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As filed with the Securities and Exchange Commission on July 11, 2006

Registration No. 333-            



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


FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


Plains All American Pipeline, L.P.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  4610
(Primary Standard Industrial
Classification Code Number)
  76-0669671
(I.R.S. Employer
Identification No.)

333 Clay Street, Suite 1600
Houston, Texas 77002
(713) 646-4100
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Tim Moore
Vice President and General Counsel
333 Clay Street, Suite 1600
Houston, Texas 77002
(713) 646-4100
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

David P. Oelman
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
(713) 758-2222
  Irvin Toole, Jr.
President and Chief Executive Officer
Pacific Energy Management LLC
5900 Cherry Avenue
Long Beach, California 90805-4408
(562) 728-2800
  Kelly B. Rose
Baker Botts L.L.P.
910 Louisiana
One Shell Plaza
Houston, Texas 77002
(713) 229-1234

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective and upon consummation of the merger described in the enclosed joint proxy statement/prospectus.

        If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.    o

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o


Title of Class of Securities
to be Registered

  Amount to be
Registered(1)

  Proposed Maximum
Offering Price
Per Security

  Proposed
Maximum
Aggregate Offering
Price(2)

  Amount of
Registration Fee


Common Units   25,860,141   N/A   $1,096,873,004   $117,366

(1)
Represents the estimated maximum number of common units of the Registrant to be issued in the merger to holders of common units of Pacific Energy Partners, L.P., determined in accordance with the terms of the merger agreement.

(2)
Estimated solely for the purpose of calculating the registration fee under Rule 457 under the Securities Act of 1933, based on the product of $32.66 (the average of the high and low prices of Pacific's common units on July 5, 2006, on the New York Stock Exchange composite tape) and 33,584,599 (the number of Pacific common units outstanding and eligible for exchange into Plains common units pursuant to the merger agreement plus (a) the number of units reserved for issuance upon the vesting of outstanding Pacific restricted common unit awards and (b) the maximum number of Pacific common units that could be issued by Pacific prior to the effective time of the merger pursuant to the merger agreement).


        The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.




The information in this joint proxy statement/prospectus is not complete and may be changed. This joint proxy statement/prospectus is not an offer to sell nor should it be considered a solicitation of an offer to buy the securities described herein in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION dated July 11, 2006

LOGO   LOGO

Dear Unitholders:

        On June 11, 2006, the board of directors of Plains All American GP LLC, which is the general partner of Plains AAP, L.P., the general partner of Plains All American Pipeline, L.P. ("Plains"), and the board of directors of Pacific Energy Management LLC, which is the general partner of Pacific Energy GP, LP, the general partner of Pacific Energy Partners, L.P. ("Pacific"), agreed to combine the businesses of Plains and Pacific by merging. As a result of the merger, the outstanding general partner and limited partner interests in Pacific will be extinguished, Pacific will be merged into Plains, and the Pacific operating subsidiaries will be directly or indirectly owned by Plains. Plains' management team and board of directors will continue in their current roles and manage the combined company. In the merger, each Pacific common unitholder (other than LB Pacific, LP, the owner of Pacific's general partner) will receive 0.77 common units of Plains for each Pacific common unit that the Pacific unitholder owns. It is generally expected that neither the Plains common unitholders nor the Pacific common unitholders who receive Plains common units in exchange for their Pacific common units will recognize any gain or loss for U.S. federal income tax purposes as a result of the merger.

        The approval and adoption of the merger agreement and the merger and the issuance of Plains common units pursuant to the merger agreement requires the approval of a majority of Plains' outstanding common units. In addition, the merger agreement and the merger must be approved and adopted by a majority of Pacific's outstanding common units (other than Pacific common units held by LB Pacific, LP) and a majority of Pacific's outstanding subordinated units, each voting separately as a class. All of Pacific's outstanding subordinated units are owned by LB Pacific, LP. Plains and Pacific have each scheduled special meetings of their unitholders to vote on these matters on                        , 2006. Regardless of the number of units you own or whether you plan to attend the meeting or meetings in which you would have an interest, it is important that your units be represented and voted at the meeting. Voting instructions are set forth inside this joint proxy statement/prospectus. Abstentions and broker non-votes will have the same effect as a vote against the transactions described in this joint proxy statement/prospectus.

        The board of directors of Plains All American GP LLC (the "Plains board") has unanimously approved and adopted the merger agreement, has determined that it is advisable and in the best interest of Plains and Plains' unitholders, and has approved the issuance of Plains common units pursuant to the merger agreement. Accordingly, the Plains board recommends that Plains' common unitholders vote to approve and adopt the merger agreement and the merger and vote to approve the issuance of Plains common units pursuant to the merger agreement.

        The conflicts committee of the board of directors of Pacific Energy Management LLC (the "Pacific conflicts committee") has unanimously approved and adopted the merger agreement and determined that it is advisable and in the best interests of Pacific and Pacific's unitholders (other than LB Pacific, LP). The board of directors of Pacific Energy Management LLC (the "Pacific board") has unanimously approved and adopted the merger agreement and determined that it is advisable and in the best interests of Pacific and Pacific's equityholders. Accordingly, the Pacific conflicts committee and the Pacific board recommend that Pacific's unitholders vote to approve and adopt the merger agreement and the merger.

        This joint proxy statement/prospectus provides you with detailed information about the proposed merger and related matters. Plains and Pacific both encourage you to read the entire document carefully. In particular, please read "Risk Factors" beginning on page 24 of this joint proxy statement/prospectus for a discussion of risks relevant to the merger and the combined company.

        Plains' common units are listed on the NYSE under the symbol "PAA," and Pacific's common units are listed on the NYSE under the symbol "PPX."


Chairman and Chief Executive Officer,
Plains All American GP LLC
 
President and Chief Executive Officer,
Pacific Energy Management LLC

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this document is truthful or complete. Any representation to the contrary is a criminal offense.

        This document is dated            , 2006, and was first mailed to unitholders on or about            , 2006.


        This document incorporates by reference important business and financial information about both Plains and Pacific that is not included in or delivered with this document. Please read "Where You Can Find More Information."

        You can obtain any of the documents incorporated by reference into this document from Plains or Pacific, as the case may be, or from the Securities and Exchange Commission's website at http://www.sec.gov. Documents incorporated by reference are available from Plains and Pacific without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference into this document. You may obtain documents incorporated by reference into this document by requesting them in writing or by telephone from the appropriate company as follows:

Plains All American Pipeline, L.P.
333 Clay Street, Suite 1600
Attention: Investor Relations
Houston, Texas 77002
Telephone: (713) 646-4222
  Pacific Energy Partners, L.P.
5900 Cherry Avenue
Attention: Investor Relations
Long Beach, California 90805
Telephone: (562) 728-2871

        You should request the documents incorporated by reference no later than                        , 2006 to obtain timely delivery. Please be sure to include your complete name and address in your request. If you request any documents, Plains or Pacific will mail them to you by first class mail, or another equally prompt means, within one business day after receipt of your request.

        All information in this document concerning Plains has been furnished by Plains. All information in this document concerning Pacific has been furnished by Pacific. Plains has represented to Pacific, and Pacific has represented to Plains, that the information furnished by and concerning one another is true and correct.


LOGO

Houston, Texas
, 2006


Notice of Special Meeting of Common Unitholders

To the Common Unitholders of Plains All American Pipeline, L.P.:

        A special meeting of holders of common units of Plains All American Pipeline, L.P. ("Plains") will be held on            , 2006 at 10:00 a.m., local time, at            , Houston, Texas, for the following purposes:


        The board of directors of Plains All American GP LLC (the "Plains board") has unanimously approved and adopted the Merger Agreement, has determined that it is advisable and in the best interest of Plains and Plains' common unitholders, and has approved the issuance of Plains common units pursuant to the Merger Agreement. Accordingly, the Plains board recommends that Plains' common unitholders vote to approve and adopt the Merger Agreement and the merger and vote to approve the issuance of Plains common units pursuant to the Merger Agreement.

        The proposals described above require the affirmative vote of a majority of Plains' outstanding common units. As a result, abstentions and broker non-votes will have the same effect as a vote against the proposals.

        Only common unitholders of record at the close of business on            , 2006 are entitled to notice of and to vote at the meeting and any adjournments of the meeting. Plains will keep at its offices in Houston, Texas, a list of common unitholders entitled to vote at the meeting available for inspection for any purpose relevant to the meeting during normal business hours for the 10 days before the meeting.

        YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE VOTE IN ONE OF THE FOLLOWING WAYS:


  By order of the Board of Directors of Plains All American GP LLC, as general partner of Plains AAP, L.P., the general partner of Plains All American Pipeline, L.P.

 


Secretary
Plains All American GP LLC

LOGO

Long Beach, California
, 2006


Notice of Special Meeting of Unitholders

To the Unitholders of Pacific Energy Partners, L.P.:

        A special meeting of holders of common units and subordinated units of Pacific Energy Partners, L.P. ("Pacific") will be held on            , 2006 at 8:00 a.m., local time, at 5900 Cherry Avenue, Long Beach, California, for the following purposes:

        The conflicts committee of the board of directors of Pacific Energy Management LLC (the "Pacific conflicts committee") has unanimously approved and adopted the Merger Agreement and determined that it is advisable and in the best interests of Pacific and Pacific's common unitholders (other than LB Pacific, LP). The full board of directors of Pacific Energy Management LLC (the "Pacific board") has unanimously approved and adopted the Merger Agreement and determined that it is advisable and in the best interests of Pacific and Pacific's equityholders. Accordingly, the Pacific conflicts committee and the Pacific board recommend that Pacific's unitholders vote to approve and adopt the Merger Agreement and the merger.

        The proposals described above require the affirmative vote of a majority of Pacific's outstanding common units (other than Pacific common units held by LB Pacific, LP) and a majority of Pacific's outstanding subordinated units, each voting separately as a class. As a result, abstentions and broker non-votes will have the same effect as a vote against the proposal. All of Pacific's outstanding subordinated units are owned by LB Pacific, LP.

        Only unitholders of record at the close of business on            , 2006 are entitled to notice of and to vote at the meeting and any adjournments of the meeting. Pacific will keep at its offices in Long Beach, California, a list of unitholders entitled to vote at the meeting available for inspection for any purpose relevant to the meeting during normal business hours for the 10 days before the meeting.

        YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE VOTE IN ONE OF THE FOLLOWING WAYS:


  By order of the Board of Directors of Pacific Energy Management LLC, as the general partner of Pacific Energy GP, LP, the general partner of Pacific Energy Partners, L.P.

 


Senior Vice President, General Counsel and Secretary
Pacific Energy Management LLC


JOINT PROXY STATEMENT/PROSPECTUS

TABLE OF CONTENTS

Questions and Answers about the Merger   1
Summary   5
  The Merger Parties   5
  The Merger   5
  Transactions Related to the Merger   6
  Directors and Management of Plains Following the Merger   6
  Market Prices of Plains and Pacific Common Units Prior to Announcing the Proposed Merger   6
  The Special Unitholder Meetings   6
  Recommendations to Unitholders   7
  Pacific's Reasons for the Merger   8
  Plains' Reasons for the Merger   9
  Opinions of Financial Advisors   10
  Interests of Certain Persons in the Merger; Conflicts of Interest   11
  The Merger Agreement   11
  U.S. Federal Income Tax Consequences   14
  Other Information Related to the Merger   14
  Summary of Risk Factors   15
Summary Historical and Pro Forma Financial and Operating Information   17
  Summary Historical and Pro Forma Financial and Operating Information of Plains   18
  Summary Historical Financial and Operating Information of Pacific   20
Comparative Per Unit Information   22
Market Prices and Distribution Information   23
Risk Factors   24
  Risks Related to the Merger and the Related Transactions   24
  Risks Related to the Combined Company's Business   27
  Risks Related to Plains' Common Units and Risks Resulting from Its Partnership Structure   36
  Tax Risks Related to the Merger and to Owning Plains Common Units   38
The Special Unitholder Meetings   42
The Merger   48
  Background of the Merger   48
  Recommendation of the Board of Directors and Conflicts Committee of Pacific's General Partner and Reasons for the Merger   57
  Recommendation of the Board of Directors of Plains' General Partner and Reasons for the Merger   61
  Additional Financial Considerations of the Parties   63
  Opinions of Financial Advisors   70
  Interests of Certain Persons in the Merger   93
  No Appraisal Rights   98
  Regulatory Matters   98
  Listing of Common Units to be Issued in the Merger   99
  Accounting Treatment   99
  Pending Litigation   99
The Merger Agreement   100
  Transactions Related to the Merger   100
  Structure of the Merger   100
  When the Merger Becomes Effective   100
  Effect of Merger on Outstanding Pacific Units   100
     

i


  Exchange of Units; Fractional Units   101
  Conditions to the Merger   103
  Representations and Warranties   104
  Covenants and Other Agreements   106
  Employee Matters   108
  Non-Solicitation   109
  Termination   110
  Termination Fees and Expenses   111
  Amendment; Extension and Waiver   112
The Merger Parties' Businesses   113
  Pacific's Business   113
  Plains' Business   116
Selected Financial Information of Plains and Pacific   121
Directors and Officers of the Combined Company   124
  Directors and Executive Officers   124
Comparison of the Rights of Plains and Pacific Common Unitholders   129
  Purpose and Term of Existence   129
  Distributions Of Available Cash   129
  Operating Surplus and Capital Surplus   130
  Subordination Period   132
  Incentive Distributions   133
  Distributions of Available Cash from Operating Surplus   134
  Distributions of Available Cash from Capital Surplus   135
  Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels   136
  Distributions of Cash Upon Liquidation   137
  Merger/Consolidation   140
  Disposal of Assets   141
  Transfer of General Partner Interest   141
  Withdrawal of General Partner   142
  Removal of General Partner   143
  Limited Call Rights   144
  Limited Preemptive Rights   144
  Amendment of Partnership Agreement   145
  Dissolution of The Partnership   147
  Liquidation   148
  Management   149
  Change Of Management Provisions   149
  Meetings, Voting   150
  Transfer of Units; Status as a Limited Partner or Assignee   151
  Conflicts of Interest   152
Description of Plains' Common Units   154
  Status as Limited Partner or Assignee   154
  Limited Liability   154
  Reports and Records   154
Material Federal Income Tax Consequences   156
  The Merger   156
  Tax Consequences of Owning Plains Common Units   158
  Partnership Status   158
  Limited Partner Status   160
  Tax Consequences of Plains Common Unit Ownership   160
  Tax Treatment of Operations   165
     

ii


  Disposition of Plains Common Units   166
  Uniformity of Plains Common Units   168
  Tax-Exempt Organizations and Other Investors   169
  Administrative Matters   170
  State, Local and Other Tax Considerations   172
Submission of Unitholder Proposals   173
Legal Matters   173
Experts   173
Where You Can Find More Information   173
  Plains' Filings   174
  Pacific's Filings   175
Information Regarding Forward-Looking Statements   176
Index to Unaudited Pro Forma Condensed Combined Financial Statements   F-1
ANNEX A—Merger Agreement   A-1
ANNEX B—Lehman Brothers Inc. Fairness Opinion to the Board of Directors of Pacific's General Partner   B-1
ANNEX C—Petrie Parkman & Co. Fairness Opinion to the Conflicts Committee of Pacific's General Partner   C-1
ANNEX D—Simmons & Company International Fairness Opinion to the Board of Directors of Plains' General Partner   D-1

iii



QUESTIONS AND ANSWERS ABOUT THE MERGER

Q:
Why am I receiving these materials?

A:
Plains and Pacific have agreed to combine their businesses by merging Pacific with and into Plains. The merger cannot be completed without the approval of the unitholders of both Plains and Pacific.

Q:
What will happen to Pacific as a result of the merger?

A:
As a result of the merger, the general partner and limited partner interests of Pacific will be extinguished, Pacific will be merged with and into Plains, and the Pacific operating subsidiaries will be directly or indirectly owned by Plains. Plains' management team and board of directors will continue in their current roles and manage the combined company.

Q:
What will Pacific common unitholders receive in the merger?

A:
Each Pacific common unitholder (other than LB Pacific, LP, the owner of Pacific's general partner) will receive 0.77 Plains common units in exchange for each Pacific common unit that the unitholder owns at the effective time of the merger. If the exchange ratio would result in a Pacific common unitholder being entitled to receive a fraction of a Plains common unit, that unitholder will receive in lieu of such fractional interest cash from Plains in an amount equal to the amount of such fractional interest multiplied by the average closing price of Plains common units on the NYSE during the five trading days ending on the third business day prior to the consummation of the merger.

Q:
What will the owner of Pacific's general partner receive in the merger?

A:
LB Pacific, LP, the owner of Pacific's general partner, will receive cash and will not receive Plains common units in the merger. LB Pacific and Plains have entered into a purchase agreement in connection with the execution of the merger agreement, pursuant to which Plains has agreed, subject to the terms and conditions of the purchase agreement, to purchase from LB Pacific immediately prior to the merger (i) all of the issued and outstanding limited partner interests in Pacific Energy GP, LP, the general partner of Pacific, (ii) the sole member interest in Pacific Energy Management LLC, the general partner of Pacific Energy GP, LP, (iii) 2,616,250 Pacific common units and (iv) 7,848,750 Pacific subordinated units for an aggregate purchase price of $700 million in cash. The purchase agreement may be terminated by LB Pacific or Plains if the merger agreement is terminated, and is subject to customary closing conditions, including satisfaction of all conditions specified in the merger agreement.

Q:
What will Plains common unitholders receive in the merger?

A:
Plains common unitholders will simply retain the Plains common units they currently own. They will not receive any additional Plains units in the merger.

Q:
What happens to my future distributions?

A:
Once the merger is completed, Pacific common unitholders (other than LB Pacific) will own Plains common units and, when distributions are approved and declared by the general partner of Plains, will receive distributions on their Plains common units in accordance with Plains' partnership agreement. Current Plains common unitholders will continue to receive distributions on their common units. Distributions are made in accordance with Plains' partnership agreement and at the discretion of the Plains board. Plains' management intends to recommend that the Plains board increase Plains' quarterly distribution from the current $0.7075 per unit ($2.83 annualized) to $0.80

1


Q:
Has Plains' general partner agreed to reduce the incentive distributions it would otherwise receive following the merger?

A:
Yes. Plains' general partner, in support of the transaction, has agreed to reduce the incentive distributions it would otherwise have received by $65 million in the aggregate over five four-quarter periods following the merger, beginning on the earlier to occur of (i) the first quarterly distribution declared and paid after the closing of the merger that equals or exceeds $0.80 per unit or (ii) the second quarterly distribution declared and paid after the closing of the merger. The date on which the event described in clause (i) or (ii) above first occurs is referred to in this joint proxy statement/prospectus as the "initial date." The reduction will be equal to $20 million in the aggregate for the first four quarters after and including the initial date, $15 million in the aggregate for the second four quarters, $15 million in the aggregate for the third four quarters, $10 million in the aggregate for the fourth four quarters, and $5 million in the aggregate for the fifth four quarters.

Q:
Should Pacific unitholders send in their certificates representing Pacific common units now?

A:
No. After the merger is completed, Pacific common unitholders who hold their units in certificated form will receive written instructions for exchanging their certificates representing Pacific common units. Please do not send in your certificates representing Pacific common units with your proxy card.

Q:
What unitholder approvals are needed to complete the merger?

A:
The following unitholder approvals are needed to complete the merger:

the affirmative vote of the holders of at least a majority of Pacific's outstanding common units (excluding common units held by LB Pacific) and at least a majority of Pacific's outstanding subordinated units, each voting as a separate class; and

the affirmative vote of the holders of at least a majority of Plains' outstanding common units.


As of the record date of the Pacific special meeting, directors and executive officers of Pacific and their affiliates had the right to vote            Pacific common units, or approximately    % of Pacific's outstanding common units, excluding common units held by LB Pacific. Pacific currently expects that all of the directors and executive officers of Pacific will vote their common units in favor of the merger agreement and the merger, although none of them has entered into any agreement obligating them to do so. In addition, LB Pacific owns all of Pacific's outstanding subordinated units. Pacific currently expects that LB Pacific will vote its subordinated units in favor of the merger agreement and the merger. Pursuant to the purchase agreement, LB Pacific has agreed to use its commercially reasonable efforts to take all appropriate action necessary or advisable to consummate and make effective the transactions contemplated by, and to satisfy the closing conditions of, the purchase agreement and the merger agreement as promptly as practicable.

2



As of the record date of the Plains special meeting, directors and executive officers of Plains and their affiliates had the right to vote            Plains common units, or approximately    % of Plains' outstanding common units. Plains currently expects that all of the directors and executive officers of Plains and their affiliates will vote their common units in favor of the merger, although none of them has entered into any agreement obligating them to do so.

Q:
When do you expect the merger to be completed?

A:
Plains and Pacific are working to complete the merger as soon as possible. A number of conditions must be satisfied before Plains and Pacific can complete the merger, including approval by the unitholders of both Plains and Pacific, the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the approval of certain state regulatory bodies. Although we cannot be sure when all of the conditions to the merger will be satisfied, Plains and Pacific expect to complete the merger in the fourth quarter of 2006. Please read "The Merger Agreement—Conditions to the Merger."

Q:
What are the tax consequences to common unitholders of the transaction?

A:
It is expected that neither the Plains common unitholders nor the Pacific common unitholders who receive Plains common units in exchange for their Pacific common units will recognize any gain or loss for U.S. federal income tax purposes as a result of the merger, except with respect to cash received in lieu of fractional Plains common units and with respect to a net decrease in a unitholder's share of nonrecourse liabilities. A net decrease in a unitholder's share of nonrecourse liabilities is not expected to occur as a result of the merger. For a description of the expected material federal income tax consequences of the merger and the holding of Plains common units after the merger, please read the information set forth in "Material Federal Income Tax Consequences."

Q:
What taxes will unitholders of the combined company be subject to?

A:
In addition to federal income taxes, unitholders of the combined company will be subject to other taxes, such as Canadian federal and provincial taxes, state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which Plains does business or owns property but in which such unitholders may not reside.

Q:
What do I need to do now?

A:
You should read this joint proxy statement/prospectus carefully. Then, if you choose to vote by proxy, you should do so as soon as possible by following the instructions listed on your proxy card.

Q:
What if I do not vote?

A:
If you do not return your proxy or if you abstain from voting, it will have the same effect as a vote against the proposals. If you sign and return your proxy card but do not indicate how you want to vote, your proxy will be counted as a vote in favor of the proposals.

Q:
If my units are held in "street name" by my broker, will my broker vote my units for me?

A:
Your broker cannot vote your units for or against approval and adoption of the merger agreement and the merger or the issuance of Plains common units pursuant to the merger agreement unless you tell the broker how you wish to vote. To tell your broker how to vote, you should follow the directions that your broker provides to you. A non-vote by your broker will have the same effect as a vote against the proposals described in this document.

3


Q:
If I am planning on attending a meeting in person, should I still vote by proxy?

A:
Yes. Whether or not you plan to attend a meeting, you should vote by proxy indicated on your proxy card. Your units will not be voted if you do not vote your proxy or if you do not vote in person at the scheduled special meetings of the unitholders of Pacific and the unitholders of Plains to be held on                        , 2006. This would have the same effect as a vote against the proposals.

Q:
Can I change my vote after I have voted by proxy?

A:
Yes. You can change your vote at any time before your proxy is voted at the meeting by following the procedures set forth in "The Special Unitholder Meetings—Voting Procedures—Revocation."

Q:
Whom do I call if I have further questions about voting, the meetings or the merger?

A:
Plains unitholders may call Plains' Investor Relations department at (713) 646-4222. If you would like additional copies, without charge, of Plains' proxy statement or if you have questions about the merger, including the procedures for voting your units, you should contact Morrow & Co., Inc., which is assisting Plains in the solicitation of proxies, as follows:

Morrow & Co., Inc.

470 West Avenue—3rd Floor
Stamford, CT 06902

paalp.info@morrowco.com

Banks and Brokerage Firms, please call (203) 658-9400

All others, please call (800) 607-0088

D.F. King & Co., Inc.

48 Wall Street
New York, NY 10005

PPX.info@DFKing.com

Banks and Brokerage Firms, please call (212) 269-5550

All others, please call (800) 769-4414

4



SUMMARY

        This summary highlights some of the information in this joint proxy statement/prospectus. It may not contain all of the information that is important to you. To understand the merger fully and for a more complete description of the terms of the merger, you should read carefully this document, the documents incorporated by reference and the full text of the merger agreement included as Annex A to this document. Please also read "Where You Can Find More Information."

