officer Pacific Energy GP, Inc., General Partner of Pacific Energy Partners, L.P.

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CERTIFICATION OF CHIEF EXECUTIVE OFFICER
EX-31.2 6 a2141701zex-31_2.htm EXHIBIT 31.2
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Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Gerald A. Tywoniuk, certify that:

1.

I have reviewed this quarterly report on Form 10-Q for the quarterly period ended June 30, 2004 of Pacific Energy Partners, L.P.;

2.

3.

4.

a): Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b): Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c): Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

a): All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b): Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 4, 2004

/s/ GERALD A. TYWONIUK

Gerald A. Tywoniuk
Senior Vice President, Chief Financial Officer and Treasurer Pacific Energy GP, Inc., General Partner of Pacific Energy Partners, L.P.

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CERTIFICATION OF CHIEF FINANCIAL OFFICER
EX-32.1 7 a2141701zex-32_1.htm EXHIBIT 32.1
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Exhibit 32.1

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
OF PACIFIC ENERGY GP, INC.
PURSUANT TO 18 U.S.C. § 1350

Pursuant to 18 U.S.C. § 1350 and in connection with the accompanying report on Form 10-Q for the quarterly period ended June 30, 2004 that is being filed concurrently with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned officer of Pacific Energy GP, Inc., the general partner of Pacific Energy Partners, L.P. (the "Partnership") hereby certifies that:

1.: The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.: The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

/s/ IRVIN TOOLE, JR.

Irvin Toole, Jr.
August 4, 2004

A signed original of this written statement required by Section 906 has been provided to Pacific Energy Partners, L.P., and will be retained by Pacific Energy Partners, L.P., and furnished to the Securities and Exchange Commission or its staff upon request.

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CERTIFICATION OF CHIEF EXECUTIVE OFFICER OF PACIFIC ENERGY GP, INC. PURSUANT TO 18 U.S.C. § 1350
EX-32.2 8 a2141701zex-32_2.htm EXHIBIT 32.2
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Exhibit 32.2

CERTIFICATION OF
CHIEF FINANCIAL OFFICER
OF PACIFIC ENERGY GP, INC.
PURSUANT TO 18 U.S.C. § 1350

1.: The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.: The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

/s/ GERALD A. TYWONIUK

Gerald A. Tywoniuk
August 4, 2004

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CERTIFICATION OF CHIEF FINANCIAL OFFICER OF PACIFIC ENERGY GP, INC. PURSUANT TO 18 U.S.C. § 1350
-----END PRIVACY-ENHANCED MESSAGE-----

PACIFIC ENERGY PARTNERS, L.P.

PACIFIC ENERGY GP, INC.
its General Partner

/s/ IRVIN TOOLE, JR.
Irvin Toole, Jr.
President and Chief Executive Officer
(Principal Executive Officer)

August 4, 2004

/s/ GERALD A. TYWONIUK
Gerald A. Tywoniuk
Senior Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)

August 4, 2004