The Merger Parties (page 113)

Pacific Energy Partners, L.P.

        Pacific is a publicly traded Delaware limited partnership engaged principally in the business of gathering, transporting, storing, and distributing crude oil, refined products and other related products. It generates revenue primarily by transporting such commodities on its pipelines, by leasing capacity in its storage tanks, and by providing other terminalling services. Pacific also buys and sells crude oil, activities that are generally complementary to its other crude oil operations. Pacific conducts its business through two business units, the West Coast Business Unit, incorporating activities in California and the Philadelphia, Pennsylvania area, and the Rocky Mountain Business Unit, which includes activities in five Rocky Mountain states and the province of Alberta, Canada.

        Pacific's principal executive offices are located at 5900 Cherry Avenue, Long Beach, California 90805, and its phone number is (562) 728-2800.

Plains All American Pipeline, L.P.

        Plains is a publicly traded Delaware limited partnership engaged in interstate and intrastate crude oil transportation and crude oil gathering, marketing, terminalling and storage, as well as the marketing and storage of liquefied petroleum gas and other natural gas related petroleum products. In addition, through its 50% equity ownership in PAA/Vulcan Gas Storage, LLC ("PAA/Vulcan"), Plains is engaged in the development and operation of natural gas storage facilities.

        Plains is one of the largest midstream crude oil companies in North America. As of March 31, 2006, Plains owned approximately 15,000 miles of active crude oil pipelines, approximately 39 million barrels of active terminalling and storage capacity and approximately 500 transport trucks. Currently, Plains handles an average of over 3 million barrels per day of physical crude oil through its extensive network of assets located in major oil producing regions of the United States and Canada.

        Plains' principal executive offices are located at 333 Clay Street, Suite 1600, Houston, Texas 77002, and its phone number is (713) 646-4100.

The Merger (page 48)

        Pursuant to the merger agreement, at the effective time of the merger, Pacific will merge with and into Plains, and the outstanding common units of Pacific (other than the common units owned by LB Pacific) will be converted into the right to receive Plains common units. Pacific will cease to exist following the merger. Each Pacific common unitholder (other than LB Pacific) will receive 0.77 Plains common units in exchange for each Pacific common unit that the unitholder owns at the effective time of the merger. If the exchange ratio would result in a Pacific common unitholder being entitled to receive a fraction of a Plains common unit, that unitholder will receive in lieu of such fractional interest cash from Plains in an amount equal to the amount of such fractional interest multiplied by the average closing price of Plains common units on the NYSE during the five trading days ending on the third business day prior to the consummation of the merger.

5



        Once the merger is completed, Pacific common unitholders (other than LB Pacific) will own Plains common units in lieu of their Pacific common units and, when distributions are declared by Plains' general partner and paid by Plains, they will receive distributions on their Plains common units in accordance with Plains' partnership agreement. Plains' management intends to recommend that the Plains board increase Plains' quarterly distribution from the current $0.7075 per unit ($2.83 annualized) to $0.80 per unit ($3.20 annualized) following the closing of the merger. Additionally, Plains' general partner, in support of the transaction, has agreed to reduce the incentive distributions it would otherwise receive by $65 million in the aggregate over five four-quarter periods following the merger, beginning on the earlier to occur of (i) the first quarterly distribution declared and paid after the closing of the merger that equals or exceeds $0.80 per unit or (ii) the second quarterly distribution declared and paid after the closing of the merger. The reduction will be equal to $20 million in the aggregate for the first four quarters after and including the initial date, $15 million in the aggregate for the second four quarters, $15 million in the aggregate for the third four quarters, $10 million in the aggregate for the fourth four quarters, and $5 million in the aggregate for the fifth four quarters. For a description of the distribution provisions of Plains' partnership agreement, please read "Comparison of the Rights of Plains and Pacific Common Unitholders."

Transactions Related to the Merger (page 100)

        In connection with the execution of the merger agreement, Plains entered into a purchase agreement with LB Pacific as of June 11, 2006, pursuant to which Plains has agreed, subject to the terms and conditions set forth in the purchase agreement, to purchase from LB Pacific immediately prior to the merger (i) all of the issued and outstanding limited partner interests in Pacific Energy GP, LP, the general partner of Pacific, (ii) the sole member interest in Pacific Energy Management LLC, the general partner of Pacific Energy GP, LP, (iii) 2,616,250 Pacific common units and (iv) 7,848,750 Pacific subordinated units, for an aggregate purchase price of $700 million in cash. The purchase agreement may be terminated by LB Pacific or Plains if the merger agreement is terminated, and is subject to customary closing conditions, including satisfaction of all conditions specified in the merger agreement.

Directors and Management of Plains Following the Merger (page 124)

        Plains' management team and board of directors will continue in their current roles and will manage the combined company.

Market Prices of Plains and Pacific Common Units Prior to Announcing the Proposed Merger

        Plains' common units are traded on the NYSE under the symbol "PAA." Pacific common units are traded on the NYSE under the symbol "PPX." The following table shows the closing unit prices of Plains and Pacific common units on June 9, 2006 (the last full trading day before Plains and Pacific announced the proposed merger) and the average closing unit price of Plains and Pacific common units during the 20-day trading period prior to and including June 9, 2006.

Date/Period

  Plains
Common Units

  Pacific
Common Units

June 9, 2006   $ 46.10   $ 32.09
20-day average     46.23     31.14

The Special Unitholder Meetings (page 42)

Pacific Special Unitholder Meeting

        Where and when:    The Pacific special unitholder meeting will take place at 5900 Cherry Avenue, Long Beach, California, on                         , 2006 at 8:00 a.m., local time.

6


        What you are being asked to vote on:    At the Pacific meeting, Pacific common unitholders (other than LB Pacific) and the Pacific subordinated unitholder will separately vote on the approval and adoption of the merger agreement and the merger. Pacific unitholders also may be asked to consider other matters as may properly come before the meeting. At this time, Pacific knows of no other matters that will be presented for the consideration of its unitholders at the meeting.

        Who may vote:    You may vote at the Pacific meeting if you owned Pacific common units (excluding LB Pacific) or Pacific subordinated units at the close of business on the record date,                        , 2006. On that date, there were                        Pacific common units (excluding common units held by LB Pacific) and                         Pacific subordinated units outstanding. You may cast one vote for each outstanding Pacific common unit or Pacific subordinated unit, as applicable, that you owned on the record date. All of the outstanding Pacific subordinated units are owned by LB Pacific.

        What vote is needed:    The affirmative vote of at least a majority of Pacific's outstanding common units (excluding common units held by LB Pacific) and the affirmative vote of at least a majority of Pacific's outstanding subordinated units, each voting as a separate class, is required to approve and adopt the merger agreement and the merger.

Plains Special Unitholder Meeting

        Where and when:    The Plains special unitholder meeting will take place at                        , Houston, Texas, on            , 2006, at 10:00 a.m., local time.

        What you are being asked to vote on:    At the Plains meeting, Plains unitholders will vote on the approval and adoption of the merger agreement and the merger. Additionally, the Plains unitholders will vote on the approval of the issuance of Plains common units pursuant to the merger agreement, which Plains currently estimates to be approximately 22.3 million Plains common units. Plains unitholders also may be asked to consider other matters as may properly come before the meeting. At this time, Plains knows of no other matters that will be presented for the consideration of its unitholders at the meeting.

        Who may vote:    You may vote at the Plains meeting if you owned Plains common units at the close of business on the record date,            , 2006. On that date, there were                        Plains common units outstanding. You may cast one vote for each Plains common unit that you owned on the record date.

        What vote is needed:    The affirmative vote of at least a majority of Plains' outstanding common units is required to approve and adopt the merger agreement and the merger and to approve the issuance of Plains common units pursuant to the merger agreement.

Recommendations to Unitholders

To Pacific Unitholders (page 57):

        The conflicts committee (the "Pacific conflicts committee") of the board of directors (the "Pacific board") of Pacific Energy Management LLC, the general partner of Pacific Energy GP, LP, the general partner of Pacific (unless the context requires otherwise, Pacific Energy Management LLC and Pacific Energy GP, LP are collectively referred to as "Pacific's general partner"), comprised of directors who are deemed to be independent of the interests of Pacific's general partner, has considered the benefits of the merger as well as the associated risks and has unanimously approved and adopted the merger agreement and determined that it is advisable and in the best interests of Pacific and Pacific's common unitholders (other than LB Pacific). Accordingly, the Pacific conflicts committee recommends that Pacific unitholders vote to approve and adopt the merger agreement and the merger.

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        The Pacific board has considered the benefits of the merger as well as the associated risks and has unanimously approved and adopted the merger agreement and determined that it is advisable and in the best interests of Pacific and Pacific's equityholders. Accordingly, the Pacific board recommends that Pacific unitholders vote to approve and adopt the merger agreement and the merger.

        Pacific's unitholders are urged to review carefully the background and reasons for the merger described under "The Merger" and the risks associated with the merger described under "Risk Factors."

To Plains Unitholders (page 61):

        The entire board of directors of Plains All American GP, LLC (the "Plains board"), the general partner of Plains AAP, L.P., the general partner of Plains (unless the context requires otherwise, Plains All American GP LLC and Plains AAP, L.P. are collectively referred to as "Plains' general partner"), including those directors who are independent of the general partner interest, has considered the benefits of the merger as well as the associated risks and has unanimously approved and adopted the merger agreement, has determined that it is advisable and in the best interest of Plains and Plains' common unitholders, and has approved the issuance of Plains common units pursuant to the merger agreement. Accordingly, the Plains board recommends that Plains' common unitholders vote to approve and adopt the merger agreement and the merger and vote to approve the issuance of Plains common units pursuant to the merger agreement.

        Plains' common unitholders are urged to review carefully the background and reasons for the merger described under "The Merger" and the risks associated with the merger described under "Risk Factors."

Pacific's Reasons for the Merger (page 57)

        The Pacific board and the Pacific conflicts committee consulted with management and legal and financial advisors and considered many factors in approving and adopting the merger agreement and the merger, including the following expected benefits of the merger to Pacific and its unitholders:

8



        The Pacific board and the Pacific conflicts committee also considered a number of risks associated with the merger, including the following:

Plains' Reasons for the Merger (page 61)

        The Plains board consulted with management and legal and financial advisors and considered many factors in approving and adopting the purchase agreement and the merger agreement and approving the issuance of Plains' common units in the merger, including the following expected benefits of the merger to Plains, its unitholders and the combined company:

9


        In addition to considering the foregoing, the Plains board consulted with its management and Plains' legal and financial advisors, and considered a variety of other factors, including:

Opinions of Financial Advisors (page 70)

        The opinions of the Pacific board's financial advisor, the Pacific conflicts committee's financial advisor and the Plains board's financial advisor are attached to this joint proxy statement/prospectus as Annexes B, C and D, respectively. You are encouraged to read those opinions carefully, as well as the descriptions of the analyses and assumptions on which the opinions were based set forth under "The Merger—Opinions of Financial Advisors." Each opinion is directed to the board of directors or conflicts committee of the applicable general partner, and does not constitute a recommendation to any unitholder as to any matter relating to the merger.

Opinion of Financial Advisor to Pacific

        Lehman Brothers Inc., financial advisor to Pacific, delivered its opinion to the Pacific board on June 11, 2006 to the effect that, as of the date of its opinion and based on and subject to various

10



assumptions made, matters considered and limitations described in the opinion, from a financial point of view, the aggregate consideration to be offered to all of the holders of the partnership interests in Pacific in the proposed transaction is fair to such holders. Pacific's general partner is deemed to be an affiliate of Lehman Brothers Inc. through a 59% ownership interest in Pacific's general partner held by certain entities controlled by Lehman Brothers Holdings Inc., the parent entity of Lehman Brothers Inc.

Opinion of Financial Advisor to the Conflicts Committee of Pacific

        Petrie Parkman & Co., financial advisor to the Pacific conflicts committee, delivered its opinion to the Pacific conflicts committee on June 11, 2006 to the effect that, as of the date of its opinion and based on and subject to various assumptions made, matters considered and limitations described in the opinion, the exchange ratio of 0.77 Plains common units for each Pacific common unit in the merger is fair, from a financial point of view, to Pacific's common unitholders, other than LB Pacific and its affiliates.

Opinion of Financial Advisor to Plains

        Simmons & Company International, financial advisor to Plains, delivered its opinion to the Plains board on June 11, 2006 to the effect that, as of the date of its opinion and based on and subject to various assumptions made, matters considered and limitations described in the opinion, the aggregate consideration to be paid by Plains as set forth in the merger agreement and in the purchase agreement with LB Pacific is fair, from a financial point of view, to Plains and Plains' common unitholders (other than those unitholders holding a direct or indirect interest in Plains' general partner).

Interests of Certain Persons in the Merger; Conflicts of Interest (page 93)

        In considering the recommendations of the Pacific board, the Pacific conflicts committee and the Plains board with respect to the merger, unitholders of both partnerships should be aware that some of the executive officers and directors of the general partners have interests in the transaction that may differ from, or may be in addition to, the interests of unitholders generally. For example, the owners of Pacific's general partner will receive cash in the transaction, a portion of which will be distributed to certain members of the Pacific board.

        In addition, owners of Plains' general partner have interests that differ materially from owners of Plains' limited partner interests. Even giving effect to the reduction in incentive distribution payments otherwise payable to Plains' general partner, the merger is expected to be accretive to Plains' general partner on a distributable cash flow basis beginning in 2007. Based on Plains' projected results, the effect of the merger is not expected to be accretive on a distributable cash flow per unit basis to Plains' existing limited partners until 2008.

The Merger Agreement (page 100)

        The merger agreement is attached to this joint proxy statement/prospectus as Annex A and is incorporated by reference into this document. You are encouraged to read the merger agreement because it is the legal document that governs the merger.

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What Needs to be Done to Complete the Merger

        Plains and Pacific will complete the merger only if the conditions set forth in the merger agreement and the purchase agreement are satisfied or, in some cases, waived. The obligations of Plains and Pacific to complete the merger are subject to the following conditions:

        Plains' obligation to complete the merger is further subject to the following conditions:

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        Pacific's obligation to complete the merger is further subject to the following conditions:

        Either Plains or Pacific may choose to complete the merger even though any condition to its obligation has not been satisfied if the necessary unitholder approvals have been obtained and the law allows it to do so.

No Solicitation

        Pacific and Pacific's general partner have agreed that they and Pacific's subsidiaries will not, directly or indirectly, and will direct and use their reasonable best efforts to cause such parties' representatives not to, initiate or continue any discussions with any other person with respect to a business combination while the merger is pending or to engage in any of those discussions unless the failure to do so would be reasonably likely to constitute a violation of their fiduciary obligations under applicable law.

Termination of the Merger Agreement

        Plains and Pacific can agree to terminate the merger agreement at any time without completing the merger, even after unitholder approvals have been obtained. In addition, either party may terminate the merger agreement on its own without completing the merger if:

Termination Fees

        Pacific will pay Plains a fee of $40 million if:

13


        Additionally, if Pacific's unitholders vote not to approve and adopt the merger agreement and the merger, Pacific will pay Plains a fee of $10 million. If the negative vote occurs after a competing proposal to acquire Pacific has been made, Pacific will pay Plains an additional fee of $30 million if Pacific consummates another acquisition transaction pursuant to which Pacific is acquired within twelve months of the negative vote.

        Plains will pay Pacific a fee of $40 million if:

        Additionally, if Plains' unitholders vote not to approve and adopt the merger agreement and the merger, Plains will pay Pacific a fee of $10 million. If the negative vote occurs after a competing proposal to acquire Plains has been made, Plains will pay Pacific an additional fee of $30 million if Plains consummates another acquisition transaction pursuant to which Plains is acquired within twelve months of the negative vote.

U.S. Federal Income Tax Consequences (page 156)

        Tax matters are very complicated. The tax consequences of the merger to you will depend on your own situation. You are urged to consult your tax advisor for a full understanding of the U.S. federal, state, local and foreign tax consequences of the merger to you.

        For U.S. federal income tax purposes, except with respect to cash received in lieu of fractional Plains common units and as described below with respect to a net decrease in a unitholder's share of nonrecourse liabilities, no gain or loss will be recognized by a Pacific unitholder or a Plains unitholder as a result of the merger. The merger will, however, result in the recalculation of each Plains and Pacific unitholder's share of nonrecourse liabilities. Each Plains unitholder and Pacific unitholder will be treated as receiving a deemed cash distribution equal to the excess, if any, of the unitholder's share of the nonrecourse liabilities immediately before the merger over the unitholder's share of the nonrecourse liabilities immediately following the merger. If the amount of the deemed cash distribution received by a Pacific unitholder or Plains unitholder exceeds such unitholder's basis in its partnership interest, such unitholder will recognize gain in an amount equal to such excess.

        The application of the rules governing the allocation of nonrecourse liabilities in the context of the merger is complex and subject to uncertainty. While there can be no assurance, Plains and Pacific do not anticipate that there will be a material decrease in the amount of nonrecourse liabilities allocable to a Pacific unitholder or a Plains unitholder as a result of the merger.

Other Information Related to the Merger

No Appraisal Rights (page 98)

        Neither Plains unitholders nor Pacific unitholders have appraisal rights under applicable law or contractual appraisal rights under their respective partnership agreements or the merger agreement.

Antitrust and Regulatory Clearance (page 98)

        The merger is subject to both state and federal antitrust laws. Plains and Pacific made the required filings with the Federal Trade Commission, or FTC, and the Antitrust Division of the Department of Justice, or DOJ, relating to the merger on June 30, 2006, but they are not permitted to complete the merger until the applicable waiting periods have expired or are otherwise terminated. Plains and Pacific

14



have made or are in the process of completing required filings with Canadian regulatory authorities, and with the Public Utilities Commission of the State of California and the Public Service Commission of the State of Wyoming, the approval of which are conditions to the merger (and in the case of Wyoming, any protest period subsequent to such approval shall have lapsed without a protest or, if a protest has been filed, such protest shall have been resolved to the reasonable satisfaction of the parties). Plains or Pacific may receive requests for information concerning the proposed merger and related transactions from the FTC or individual states.

Listing of Common Units to be Issued in the Merger (page 99)

        Plains expects to obtain approval to list on the NYSE the common units to be issued pursuant to the merger agreement, which approval is a condition to the merger.

Accounting Treatment (page 99)

        Plains will account for the merger using the purchase method of accounting. Under that method of accounting, the aggregate consideration that Plains pays for Pacific will be allocated to Pacific's assets and liabilities based on their fair values, with any excess being treated as goodwill. Plains currently expects to record approximately $800 million of goodwill upon completion of the merger, but that estimate is subject to change.

Comparison of the Rights of Pacific and Plains Common Unitholders (page 129)

        Pacific common unitholders (other than LB Pacific) will own Plains common units following the completion of the merger, and their rights associated with the Plains common units will be governed by, in addition to Delaware law, Plains' partnership agreement, which differs in a number of respects from Pacific's partnership agreement.

Pending Litigation (page 99)

        On June 15, 2006, a lawsuit was filed against Pacific and certain of the officers and directors of Pacific's general partner. The claim seeks class action status, and asserts claims of self-dealing and breach of fiduciary duty in connection with the merger and related transactions. Pacific believes that the lawsuit is without merit and intends to defend against it vigorously. There can be no assurance that additional claims may not be made or filed, the substance of which may be similar to the allegations described above or that otherwise might arise from, or in connection with, the merger agreement and the transactions it contemplates.

Summary of Risk Factors

        You should consider carefully all the risk factors together with all of the other information included in this joint proxy statement/prospectus before deciding how to vote. The risks related to the merger and the related transactions, the combined company's business, Plains' common units and risks resulting from its partnership structure are described under the caption "Risk Factors" beginning on page 24 of this joint proxy statement/prospectus. Some of these risks include, but are not limited to, those described below:

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16



SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING INFORMATION

        The following tables set forth, for the periods and at the dates indicated, summary historical financial and operating information for Plains and Pacific and summary pro forma financial information for Plains after giving effect to the proposed merger with Pacific. The summary historical income statement and balance sheet data for each of the three years in the period ended December 31, 2005 are derived from and should be read in conjunction with the audited financial statements and accompanying footnotes for such periods incorporated by reference into this joint proxy statement/prospectus. The summary historical income statement data for the three-month periods ended March 31, 2005 and 2006 and balance sheet data at March 31, 2006 are derived from and should be read in conjunction with the unaudited financial statements and accompanying footnotes for such periods incorporated by reference into this joint proxy statement/prospectus.

        The summary pro forma financial statements of Plains show the pro forma effect of Plains' proposed merger with Pacific. For a complete discussion of the pro forma adjustments underlying the amounts in the table below, please read the section titled "Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page F-1 of this document.

        Plains' unaudited pro forma condensed statements of combined operations for the year ended December 31, 2005 and for the three months ended March 31, 2006 assume the transactions occurred on January 1, 2005. Plains' unaudited pro forma condensed combined balance sheet shows the financial effects of the transactions as if they had occurred on March 31, 2006.

17



SUMMARY HISTORICAL AND PRO FORMA FINANCIAL
AND OPERATING INFORMATION OF PLAINS

 
  Plains Consolidated Historical
  Plains Pro Forma
 
 
  For the Year Ended December 31,
  For the Three Months Ended March 31,
  For the Year Ended December 31,
  For the Three Months Ended March 31,
 
 
  2003
  2004
  2005
  2005
  2006
  2005
  2006
 
 
  (In millions, except per unit amounts)

 
Statement of operations data:                                            
Total revenues(1)   $ 12,589.9   $ 20,975.5   $ 31,177.3   $ 6,638.5   $ 8,635.4   $ 31,389.0   $ 8,697.4  
Purchases and related costs(1)     (12,232.5 )   (20,424.6 )   (30,442.5 )   (6,486.2 )   (8,427.4 )   (30,431.3 )   (8,419.4 )
Field operating costs(2)     (139.9 )   (219.5 )   (272.5 )   (63.8 )   (82.3 )   (375.5 )   (115.2 )
General and administrative expenses(2)     (73.1 )   (82.7 )   (103.2 )   (22.1 )   (31.8 )   (128.6 )   (38.7 )
Depreciation and amortization     (46.2 )   (68.7 )   (83.5 )   (19.1 )   (21.6 )   (129.4 )   (33.2 )
   
 
 
 
 
 
 
 
  Total costs and expenses     (12,491.7 )   (20,795.5 )   (30,901.7 )   (6,591.2 )   (8,563.1 )   (31,064.8 )   (8,606.5 )
   
 
 
 
 
 
 
 
Other, net                         (0.5 )    
Operating income     98.2     180.0     275.6     47.3     72.3     323.7     90.9  
Equity earnings (loss) in unconsolidated affiliates             1.0         (0.2 )   2.8     0.2  
Interest expense     (35.2 )   (46.7 )   (59.4 )   (14.6 )   (15.3 )   (124.7 )   (33.8 )
Interest income and other, net     (3.6 )   (0.2 )   0.6     0.1     0.3     1.7     0.7  
Income tax expense                         (1.2 )   (0.3 )
   
 
 
 
 
 
 
 
Income before cumulative effect of change in accounting principle(7)   $ 59.4   $ 133.1   $ 217.8   $ 32.8   $ 57.1   $ 202.3   $ 57.7  
   
 
 
 
 
 
 
 
Basic net income per limited partner unit before cumulative effect of change in accounting principle   $ 1.01   $ 1.94   $ 2.77   $ 0.43   $ 0.65   $ 2.10   $ 0.55  
   
 
 
 
 
 
 
 
Diluted net income per limited partner unit before cumulative effect of change in accounting principle   $ 1.00   $ 1.94   $ 2.72     0.43     0.63   $ 2.07   $ 0.54  
   
 
 
 
 
 
 
 
Basic weighted average number of limited partner units outstanding     52.7     63.3     69.3     67.5     74.0     91.6     96.3  
Diluted weighted average number of limited partner units outstanding     53.4     63.3     70.5     68.2     75.7     92.8     98.0  
Balance sheet data (at end of period):                                            
Total assets   $ 2,095.6   $ 3,160.4   $ 4,120.3   $ 3,943.2   $ 4,733.7         $ 7,316.2  
Total long-term debt   $ 519.0   $ 949.0   $ 951.7   $ 930.2   $ 951.5         $ 2,294.5  
Total debt   $ 646.3   $ 1,124.5   $ 1,330.1   $ 1,491.2   $ 1,827.3         $ 3,170.3  
Partners' capital   $ 746.7   $ 1,070.2   $ 1,330.7   $ 1,010.6   $ 1,438.7         $ 2,461.3  
Other Data:                                            
Maintenance capital expenditures   $ 7.6   $ 11.3   $ 14.0   $ 4.0   $ 4.7              
Net cash provided by (used in) operating activities(3)   $ 115.3   $ 104.0   $ 24.1   $ (271.9 ) $ (457.6 )            
Net cash provided by (used in) investing activities(3)   $ (272.1 ) $ (651.2 ) $ (297.2 ) $ (61.7 ) $ (84.3 )            
Net cash provided by (used in) financing activities   $ 157.2   $ 554.5   $ 270.6   $ 342.6   $ 541.5              
Distributions per limited partner unit(4)   $ 2.2125   $ 2.3525   $ 2.6500   $ 0.6375   $ 0.7075              

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL
AND OPERATING INFORMATION OF PLAINS (Continued)

 
  Plains Consolidated Historical
 
  For the Year Ended December 31,
  For the Three Months Ended March 31,
 
  2003
  2004
  2005
  2005
  2006
 
  (Volumes in thousands of barrels per day)

Operating Data(5):                    
Pipeline segment:                    
  Tariff activities                    
    All American   59   54   51   54   44
    Basin   263   265   290   277   314
    Capline   N/A   123   132   160   86
    Cushing to Broome   N/A   N/A   66   23   70
    North Dakota/Trenton   N/A   39   77   61   82
    West Texas/New Mexico Area Systems(6)   189   338   428   401   399
    Canada   203   263   255   268   239
    Other   110   330   426   410   489
  Pipeline margin activities   78   74   74   75   91
   
 
 
 
 
      Total   902   1,486   1,799   1,729   1,814
   
 
 
 
 
Gathering, marketing, terminalling and storage segment:                    
  Crude oil lease gathering   437   589   610   622   615
  LPG sales   38   48   56   84   84

(1)
Includes buy/sell transactions. See Note 2 to Plains' Consolidated Financial Statements in Plains' Annual Report on Form 10-K for the year ended December 31, 2005 incorporated by reference herein. Also, see footnote 7 below.

(2)
Includes compensation expense related to Plains' 1998 Long-Term Incentive Plan and Plains' 2005 Long-Term Incentive Plan. See Item 11, "Executive Compensation—Long-Term Incentive Plans" in Plains' Annual Report on Form 10-K for the year ended December 31, 2005 incorporated by reference herein.

(3)
In conjunction with the change in accounting principle Plains adopted as of January 1, 2004, Plains has reclassified cash flows for 2003 and prior years associated with purchases and sales of linefill on assets that Plains owns as cash flows from investing activities instead of the historical classification as cash flows from operating activities.

(4)
Distributions represent those declared with respect to the period and paid in the following period. Plains' general partner is entitled to receive 2% proportional distributions and also incentive distributions if the amount Plains distributes with respect to any quarter exceeds levels specified in Plains' partnership agreement. See Note 5 to Plains' Consolidated Financial Statements in Plains' Annual Report on Form 10-K for the year ended December 31, 2005 incorporated by reference herein.

(5)
Volumes associated with acquisitions represent total volumes transported for the number of days Plains actually owned the assets divided by the number of days in the period.

(6)
The aggregate of multiple systems in the West Texas/New Mexico area.

(7)
The Plains pro forma income before cumulative effect of change in accounting principle for the year ended December 31, 2005 includes, as required, the following pro forma adjustments related to the acquisition of the Valero assets that Pacific acquired effective September 30, 2005: (i) depreciation expense for the entire year of approximately $11 million associated with Plains' estimated purchase price allocated to the Valero assets; and (ii) interest expense of approximately $11 million for the entire year on the $175 million of 6 1/4% senior notes issued to fund the asset acquisition. However, since the Valero transaction was an asset acquisition, the Plains pro forma income before cumulative effect of change in accounting principle for the year ended December 31, 2005 does not include revenues and related operating expenses for the period prior to the asset acquisition by Pacific. In addition, the Plains pro forma income before cumulative effect of change in accounting principle for the year ended December 31, 2005 and the three months ended March 31, 2006 does not include any synergies that Plains expects to achieve as a result of the merger with Pacific. For further discussion of potential business combination synergies, see the section captioned "The Merger—Additional Financial Considerations of the Parties."

19



SUMMARY HISTORICAL FINANCIAL AND OPERATING INFORMATION OF PACIFIC

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

 
  Pacific Consolidated Historical
 
 
  Year Ended December 31,
  Three Months Ended March 31,
 
 
  2003
  2004
  2005
  2005
  2006
 
 
  (In millions, except per unit amounts)

 
Consolidated Statements of Income:                                
Revenue:                                
  Pipeline transportation(1)   $ 101.8   $ 108.4   $ 116.6   $ 28.0   $ 33.9  
  Storage and terminalling(2)     12.7     37.6     52.0     10.3     20.1  
  Pipeline buy/sell transportation(3)         18.6     35.7     9.1     9.7  
  Crude oil sales, net of purchases(4)     21.3     16.8     20.0     1.8     6.8  
   
 
 
 
 
 
  Total revenue before expenses     135.8     181.4     224.3     49.2     70.5  
   
 
 
 
 
 
Expenses:                                
  Operating     61.0     85.3     104.4     21.8     33.4  
  General and administrative     13.7     15.4     18.5     5.2     6.9  
  Accelerated long-term incentive plan compensation expense(5)             3.1     3.1      
  Line 63 oil release costs(6)             2.0     2.0      
  Transaction costs(7)             1.8     1.8      
  Depreciation and amortization     18.9     24.2     29.4     6.5     10.0  
   
 
 
 
 
 
  Total expenses     93.6     124.9     159.2     40.4     50.3  
   
 
 
 
 
 
Share of net income (loss) of Frontier     (0.2 )   1.3     1.8     0.4     0.4  
   
 
 
 
 
 
Write-down of idle property(8)         (0.8 )   (0.5 )        
   
 
 
 
 
 
Operating income     42.0     57.0     66.4     9.2     20.6  
Interest and other income     0.5     1.0     1.1     0.4     0.4  
Write-off of deferred financing cost and interest rate swap termination expense         (2.9 )            
Interest expense     (17.5 )   (19.2 )   (26.7 )   (5.6 )   (9.1 )
   
 
 
 
 
 
Income before income taxes     25.0     35.9     40.8     4.0     11.9  
   
 
 
 
 
 
Income tax (expense) benefit:                                
  Current         (0.2 )   (1.3 )   (0.7 )   (0.4 )
  Deferred             0.1     0.1     0.1  
   
 
 
 
 
 
          (0.2 )   (1.2 )   (0.6 )   (0.3 )
   
 
 
 
 
 
Net income   $ 25.0   $ 35.7   $ 39.6   $ 3.4   $ 11.6  
   
 
 
 
 
 
Basic net income per limited partner unit   $ 1.10   $ 1.23   $ 1.25   $ 0.17   $ 0.30  
Diluted net income per limited partner unit   $ 1.09   $ 1.23   $ 1.25   $ 0.17   $ 0.30  
Weighted average limited partner units outstanding:                                
  Basic     22.3     28.4     32.4     29.7     39.3  
  Diluted     22.5     28.5     32.4     29.7     39.3  

Other Financial Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Net cash provided by operating activities   $ 42.7   $ 57.2   $ 76.1   $ 15.9   $ 6.0  
Net cash used in investing activities   $ (180.3 ) $ (156.0 ) $ (512.8 ) $ (4.3 ) $ (26.4 )
Net cash provided by (used in) financing activities   $ 123.4   $ 112.4   $ 431.3   $ (13.0 ) $ 14.3  
Capital expenditures:                                
  Sustaining   $ 2.1   $ 1.9   $ 6.1   $ 0.2   $ 0.8  
  Transition     0.4     1.9     11.4     2.3     3.2  
  Expansion     8.4     12.7     34.2     1.9     20.2  
   
 
 
 
 
 
    Total capital expenditures   $ 10.9   $ 16.5   $ 51.7   $ 4.4   $ 24.2  
   
 
 
 
 
 
                                 

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Balance Sheet Data (at period end):                                
Property and equipment, net   $ 568.0   $ 718.6   $ 1,185.5   $ 715.6   $ 1,205.6  
Total assets   $ 650.2   $ 869.9   $ 1,476.5   $ 920.1   $ 1,506.3  
Total debt, including current portion   $ 298.0   $ 357.2   $ 565.6   $ 356.4   $ 601.0  
Net partners' capital   $ 295.1   $ 422.5   $ 698.2   $ 413.0   $ 688.2  
Limited partner units outstanding   $ 24.9   $ 29.6   $ 39.3   $ 29.7   $ 39.3  

Operating Data (volumes in thousands of barrels per day):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
West Coast Business Unit:                                
  Pipeline throughput(9)     151.0     141.2     119.6     138.5     118.6  
Rocky Mountain Business Unit—throughput(9):                                
  Rangeland system(3):                                
    Sundre—North         21.0     21.0     21.4     24.7  
    Sundre—South         48.1     47.1     48.2     40.7  
  Western Corridor system     16.7     20.2     24.7     22.5     24.4  
  Salt Lake City Core system     107.5     115.1     119.6     108.7     123.8  
  Rocky Mountain Products Pipeline(1)             60.2         61.5  
  Frontier pipeline(10)     41.7     47.4     47.3     38.3     48.2  

(1)
Includes Pacific's ownership of the Rocky Mountain Products Pipeline acquired on September 30, 2005.

(2)
Includes Pacific's ownership of the Pacific Terminals storage and distribution system from July 31, 2003 and its ownership of Pacific Atlantic Terminals from September 30, 2005.

(3)
Includes Pacific's ownership of the Rangeland system, which Pacific acquired on May 11, 2004 and June 30, 2004.

(4)
The above amounts are net of purchases of $358.5 million, $402.3 million, and $623.1 million for the years ended 2003, 2004 and 2005, respectively and $114.4 million and $256.3 million for the three months ended March 31, 2005 and 2006, respectively.

(5)
In March 2005, in connection with the change in control of Pacific's general partner, all restricted units outstanding under Pacific's long-term incentive plan immediately vested. As a result, Pacific recognized $3.1 million in compensation expense in the first quarter of 2005. Accelerated long-term incentive plan compensation expense includes $0.6 million of operating expense and $2.5 million of general and administrative expense.

(6)
As a result of the March 23, 2005 release of crude oil from Pacific's Line 63, Pacific recorded $2.0 million of net oil release costs in the first quarter of 2005, consisting of what Pacific estimated to be $25.7 million of accrued costs relating to the release, net of insurance recovery of $15.6 million and accrued insurance receipts of $8.1 million as of March 31, 2006.

(7)
Pursuant to an ancillary agreement, Pacific's general partner reimbursed it $2.4 million for costs incurred in connection with a consent solicitation prepared and delivered to the holders of Pacific's 71/8% senior notes to approve certain amendments to the governing indenture and for severance and other costs incurred in connection with the sale of Pacific's general partner. In accordance with generally accepted accounting principles, Pacific recorded $0.6 million as capitalized deferred financing costs and $1.8 million as an expense, both in the first quarter of 2005. The reimbursements were recorded as a general partner's capital contribution.

(8)
These amounts represent write-downs to fair market value of idle Pacific Terminals property that has been or is expected to be sold.

(9)
Throughput is the total number of barrels per day transported on a pipeline system. Pacific recognizes throughput at the time a barrel of crude oil is delivered to its ultimate delivery point. Throughput is presented in thousands of barrels per day.

(10)
Represents 100% of the throughput on the Frontier pipeline.

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COMPARATIVE PER UNIT INFORMATION

        The following table presents: (1) historical per unit information for Plains; (2) pro forma per unit information of the combined company after giving effect to the merger and the transactions related to the merger; and (3) historical and equivalent pro forma per unit information for Pacific.

        The combined company pro forma per unit information was derived by combining information from the historical consolidated financial statements of Plains and Pacific using the purchase method of accounting for the merger. You should read this table together with the historical consolidated financial statements of Plains and Pacific that are filed with the Securities and Exchange Commission and incorporated by reference into this joint proxy statement/prospectus. Please read the "Where You Can Find More Information" section of this document. You should not rely on the pro forma per unit information as being necessarily indicative of actual results had the merger occurred on January 1, 2005 or March 31, 2006.

 
  Year Ended December 31, 2005
 
  Plains
  Pacific
 
  Historical
  Combined
Company
Pro Forma(1)

  Historical
  Equivalent
Pro Forma(2)

Net income per limited partner unit before cumulative effect of change in accounting principle:                        
  Basic   $ 2.77   $ 2.10   $ 1.25   $ 1.62
  Diluted   $ 2.72   $ 2.07   $ 1.25   $ 1.59
Cash distributions per unit(3)   $ 2.6500     N/A   $ 2.0925     N/A
Book value per common unit   $ 17.54     N/A   $ 20.90     N/A
 
  Three Months Ended March 31, 2006
 
  Plains
  Pacific
 
  Historical
  Combined
Company
Pro Forma(1)

  Historical
  Equivalent
Pro Forma(2)

Net income per limited partner unit before cumulative effect of change in accounting principle:                        
  Basic   $ 0.65   $ 0.55   $ 0.30   $ 0.42
  Diluted   $ 0.63   $ 0.54   $ 0.30   $ 0.42
Cash distributions per unit(3)   $ 0.7075     N/A   $ 0.5675     N/A
Book value per common unit   $ 18.40   $ 24.41   $ 20.65   $ 18.80

(1)
The combined company's pro forma information includes the effect of the merger on the basis described in the notes to the Unaudited Pro Forma Condensed Combined Financial Statements included elsewhere in this joint proxy statement/prospectus.

(2)
Pacific's equivalent pro forma earnings and book value amounts have been calculated by multiplying the combined company's related pro forma per unit amounts by the 0.77 exchange ratio.

(3)
Represents cash distributions per common unit declared with respect to the period and paid in the following period.

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MARKET PRICES AND DISTRIBUTION INFORMATION

        Plains common units are traded on the NYSE under the symbol "PAA," and Pacific common units are traded on the NYSE under the symbol "PPX." The following table sets forth, for the periods indicated, the range of high and low sales prices per unit for Plains common units and Pacific common units, on the NYSE composite tape, as well as information concerning quarterly cash distributions paid on those units. The sales prices are as reported in published financial sources.

 
  Plains Common Units
  Pacific Common Units
 
 
  High
  Low
  Distributions(1)
  High
  Low
  Distributions(1)
 
2004                                      
First Quarter   $ 35.23   $ 31.18   $ 0.5625   $ 30.39   $ 27.10   $ 0.4875  
Second Quarter   $ 36.13   $ 27.25   $ 0.5775   $ 28.55   $ 21.96   $ 0.4875  
Third Quarter   $ 35.98   $ 31.63   $ 0.6000   $ 28.64   $ 25.89   $ 0.4875  
Fourth Quarter   $ 37.99   $ 34.51   $ 0.6125   $ 29.47   $ 26.48   $ 0.5000  

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
First Quarter   $ 40.98   $ 36.50   $ 0.6375   $ 33.65   $ 28.00   $ 0.5125  
Second Quarter   $ 45.08   $ 38.00   $ 0.6500   $ 32.40   $ 29.10   $ 0.5125  
Third Quarter   $ 48.20   $ 42.01   $ 0.6750   $ 35.69   $ 31.07   $ 0.5125  
Fourth Quarter   $ 42.82   $ 38.51   $ 0.6875   $ 32.00   $ 28.10   $ 0.5550  

2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
First Quarter   $ 47.00   $ 39.81   $ 0.7075   $ 32.10   $ 29.50   $ 0.5675  
Second Quarter   $ 48.92   $ 42.81   $ (2 ) $ 35.06   $ 29.80   $ (2 )
Third Quarter (through July 7, 2006)   $ 44.18   $ 43.21   $ (2 ) $ 33.23   $ 32.46   $ (2 )

(1)
Represents cash distributions per common unit declared with respect to the quarter and paid in the following quarter.

(2)
Cash distributions in respect of quarters subsequent to the first quarter of 2006 have not been declared or paid.

        As of the record date for the special meeting, Plains had    outstanding common units, beneficially held by approximately    holders. Plains' partnership agreement requires it to distribute all of its "available cash," as defined in its partnership agreement, within 45 days after the end of each quarter. The payment of quarterly cash distributions by Plains in the future, therefore, will depend on the amount of "available cash" on hand at the end of each quarter.

        As of the record date for the special meeting, Pacific had                  outstanding common units, beneficially held by approximately                  holders, and                   subordinated units, all held by LB Pacific. Pacific's partnership agreement requires it to distribute all of its "available cash," as defined in its partnership agreement, within 45 days after the end of each quarter, less reserves established by its general partner. If the merger is not completed, the payment of quarterly cash distributions by Pacific in the future will depend on the amount of "available cash" on hand at the end of each quarter.

        Plains' management intends to recommend that the Plains board increase Plains' quarterly distribution from the current $0.7075 per unit to $0.80 per unit following the closing of the merger. Plains' general partner, in support of the transaction, has agreed to reduce the incentive distributions otherwise payable to it by $65 million in the aggregate over five four-quarter periods following the merger, beginning on the earlier to occur of (i) the first quarterly distribution declared and paid after the closing of the merger that equals or exceeds $0.80 per unit or (ii) the second quarterly distribution declared and paid after the closing of the merger. The reduction will be equal to $20 million in the aggregate for the first four quarters after and including the initial date, $15 million in the aggregate for the second four quarters, $15 million in the aggregate for the third four quarters, $10 million in the aggregate for the fourth four quarters, and $5 million in the aggregate for the fifth four quarters. For a description of the distribution provisions of Plains' partnership agreement, please read "Comparison of the Rights of Plains and Pacific Common Unitholders."

23



RISK FACTORS

        You should consider carefully the following risk factors, together with all of the other information included in, or incorporated by reference into, this joint proxy statement/prospectus before deciding how to vote. This document also contains forward-looking statements that involve risks and uncertainties. Please read "Information Regarding Forward-Looking Statements."

Risks Related to the Merger and the Related Transactions

        Integration of the two previously independent companies will be a complex, time consuming and costly process. Failure to timely and successfully integrate these companies may have a material adverse effect on the combined company's business, financial condition and results of operations. The difficulties of combining the companies will present challenges to the combined company's management, including:

        The combined company will also be exposed to other risks that are commonly associated with transactions similar to the merger, such as unanticipated liabilities and costs, some of which may be material, and diversion of management's attention. As a result, the anticipated benefits of the merger, including anticipated synergies, may not be fully realized, if at all.

        At the effective time of the merger, the market value of the consideration that Pacific unitholders will receive in the merger will depend on the trading price of Plains common units. The 0.77 exchange ratio that determines the number of Plains common units that Pacific unitholders will receive in the merger is fixed. This means that there is no "price protection" mechanism contained in the merger agreement that would adjust the number of Plains common units that Pacific unitholders will receive based on any decreases in the trading price of Plains common units. Because the parties will be required to obtain certain federal and state regulatory approvals in order to consummate the merger, the period of time between the date of the Pacific special meeting and the closing date could be substantial, thereby increasing the risk that the value of Plains common units could decrease. If Plains' common unit price decreases, the market value of the consideration received by Pacific common unitholders will also decrease. Consider the following example:

        Example:    Based on the closing trading price of Plains common units on July 5, 2006 of $43.43 per unit, and based on the fixed 0.77 exchange ratio, the market value of the consideration to be received by Pacific's common unitholders would be $33.44 per unit, or $43.43 multiplied by 0.77. If the trading price for Plains' common units decreased 10% from $43.43 to $39.09 per unit, then, based on the 0.77 fixed exchange ratio, the market value of the consideration to be received by Pacific's common unitholders would decrease from $33.44 to $30.10 per unit, or $39.09 multiplied by 0.77.

24



        For historical and current market prices of Plains common units and Pacific common units, please read the "Market Prices and Distribution Information" section of this joint proxy statement/prospectus.

        The merger agreement contains conditions that, if not satisfied or waived, would result in the merger not occurring, even though Plains' unitholders and Pacific's unitholders may have voted in favor of the merger agreement and related matters. In addition, Pacific and Plains can agree not to consummate the merger even if all unitholder approvals have been received. The closing conditions to the merger may not be satisfied, and any unsatisfied conditions may not be waived, which may cause the merger not to occur.

        While the merger agreement is in effect, Pacific is prohibited from entering into or soliciting, initiating or encouraging any inquiries or proposals that may lead to a proposal to acquire Pacific, or offer to enter into certain transactions such as a merger, sale of assets or other business combination, with any other person, subject to fiduciary obligations under applicable law. As a result of these provisions in the merger agreement, Pacific may lose opportunities to enter into more favorable transactions.

        Moreover, the merger agreement provides for the payment of up to $40 million in termination fees under specified circumstances, which fees are intended to provide a financial incentive for each of Plains and Pacific to seek to complete the proposed merger rather than to explore alternative transactions that potentially could be more favorable to its unitholders. For a detailed discussion of these termination fees, please read "The Merger Agreement—Termination Fees and Expenses."

        Both Plains and Pacific have also agreed to refrain from taking certain actions with respect to their businesses and financial affairs pending completion of the merger or termination of the merger agreement. These restrictions and the no-solicitation provisions (described in more detail in "The Merger Agreement") could be in effect for an extended period of time if completion of the merger is delayed.

        In addition to the economic costs associated with pursuing a merger, each of Plains' and Pacific's management is devoting substantial time and other human resources to the proposed transaction and related matters, which could limit Plains' and Pacific's ability to pursue other attractive business opportunities, including potential joint ventures, stand-alone projects and other transactions. If either Plains or Pacific is unable to pursue such other attractive business opportunities, then its growth prospects and the long-term strategic position of its business and the combined business could be adversely affected.

        Completion of the merger is conditioned upon the receipt of required governmental consents, approvals, orders and authorizations. Although Plains and Pacific intend to pursue vigorously all required governmental approvals, the requirement to receive these approvals before the merger could delay the completion of the merger, possibly for a significant period of time after Plains' and Pacific's unitholders have approved the merger. Any delay in the completion of the merger could diminish anticipated benefits of the merger or result in additional transaction costs, loss of revenue or other effects associated with uncertainty about the transaction. Any uncertainty over the ability of the partnerships to complete the merger could make it more difficult for them to retain key employees or

25


to pursue business strategies. In addition, until the merger is completed, the attention of management may be diverted from ongoing business concerns and regular business responsibilities to the extent management is focused on matters relating to the transaction, such as obtaining regulatory approvals.

        Plains and Pacific cannot complete the merger until the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired or is otherwise terminated. As a prerequisite to obtaining clearance of the proposed merger (or to avoid an injunction), the combined company (or either or both of Plains and Pacific) may be required to divest certain assets. Pursuant to the merger agreement, Pacific is required to agree to divest any assets required by an antitrust regulator to the extent such divestitures are recommended by Plains, and Plains is required to agree to divest any Pacific assets to the extent such divestitures would not result in a material adverse effect on the business being acquired by Plains. Notwithstanding the provisions of the merger agreement, Plains and Pacific may nonetheless elect to comply with divestiture requirements of an antitrust regulator to consummate the merger.

        Divestitures of assets can be time consuming and may delay completion of the proposed merger. Because there may be a limited number of potential buyers for the assets subject to divestiture and because potential buyers will likely be aware of the circumstances of the sale, these assets could be sold at prices lower than their fair market values or the prices Plains or Pacific paid for these assets. Asset divestitures could also significantly reduce the value of the combined company, eliminate potential cost savings opportunities or lessen the anticipated benefits of the merger.

        In addition, under section 704(c) of the Code, all or a portion of any gain recognized following the merger as a result of divestitures of Pacific assets may be required to be allocated to the pre-merger Pacific unitholders and all or a portion of any gain recognized following the merger as a result of divestitures of Plains assets may be required to be allocated to the pre-merger Plains unitholders. No special distributions will be made to the unitholders with respect to any tax liability resulting from such allocations.

        The completion of the merger will result in an event of default under Pacific's credit facility. To avoid a default, the credit facility must be amended or refinanced at or before the completion of the merger. Plains currently intends to refinance this credit facility in connection with the completion of the merger. If Pacific's credit facility is not amended or refinanced prior to the completion of the merger, the resulting default could have a material adverse effect on the combined company.

        The closing of the merger will constitute a "change of control" under Pacific's indentures for its senior notes. If the change of control results in a ratings downgrade of the Pacific senior notes by either Moody's Investors Service or Standard & Poor's within 90 days after the change of control has occurred, the combined company will be obligated to offer to repurchase each holder's senior notes at 101% of their aggregate principal amount, plus accrued interest. Pacific has $425 million aggregate principal amount of senior notes outstanding.

        If the combined company makes an offer to repurchase the notes, it is possible that holders of a large amount of Pacific's notes may exercise their repurchase right, in which case the combined company would be required to raise significant capital in the short term to fulfill the repurchase obligations. If the combined company were for any reason unable to satisfy the repurchase obligations,

26



it would result in an event of default under Pacific's indentures, which could have a material adverse effect on the combined company.

        In considering the recommendation of the board of directors of each of Plains' and Pacific's general partner to approve the merger agreement and the merger, you should consider that some of the directors and executive officers of Plains' and Pacific's general partners have interests that differ from, or are in addition to, their interests as Plains and Pacific unitholders generally. These interests include:

        In addition, the owners of Pacific's general partner have interests that differ from owners of Pacific's limited partner interests and the owners of Plains' general partner have interests that differ from the owners of Plains' limited partner interests. The owners of Pacific's general partner will receive cash in the transaction, a portion of which will be distributed to certain members of the Pacific board. For a detailed discussion of the interests of the directors and executive officers of Plains' and Pacific's general partners, please read "The Merger—Interests of Certain Persons in the Merger."

Risks Related to the Combined Company's Business

        Following the completion of the merger, the combined company will have a substantially increased level of consolidated debt. On a pro forma basis and excluding any debt incurred in connection with acquisitions after March 31, 2006, the combined company's consolidated long-term debt as of March 31, 2006 is estimated to be approximately $2.3 billion immediately following the completion of the merger. Among other things, this increased leverage may be viewed negatively by credit rating agencies. Pacific's indentures for its senior notes contain non-investment grade, or high-yield, financial covenants and other restrictions. These indentures restrict, among other things, Pacific's ability to pay distributions, incur debt, sell assets, enter into affiliate transactions or create liens on its assets. In the event that the combined company maintains Plains' current investment grade credit ratings, the high-yield covenants contained in Pacific's senior note indentures will fall away, effectively resulting in indentures with investment grade covenants. In the event that the combined company does not maintain Plains' investment grade credit ratings following the merger, the combined company will be subject to the high-yield covenants currently contained in Pacific's senior note indentures. Accordingly, the combined company would be required to comply with these restrictive covenants on an enterprise-wide basis and could be subject to increased capital costs.

27


        Debt service obligations, restrictive covenants in its revolving credit facility and the indentures governing its outstanding senior notes and maturities resulting from this leverage may adversely affect the combined company's ability to finance future operations, pursue acquisitions and fund other capital needs and the combined company's ability to pay cash distributions to unitholders, and may make the combined company's results of operations more susceptible to adverse economic or operating conditions. During an event of default under any of its debt agreements, the combined company would be prohibited from making cash distributions to its unitholders.

        Generally, it will be the combined company's policy that it establish a margin for crude oil purchased by selling crude oil for physical delivery to third party users, such as independent refiners or major oil companies, or by entering into a future delivery obligation under futures contracts on the NYMEX, the Intercontinental Exchange and over-the-counter. Through these transactions, the combined company will seek to maintain a position that is substantially balanced between purchases, on the one hand, and sales or future delivery obligations, on the other hand. Plains expects that the combined company's policy generally will be not to acquire and hold crude oil, futures contracts or derivative products for the purpose of speculating on price changes. These policies and practices cannot, however, eliminate all price risks. For example, any event that disrupts the combined company's anticipated physical supply of crude oil could expose it to risk of loss resulting from price changes. The combined company will also be exposed to basis risk when crude oil is purchased against one pricing index and sold against a different index. Moreover, the combined company will be exposed to some risks that are not hedged, including price risks on certain of its inventory, such as pipeline linefill, which must be maintained in order to transport crude oil on its pipelines. In addition, the combined company will engage in a controlled trading program for up to an aggregate of 500,000 barrels of crude oil. Although this activity will be monitored independently by the combined company's risk management function, it exposes the combined company to price risks within predefined limits and authorizations.

        In addition, the combined company's trading operations may involve the risk of non-compliance with its trading policies. For example, Plains discovered in November 1999 that its trading policy was violated by one of its former employees, which resulted in aggregate losses of approximately $181.0 million. Plains has taken steps within its organization to enhance its processes and procedures to detect unauthorized trading. There is no assurance, however, that these steps will detect and prevent all violations of the combined company's trading policies and procedures, particularly if deception or other intentional misconduct is involved.

        The combined company's operations involving the storage, treatment, processing, and transportation of liquid hydrocarbons will be subject to stringent federal, state, and local laws and regulations governing the discharge of materials into the environment. The combined company's segment operations also will be subject to laws and regulations relating to protection of the environment, operational safety and related matters. Compliance with all of these laws and regulations will increase the combined company's overall cost of doing business, including its capital costs to construct, maintain and upgrade equipment and facilities. Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties, the imposition of investigatory and remedial liabilities, the issuance of injunctions that may restrict, inhibit or prohibit the combined company's operations, or claims of damages to property or persons.

        Pro forma for the merger, the combined company would own more than three times the miles of pipeline Plains owned three years ago. As Plains has expanded its pipeline assets, it has experienced a

28



corresponding increase in the number of releases of crude oil to the environment. The combined company will be exposed to potentially substantial expense, including clean-up and remediation costs, fines and penalties, and third party claims for personal injury or property damage related to past or future releases. Some of these expenses could increase by amounts disproportionately higher than the relative increase in pipeline mileage and the increase in revenues associated therewith. The incurrence of such expenses not covered by insurance, indemnity or reserves could materially adversely affect the combined company's results of operations.

        Plains and Pacific each currently spend substantial amounts to comply with DOT-mandated pipeline integrity rules. The U.S. Department of Transportation ("DOT") is currently in the process of expanding the scope of its pipeline regulation to include the establishment of additional pipeline integrity management programs for certain gathering pipeline systems that are not currently subject to regulation. Neither Plains nor Pacific currently knows what, if any, impact this will have on the combined company's operating expenses.

        During 2006, Plains is expanding an internal review process started in 2004 in which it is reviewing various aspects of its pipeline and gathering systems that are not subject to the DOT pipeline integrity management rules. The purpose of this process is to review the surrounding environment, condition and operating history of these pipeline and gathering assets to determine if such assets warrant additional investment or replacement. Accordingly, the combined company could be required (as a result of additional DOT regulation), or it may elect (as a result of its own internal initiatives), to spend substantial sums to ensure the integrity of and upgrade its pipeline systems to maintain environmental compliance, and in some cases, the combined company may take pipelines out of service if it believes the cost of upgrades will exceed the value of the pipelines. Neither Plains nor Pacific can provide any assurance as to the ultimate amount or timing of future pipeline integrity expenditures for environmental compliance.

        Plains and Pacific believe that, because of the combined company's strategic asset base and complementary business models, the combined company will continue to benefit from swings in market prices and shifts in market structure during periods of volatility in the crude oil market. The combined company's ability to capture that benefit, however, will be subject to numerous risks and uncertainties, including its maintaining an attractive credit rating and continuing to receive open credit from its suppliers and trade counter-parties.

        A significant portion of the combined company's segment profit will be derived from pipeline transportation margins associated with the Santa Ynez and Point Arguello fields located offshore California and the onshore fields in the San Joaquin Valley. Plains expects that there will continue to be natural production declines from each of these fields as the underlying reservoirs are depleted. Plains estimates that a 5,000 barrel per day decline in volumes shipped from the outer continental shelf fields would result in a decrease in annual pipeline segment profit of the combined company of approximately $6.1 million ($3.6 million from Plains' operations and $2.5 million from Pacific's operations). A similar decline in volumes shipped from the San Joaquin Valley would result in an estimated $3.2 million decrease in annual pipeline segment profit of the combined company, the majority of which would be related to the Pacific business. In addition to natural production declines, any significant production disruption from the outer continental shelf fields and the San Joaquin Valley due to production problems, transportation problems or other reasons could also have a similar effect on the combined company's business.

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        Third party shippers generally do not have long-term contractual commitments to ship crude oil on Plains' or Pacific's pipelines. A decision by a shipper to substantially reduce or cease to ship volumes of crude oil on the combined company's pipelines could cause a significant decline in its revenues. For example, Plains estimates that an average 20,000 barrel per day variance in the Basin Pipeline System within the current operating window, equivalent to an approximate 7% volume variance on that system, would change annualized segment profit by approximately $1.4 million. In addition, Plains estimates that an average 10,000 barrel per day variance on the Capline Pipeline System, equivalent to an approximate 7% volume variance on that system, would change annualized segment profit by approximately $1.3 million.

        To maintain the volumes of crude oil the combined company purchases in connection with its gathering, marketing, terminalling and storage operations, the combined company will need to continue to contract for new supplies of domestic crude oil or increase its foreign activities in order to offset volumes lost because of natural declines in domestic crude oil production from depleting wells or volumes lost to competitors. Replacement of lost volumes of crude oil is particularly difficult in an environment where production is low and competition to gather available production is intense. Generally, because producers experience inconveniences in switching crude oil purchasers, such as delays in receipt of proceeds while awaiting the preparation of new division orders, producers typically do not change purchasers on the basis of minor variations in price. Thus, the combined company may experience difficulty acquiring crude oil at the wellhead in areas where relationships already exist between producers and other gatherers and purchasers of crude oil. Plains estimates that a 15,000 barrel per day decrease in barrels gathered by the combined company would have an approximate $4.4 million per year negative impact on segment profit. This impact assumes a reasonable margin throughout various market conditions. Actual margins vary based on the location of the crude oil, the strength or weakness of the market and the grade or quality of crude oil. Plains estimates that a $0.01 variance in the average segment profit per barrel would have an approximate $2.6 million annual effect on segment profit.

        Demand for crude oil is dependent upon the impact of future economic conditions, fuel conservation measures, alternative fuel requirements, governmental regulation or technological advances in fuel economy and energy generation devices, all of which could reduce demand. Demand also depends on the ability and willingness of shippers having access to the combined company's transportation assets to satisfy their demand by deliveries through those assets.

        Fluctuations in demand for crude oil, such as those caused by refinery downtime or shutdown, could have a negative effect on the combined company's operating results. Specifically, reduced demand in an area serviced by the combined company's transmission systems will negatively affect the throughput on such systems. Although the negative impact may be mitigated or overcome by the combined company's ability to capture differentials created by demand fluctuations, this ability is dependent on location and grade of crude oil, and thus is unpredictable.

        In many cases, the crude oil carried on the combined company's pipeline system will need to be routed onto third party pipelines to reach the refinery or other end market. Reduced throughput on these interconnecting pipelines as a result of testing, line repair, reduced operating pressures or other

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causes could result in reduced throughput on the combined company's pipeline systems that would adversely affect its profitability.

        The combined company's competitors will include other crude oil pipelines, the major integrated oil companies, their marketing affiliates, and independent gatherers, brokers and marketers and local distribution companies of widely varying sizes, financial resources and experience. Some of these competitors have capital resources many times greater than those of the combined company and control greater supplies of crude oil.

        The combined company will have a number of significant organic growth projects that require the expenditure of significant amounts of capital, including Pacific's Pier 400 project, Salt Lake City expansion and Cheyenne pipeline projects, and Plains' Pine Prairie joint venture and St. James terminal projects. Many of these projects involve numerous regulatory, environmental, weather-related, political and legal uncertainties that will be beyond the control of the combined company. As these projects are undertaken, required approvals may not be obtained, may be delayed or may be obtained with conditions that materially alter the expected return associated with the underlying projects. These projects may require significant outlays of capital. Moreover, revenues associated with these organic growth projects will not increase immediately upon the expenditures of funds with respect to a particular project and these projects may be completed behind schedule or over budgeted cost. Because of continuing increased demand for materials, equipment and services, there could be shortages and cost increases associated with construction projects. The combined company may construct pipelines, facilities or other assets in anticipation of market demand that dissipates or market growth that never materializes. As a result of these uncertainties, the anticipated benefits associated with the combined company's capital projects may not be achieved.

        Plains entered into the natural gas storage business in September 2005 in connection with PAA/Vulcan's acquisition of Energy Center Investments LLC. Although many aspects of the natural gas storage industry are similar in many respects to Plains' crude oil gathering, marketing, terminalling and storage operations, Plains' current management has little experience in developing and operating natural gas storage facilities. There are significant risks and costs inherent in Plains' efforts to engage in natural gas storage operations, including the risk that the new line of business may not be profitable and that the combined company might not be able to operate the natural gas storage business or implement its operating policies and strategies successfully.

        Plains' natural gas storage operations are conducted through PAA/Vulcan, a 50% joint venture. The board of directors of PAA/Vulcan, which includes an equal number of representatives from Plains and Vulcan Gas Storage, is responsible for providing strategic direction and policy making, and Plains is responsible for the day-to-day operations. As with any such joint venture arrangements, differences in views among the joint venture participants may result in delayed decisions or in failures to agree on major matters, potentially adversely affecting the business and operations of the joint ventures and in turn Plains' business and operations.

        The devotion of capital, management time and other resources to natural gas storage operations could adversely affect the combined company's existing business. Entering into the natural gas storage industry may require substantial changes, including acquisition costs, capital development expenditures, and adding management and employees who possess the skills needed to operate a natural gas storage business. For example, Pine Prairie is currently under development and there is no guarantee that it

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will be fully developed in the expected time frame or at the expected cost or generate the expected returns. Participation in the natural gas storage industry will require an investment in personnel and assets and the assumption of risks that may be greater than Plains previously assumed.

        The combined company's ability to grow will depend in part on its ability to make acquisitions that result in an increase in available cash per unit. If the combined company is unable to complete such accretive acquisitions either because it is (i) unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts, (ii) unable to raise financing for such acquisitions on economically acceptable terms, or (iii) outbid by competitors, its future growth will be limited. In particular, competition for midstream assets and businesses has intensified substantially and as a consequence such assets and businesses have become more costly. As a result, the combined company may not be able to complete the number or size of acquisitions that it targets internally or to continue to grow as quickly as Plains has historically.

        The combined company will continuously consider and enter into discussions regarding potential acquisitions. These transactions can be effected quickly, may occur at any time and may be significant in size relative to the combined company's existing assets and operations. Any material acquisition will require access to capital. Any limitations on the combined company's access to capital or increase in the cost of that capital could significantly impair its ability to execute its acquisition strategy. Assuming all other factors affecting the cost of equity capital are equal, the combined company's cost of equity capital will be higher than that of Pacific on a stand-alone basis as a result of Plains' current payment of incentive distributions to its general partner at a 50% level compared to Pacific's current payment of incentive distributions to its general partner at a 15% level. In addition, the combined company's inability to maintain its targeted credit profile, including maintaining Plains' investment grade credit ratings, could negatively affect its cost of capital as well as its ability to execute its acquisition strategy.

        Any acquisition involves potential risks, including:

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        Any of these factors could adversely affect the combined company's ability to achieve anticipated levels of cash flows from its acquisitions, to realize other anticipated benefits and to pay distributions or meet its debt service requirements.

        The combined company's domestic interstate common carrier pipelines will be subject to regulation by the FERC under the Interstate Commerce Act. The Interstate Commerce Act requires that tariff rates for petroleum pipelines be just and reasonable and non-discriminatory. The combined company's natural gas storage operations are subject to regulations by the FERC or the Michigan Public Service Commission. In addition, failure to comply with applicable regulations under the Natural Gas Act, and certain other state laws could result in the imposition of administrative, civil and criminal remedies. The combined company also will be subject to the Pipeline Safety Regulations of the DOT. The combined company's intrastate pipeline transportation activities will be subject to various state laws and regulations as well as orders of regulatory bodies.

        The combined company's Canadian pipelines will be subject to regulation by the National Energy Board ("NEB") or by provincial agencies. Under the National Energy Board Act, the NEB could investigate the tariff rates or the combined company's terms and conditions of service relating to a jurisdictional pipeline on its own initiative or at the urging of a shipper or other interested party and, if it found its rates or terms of service relating to such pipeline unjust or unreasonable or unjustly discriminatory, require the combined company to reduce its rates, provide access to other shippers, or change its terms of service. A provincial agency could, on the application of a shipper or other interested party, investigate the tariff rates or the combined company's terms and conditions of service relating to its provincially regulated proprietary pipelines and, if it found its rates or terms of service unreasonable or unjustly discriminatory, declare the pipelines to be common carrier pipelines and require it to reduce its rates, provide access to other shippers, or otherwise alter its terms of service. Any reduction in the combined company's tariff rates would most likely result in lower revenue and cash flows.

        The laws and regulations governing pipeline operations are subject to change and interpretation by the relevant governmental agency. Any such change or interpretation adverse to the combined company could have a material adverse effect on its operations, revenues and profitability.

        The combined company's cross-border activities with its Canadian subsidiaries will subject it to regulatory matters, including export licenses, tariffs, Canadian and U.S. customs and tax issues and toxic substance certifications. Regulations include the Short Supply Controls of the Export Administration Act, the North American Free Trade Agreement and the Toxic Substances Control Act. Violations of these license, tariffs and tax reporting requirements could result in the imposition of significant administrative, civil and criminal penalties.

        The Energy Policy Act of 1992 (the "EPAct"), among other things, deems "just and reasonable" within the meaning of the Interstate Commerce Act any oil pipeline rate in effect for the 365-day period ending on the date of the enactment of EPAct if the rate in effect was not subject to protest, investigation, or complaint during such 365-day period (that is, the EPAct "grandfathers" any such rates). The EPAct further protects any rate meeting this requirement from complaint unless the complainant can show that a substantial change occurred after the enactment of EPAct in the economic circumstances of the oil pipeline that were the basis for the rate or in the nature of the services provided which were a basis for the rate. This grandfathering protection does not apply, under certain

33


specified circumstances, when the person filing the complaint was under a contractual prohibition against the filing of a complaint.

        For the combined company's domestic interstate common carrier pipelines subject to FERC regulation under the Interstate Commerce Act, shippers may protest the combined company's pipeline tariff filings, and the FERC may investigate new or changed tariff rates. Further, other than for rates set under market-based rate authority and for rates that remain grandfathered under EPAct, the FERC may order refunds of amounts collected under rates that were in excess of a just and reasonable level when taking into consideration the pipeline system's cost of service. In addition, shippers may challenge the lawfulness of tariff rates that have become final and effective. The FERC may also investigate such rates absent shipper complaint. The FERC's ratemaking methodologies may limit the combined company's ability to set rates based on its true costs or may delay the use of rates that reflect increased costs.

        The potential for a challenge to the status of the combined company's grandfathered rates under EPA (by showing a substantial change in circumstances) or a challenge to its indexed rates creates the risk that the FERC might find some of the combined company's rates to be in excess of a just and reasonable level—that is, a level justified by its cost of service. In such an event, the FERC could order the combined company to reduce any such rates and could require the payment of reparations to complaining shippers for up to two years prior to the complaint.

        There can be no assurance that the combined company will adequately assess the creditworthiness of its existing or future counterparties or that there will not be an unanticipated deterioration in their creditworthiness, which could have an adverse impact on the combined company.

        In those cases in which the combined company provides division order services for crude oil purchased at the wellhead, it may be responsible for distribution of proceeds to all parties. In other cases, it may pay all of or a portion of the production proceeds to an operator who distributes these proceeds to the various interest owners. These arrangements will expose the combined company to operator credit risk, and there can be no assurance that it will not experience losses in dealings with other parties.

        Over the last several years, as the scale and scope of Plains' and Pacific's respective businesses activities have expanded, the breadth and depth of available insurance markets have contracted. Some of this may be attributable to the events of September 11, 2001, which adversely impacted the availability and costs of certain types of coverage. Plains and Pacific anticipate that the effects of hurricanes along the Gulf Coast during 2005 may also have an adverse effect on the availability and cost of coverage. You cannot be assured that the combined company will be able to maintain adequate insurance in the future at rates it considers reasonable. The occurrence of a significant event not fully insured could materially and adversely affect the combined company's operations and financial condition.

        The combined company's gathering and marketing operations will include purchasing crude oil that is carried on third party tankers and barges. The combined company's water borne cargoes of crude oil will be at risk of being damaged or lost because of events such as marine disaster, bad weather, mechanical failures, grounding or collision, fire, explosion, environmental accidents, piracy, terrorism and political instability. Such occurrences could result in death or injury to persons, loss of property or environmental damage, delays in the delivery of cargo, loss of revenues from or termination of charter

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contracts, governmental fines, penalties or restrictions on conducting business, higher insurance rates and damage to the combined company's reputation and customer relationships generally. While certain of these risks may be covered under its insurance program, any of these circumstances or events could increase the combined company's costs or lower its revenues.

        In instances in which cargoes are purchased FOB (title transfers when the oil is loaded onto a vessel chartered by the purchaser) the contract to purchase is typically made prior to the vessel being chartered. In such circumstances the combined company will take the risk of higher than anticipated charter costs. The combined company will also be exposed to increased transit time and unanticipated demurrage charges, which involve extra payment to the owner of a vessel for delays in offloading, circumstances that the combined company may not control.

        Crew members, suppliers of goods and services to a vessel, other shippers of cargo and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lienholder may enforce its lien by arresting a vessel through foreclosure proceedings. The arrest or attachment of a vessel carrying a cargo of the combined company's oil could substantially delay its shipment.

        In addition, in some jurisdictions, under the "sister ship" theory of liability, a claimant may arrest both the vessel that is subject to the claimant's maritime lien and any "associated" vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert "sister ship" liability against one vessel carrying the combined company's cargo for claims relating to a vessel with which the combined company has no relation.

        A portion of the combined company's storage and distribution business conducted in the Los Angeles basin will be dependent on its ability to receive waterborne crude oil and other dark products, a major portion of which are presently being received through dock facilities operated by Shell Oil Products in the Port of Long Beach. The agreement that will allow the combined company to utilize these dock facilities expires in October 2006, and there is no guarantee that it will be renewed. If this agreement is not renewed and if other alternative dock access cannot be arranged, the volumes of crude oil and other dark products that Pacific presently receives from its customers in the Los Angeles basin may be reduced, which could result in a reduction of storage and distribution revenue and cash flow.

        Because the combined company will conduct operations in Canada, it will be exposed to currency fluctuations and exchange rate risks that may adversely affect its results of operations.

        Since the September 11, 2001 terrorist attacks, the U.S. government has issued warnings that energy assets, specifically the nation's pipeline infrastructure, may be future targets of terrorist organizations. These developments will subject the combined company's operations to increased risks. Any future terrorist attack that may target the combined company's facilities, those of its customers and, in some cases, those of other pipelines, could have a material adverse effect on its business.

        Plains had approximately $48 million of goodwill on its consolidated balance sheet as of March 31, 2006. Plains currently expects to record approximately $800 million of goodwill upon completion of the merger with Pacific, but that estimate is subject to change pending the completion of an independent

35


appraisal. Consequently, pro forma for the merger, Plains expects that approximately $848 million, representing approximately 12% of the combined company's consolidated assets at March 31, 2006 on a pro forma basis, may be recorded as goodwill. In addition, Plains estimates that it will record approximately $100 million to $150 million of goodwill in conjunction with other acquisitions made in the second quarter of 2006. These estimates are preliminary and may be adjusted pending the completion of independent appraisals. Goodwill is recorded when the purchase price of a business exceeds the fair market value of the acquired tangible and separately measurable intangible net assets. U.S. generally accepted accounting principles, or GAAP, will require the combined company to test goodwill for impairment on an annual basis or when events or circumstances occur indicating that goodwill might be impaired. If the combined company were to determine that any of its remaining balance of goodwill was impaired, it would be required to take an immediate charge to earnings with a corresponding reduction of partners' equity and increase in balance sheet leverage as measured by debt to total capitalization.

Risks Related to Plains' Common Units and Risks Resulting from Its Partnership Structure

        Prior to making any distribution on the common units, Plains will reimburse its general partner and its affiliates, including officers and directors of its general partner, for all expenses incurred on Plains' behalf. The reimbursement of expenses and the payment of fees could adversely affect Plains' ability to make distributions. The general partner has sole discretion to determine the amount of these expenses. In addition, Plains' general partner and its affiliates may provide Plains services for which Plains will be charged reasonable fees as determined by the general partner.

        Because distributions on the common units are dependent on the amount of cash Plains generates, distributions may fluctuate based on Plains' performance. The actual amount of cash that is available to be distributed each quarter will depend on numerous factors, some of which are beyond Plains' control and the control of its general partner. Cash distributions are dependent primarily on cash flow, including cash flow from financial reserves and working capital borrowings, and not solely on profitability, which is affected by non-cash items. Therefore, cash distributions might be made during periods when Plains records losses and might not be made during periods when Plains records profits.

        Plains' general partner manages and operates Plains. Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting Plains' business. Unitholders have no rights to elect the general partner or the directors of the general partner on an annual or other continuing basis.

        Furthermore, if unitholders are dissatisfied with the performance of Plains' general partner, they currently have little practical ability to remove Plains' general partner or otherwise change its management. Plains' general partner may not be removed except upon the vote of the holders of at least 662/3% of its outstanding units (including units held by Plains' general partner or its affiliates). Because affiliates of Plains' general partner owned more than    % of Plains' outstanding common units pro forma for the completion of the merger as of the record date, the removal of Plains' general partner is not readily practicable without the consent of both Plains' general partner and its affiliates.

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        In addition, the following provisions of Plains' partnership agreement may discourage a person or group from attempting to remove Plains' general partner or otherwise change Plains' management:

        As a result of these provisions, the price at which Plains' common units will trade may be lower because of the absence or reduction of a takeover premium in the trading price.

        Plains' general partner may cause Plains to issue an unlimited number of common units without unitholder approval (subject to applicable NYSE rules). Plains may also issue at any time an unlimited number of equity securities ranking junior or senior to the common units without unitholder approval (subject to applicable NYSE rules). The issuance of additional common units or other equity securities of equal or senior rank will have the following effects:

        If at any time Plains' general partner and its affiliates own 80% or more of the common units, the general partner will have the right, but not the obligation, which it may assign to any of its affiliates, to acquire all, but not less than all, of the remaining common units held by unaffiliated persons at a price generally equal to the then current market price of the common units. As a result, unitholders may be required to sell their common units at a time when they may not desire to sell them or at a price that is less than the price they would like to receive. They may also incur a tax liability upon a sale of their common units.

        Under Delaware law, a unitholder could be held liable for Plains' obligations to the same extent as a general partner if a court determined that the right of unitholders to remove Plains' general partner or to take other action under Plains' partnership agreement constituted participation in the "control" of Plains' business.

        Plains' general partner generally has unlimited liability for Plains' obligations, such as Plains' debts and environmental liabilities, except for those contractual obligations that are expressly made without recourse to Plains' general partner.

        In addition, Section 17-607 of the Delaware Revised Uniform Limited Partnership Act provides that under some circumstances, a unitholder may be liable to Plains for the amount of a distribution for a period of three years from the date of the distribution.

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        These conflicts may include the following:

Tax Risks Related to the Merger and to Owning Plains Common Units

        You are urged to read the "Material Federal Income Tax Consequences" section of this joint proxy statement/prospectus for a more complete discussion of the following federal income tax risks related to the merger and owning and disposing of common units received in the merger.

        Although it is anticipated that no gain or loss will be recognized by a Plains unitholder or a Pacific unitholder as a result of the merger (except with respect to cash received in lieu of fractional Plains common units and a net decrease in a unitholder's share of nonrecourse liabilities discussed below), no ruling has been or will be requested from the Internal Revenue Service, or IRS, with respect to the tax consequences of the merger. Instead, Plains and Pacific are relying on the opinions of their respective counsel as to the tax consequences of the merger, and counsel's conclusions may not be sustained if challenged by the IRS.

        As a result of the merger, each Plains and Pacific unitholder's share of nonrecourse liabilities will be recalculated. Each Plains unitholder and Pacific unitholder will be treated as receiving a deemed cash distribution equal to the excess, if any, of such unitholder's share of nonrecourse liabilities immediately before the merger over such unitholder's share of nonrecourse liabilities immediately following the merger. If the amount of the deemed cash distribution received by a Pacific unitholder or a Plains unitholder exceeds the unitholder's basis in his partnership interest, such unitholder will recognize gain in an amount equal to such excess. The application of the rules governing the allocation of nonrecourse liabilities in the context of the merger is complex and subject to uncertainty. There can be no assurance that there will not be a net decrease in the amount of nonrecourse liabilities allocable to a Pacific unitholder or a Plains common unitholder as a result of the merger.

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        Passive loss limitations generally provide that specific taxpayers may only deduct losses from passive activities to the extent of the taxpayer's income from passive activities. The passive loss limitations are applied separately with respect to each publicly traded partnership. There is no guidance as to whether suspended passive losses related to Pacific common units will be available to offset future passive income from Plains following the merger. Accordingly, a Pacific common unitholder's ability to utilize suspended Pacific passive losses to offset Plains taxable income following the merger may be limited.

        The treatment of the exchange of Pacific common units for Plains common units in the merger as a tax-free exchange is dependent upon each of Plains and Pacific being treated as a partnership for federal income tax purposes. If either Plains or Pacific were treated as a corporation for federal income tax purposes, the exchange would likely be a fully taxable transaction for a Pacific unitholder.

        The anticipated after-tax economic benefit of an investment in the common units depends largely on Plains being treated as a partnership for federal income tax purposes. Plains has not requested, and does not plan to request, a ruling from the IRS on this or any other matter affecting Plains.

        If Plains were treated as a corporation for federal income tax purposes, Plains would pay federal income tax on Plains' income at the corporate tax rate, which is currently a maximum of 35%, and would likely pay state income tax at varying rates. Distributions to Plains' unitholders would generally be taxed again to them as corporate distributions, and no income, gains, losses, deductions or credits would flow through to them. Treatment of Plains as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to the unitholders, likely causing a substantial reduction in the value of the common units. Moreover, treatment of Plains as a corporation could materially and adversely affect Plains' ability to make cash distributions to Plains' unitholders or to make payments on Plains' debt securities.

        Current law may change so as to cause Plains to be treated as a corporation for federal income tax purposes or otherwise subject Plains to entity-level taxation. In addition, because of widespread state budget deficits, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise or other forms of taxation. If any state were to impose a tax upon Plains as an entity, the cash available for distribution to Plains' unitholders would be reduced. Plains' partnership agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subjects Plains to taxation as a corporation or otherwise subjects Plains to entity-level taxation for federal, state or local income tax purposes, then the minimum quarterly distribution and the target distribution levels will be adjusted to reflect the impact of that law on Plains.

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        Plains has not requested a ruling from the IRS with respect to any matter affecting Plains. The IRS may adopt positions that differ from the conclusions of Plains' counsel or from the positions Plains takes. It may be necessary to resort to administrative or court proceedings to sustain some or all of Plains' counsel's conclusions or the positions Plains takes. A court may not concur with Plains' counsel's conclusions or the positions Plains takes. Any contest with the IRS may materially and adversely impact the market for common units and the price at which they trade. In addition, the costs of any contest with the IRS, principally legal, accounting and related fees, will be borne by Plains and directly or indirectly by the unitholders and the general partner because the costs will reduce Plains' cash available for distribution or debt service.

        Because unitholders of the combined company will be treated as partners to whom Plains will allocate taxable income which could be different in amount than the cash Plains distributes, they will be required to pay any federal income taxes and, in some cases, state and local income taxes on their share of Plains' taxable income even if they do not receive any cash distributions from Plains. Unitholders may not receive cash distributions from Plains equal to their share of Plains' taxable income or even equal to the actual tax liability that results from their share of Plains' taxable income.

        If Plains' unitholders sell their common units, they will recognize gain or loss equal to the difference between the amount realized and their tax basis in those common units. Prior distributions in excess of the total net taxable income allocated to a unitholder for a common unit, which decreased the unitholder's tax basis in that common unit, will, in effect, become taxable income to the unitholder if the common unit is sold at a price greater than the unitholder's tax basis in that common unit, even if the price the unitholder receives is less than the unitholder's original cost. A substantial portion of the amount realized, whether or not representing gain, may be ordinary income to the unitholder. Should the IRS successfully contest some positions Plains takes, the unitholder could recognize more gain on the sale of units than would be the case under those positions, without the benefit of decreased income in prior years. Also, if a unitholder sells units, the unitholder may incur a tax liability in excess of the amount of cash received from the sale.

        Investment in common units by tax-exempt entities, such as individual retirement accounts (IRAs), and non-U.S. persons raises issues unique to them. For example, virtually all of Plains' income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file U.S. federal tax returns and pay tax on their share of Plains' taxable income.

        Because Plains and Pacific cannot match transferors and transferees of common units and because of other reasons, Plains and Pacific have adopted depreciation and amortization positions that do not

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conform with all aspects of the Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to Plains' unitholders. It also could affect the timing of these tax benefits or the amount of gain from a unitholder's sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to a unitholder's tax return.

        In addition to federal income taxes, unitholders of the combined company will be subject to other taxes, such as Canadian federal and provincial taxes, state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which Plains does business or owns property but in which such unitholders may not reside. Plains owns property and conducts business in Canada and in most states in the United States. Unitholders may be required to file tax returns and pay taxes in many or all of the jurisdictions in which Plains does business or owns property. Further, unitholders of the combined company may be subject to penalties for failure to comply with those requirements. It will be the combined company's unitholders' responsibility to file all U.S. federal, foreign, state and local tax returns. Plains' counsel has not rendered an opinion on the foreign, U.S. state or local tax consequences of an investment in Plains common units.

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THE SPECIAL UNITHOLDER MEETINGS

 
  Plains
  Pacific
Time, Place and Date                           , 2006
10:00 a.m., local time
          
         
Houston, Texas
                          , 2006
8:00 a.m., local time
5900 Cherry Avenue
Long Beach, California

 

 

The meeting may be adjourned or postponed to another date or place for proper purposes, including for the purpose of soliciting additional proxies.

 

The meeting may be adjourned or postponed to another date or place for proper purposes, including for the purpose of soliciting additional proxies.

Purposes

 


 

To consider and vote on the approval and adoption of the merger agreement and the merger;

 


 

To consider and vote on the approval and adoption of the merger agreement and the merger; and

 

 


 

To consider and vote on the approval of the issuance of Plains common units pursuant to the merger agreement, which Plains currently estimates to be approximately 22.3 million common units; and

 


 

To transact other business as may properly be presented at the meeting or any adjournments of the meeting.

 

 


 

To transact other business as may properly be presented at the meeting or any adjournments of the meeting.

 

At the present time, Pacific knows of no other matters that will be presented for consideration at the meeting.

 

 

At the present time, Plains knows of no other matters that will be presented for consideration at the meeting.

 

 

 

 

Quorum

 

Presence, in person or by proxy, of holders of a majority of the outstanding Plains common units.

 

Presence, in person or by proxy, of holders of a majority of the outstanding Pacific common units (excluding common units held by LB Pacific) and a majority of the outstanding Pacific subordinated units.

Record Date

 

Close of business on                        , 2006.

 

Close of business on                        , 2006.

Units Entitled to Vote

 


 

You may vote at the Plains meeting if you owned Plains common units as of the record date.

 


 

You may vote at the Pacific meeting if you owned Pacific common units or Pacific subordinated units as of the record date.
                 

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You may cast one vote for each Plains common unit that you owned on the record date.

 


 

You may cast one vote for each Pacific common unit and one vote for each Pacific subordinated unit that you owned on the record date.

Recommendations of the Boards of Directors and Pacific's Conflicts Committee

 

The Plains board has considered the benefits of the merger as well as the associated risks and has unanimously approved and adopted the merger agreement, has determined that it is advisable and in the best interest of Plains and Plains' common unitholders, and has approved the issuance of Plains common units pursuant to the merger agreement. Accordingly, the Plains board recommends that Plains' common unitholders vote to approve and adopt the merger agreement and the merger and vote to approve the issuance of Plains common units pursuant to the merger agreement.

 

The Pacific conflicts committee, comprised of directors who are deemed to be independent of the interests of Pacific's general partner, has considered the benefits of the merger as well as the associated risks and has unanimously approved and adopted the merger agreement and determined that it is advisable and in the best interests of Pacific and Pacific's common unitholders (other than LB Pacific). Accordingly, the Pacific conflicts committee recommends that Pacific unitholders vote to approve and adopt the merger agreement and the merger.

The Pacific board has considered the benefits of the merger as well as the associated risks and has unanimously approved and adopted the merger agreement and determined that it is advisable and in the best interests of Pacific and Pacific's equityholders. Accordingly, the Pacific board recommends that Pacific unitholders vote to approve and adopt the merger agreement and the merger.

Votes Required

 


 

The affirmative vote of at least a majority of Plains' outstanding common units is required to approve and adopt the merger agreement and the merger and to approve the issuance of Plains common units pursuant to the merger agreement.

 


 

The affirmative vote of at least a majority of Pacific's outstanding common units (other than units held by LB Pacific) and at least a majority of Pacific's outstanding subordinated units, voting as separate classes, is required to approve and adopt the merger agreement and the merger.
                 

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The failure of a unitholder to vote in person or by proxy will have the effect of a vote against approval and adoption of the merger agreement and the merger and against the approval of the issuance of Plains common units pursuant to the merger agreement.

 


 

The failure of a unitholder to vote in person or by proxy will have the effect of a vote against approval and adoption of the merger agreement and the merger.

 

 


 

As of the record date of the Plains special meeting, directors and executive officers of Plains and their affiliates had the right to vote            Plains common units, or approximately    % of Plains' outstanding common units. Plains currently expects that all of the directors and executive officers of Plains and their affiliates will vote their common units in favor of the merger, although none of them has entered into any agreement obligating them to do so.

 


 

As of the record date of the Pacific special meeting, directors and executive officers of Pacific and their affiliates had the right to vote            Pacific common units, or approximately    % of Pacific's outstanding common units, excluding common units held by LB Pacific. Pacific currently expects that all of the directors and executive officers of Pacific will vote their common units in favor of the merger, although none of them has entered into any agreement obligating them to do so. In addition, LB Pacific owns all of Pacific's outstanding subordinated units. Pacific currently expects that LB Pacific will vote its subordinated units in favor of the merger. Pursuant to the purchase agreement, LB Pacific has agreed to use its commercially reasonable efforts to take all appropriate action necessary or advisable to consummate and make effective the transactions contemplated by, and to satisfy the closing conditions of, the purchase agreement and the merger agreement as promptly as practicable.
                 

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Units Outstanding

 

As of the record date, there were                  Plains common units outstanding.

 

As of the record date, there were                  Pacific common units outstanding.

Voting Procedures

 

Voting by Plains Common Unitholders

 

Voting by Pacific Unitholders

 

 

Plains common unitholders may vote using any of the following methods:

 

Pacific unitholders may vote using any of the following methods:

 

 


 

phone the toll-free number listed on your proxy card and follow the recorded instructions;

 


 

phone the toll-free number listed on your proxy card and follow the recorded instructions;

 

 


 

go to the Internet website listed on your proxy card and follow the instructions provided;

 


 

go to the Internet website listed on your proxy card and follow the instructions provided;

 

 


 

complete, sign and mail your proxy card in the postage-paid envelope; or

 


 

complete, sign and mail your proxy card in the postage-paid envelope; or

 

 


 

attend the meeting and vote in person.

 


 

attend the meeting and vote in person.

 

 

If you have timely and properly submitted your proxy, clearly indicated your vote and have not revoked your proxy, your units will be voted as indicated. If you have timely and properly submitted your proxy but have not clearly indicated your vote, your units will be voted FOR approval and adoption of the merger agreement and the merger and FOR approval of the issuance of Plains common units pursuant to the merger agreement.

If any other matters are properly presented at the meeting for consideration, the persons named in your proxy will have the discretion to vote on these matters in accordance with their best judgment. Proxies voted against adoption of the merger agreement, the merger and the issuance of Plains common units in connection with the merger will not be voted in favor of any adjournment of the meeting for the purpose of soliciting additional proxies.

 

If you have timely and properly submitted your proxy, clearly indicated your vote and have not revoked your proxy, your units will be voted as indicated. If you have timely and properly submitted your proxy but have not clearly indicated your vote, your units will be voted FOR approval and adoption of the merger agreement and the merger.

If any other matters are properly presented at the meeting for consideration, the persons named in your proxy will have the discretion to vote on these matters in accordance with their best judgment. Proxies voted against adoption of the merger agreement and the merger will not be voted in favor of any adjournment of the meeting for the purpose of soliciting additional proxies.

 

 

 

 

 

 

 

 

 

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Revocation

 

Revocation

 

 

You may revoke your proxy at any time prior to its exercise by:

 

You may revoke your proxy at any time prior to its exercise by:

 

 


 

giving written notice of revocation to the Secretary of Plains' general partner;

 


 

giving written notice of revocation to the Secretary of Pacific's general partner;

 

 


 

appearing and voting in person at the Plains meeting; or

 


 

appearing and voting in person at the Pacific meeting; or

 

 


 

properly completing and executing a later dated proxy and delivering it to the Secretary of Plains' general partner at or before the Plains meeting.

 


 

properly completing and executing a later dated proxy and delivering it to the Secretary of Pacific's general partner at or before the Pacific meeting.

 

 

Your presence without voting at the meeting will not automatically revoke your proxy, and any revocation during the meeting will not affect votes previously taken.

 

Your presence without voting at the meeting will not automatically revoke your proxy, and any revocation during the meeting will not affect votes previously taken.

 

 

Validity

 

Validity

 

 

The inspectors of election will determine all questions as to the validity, form, eligibility (including time of receipt) and acceptance of proxies. Their determination will be final and binding. The board of directors of Plains' general partner has the right to waive any irregularities or conditions as to the manner of voting. Plains may accept your proxy by any form of communication permitted by Delaware law so long as Plains is reasonably assured that the communication is authorized by you.

 

The inspectors of election will determine all questions as to the validity, form, eligibility (including time of receipt) and acceptance of proxies. Their determination will be final and binding. The board of directors of Pacific's general partner has the right to waive any irregularities or conditions as to the manner of voting. Pacific may accept your proxy by any form of communication permitted by Delaware law so long as Pacific is reasonably assured that the communication is authorized by you.

Solicitation of Proxies

 

The accompanying proxy is being solicited on behalf of the Plains board. The expenses of preparing, printing and mailing the proxy and materials used in the solicitation will be borne by Plains.

 

The accompanying proxy is being solicited on behalf of the Pacific board. The expenses of preparing, printing and mailing the proxy and materials used in the solicitation will be borne by Pacific.

 

 

Morrow & Co., Inc. has been retained by Plains to aid in the solicitation of proxies for a fee of $7,500 plus expenses and the reimbursement of out-of-pocket expenses. Proxies may be solicited from Plains unitholders by personal interview, telephone and telegram by directors, officers and employees of Plains' general partner, who will not receive additional compensation for performing that service. Arrangements also will be made with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of proxy materials to the beneficial owners of Plains units held by those persons, and Plains will reimburse them for any reasonable expenses that they incur.

 

D.F. King & Co., Inc. has been retained by Pacific to aid in the solicitation of proxies for a fee of $7,500 plus expenses and the reimbursement of out-of-pocket expenses. Proxies may also be solicited from Pacific unitholders by personal interview, telephone and telegram by directors, officers and employees of Pacific's general partner, who will not receive additional compensation for performing that service. Arrangements also will be made with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of proxy materials to the beneficial owners of Pacific units held by those persons, and Pacific will reimburse them for any reasonable expenses that they incur.
                 

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Units Held in Street Name

 

If you hold your units in the name of a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or nominee when voting your units or when granting or revoking a proxy.

 

 

Absent specific instructions from you, your broker is not empowered to vote your units with respect to the approval and adoption of the merger agreement and the merger or, if you are a Plains unitholder, the approval of the issuance of Plains common units pursuant to the merger agreement. The units not voted because brokers lack power to vote them without instructions are also known as "broker non-votes."

 

 

Abstentions and broker non-votes will have the same effect as a vote against the proposals.

47



THE MERGER

Background of the Merger

        In December 2005, representatives of Lehman Brothers Inc. met with Mr. Christopher Manning, the Chairman of the Board of Pacific's general partner and a principal of Lehman Brothers Merchant Banking, to discuss strategic alternatives for Pacific, including a possible initial public offering of Pacific's general partner or a sale of Pacific. After this meeting, Mr. Manning authorized Lehman Brothers Inc. to engage in discussions to determine the level of interest in a possible sale of Pacific. Over approximately the next three months, Lehman Brothers Inc. evaluated the field of potential buyers to acquire Pacific and contacted all twelve of those it identified as logical buyers (including Plains).

        On January 10, 2006, Mr. Manning met in Houston, Texas with Mr. Greg Armstrong, the Chairman of the Board and Chief Executive Officer of Plains' general partner, and Mr. Harry Pefanis, the President and Chief Operating Officer of Plains' general partner, at which time the possibility of a business combination involving Pacific and Plains was informally discussed. In addition, Plains had, since 1999, engaged in informal discussions with the former owner of Pacific's general partner regarding a potential business combination involving Plains and Pacific, which discussions were unrelated to the discussions in 2006 that led to the proposed merger.

        Between March 22, 2006 and April 4, 2006, four potential buyers, referred to herein as Parties A, B, C and D, signed confidentiality agreements and began their respective due diligence reviews by meeting with members of Pacific's management in Long Beach, California. At these meetings, held separately for each of the four potential buyers, Pacific's management gave a presentation and provided information about Pacific and its prospects to the potential buyer's representatives, and answered questions relating to various aspects of Pacific's business and a possible transaction with such party.

        On March 24, 2006, the full board of directors of Pacific's general partner was advised by Mr. Manning that Pacific and its management team had begun meeting with potential buyers of Pacific.

        On April 4, 2006, Parties A, B, C and D were sent letters requesting proposals to acquire LB Pacific or, alternatively, both LB Pacific and Pacific together. In the letter, Lehman Brothers Inc. requested that the bidders provide detail on valuation, the form of consideration, any approvals required to consummate a transaction, financing arrangements and due diligence requirements.

        On April 13, 2006, a representative of Lehman Brothers Inc. contacted a representative of Simmons & Company International, financial advisor to Plains, to invite Plains to participate in the process. On April 17, 2006, Plains signed a confidentiality agreement and members of Pacific's management provided an initial operational and financial presentation to representatives of Plains. Between April 17, 2006 and May 16, 2006, representatives of Plains conducted a due diligence review of certain financial, operational and legal matters related to Pacific.

        On April 18, 2006, Party A and Party B submitted proposals. Party C and Party D did not submit proposals to Lehman Brothers Inc., and no further discussions occurred with these parties. Party A's proposal contemplated a purchase of all of the equity interests in Pacific, including those owned by LB Pacific and the public, by paying cash to LB Pacific for its ownership interests in the Pacific general partner entities as well as its common and subordinated units of Pacific, and issuing equity securities of Party A to Pacific's common unitholders (other than LB Pacific). Party A's proposal was subject to financing conditions and completion of confirmatory due diligence. Party B's proposal contemplated a purchase of LB Pacific for cash. Party B also expressed an interest in exploring alternative transactions, including an acquisition of only the general partner interest in Pacific or a combination of an investment in Pacific's general partner and a contribution of assets by Party B. Party B's proposal did not include a financing condition, but was subject to further operational and environmental due diligence.

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        On April 19, 2006, Mr. Armstrong notified the Plains board of management's discussions with representatives of Pacific regarding a potential business combination between Pacific and Plains and indicated that Plains' management intended to submit a non-binding proposal to acquire all of the general partner and limited partner interests of Pacific. Also on April 19, 2006, Messrs. Armstrong and Pefanis and representatives of Simmons & Company and Lehman Brothers Inc. met to discuss Plains' questions regarding the bid process.

        On April 20, 2006, Plains submitted an initial, non-binding proposal contemplating a purchase of all of the equity interests in Pacific, including those owned by LB Pacific and the public, by paying cash to LB Pacific for its ownership interests in the Pacific general partner entities as well as its common and subordinated units of Pacific, and issuing Plains common units to Pacific's common unitholders (other than LB Pacific). Plains' proposal was not subject to a financing condition, but was subject to limited confirmatory due diligence.

        On April 21, 2006, a representative of Lehman Brothers Inc. informed a representative of Simmons & Company that Plains' initial proposal merited further discussions between Plains and Pacific. Lehman Brothers Inc. likewise informed a representative of Party A that its initial proposal merited further discussions. Despite several requests by Lehman Brothers Inc. and a request by Mr. Manning for Party B to clarify certain aspects of its proposal, Party B did not respond. No further contacts with Party B occurred. Also on April 21, 2006, Plains' management provided a copy of Plains' initial proposal to the Plains board along with summary operational and financial information related to Pacific. Also on April 21, 2006, a representative of Simmons & Company submitted on behalf of Plains an initial due diligence request list to LB Pacific and Pacific.

        On April 24, 2006, Pacific provided Plains with access to an online data room to respond to Plains' various document requests and inquiries. Between late April 2006 and May 16, 2006, Plains and Party A conducted due diligence on Pacific both in person and through the online dataroom. Pacific made available to Plains and Party A data regarding the revenues, expenses, capital expenditures, general and administrative expenses, financial performance, facilities, assets and liabilities of Pacific. During this time Pacific made certain of its employees available to Plains and Party A for detailed due diligence discussions. Plains' due diligence review continued through June 11, 2006 and Plains' management was assisted in its due diligence efforts by Simmons & Company, PricewaterhouseCoopers LLP, transaction services advisors to Plains, and Vinson & Elkins LLP, primary outside counsel to Plains.

        On April 25, 2006, Plains' management provided the Plains board with a summary overview of Pacific and the merits and risks associated with a potential combination. The management summary addressed, among other things, Pacific's strategic fit with Plains, potential synergies, a brief summary of Pacific's major assets and estimated cash flow contribution and the potential risks and challenges associated with the acquisition of Pacific.

        On April 28, 2006, members of Plains' and Pacific's management teams met in Long Beach, California to discuss certain due diligence matters with respect to Pacific.

        At the end of April 2006, the Pacific conflicts committee was advised by Pacific's management that it was becoming increasingly likely that the conflicts committee would be required to review a possible transaction involving a sale of Pacific or its general partner. The conflicts committee consisted of the four independent directors on the board, Messrs. John C. Linehan (Chairman), David L. Lemmon, Jim E. Shamas and William L. Thacker. Following this notice, the conflicts committee engaged Richards, Layton & Finger, P.A. to act as its legal counsel, and Petrie Parkman & Co. to act as its financial advisor.

        On May 1, 2006, initial drafts of a purchase agreement and merger agreement prepared by Baker Botts L.L.P., counsel to LB Pacific, and Morris, Nichols, Arsht & Tunnell LLP, special Delaware counsel to LB Pacific, were delivered to Plains' management and to Party A.

49



        On May 2, 2006, the Pacific conflicts committee met telephonically with Petrie Parkman and Richards, Layton & Finger. In addition, Mr. Manning and Mr. Irvin Toole, Pacific's President and Chief Executive Officer, were asked to participate in the meeting. Mr. Manning described the background and status of the consideration by LB Pacific of a potential business combination involving Pacific. Following Mr. Manning's presentation, there was a discussion regarding the potential transactions and alternatives. After excusing Messrs. Manning and Toole from the meeting, Richards, Layton & Finger advised the conflicts committee regarding certain legal matters. The conflicts committee also discussed the anticipated next steps in evaluating a potential business combination involving Pacific.

        On May 3, 2006, at a regularly-scheduled meeting of the Pacific board, Mr. Manning updated the Pacific directors as to the status of the proposals that had been received from Plains, Party A and Party B, and informed the directors that final proposals would be requested from Plains and Party A. He also stated that calls to the representatives of Party B to discuss its initial proposal and to assess its interest in submitting a final proposal were not being returned, so it did not appear likely that a final proposal would be received from Party B.

        Also on May 3, 2006, representatives of management of Party A gave a presentation to Pacific's management covering Party A's business, properties, assets, strategies and stand-alone financial and operational projections. Also on May 3, 2006, Plains' management advised the Plains board as to the status of its discussions with Pacific and that final proposals from bidders would be requested to be delivered on May 16, 2006. Also on that date, Plains' management informed the Plains board that it anticipated holding a board meeting on May 15, 2006 to discuss its final proposal prior to submittal.

        On May 8, 2006, representatives of Plains' management gave a presentation to Pacific's management and representatives covering Plains' business, properties, assets, strategies and stand-alone financial and operational projections.

        On May 10, 2006, through its online data room, Pacific provided Plains with unrisked projections, which are referred to as the "upside case" and "Case 2" in the financial analyses of Lehman Brothers Inc. and Petrie Parkman & Co., respectively, summaries of which are included elsewhere in this joint proxy statement/prospectus.

        Between May 10 and May 15, 2006, Plains' management delivered to the Plains board a compilation of materials related to the potential acquisition of Pacific. The information delivered provided an operational and financial overview of Pacific, including an accretion/dilution analysis of the combination and other transaction-related information.

        On May 11, 2006, letters were sent to Plains and Party A requesting that final proposals be submitted by May 16th, together with any proposed revisions to the draft transaction agreements previously provided. The letters requested that bidders provide final proposals as to the form and amount of consideration, required approvals and conditions to closing, financing arrangements and further due diligence requirements.

        Also on May 11, 2006, Mr. Armstrong and Mr. Gary Petersen, a member of the Plains board, participated in a charity golf tournament with a representative of Lehman Brothers Inc. during which the proposed transaction was informally discussed. Mr. Armstrong and the Lehman Brothers Inc. representative were later joined by a representative of Simmons & Company.

        On May 15, 2006, the Plains board convened a special meeting to consider the potential acquisition of Pacific. Following significant discussion and deliberation, the Plains board unanimously approved the submission by Plains' management of a final proposal to acquire LB Pacific's ownership interests in the Pacific general partner entities as well as its common and subordinated units and the common units of Pacific held by persons other than LB Pacific, subject to certain specified financial and exchange ratio limitations.

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        On various dates prior to Plains' submittal of a proposal on May 16, 2006, Mr. Armstrong had individual discussions with Messrs. David N. Capobianco, Gary R. Petersen and Robert V. Sinnott, each of whom serve on the Plains board as a designee of one of the owners of the Plains general partner. The discussions involved the possibility that the general partner would reduce the incentive distributions otherwise payable to the general partner for some period of time. The purpose of the potential reduction would be to facilitate the proposed transaction. It was noted in these discussions that a reduction in the incentive distributions would require an amendment to the Plains partnership agreement, which in turn would require approval of at least 662/3% of the ownership interest in Plains' general partner. Collectively, affiliates of these three directors and Plains' management own approximately 90% of the ownership interests in Plains' general partner.

        On May 16, 2006, Mr. Armstrong met with representatives of Simmons & Company and Lehman Brothers Inc. to discuss clarification of the bid process and proposal parameters.

        Also on May 16, 2006, Plains and Party A submitted final written proposals. Relative to its initial proposal, Party A's proposal provided for reduced consideration to both LB Pacific and Pacific's public unitholders. The proposal was subject to board approval and resolution of remaining due diligence items. Party A's revisions to the merger agreement included substantial revisions to the nonsolicitation provisions of the document, and proposed a $45 million termination fee. Shortly after submitting its final proposal, Party A was informed that its offer was inferior to other offers received, both in terms of consideration to LB Pacific and consideration to the public unitholders. Party A indicated it was willing to increase the purchase price payable to LB Pacific to a level consistent with its initial proposal. Party A did not indicate that it was willing to increase the consideration to Pacific common unitholders. The parties did not pursue additional discussions with Party A after the May 16th discussion.

        In its final written proposal, Plains offered to pay $725 million in cash to LB Pacific (for its ownership interests in Pacific's general partner entities, as well as its common and subordinated units of Pacific), and 0.75 Plains common units for each Pacific common unit held by the public (other than LB Pacific). In its proposal, Plains also stated that management intended to recommend that the Plains board increase the Plains quarterly distribution rate to $0.80 per unit following the proposed combination from the then current $0.7075 per unit, and that its general partner had indicated a willingness to reduce its incentive distributions by $10 million in 2007 and $5 million in 2008. Plains' proposal was not subject to a financing condition or further due diligence, and had been unanimously approved by the Plains board. Plains' proposal was subject to obtaining the requisite approvals from (i) the owners of Plains All American GP LLC for the merger and any reductions in incentive distribution payments and (ii) Plains' unitholders for the merger and the issuance of Plains common units. Plains' proposed changes to the merger agreement contained substantial revisions to the nonsolicitation and termination fee provisions and proposed a $40 million termination fee ($15 million of which was payable if Pacific's unitholders did not approve the merger agreement).

        On May 17, 2006, Messrs. Armstrong and Pefanis and representatives of Simmons & Company and Lehman Brothers Inc. met in Houston, Texas to discuss and clarify certain aspects of Plains' final written proposal. The conversation was primarily focused on the assumptions that Plains' management had used in its analysis, including synergies, acquisition financing, growth projects and the reduction in Plains' general partner's incentive distributions.

        The Pacific board adopted resolutions effective May 18, 2006 formally authorizing and delegating to the Pacific conflicts committee various responsibilities, including: (i) reviewing, evaluating and negotiating (or delegating the ability to negotiate) any proposed business combination involving Pacific or any alternatives thereto; (ii) evaluating whether any proposed business combination or any alternatives thereto are fair and reasonable to, and in the best interests of, the common unitholders of Pacific, other than LB Pacific; and (iii) making a recommendation to the board as to what action, if any, should by taken by the Pacific board with respect to the proposed business combination or any alternatives thereto. The resolutions further provided that the Pacific board would not recommend a proposed business combination or alternatives thereto for approval by the holders of Pacific units

51



without the prior approval of the Pacific conflicts committee. In addition, the resolutions provided that the chairman of the conflicts committee be paid $50,000 and each of the three other members of the conflicts committee be paid $40,000 for their services.

        On May 18, 2006, the Plains board convened a regularly scheduled meeting. At this meeting, Plains' management updated members of the Plains board as to the ongoing discussions among Plains, Pacific and their respective representatives. Mr. Armstrong also described the potential temporary adjustment to the general partner's incentive distributions to Messrs. Everardo Goyanes, J. Taft Symonds and Arthur L. Smith, members of the Plains board who are not affiliated with the owners of the general partner.

        On May 19, 2006, the Pacific conflicts committee met telephonically with its legal and financial advisors. During this meeting, Petrie Parkman provided a status report on the ongoing negotiations with respect to a potential business combination involving Pacific. Also on May 19, 2006, Baker Botts sent drafts of the transaction agreements, revised to incorporate certain of the comments contained in Plains' May 16th proposal, to Pacific's management, Andrews Kurth LLP, which had been retained by Pacific as its primary outside legal counsel in connection with the potential transaction, and Richards, Layton & Finger. Over the course of the following four days, representatives of LB Pacific, Pacific management, Baker Botts, Richards, Layton & Finger and Andrews Kurth, met telephonically to discuss various issues with respect to the draft transaction agreements, including:

        On May 23, 2006, Baker Botts sent revised drafts of the transaction agreements to Vinson & Elkins LLP, as well as to Pacific's management, LB Pacific, Lehman Brothers Inc., Richards, Layton & Finger and Andrews Kurth.

        On May 24, 2006, the Pacific conflicts committee, along with its advisors, Petrie Parkman and Richards, Layton & Finger, conducted a series of meetings in Houston, Texas with representatives of Lehman Brothers Inc., Plains' management and Pacific's management. Also present at the meetings were representatives of Andrews Kurth and representatives of Deloitte & Touche LLP, which had been retained by Pacific to conduct accounting due diligence on Plains. Lehman Brothers Inc. provided an overview of the process to date and a preliminary analysis of the proposed offers from Party A and Plains. Plains made a management presentation that discussed its strategy, five-year financial plan and potential benefits of the proposed transaction. Pacific management made a presentation on the status of their business and financial forecasts, including their management case and upside case.

        Between May 25, 2006 and June 9, 2006, Pacific's management and representatives of Lehman Brothers Inc., Petrie Parkman, Andrews Kurth and Deloitte & Touche conducted a due diligence review of certain financial, accounting, operational, corporate and legal materials of Plains. Materials provided included general corporate materials, management reports, litigation summaries, material contracts, title materials, benefits arrangements and summaries and environmental and regulatory information. Pacific's management and its advisors also had a number of due diligence meetings with representatives of Plains' management to discuss various aspects of Plains' business and its prospects, including, specifically, meetings to discuss accounting and finance, tax matters, litigation and legal matters, environmental issues, operations, corporate affairs and property and rights-of way.

52



        On May 25, 2006, representatives of Baker Botts, Richards Layton & Finger, Vinson & Elkins, and Prickett, Jones & Elliott, P.A., special Delaware counsel to Plains, met telephonically to discuss various issues pertaining to the transaction agreements. The parties discussed, without resolution, Pacific's proposed changes to the definition of what constituted a "material adverse effect" and to the nonsolicitation and termination fee provisions. On May 26, 2006, Vinson & Elkins distributed revised drafts of the transaction agreements to Baker Botts. Over the course of the next five days, representatives of LB Pacific, Pacific management, Baker Botts, Andrews Kurth and Richards, Layton & Finger met telephonically and/or in person to discuss the revised transaction agreements.

        On May 30, 2006, the Pacific conflicts committee met telephonically with its advisors. The conflicts committee and its advisors discussed the status of Pacific's transactional due diligence with respect to Plains. It was decided that one or more members of the conflicts committee and the committee's advisors would meet with Plains' management to discuss certain due diligence information as requested by the conflicts committee. As a result of this meeting, Pacific's representatives were provided access to certain sensitive business information of Plains that Pacific deemed necessary to its due diligence review of Plains.

        On May 31, 2006, representatives of Plains, Pacific, Simmons & Company, Lehman Brothers Inc., Vinson & Elkins and Baker Botts met in Baker Botts's offices in Houston, Texas (with some persons participating telephonically). The parties discussed the outstanding issues on the transaction agreements, including the following:

        After multiple break-out sessions and resumed discussions, the parties reached mutually agreeable resolutions of most of the outstanding issues, including the following:

        That evening, Baker Botts distributed revised drafts of the transaction agreements reflecting the parties' discussions earlier that day. Throughout the course of the following day, Baker Botts and Vinson & Elkins met several times telephonically to make further progress toward resolving the remaining documentation issues. On June 1, 2006, Vinson & Elkins distributed revised drafts of the transaction agreements.

        Also on June 1, 2006, Messrs. John Linehan and William Thacker, two members of the Pacific conflicts committee, and representatives of Petrie Parkman and Richards, Layton & Finger, met in Houston, Texas to review sensitive business information of Plains that had been made available to the

53



Pacific conflicts committee and to meet with members of Plains' senior management. During the meeting with Plains' senior management, there was extensive discussion regarding Plains' business condition and prospects, synergies from the potential business combination, potential additional acquisitions, risks of a reduction in its credit ratings and related issues, integration issues, risk management issues and various other financial issues.

        On June 2, 2006, the Pacific conflicts committee met telephonically with its legal and financial advisors. Members of Pacific's management and Andrews Kurth also participated in this meeting. Messrs. Linehan and Thacker, along with the conflicts committee's advisors, presented a report on the information reviewed and discussions held with Plains' senior management the day before in Houston, Texas. There was discussion regarding due diligence results to date, the status of the due diligence review and any remaining open items, and the engagement of Lehman Brothers Inc. as financial advisor to Pacific and the terms of the engagement. After all persons other than the conflicts committee members and the committee's advisors were dismissed from the meeting, Petrie Parkman made a preliminary presentation analyzing the potential business combination between Pacific and Plains, and the conflicts committee discussed the merits of such a business combination from the perspective of the common unitholders of Pacific, other than LB Pacific. Also on June 2, 2006, Baker Botts distributed revised drafts of the transaction agreements to the working group, including the conflicts committee and its advisors for consideration at their next meeting.

        Also on June 2, 2006, Plains' management updated members of the Plains board as to the status of ongoing discussions among Plains, Pacific and their respective representatives.

        On June 7, 2006, the Pacific conflicts committee met in Houston, Texas, with its financial and legal advisors. One committee member participated by telephone. Also present at the invitation of the conflicts committee were members of Pacific management, Andrews Kurth, Deloitte & Touche and Lehman Brothers Inc. The Pacific management team made a presentation of management's views and assessment of the proposed transaction with Plains. Lehman Brothers Inc. made a presentation regarding the terms and structure of the potential transaction with Plains and an analysis of the potential transaction from a financial point of view to Pacific and all of its equityholders as a whole. There also was discussion regarding the results of due diligence on Plains and the status of the due diligence process. After excusing Lehman Brothers Inc. from the meeting, the conflicts committee and its advisors and Pacific management discussed various aspects of the potential transaction with Plains. Following this discussion, the conflicts committee excused from the meeting all persons other than the committee's advisors. Petrie Parkman made a detailed presentation regarding the potential transaction with Plains, including an analysis of the potential transaction from a financial point of view from the perspective of Pacific's common unitholders other than LB Pacific, and there was extensive discussion regarding the merits of the potential transaction. Richards, Layton & Finger made a presentation regarding various legal matters relating to the potential transaction and the conflicts committee's consideration of the potential transaction. At this point in the meeting, the conflicts committee invited Mr. Manning and Mr. Josh Collins, a member of the Pacific board and a principal of Lehman Brothers Merchant Banking, to join the meeting to discuss the process by which LB Pacific had explored potential business combinations, and the views of Lehman Brothers Merchant Banking as to the prospects of Pacific and the terms of the potential transaction with Plains. After excusing Messrs. Manning and Collins from the meeting, the conflicts committee and its advisors further discussed the merits and risks of the proposed transaction with Plains and the prospects for Pacific as a stand-alone entity. Following this discussion, the conflicts committee determined that a counteroffer should be made and agreed upon the terms of such counteroffer. The conflicts committee then invited representatives of Lehman Brothers Merchant Banking and Pacific senior management to join the meeting, and Mr. Linehan then informed them that the committee would be willing to approve the proposed transaction with Plains if the exchange ratio were increased from 0.75 to 0.82 Plains common units for each Pacific common unit (other than common units owned by LB Pacific). That evening, Andrews Kurth and Richards, Layton & Finger provided Vinson & Elkins and Baker Botts with

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comments to the merger agreement based on the conflicts committee's discussions earlier that day. The comments reflected the proposed increase to the exchange ratio, as well as revisions to the nonsolicitation provisions and the employee-related covenants, among other things.

        On June 8 and 9, 2006, various discussions took place between and among representatives of Plains, LB Pacific, Lehman Brothers Inc. and Simmons & Company. Such discussions resulted in the revised proposal that representatives of Lehman Brothers Inc. presented to the Pacific conflicts committee on June 10th.

        On June 9, 2006, Vinson & Elkins distributed revised drafts of the transaction agreements, which contained changes responsive to the comments proposed by Andrews Kurth and Richards, Layton & Finger on June 7th. The revised drafts incorporated in large part the proposed changes to the nonsolicitation provisions of the merger agreement, but did not address some of the employee-related comments in the June 7th mark-up.

        On June 10, 2006, the Pacific conflicts committee met telephonically. Representatives of Richards, Layton & Finger, Petrie Parkman, Pacific management, Andrews Kurth, Lehman Brothers Inc. and Baker Botts also attended portions of the meeting. During the meeting, representatives of Lehman Brothers Inc. presented to the conflicts committee a revised proposal to which both Plains and LB Pacific were willing to agree, which decreased the cash consideration to LB Pacific by $25 million, to $700 million, increased the exchange ratio in the merger from 0.75 to 0.77 Plains common units per Pacific common unit (other than common units owned by LB Pacific), and increased the amount by which Plains' general partner would agree to reduce its incentive distributions from $15 million over two years to $65 million over five years. A representative of Lehman Brothers Inc. told the conflicts committee members that he had been advised by Plains and LB Pacific that the proposal represented the best and final offer from both Plains and LB Pacific. After excusing all participants except the conflicts committee members and the committee's advisors, there was discussion regarding whether the revised offer truly represented the best and final offer from Plains and LB Pacific. Mr. Linehan reported that he had received separate calls the day before from Mr. Manning and Mr. Toole, respectively, informing him that this revised offer would be the best and final offer from LB Pacific and Plains. After further discussion, the committee determined that Mr. Linehan should contact Mr. Armstrong to determine whether there was any further room for an increase in the consideration from Plains. The conflicts committee agreed to consider the revised proposal from Plains and LB Pacific further after the parties had resolved all remaining documentation issues and Mr. Linehan provided a status report on his anticipated conversation with Mr. Armstrong. Later that day, Baker Botts sent revised drafts of the transaction agreements to Vinson & Elkins, which drafts reflected the changes to the economic terms and Pacific's response on the remaining outstanding employee-related issues.

        On June 11, 2006, the Plains board met telephonically with its advisors to review the proposed transaction. Plains' senior management advised the members of the board as to the status of the parties' discussions and anticipated timing for executing definitive transaction agreements. Plains' senior management also discussed the projected operating and financial performance of Plains, Pacific and the combined company. Plains' senior management discussed its plan to permanently finance the acquisition as well as liquidity and rating agency matters. Simmons & Company made a detailed presentation analyzing the proposed acquisition. Following the presentation and discussion, Simmons & Company delivered its oral opinion (subsequently confirmed in writing) that, as of June 11, 2006, based upon and subject to the factors and assumptions set forth in its opinion, the aggregate consideration to be paid by Plains as set forth in the transaction agreements was fair, from a financial point of view, to Plains and Plains' common unitholders (other than those unitholders holding a direct or indirect interest in Plains' general partner). Next, Vinson & Elkins reviewed the terms of the transaction as reflected in the forms of the transaction agreements. Vinson & Elkins also advised the board regarding certain legal matters and the board's consideration of the potential transaction. Following extensive discussion regarding the proposed acquisition, the members of the Plains board unanimously approved

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the purchase agreement, the merger agreement and the merger and related transactions (including the issuance of Plains common units pursuant to the merger agreement). The Plains board also determined to recommend that Plains' unitholders approve and adopt the merger agreement and the merger and approve the issuance of Plains common units pursuant to the merger agreement.

        Following the Plains board's meeting, members of senior management of Plains and Pacific, as well as representatives of Petrie Parkman, Baker Botts, Vinson & Elkins, Richards, Layton & Finger and Andrews Kurth, met telephonically to discuss the remaining issues on the transaction agreements. The parties reached agreement on all issues other than the timing of the reductions to Plains' general partner's incentive distributions, which the parties planned to resolve later that day.

        Later in the day on June 11th, the Pacific conflicts committee met telephonically with its advisors to review the proposed transaction. Mr. Linehan reported that he had spoken with Mr. Armstrong, and during the discussion Mr. Armstrong had stated that the revised proposal was Plains' best and final offer. Petrie Parkman and Richards, Layton & Finger then apprised the conflicts committee members of the status of discussions and reviewed the terms of the transaction as reflected in the forms of the transaction agreements. Next, Petrie Parkman made a detailed presentation analyzing the revised proposal. Following the presentation and discussion, Petrie Parkman stated that it expected to be in a position to provide, at the request of the committee, an oral opinion that the exchange ratio of 0.77 Plains common units for each Pacific common unit was fair from a financial point of view to Pacific's common unitholders other than LB Pacific. Richards, Layton & Finger advised the conflicts committee members regarding certain corporate law matters. Following extensive discussion, the conflicts committee agreed to approve the merger agreement and the merger, subject to satisfactory resolution as to the timing of the reductions to Plains' general partner's incentive distributions. The conflicts committee agreed to meet again later that day after receipt of Plains' proposal on the incentive distribution reductions.

        Also on June 11, representatives of Plains obtained a member's consent of Plains All American GP LLC approving (i) a prospective amendment to Plains' partnership agreement, to become effective upon consummation of the merger, that would reduce the incentive distribution payments as reflected in the merger agreement and (ii) the merger.

        Shortly after receipt of Plains' proposal on the incentive distribution reductions, the Pacific conflicts committee met again telephonically with its advisors. After discussion, the conflicts committee concluded that the terms of Plains' proposal on the incentive distribution reductions was satisfactory. The conflicts committee then requested Petrie Parkman's oral opinion as to the fairness of the financial consideration offered in the proposed merger. Petrie Parkman delivered its oral opinion (subsequently confirmed in writing) to the conflicts committee that, as of June 11, 2006, based upon and subject to the factors and assumptions set forth in its opinion, the exchange ratio of 0.77 Plains common units for each Pacific common unit (other than common units owned by LB Pacific) was fair from a financial point of view to Pacific's common unitholders other than LB Pacific. After further discussion regarding the proposed transaction, the committee members unanimously determined that the terms of the merger agreement and the merger, including the relative consideration to be received by LB Pacific on the one hand, and the common unitholders other than LB Pacific on the other hand, were fair to Pacific's common unitholders (other than LB Pacific). The committee members unanimously approved the merger agreement and the merger. The committee members also determined that the committee's approval of the merger agreement and related transactions constituted "special approval" pursuant to Pacific's partnership agreement. The Pacific conflicts committee also determined to recommend that Pacific's unitholders approve and adopt the merger agreement and the merger.

        Later that evening, the board of directors of Pacific's general partner met telephonically to review the transaction. At the meeting, Pacific's management, together with representatives of Lehman Brothers Inc., Andrews Kurth and Baker Botts, apprised the board of the status of discussions and reviewed the terms of the transaction as reflected in the forms of the transaction agreements. Lehman Brothers Inc. delivered its oral opinion (subsequently confirmed in writing) to the board that, as of

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June 11, 2006, based upon and subject to the factors and assumptions set forth in its opinion, the aggregate consideration to be offered to all holders of the partnership interests of Pacific was fair, from a financial point of view, to such holders. Andrews Kurth advised the board regarding certain legal matters and the board's consideration of the potential transaction. At the request of Mr. Manning, Mr. Linehan and Richards, Layton & Finger provided a brief report regarding the work of the Pacific conflicts committee and its recommendations to the Pacific board. Following extensive discussion, the Pacific board unanimously approved the merger agreement and the merger. The Pacific board also determined to recommend that Pacific's unitholders approve and adopt the merger agreement and the merger.

        After the meetings, the merger agreement, purchase agreement, disclosure schedules and ancillary documents were finalized, and the transaction agreements were executed by the parties thereto. On June 12, 2006, Plains and Pacific issued a joint press release announcing the execution of the transaction agreements.

        On June 15, 2006, a lawsuit was filed in the Superior Court of California, County of Los Angeles, entitled Kosseff v. Pacific Energy, et al., case no. BC 3544016. The plaintiff alleges that he is a unitholder of Pacific, and he seeks to represent a class comprising all of Pacific's unitholders. The complaint names as defendants Pacific and certain of the officers and directors of Pacific's general partner, and asserts claims of self-dealing and breach of fiduciary duty in connection with the merger and related transactions. The plaintiff seeks injunctive relief against completing the merger or, if the merger is completed, rescission of the merger, other equitable relief, and recovery of the plaintiff's costs and attorneys' fees.

Recommendation of the Board of Directors and Conflicts Committee of Pacific's General Partner and Reasons for the Merger

        The Pacific board has considered the benefits of the merger as well as the associated risks and has unanimously approved and adopted the merger agreement and determined that it is advisable and in the best interests of Pacific and Pacific's equityholders. Accordingly, the Pacific board recommends that Pacific unitholders vote to approve and adopt the merger agreement and the merger.

        In addition, the Pacific conflicts committee, comprised of directors who are deemed to be independent of the interests of Pacific's general partner, has considered the benefits of the merger as well as the associated risks and has unanimously approved and adopted the merger agreement and determined that it is advisable and in the best interests of Pacific and Pacific's common unitholders. Accordingly, the Pacific conflicts committee recommends that Pacific unitholders vote to approve and adopt the merger agreement and the merger.

        In considering the recommendation of the Pacific board and the Pacific conflicts committee with respect to the merger, you should be aware that some executive officers and directors have interests in the merger that are different from, or in addition to, the interests of Pacific's common unitholders generally. The Pacific board and the Pacific conflicts committee were aware of these interests in approving the merger agreement and the merger.

        In reaching their respective decisions on the merger, the Pacific board and the Pacific conflicts committee consulted with management and legal and financial advisors and considered a number of factors, including the following potential benefits and other factors:

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        The Pacific board and the Pacific conflicts committee also considered a number of risks associated with the merger, including the following:

In the view of the Pacific board and the Pacific conflicts committee, these risks did not outweigh the advantages of the merger.

        Finally, the Pacific board and the Pacific conflicts committee considered a number of procedural factors associated with the merger, including the following:

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        The foregoing discussion of the factors considered by the Pacific board and the Pacific conflicts committee is not intended to be exhaustive, but it does set forth the principal factors considered by the board and the conflicts committee. The Pacific board and the Pacific conflicts committee reached their respective unanimous conclusions to recommend the merger agreement and the merger in light of various factors described above and other factors that each member of the board and the conflicts

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committee believed were appropriate. In view of the wide variety of factors considered by the Pacific board and the Pacific conflicts committee in connection with their evaluations of the merger and the complexity of these matters, the board and the conflicts committee did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors they considered in reaching their decisions and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determinations. Rather, the Pacific board and the Pacific conflicts committee made their recommendations based on the totality of information presented to them and the investigations conducted by them. In considering the factors discussed above, individual directors may have given different weights to different factors.

Recommendation of the Board of Directors of Plains' General Partner and Reasons for the Merger

        The Plains board has considered the benefits of the merger as well as the associated risks and has unanimously approved and adopted the merger agreement, has determined that it is advisable and in the best interest of Plains and Plains' common unitholders, and has approved the issuance of Plains common units pursuant to the merger agreement. Accordingly, the Plains board recommends that Plains' common unitholders vote to approve and adopt the merger agreement and the merger and vote to approve the issuance of Plains common units pursuant to the merger agreement. The potential benefits considered by the Plains board included the following:

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        In addition to considering the foregoing, the Plains board consulted with its management and Plains' legal and financial advisors, and considered a variety of other factors, including:

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        The foregoing discussion of the factors considered by the Plains board is not intended to be exhaustive, but it does set forth the principal factors considered by the board. The board reached its unanimous conclusion to recommend the merger agreement and the merger, and the issuance of Plains units in the merger, in light of various factors described above and other factors that each member of the board believed were appropriate. In view of the wide variety of factors considered by the Plains board in connection with its evaluation of the merger and the complexity of these matters, the board did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determinations. Rather, the board made its recommendation based on the totality of information presented to it and the investigations conducted by it. Individual directors may have given different weights to different factors.

        In considering the recommendation of the Plains board with respect to the merger, you should be aware that some executive officers and directors have interests in the merger that are different from, or in addition to, the interests of Plains' common unitholders generally. The Plains board was aware of these interests in approving the merger agreement and the merger.

Additional Financial Considerations of the Parties

        In considering the merits of the proposed merger, the Pacific conflicts committee and the Pacific board reviewed a number of cases for Plains' and Pacific's future financial and operating performance through 2010. Projections were reviewed for Plains and Pacific on a stand-alone basis and on a combined basis giving effect to the proposed merger and estimated synergies associated with the merger. The Pacific conflicts committee and the Pacific board reviewed the projections as a tool to evaluate the relative merits and risks associated with Pacific continuing as a stand-alone entity versus Pacific and Plains as a combined enterprise, recognizing that relatively small variances in the assumptions underlying the projected cases would cause material differences in the results projected as a result of the extended projection period. Given the sensitivity to small variances, the projections were regarded primarily as directional indicators of potential accretion and were just one of several factors considered by the Pacific conflicts committee and the Pacific board in making their respective determinations with respect to the merger and the merger agreement. For additional discussion regarding the factors considered by the Pacific conflicts committee and the Pacific board, please read "The Merger—Recommendation of the Board of Directors and Conflicts Committee of Pacific's General Partner and Reasons for the Merger."

        In developing the projected cases, Pacific made numerous material assumptions with respect to Pacific and Plains, including:

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        All of these assumptions involve variables making them difficult to predict, and most are beyond the control of Pacific. Although Pacific believes that there was a reasonable basis for its projections and underlying assumptions, any assumptions for near-term projected cases remain uncertain, and the risk of inaccuracy increases with the length of the forecasted period.

        Although combined company 2006 results were reviewed, the merger was not expected to close before the fourth quarter of 2006. As a result, 2007 and near-term combined company projections were the primary point of focus, and later-year projections were used to gauge the long-term strategic benefits of the merger. The Pacific conflicts committee and the Pacific board placed less importance on the later-year projections given the inherent uncertainties in forecasting results that far into the future.

        Conflicts Committee of the Pacific Board of Directors.    The Pacific conflicts committee primarily relied on two sets of projections for Pacific: Average Research Analyst Estimates and a Management Case. The Average Research Analyst Estimates were derived from average published Wall Street research analyst estimates for 2006 and 2007 earnings before interest, tax, depreciation and amortization ("EBITDA") and distributable cash flow per limited partner unit. The Management Case, which was provided by Pacific management, projected financial results for fiscal years 2006 through 2010. The Management Case represented management's view of the most likely projected results using then-current information. The Pacific conflicts committee also was provided with a projected case assuming full and rapid exploitation of commercial opportunities available to Pacific without any risk adjustments for such things as the size, timing or results of future investments in internal growth projects, or for the timing of permitting and construction. The committee did not give significant weight to this case due to the lack of risk adjustments. In addition to the foregoing, the committee also was provided with and reviewed the projections described below under "—Pacific Board of Directors."

        The Pacific conflicts committee also reviewed three sets of projections for Plains: Average Research Analyst Estimates and two cases, Case 1 and Case 2, based on information provided by, and discussions with, the management of Plains and its advisors, and on public guidance disclosed by Plains in its Current Report on Form 8-K furnished on May 3, 2006 and in a press release issued on May 25, 2006. Average Research Analyst Estimates were derived from average published Wall Street research estimates for 2006 and 2007 EBITDA and distributable cash flow per unit. The information provided by and discussed with Plains management and its advisors included estimates for certain financial metrics such as Adjusted EBITDA, interest expense and maintenance capital expenditures and assumptions (including capital expenditures on growth projects, financing assumptions and expected cash flow impact of those projects) that were used to calculate the remaining projections. The principal difference between Case 1 and Case 2 was the amount of capital expenditures spent on growth projects and/or acquisitions.

        To develop the combined company projections, the Pacific conflicts committee, after review, relied on several assumptions from Plains' management and its advisors, including the financing assumptions for the merger, estimated synergies and future distribution policy. To achieve comparable estimates, projected cases (for both Pacific and Plains on a stand-alone basis and on a combined company basis) were prepared assuming no acquisitions would be completed by either party in the forecast period. Two combined company scenarios were reviewed using: (i) the Pacific Average Research Analyst Estimates and the Plains Average Research Analyst Estimates ("Scenario 1"), and (ii) the Pacific Management Case and Plains Case 1 ("Scenario 2"). Among other assumptions, the Pacific conflicts committee considered the estimated percentage change in the distributable cash flow per Pacific limited partner unit and the distributions per Pacific limited partner unit under both scenarios. Under the two scenarios, the percentage increases in distributions on limited partner units from the distributions estimated each year in the relevant Pacific stand-alone cases are listed below. A positive change

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represents an improvement to the Pacific stand-alone case. The committee noted the increase in distribution coverage in the projections, which enhances the visibility for future distribution growth.

 
  Scenario 1
  Scenario 2
 
  2006E
  2007E
  2006E
  2007E
Distributable Cash Flow per Limited Partner Unit   8.3%   6.2%   7.6%   11.6%
Distributions per Limited Partner Unit   1.4%   1.1%   2.4%   5.1%

        Pacific Board of Directors.    The Pacific board primarily relied on two sets of projections for Pacific on a stand-alone basis: a Street Case, and the Management Case described above under "—Conflicts Committee of the Pacific Board of Directors." The Street Case was derived from median published Wall Street research analyst estimates for 2006 and 2007 EBITDA, maintenance capital expenditures and growth capital expenditures, which were assumed to be financed 50% with debt and 50% with equity and to occur at mid-year. The Pacific board was also provided a projected case assuming full and rapid exploitation of commercial opportunities available to Pacific without any risk adjustments. The board did not give significant weight to this case due to the lack of risk adjustments.

        The Pacific board utilized two sets of projections for Plains on a stand-alone basis: a Street Case and a Management Case. The Street Case was derived from median published Wall Street research estimates for 2006 and 2007 EBITDA, maintenance capital expenditures and growth capital expenditures, which were assumed to be financed 50% with debt and 50% with equity and to occur at mid-year. The Management Case was derived from information provided by Plains management and its advisors. This information included estimates for certain financial metrics through 2010 such as Adjusted EBITDA, interest expense and maintenance capital expenditures and assumptions (including capital expenditures on growth projects, financing assumptions and expected cash flow impact of those projects) which were used to calculate the remaining projections.

        To develop the combined company projections, Pacific's management and Pacific's board, after review, relied on several assumptions from Plains' management and its advisors, including the financing assumptions for the merger, estimated synergies and future distribution policy. To achieve comparable estimates, projected cases (for both Pacific and Plains on a stand-alone basis and on a combined company basis) were prepared assuming no acquisitions would be completed by either party in the forecast period. Using the above mentioned merger assumptions, two combined company scenarios were reviewed: (i) Pacific Street Case and Plains Street Case ("Scenario 3"), and (ii) Pacific Management Case and Plains Management Case ("Scenario 4"). An additional scenario was prepared using the non-risk-adjusted Pacific case assuming full and rapid exploitation of commercial opportunities, but this scenario was not given significant weight due to the lack of risk adjustments. Among other assumptions, the Pacific board considered the percentage change in the distributable cash flow per Pacific limited partner unit and the distributions per Pacific limited partner unit under both scenarios. Under the two scenarios, the percentage increases in distributions on limited partner units from the distributions estimated each year in the relevant Pacific stand-alone cases are listed below. A positive change represents an improvement to the Pacific stand-alone case. The board noted the increase in distribution coverage in the projections, which enhances the visibility for future distribution growth.

 
  Scenario 3
  Scenario 4
 
  2006E
  2007E
  2006E
  2007E
  2008E
  2009E
  2010E
Distributable Cash Flow per Limited Partner Unit   8.5%   11.0%   7.3%   17.2%   10.2%   12.7%   8.3%
Distributions per Limited Partner Unit   2.7%   6.4%   2.8%   3.9%   9.6%   9.2%   8.0%

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        In considering the merits of the proposed merger, the Plains board reviewed a number of projected cases for Plains' future financial and operating performance through 2012 that were prepared by Plains' management with assistance from its financial advisor. Certain assumptions included in these projected cases prepared by Plains' management and its financial advisor, but not the entirety of the projected cases, were provided to the Pacific board and the Pacific conflicts committee and their advisors during presentations made by Plains' management, which are referred to above and below. Projections were reviewed for Plains on a stand-alone basis and on a combined basis giving effect to the proposed merger and anticipated synergies associated with the merger. Projected cases (both stand-alone and combined) were prepared assuming (i) no acquisitions would be completed in the forecast period, which are referred to below as the "non-acquisition cases" and (ii) the completion of acquisitions during the forecast period, which are referred to below as the "acquisition cases." The Plains board reviewed the projections as a tool to evaluate the relative merits and risks associated with Plains continuing as a stand-alone entity versus Plains and Pacific as a combined enterprise, recognizing that relatively small variances in the assumptions underlying the projected cases would cause material differences in the results projected as a result of the extended projection period. Given the sensitivity to small variances, the projections were regarded primarily as directional indicators of potential accretion and were just one of several factors considered by the Plains board in making its determinations with respect to the merger and the merger agreement. For additional discussion regarding the factors considered by the Plains board, please read "The Merger—Recommendation of the Board of Directors of Plains' General Partner and Reasons for the Merger."

        The projected cases were developed in a manner generally consistent with Plains' historical development of financial and operating guidance. The projected cases were developed without changes to Plains' existing accounting policies, with the exception of Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities", Statement of Financial Accounting Standards No. 123(R) "Share-Based Payment", and potential gains and losses on foreign currency revaluations as there is no reasonably accurate way to forecast the potential gains and losses on these items as they are dependent upon market conditions that are outside of Plains' control.

        In developing the projected cases, Plains' management made numerous material assumptions with respect to Plains and Pacific, including:


        With respect to future investments in internal growth projects, Plains' management assumed that it would invest $150 million in 2007 and $100 million per year thereafter on a stand-alone basis, such investments being in addition to its projects that are already in progress. In the combined case, Plains' management assumed an additional $100 million per year of investments in internal growth projects above the stand-alone case. The projected cases also assume that Plains begins receiving distributions from its investment in PAA/Vulcan Gas Storage LLC in 2009.

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        For the acquisition cases, additional assumptions were made with respect to the size, availability, timing and anticipated results of, and cash flows from, acquired assets. All of these assumptions involve variables making them difficult to predict, and most are beyond the control of Plains. Although Plains believes that there was a reasonable basis for its projections and underlying assumptions, any assumptions for near-term projected cases remain uncertain, and the risk of inaccuracy increases with the length of the forecasted period.

        The projection of future acquisitions is particularly difficult as Plains has no control over the availability or price of future acquisition opportunities. On a stand-alone basis, Plains' management has historically targeted the completion of acquisitions for average aggregate consideration of approximately $200 million to $300 million per year. Since 2002, excluding the proposed merger with Pacific, Plains has averaged over $340 million of completed acquisitions per year. In developing certain of the stand-alone and combined company cases, Plains' management incorporated incremental acquisitions of $200 million and $300 million per year, respectively, in order to evaluate their indicative impact on Plains or the combined company's growth profile.

        Plains' management assumed that the Adjusted EBITDA and economic returns generated from potential future investments in internal growth projects and potential acquisitions would be generally consistent with the economic returns that it has realized on historical internal growth investments and acquisitions of similar size and asset type, with some judgmental adjustments to reflect recent changes in market trends and increased competition for acquisitions.

        The primary metric of each projected case was Adjusted EBITDA, which in turn was used to determine projected economic returns as well as distributable cash flows. The forecasts did not attempt to project future depreciation, net income or net income per unit. The significant assumptions incorporated into the various Adjusted EBITDA forecasts are discussed above and below. Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization and was adjusted for certain selected items that Plains believed impacted the comparability of financial results between reporting periods.

        With respect to Plains' stand-alone case, on June 12, 2006, Plains furnished a Current Report on Form 8-K that updated its financial and operating guidance for the second half of 2006 and provided preliminary Adjusted EBITDA guidance for 2007. The update increased the midpoint for Plains' 2006 Adjusted EBITDA guidance by approximately 7% to $466 million and established a midpoint for 2007 Adjusted EBITDA of $500 million. The guidance update, which excluded the impact of the proposed merger, incorporated the full-year benefit of Plains' announced 2006 acquisitions as well as internal growth projects projected to meaningfully contribute to 2007 results, but excluded any additional acquisitions not announced as of the date of such update. The updated guidance for 2006 and 2007 and its impact on subsequent years was incorporated into the projected cases reviewed by the Plains board. Plains' management used the updated stand-alone guidance as the foundation for constructing the projected cases of its future financial and operating performance. As a result of projected contributions from potential future expansion capital expenditures, on a stand-alone basis, Plains' Adjusted EBITDA was forecasted to increase to $620 million by 2010 in the non-acquisition case and to $714 million in the acquisition case. In each case, such Adjusted EBITDA forecasts were viewed only as directional indicators.

        In examining the potential contribution from Pacific, the Plains board reviewed financial projections for Pacific prepared by Plains' management team. Plains' management and the Plains board also had access to the upside case projections of Pacific's management, but did not use these projections as they were presented in evaluating the merger because they assume full and rapid exploitation of commercial opportunities without any risk adjustments. Plains' projections for Pacific, which incorporated anticipated synergies associated with the merger and the anticipated implementation of a number of internal growth projects, were significantly higher than Pacific's recent

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financial results (but less than Pacific's upside case). In order to achieve this projected increase, Plains projected that aggregate incremental capital investments through 2011 will total approximately $682 million, with approximately 90% to 95% of the capital expected to be invested by the end of 2008. A substantial portion of the projected Adjusted EBITDA from the projects would be supported by existing throughput agreements, lease agreements or similar contracts intended to ensure a reasonable level of utilization.

        Assuming the merger is consummated near the end of 2006, total synergies were projected to approximate $30 million in 2007, increasing to approximately $55 million on an annualized basis by 2010 and further escalating to $72 million in 2012. The synergies were expected to derive from cost savings, operating synergies and efficiencies and commercial opportunities. Realization of certain of these synergies would require projected capital spending of approximately $102 million, which is included in the aforementioned $682 million of aggregate incremental capital investments.

        As a result of anticipated synergies and Plains' projection of Pacific's base level Adjusted EBITDA, the incremental Adjusted EBITDA contribution from the proposed merger was projected to be approximately $184 million in 2007. As a result of a projected increase in realized synergies and anticipated contributions from expansion capital expenditures, the annual Adjusted EBITDA contribution from the proposed merger was projected to increase to approximately $314 million in 2010 and $337 million in 2012.

        The Plains board reviewed the expected economic returns associated with the merger and the related impacts on the combined company's distribution growth potential. Plains projected that the invested capital-to-one year forward Adjusted EBITDA multiple for the acquisition of Pacific would improve over time as cash flow from internal growth projects and anticipated synergies were realized. Based on Plains' non-acquisition case projection for invested capital and Pacific's 2007 incremental Adjusted EBITDA contribution of $184 million, the initial implied acquisition multiple for the transaction was projected to be approximately 13.7x. At the end of 2011 the invested capital-to-one year forward Adjusted EBITDA multiple for the transaction was projected to approximate 9.1x. This multiple was calculated using approximately $3.1 billion of invested capital, representing the sum of the transaction value at announcement and the projected capital to be spent through year-end 2011, and Plains' non-acquisition case projection for Pacific's 2012 incremental Adjusted EBITDA contribution of $337 million.

        The Plains board also reviewed the projected impact of the proposed merger on distributable cash flow ("DCF") per unit, which is a common metric by which investors measure the distribution capacity of a publicly traded partnership, relative to the Plains stand-alone case. Based on the projected non-acquisition case Adjusted EBITDA of the combined company, an assumption of $100 million per year in incremental internal growth projects for the combined company, certain capital structure and financing assumptions (including the assumptions that (i) at least 50% of future expansion capital and acquisitions would be funded with cash flow in excess of distributions and equity and (ii) subject to the impact of the incentive distribution rights of Plains' general partner and the effect of the agreement of Plains' general partner to reduce the incentive distributions that would otherwise be payable to it, the cost of capital for the combined company would be relatively consistent with Plains' cost of capital at the time the projections were prepared), the combined company projections indicated that the proposed merger would be dilutive relative to DCF per unit in Plains' stand-alone case in 2007 by approximately $0.14 per unit and would be accretive to DCF per unit by approximately $0.25 and $0.35 per unit in 2010 and 2012, respectively. With respect to the projected acquisition case, which also assumed $100 million per year of incremental growth projects for the combined company as well as similar financing assumptions, the combined company projections indicated that, on a DCF per unit basis relative to the stand-alone case, the proposed merger would be dilutive in 2007 by $0.13 and accretive in 2010 and 2012 by $0.26 and $0.34, respectively. The Plains board also reviewed variance sensitivity analyses, which confirmed that relatively small variances in the assumptions underlying the

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projected cases would cause material differences in the projected results. Because of this sensitivity and the related potential for inaccuracy, particularly in the longer term, the projections were regarded primarily as directional indicators of potential accretion and not as a prediction of results.

        The Plains board also took into consideration that a significant portion of Pacific's projected Adjusted EBITDA was derived from tariff and fee-based activities that would provide an enhanced level of stability to the combined company's Adjusted EBITDA, as well as the long-term attractiveness of the combined company's asset base beyond 2012.

        These and other relevant factors were considered in projecting that the combined company would be able to increase its cash distribution to $3.20 per unit on an annualized basis shortly after closing the merger, and continue to target an annual distribution growth rate of 7% to 9% per year relative to the higher distribution level for the next several years, while maintaining an appropriate distribution coverage ratio. This distribution growth outlook assumes no net deterioration of the base businesses and the successful development of internal growth project portfolios of Plains and Pacific, as well as the anticipated synergies of the merger and the effect of Plains' general partner's agreement to reduce its incentive distributions from what it would otherwise have received.

        Plains and Pacific make public only very limited information as to future financial and operating performance and neither partnership typically provides specific or detailed information over an extended period of time because of the speculative nature of such forward-looking information. The foregoing projected information is included in this joint proxy statement/prospectus only because this information was considered by the Plains board, the Pacific board and/or the Pacific conflicts committee, as applicable, in performing due diligence and evaluating the merger and related transactions. The inclusion of the foregoing projected information in this joint proxy statement/prospectus should not be regarded as an indication that either Plains or Pacific or their respective representatives considered or consider the projected information to be a reliable or accurate prediction of future events, and the projected information should not be relied upon as such.

        The projected information described above was not prepared with a view to compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants regarding projections or forecasts. The projected financial information is not presented in accordance with GAAP. The projected financial information included in this joint proxy statement has been prepared by, and is the responsibility of, Plains' and Pacific's management, as applicable. PricewaterhouseCoopers LLP and KPMG LLP have neither examined nor compiled the accompanying projected financial information and, accordingly, PricewaterhouseCoopers LLP and KPMG LLP do not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP and KPMG LLP reports incorporated by reference in this document relate to Plains' and Pacific's historical financial information, respectively. Such reports do not extend to the projected financial information and should not be read to do so.

        The internal financial forecasts (upon which the projected information is based) are, in general, prepared solely for internal use to guide various management decisions, including with respect to capital budgeting. Such internal financial forecasts are inherently subjective in nature, susceptible to interpretation and accordingly such forecasts may not be achieved.

        The internal financial forecasts also reflect numerous assumptions made by management, including the categories of material assumptions described above, all of which are difficult to predict and many of which are beyond the control of the preparing party. Accordingly, there can be no assurance that the assumptions made in preparing the internal financial forecasts upon which the foregoing projected financial information was based will prove accurate. There will be differences between actual and forecasted results, and the differences may be material.

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        Each of Plains and Pacific believe that the projected information prepared and/or provided by it was reasonable at the time developed. However, none of Plains, Pacific or their respective representatives has made or makes any representation to any unitholder regarding the ultimate performance of Plains, Pacific or the combined company relative to the information included in the projected information above, and none of them intends to update or otherwise revise the projected information to reflect circumstances existing after the date when made or to reflect the occurrence of future events in the event that any or all of the assumptions underlying the projected information prove to be in error.

Opinions of Financial Advisors

        Lehman Brothers Inc. ("Lehman Brothers") acted as financial advisor to the Pacific board in connection with the proposed merger and the transactions related to the merger. On June 11, 2006, Lehman Brothers rendered its oral opinion (subsequently confirmed in writing) to Pacific's board that as of such date and, based upon and subject to certain matters stated therein, from a financial point of view, the aggregate consideration to be offered to all of the holders of the partnership interests in Pacific in the proposed transaction is fair to such holders.

        THE FULL TEXT OF LEHMAN BROTHERS' WRITTEN OPINION, DATED JUNE 11, 2006 ("LEHMAN BROTHERS' OPINION") IS ATTACHED AS ANNEX B TO THIS JOINT PROXY STATEMENT/PROSPECTUS. PACIFIC UNITHOLDERS MAY READ SUCH OPINION FOR A DISCUSSION OF THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, FACTORS CONSIDERED AND LIMITATIONS UPON THE REVIEW UNDERTAKEN BY LEHMAN BROTHERS IN RENDERING ITS OPINION. THE FOLLOWING IS A SUMMARY OF LEHMAN BROTHERS' OPINION AND THE METHODOLOGY THAT LEHMAN BROTHERS USED TO RENDER ITS FAIRNESS OPINION. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.

        LEHMAN BROTHERS' ADVISORY SERVICES AND OPINION WERE PROVIDED FOR THE INFORMATION AND ASSISTANCE OF THE PACIFIC BOARD IN CONNECTION WITH ITS CONSIDERATION OF THE PROPOSED TRANSACTION. LEHMAN BROTHERS' OPINION IS NOT INTENDED TO BE AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY UNITHOLDER OF PACIFIC AS TO HOW SUCH UNITHOLDER SHOULD VOTE WITH RESPECT TO THE PROPOSED TRANSACTION. LEHMAN BROTHERS WAS NOT REQUESTED TO OPINE AS TO, AND LEHMAN BROTHERS' OPINION DOES NOT ADDRESS, (I) LB PACIFIC LP'S OR PACIFIC'S UNDERLYING BUSINESS DECISION TO PROCEED WITH OR EFFECT THE PROPOSED TRANSACTION OR (II) THE ALLOCATION OF THE AGGREGATE CONSIDERATION BETWEEN LB PACIFIC AND THE HOLDERS OF PACIFIC COMMON UNITS NOT HELD BY LB PACIFIC IN THE PROPOSED TRANSACTION.

        In arriving at its opinion, Lehman Brothers reviewed and analyzed:

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        In addition, Lehman Brothers had discussions with the managements of Pacific and Plains concerning their respective businesses, operations, assets, liabilities, financial conditions and prospects, including the expected synergies, and undertook such other studies, analyses and investigations as Lehman Brothers deemed appropriate.

        In arriving at its opinion, Lehman Brothers assumed and relied upon the accuracy and completeness of the financial and other information used by Lehman Brothers without assuming any responsibility for independent verification of such information. Lehman Brothers further relied upon the assurances of the managements of Pacific and Plains that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of Pacific, including both management and upside cases, upon advice of Pacific, Lehman Brothers assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Pacific as to the future financial performance of Pacific, and Lehman Brothers relied on both management and upside cases in performing its analysis. With respect to the financial projections of Plains, upon advice of Pacific, Lehman Brothers assumed that such projections were reasonably prepared on the basis reflecting the best currently available estimates and judgments of the management of Plains as to the future financial performance of Plains and that Plains will perform substantially in accordance with such projections. Additionally, upon advice of Pacific, Lehman Brothers considered and relied upon published estimates of independent research analysts on Pacific and Plains in performing its analysis. Upon advice of

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Pacific, Lehman Brothers also assumed that the amounts and timing of the expected synergies were reasonable and that the expected synergies will be realized substantially in accordance with such estimates. In arriving at its opinion, Lehman Brothers did not conduct a physical inspection of the properties and facilities of Pacific or Plains and did not make or obtain any evaluations or appraisals of the assets or liabilities of Pacific or Plains. Lehman Brothers' opinion necessarily was based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of such opinion.

        In connection with rendering its opinion, Lehman Brothers performed certain financial, comparative and other analyses as described below. In arriving at its opinion, Lehman Brothers did not ascribe a specific range of value to Pacific or Plains, but rather made its determination as to the fairness, from a financial point of view, to all of the holders of partnership interests in Pacific of the aggregate consideration to be offered to such holders in the proposed transaction on the basis of financial and comparative analyses. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial and comparative analysis, and the application of those methods to the particular circumstances, and therefore, such an opinion is not readily susceptible to summary description. Furthermore, in arriving at its opinion, Lehman Brothers did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Lehman Brothers believes that its analyses must be considered as a whole and that considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion. In its analyses, Lehman Brothers made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Pacific and Plains. None of Pacific, Plains, Lehman Brothers or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses were not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth therein. In addition, analyses relating to the value of businesses do not purport to be appraisals or to reflect the prices at which businesses actually may be sold.

        The following is a summary of the material financial analyses used by Lehman Brothers in connection with providing its opinion to the Pacific board. Certain of the summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Lehman Brothers, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Accordingly, the analyses listed in the tables and described below must be considered as a whole. Considering any portion of such analyses and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying the Lehman Brothers opinion.

        Lehman Brothers' Valuation Analysis.    Lehman Brothers performed valuation analyses of Pacific as a stand-alone entity using the following methodologies: discounted cash flow analysis, comparable companies trading analysis, comparable master limited partnership merger analysis and comparable midstream/pipeline transactions analysis. The table below summarizes the indicative valuation ranges for Pacific on both an enterprise and equity basis as derived from these methodologies, and compares these valuation ranges to the aggregate consideration to be offered by Plains in the proposed transaction.

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Valuation Summary Results—Pacific

Valuation Methodology

  Indicative
Enterprise
Valuation Range

  Implied Equity
Valuation Range

 
  ($ in millions)

  ($ in millions)

Discounted Cash Flow Analysis—Management Case   $ 2,000 - $2,400   $ 1,411 - $1,811
Discounted Cash Flow Analysis—Upside Case   $ 2,100 - $2,600   $ 1,511 - $2,011
Comparable Companies Trading Analysis   $ 1,900 - $2,200   $ 1,311 - $1,611
Comparable MLP Merger Analysis   $ 2,000 - $2,300   $ 1,411 - $1,711
Comparable Midstream/Pipeline Transactions Analysis   $ 1,600 - $1,800   $ 1,011 - $1,211
   
 
Aggregate Consideration in the Proposed Transaction   $ 2,315   $ 1,726
   
 

        Discounted Cash Flow Analysis.    Lehman Brothers performed a discounted cash flow analysis of Pacific to calculate the estimated present value of the enterprise value of Pacific. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating its "present value" of estimated future cash flows of the asset. "Present value" refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors applicable to a particular asset. The estimated present value of the enterprise value of Pacific was calculated by adding the projected unlevered free cash flows of Pacific for the five fiscal years beginning January 1, 2006 and ending December 31, 2010 to the present value of the terminal value of the partnership interests in Pacific.

        To estimate the residual value of Pacific at the end of the forecast period, or terminal value, Lehman Brothers used perpetuity of projected unlevered free cash flows and assumed growth rates for projected unlevered free cash flows beyond 2010 of 1.0% to 3.0% per year. Lehman Brothers also assumed discount rates of 9.0% to 12.0%. The range of discount rates was based on an analysis of the weighted average cost of capital for Pacific and other comparable companies. The growth rates for the projected unlevered free cash flows beyond 2010 used were based on estimated organic growth rates consistent with industry practices.

        The projections underlying the discounted cash flow analysis were prepared by Pacific management. In performing the discounted cash flow analysis, Lehman Brothers considered both the management case and upside case with respect to the operating and financial projections. In each case, Pacific is assumed to operate as a stand-alone entity and, accordingly, the estimated synergies associated with the proposed transaction were not included in the analysis. Based on the discount rates and terminal values as described above, the management case resulted in an indicative enterprise valuation range of $2,000 million to $2,400 million which implied an equity valuation range of $1,411 million to $1,811 million, and the upside case resulted in an indicative enterprise valuation range of $2,100 million to $2,600 million which implied an equity valuation range of $1,511 million to $2,011 million. The equity valuation range was obtained by subtracting short-term and long-term debt and adding cash on the balance sheet as of March 31, 2006 to the enterprise valuation range. Lehman Brothers noted that the aggregate consideration to be offered to all of the holders of Pacific partnership interests in the proposed transaction was within the range calculated for both management and upside cases.

        Comparable Companies Trading Analysis.    In order to assess how the public market values units of similar publicly traded companies, Lehman Brothers reviewed and compared specific financial and

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operating data relating to Pacific with selected companies that Lehman Brothers deemed comparable to Pacific, including:

  Boardwalk Pipeline Partners, LP     Magellan Midstream Partners, L.P.
  Buckeye Partners, L.P.     ONEOK Partners, L.P.
  Enbridge Energy Partners, L.P.     Plains All American Pipeline, L.P.
  Energy Transfer Partners, L.P.     Sunoco Logistics Partners L.P.
  Enterprise Products Partners L.P.     TEPPCO Partners, L.P.
  Kinder Morgan Energy Partners, L.P.     Valero L.P.

        The comparable companies listed above were chosen because they are publicly traded master limited partnerships with operations that for purposes of this analysis may be considered similar to Pacific. Lehman Brothers calculated various multiples and ratios for the comparable companies and used the multiples and ratios as a reference point to develop an indicative valuation for Pacific. Lehman Brothers reviewed multiples and ratios for the comparable companies based on estimates of earnings before interest, taxes, depreciation and amortization (EBITDA); net income; net income per limited partnership unit; distributable cash flow (defined as EBITDA less interest expense and maintenance capital expenditures); and distributable cash flow per limited partnership unit. The projections for the comparable companies and Pacific were based on published estimates of independent research analysts. Because this analysis is meant to estimate the value of Pacific on a stand-alone basis, the expected synergies were not included in the comparable companies analysis. The multiples for the comparable companies were calculated using the closing unit prices for the comparable companies as of June 9, 2006 and balance sheet data as of March 31, 2006. In calculating the limited partnership equity values for each of the comparable companies, Lehman Brothers used the current market price for the specific partnership's common units and applied no discount on the value of subordinated units (where applicable) relative to the price of the common unit. In calculating the general partner equity values for each of the comparable companies, Lehman Brothers multiplied the cash flows being received by the general partner (based on the latest quarterly distribution annualized) by a multiple of 30.0x, which was derived using comparable publicly traded general partnerships. For master limited partnerships with publicly traded general partners, such as Enterprise Products Partners L.P. and Magellan Midstream Partners, L.P., the market value of the general partner was used instead

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of the multiple of distributions method. With respect to the comparable companies, Lehman Brothers considered the following statistics and multiples:

 
  Median
  Average
  High
  Low
 
L.P. Unit Distribution Yield (latest quarter annualized)   7.05 % 6.88 % 8.53 % 5.31 %
Unit Price as a Multiple of:                  
  Distributable Cash Flow per L.P. Unit                  
    2006E   13.4 x 13.6 x 17.0 x 10.6 x
    2007E   13.0 x 12.5 x 14.1 x 9.5 x
 
Net Income per L.P. Unit

 

 

 

 

 

 

 

 

 
    2006E   17.3 x 18.2 x 23.4 x 15.0 x
    2007E   16.8 x 17.0 x 23.4 x 13.9 x

Total Equity Value as a Multiple of:

 

 

 

 

 

 

 

 

 
  Aggregate Distributable Cash Flow                  
    2006E   14.8 x 15.7 x 21.5 x 11.9 x
    2007E   13.3 x 14.0 x 19.0 x 9.9 x
 
Aggregate Net Income

 

 

 

 

 

 

 

 

 
    2006E   20.4 x 21.5 x 33.8 x 16.5 x
    2007E   19.2 x 19.9 x 34.8 x 14.1 x

Total Enterprise Value as a Multiple of:

 

 

 

 

 

 

 

 

 
  Aggregate EBITDA                  
    2006E   13.9 x 14.2 x 18.6 x 11.3 x
    2007E   12.8 x 12.9 x 16.8 x 10.2 x

        Given the inherent differences between the business, operations and prospects of Pacific and the businesses, operations and prospects of the comparable companies, Lehman Brothers believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the comparable company analysis and accordingly also made qualitative judgments concerning differences between the financial and operating characteristics and prospects of Pacific and the comparable companies that could affect the public trading values of each. These qualitative judgments related primarily to the differing sizes, growth prospects, profitability levels and degree of operational risk between Pacific and the comparable companies.

        Based upon these judgments, Lehman Brothers selected a range of multiples for each metric and applied them to the stand-alone financial metrics for Pacific. The resulting indicative enterprise valuation range was $1,900 million to $2,200 million which implied an equity valuation range of $1,311 million to $1,611 million. Lehman Brothers noted that the aggregate consideration to be offered to all of the holders of partnership interests in Pacific in the proposed transaction was above this valuation range.

        Comparable Master Limited Partnership ("MLP") Merger Analysis.    Lehman Brothers reviewed and analyzed certain information relating to the following transactions: the acquisition of Kaneb Pipe Line Partners, L.P. by Valero L.P., the acquisition of GulfTerra Energy Partners, L.P. by Enterprise Products Partners L.P., and the acquisition of Santa Fe Pacific Pipeline Partners, L.P. by Kinder Morgan Energy Partners, L.P. These mergers were selected because the operations of these companies may be considered similar to Pacific for purposes of this analysis and these mergers represent the only mergers completed by publicly traded energy industry master limited partnerships. Among other things, Lehman Brothers analyzed the equity purchase price as a multiple of latest twelve months (LTM) net income and LTM distributable cash flow. Additionally, Lehman Brothers analyzed the total purchase price as a multiple of LTM EBITDA and LTM earnings before interest and taxes (EBIT). Lehman Brothers used

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the multiples as a reference point to derive an indicative valuation range for Pacific. The projections for the comparable MLP merger transactions and Pacific were based on published estimates of independent research analysts. As in the comparable companies analysis, Lehman Brothers excluded the expected synergies from this comparable MLP merger analysis. The following table summarizes the results of this analysis:

 
  Median
  Average
  High
  Low
 
Total Equity Value as a Multiple of:                  
  LTM Distributable Cash Flow   18.5 x 18.4 x 19.4 x 17.3 x
  LTM Net Income   21.3 x 21.5 x 23.2 x 19.9 x

Total Enterprise Value as a Multiple of:

 

 

 

 

 

 

 

 

 
  LTM EBITDA   13.8 x 13.8 x 15.0 x 12.7 x
  LTM EBIT   19.5 x 18.5 x 20.1 x 15.7 x

        The comparable MLP merger analysis resulted in an indicative enterprise valuation range of $2,000 million to $2,300 million which implied an equity valuation range of $1,411 million to $1,711 million. Lehman Brothers noted that the aggregate consideration to be offered to all of the holders of partnership interests in Pacific in the proposed transaction was above this valuation range.

        Comparable Midstream/Pipeline Transactions Analysis.    Lehman Brothers reviewed and analyzed certain information relating to selected transactions in the midstream liquids and midstream natural gas industry since 1991, including but not limited to transactions between the following parties:

  TEPPCO Partners, L.P. /
Duke Energy Corporation
    Enbridge Income Fund /
Enbridge Inc.
  KN Energy, Inc. / Kinder
Morgan, Inc.
    Plains All American Pipeline, L.P. /
Shell Pipeline Co. LP
  Alberta Energy Co. Ltd. /
AEC Pipelines, L.P.
    Enbridge Energy Partners, L.P. /
Shell Pipeline Co. LP
  Alberta Energy Co. Ltd. /
TransCanada Pipelines Ltd.
    Pacific Energy Partners, L.P. /
BP Canada Energy Co.
  Plains All American Pipeline, L.P. /
Murphy Oil Co. Ltd.
    Magellan Midstream Partners, L.P. /
National Cooperative Refinery Association
  Pembina Pipeline Income Fund /
AEC Pipelines, L.P.
    Plains All American Pipeline, L.P. /
Link Energy LLC
  Koch Industries, Inc. /
BP America, Inc.
    Magellan Midstream Partners, L.P. /
Shell Oil Products US
  BC Gas Inc. /
EnCana Corp.
    Buckeye Partners, L.P. /
Shell Oil Products US
  Kaneb Pipeline Partners, L.P. /
Tesoro Petroleum Corp.
    Koch Industries, Inc. /
ONEOK, Inc.
  Madison Dearborn Partners, LLC and Carlyle/Riverstone Global Energy and Power Fund II, L.P. / The Williams Companies, Inc.     Pacific Energy Partners, L.P. /
Valero L.P.

        Lehman Brothers calculated, when available, the LTM and one-year forward EBITDA multiples implied by the aggregate purchase price involved in such midstream/pipeline transactions and used these multiples as a reference point to develop an indicative valuation range for Pacific. The projections for the comparable midstream/pipeline transactions and Pacific were based on published estimates of independent research analysts. As in the comparable MLP merger analysis, Lehman

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Brothers excluded the expected synergies from this comparable midstream/pipeline transactions analysis. The following table summarizes the results of this analysis:

 
  Median
  Average
  High
  Low
 
Total Enterprise Value as a Multiple of:                  
  LTM EBITDA   9.0 x 9.2 x 14.9 x 4.5 x

        The comparable midstream/pipeline transactions analysis resulted in an indicative enterprise valuation range of $1,600 million to $1,800 million which implied an equity valuation range of $1,011 million to $1,211 million. Lehman Brothers noted that the aggregate consideration to be offered to all of the holders of partnership interests in Pacific in the proposed transaction was significantly above this valuation range. However, Lehman Brothers believes that the comparable midstream/pipeline transactions analysis is less relevant than the other valuation methodologies for a number of reasons, principally, due to the tax-advantaged nature of MLPs and the significant unit-for-unit exchange component (59.4% of total equity consideration) in the proposed transaction as compared to the all-cash consideration for almost all of the comparable midstream/pipeline transactions.

        Historical Exchange Ratio Analysis.    To illustrate the implied average exchange ratio of Pacific common units for Plains common units, Lehman Brothers compared the historical per unit prices of Pacific and Plains during different periods for the two-year period prior to June 9, 2006. The following table summarizes the historical implied average exchange ratio calculated for the periods indicated:

 
  Average Exchange Ratio
June 9, 2006   0.696x
5 day period   0.686x
10 day period   0.668x
20 day period   0.674x
30 day period   0.688x
60 day period   0.694x
90 day period   0.698x
120 day period   0.707x
One year period   0.721x
Two year period   0.757x

        Transaction Premium Analysis.    To illustrate how the premium implied by the 0.770x exchange ratio in the merger compared to the premiums paid in similar transactions, Lehman Brothers compared the premium implied in the merger to the premiums paid in transactions in the energy sector, between September 27, 2001 and June 9, 2006, with a value greater than $1 billion and where the consideration was not 100% cash. Lehman Brothers calculated the premium per share paid by the acquiror compared to the share price of the target company prevailing (i) one day, (ii) one week and (iii) one month (four weeks) prior to the announcement of the transaction. The following table summarizes the results of the premiums paid calculated for these transactions, as well as the premiums implied by the 0.770x exchange ratio offered in the merger:

 
  Premiums
Implied
by 0.770x
Exchange Ratio

  Median
  Average
  High
  Low
 
Time Period                      
  One Day   10.6 % 20.9 % 18.4 % 37.9 % (4.0 )%
  One Week   10.6 % 18.8 % 18.9 % 39.2 % (10.2 )%
  One Month   14.4 % 24.6 % 23.7 % 48.7 % (2.9 )%

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        Lehman Brothers also noted that the 0.770x exchange ratio represented an implied premium of 14.3% over the average exchange ratio calculated using closing prices during the 20 trading days prior to and including June 9, 2006.

        Contribution Analysis.    To illustrate the respective contributions of Pacific and Plains to the estimated net income per limited partnership unit and estimated distributable cash flow per limited partnership unit of the combined company, Lehman Brothers calculated such estimated net income and distributable cash flow based on published estimates of independent research analysts and the management and upside cases prepared by the management of Pacific. Based on these estimates, Lehman Brothers derived implied exchange ratios based on the relative contribution by each of Pacific and Plains, as well as the 0.770x exchange ratio offered in the merger. The following table summarizes the results of such review:

 
  Implied Exchange Ratio Based on:
 
  Distributable Cash Flow
per L.P. Unit

  Net Income
per L.P. Unit

Street Case        
  2006E   0.687x   0.527x
  2007E   0.717x   0.598x
Management Case        
  2006E   0.696x   0.499x
  2007E   0.661x   0.463x
  2008E   0.723x   0.561x
Upside Case        
  2006E   0.696x   0.499x
  2007E   0.717x   0.538x
  2008E   0.884x   0.886x

        Pro Forma Analysis.    To determine the pro forma impact of the proposed transaction on, among other things, Pacific's and Plains' projected distributable cash flow per limited partnership unit for the years 2006 through 2010, Lehman Brothers compared the distributable cash flow per limited partnership unit of Pacific and Plains, on a stand-alone basis, to the distributable cash flow per limited partnership unit of Pacific and Plains pro forma for the proposed transaction. Three scenarios, each of which included expected synergies and the impact of the reduction in incentive distributions that would have otherwise been payable to Plains' general partner, were analyzed based on: (i) published estimates of independent research analysts for both Pacific and Plains (estimates were only available for 2006 and 2007), (ii) the management case provided by Pacific management and the financial projections provided by Plains management, and (iii) the upside case provided by Pacific management and the financial projections provided by Plains management. Based on this review, Lehman Brothers noted that the proposed transaction would be accretive to distributable cash flow per limited partnership unit for holders of Pacific limited partnership interests in all years under all cases except for 2008, 2009 and 2010 under the upside case.

        General.    Lehman Brothers is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. LB Pacific and the Pacific board selected Lehman Brothers because of its expertise, reputation and familiarity with Pacific and the oil and gas industry generally and because its investment banking professionals have substantial experience in transactions comparable to the merger.

        As compensation for its services in connection with the merger, Lehman Brothers was paid $1.0 million upon the delivery of the Lehman Brothers opinion. Additional compensation of $11.5 million will be payable to Lehman Brothers upon completion of the proposed transaction, and

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Lehman Brothers will be reimbursed for reasonable out-of-pocket expenses incurred in connection with the proposed transaction. The opinion fee, the additional consideration and the reimbursement of out-of-pocket expenses will be paid one-third by LB Pacific and two-thirds by Pacific. In addition, Pacific has agreed to indemnify Lehman Brothers for certain liabilities that may arise out of its engagement by Pacific and the rendering of the Lehman Brothers opinion. Lehman Brothers also has performed various investment banking services for Pacific and Plains in the past, and expects to perform such services for Plains in the future, and received and expects to receive customary fees for such services.

        In the ordinary course of its business, Lehman Brothers may actively trade in the debt or equity securities of Pacific and Plains for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. Pacific's general partner is deemed to be an affiliate of Lehman Brothers through a 59% ownership interest in Pacific's general partner held by certain entities controlled by Lehman Brothers Holdings Inc., the parent entity of Lehman Brothers.

        The Pacific conflicts committee engaged Petrie Parkman & Co. ("Petrie Parkman") as its financial advisor as of May 2, 2006 in connection with the possible sale, merger, or similar transactions involving all or a portion of Pacific and, in connection therewith, of LB Pacific and/or certain of its affiliates. On June 11, 2006, Petrie Parkman delivered to the Pacific conflicts committee its oral opinion, and subsequently confirmed in writing that, as of that date and based upon and subject to the matters set forth in the opinion, the exchange ratio was fair, from a financial point of view, to the holders of Pacific common units, other than LB Pacific and its affiliates.

        THE FULL TEXT OF THE PETRIE PARKMAN OPINION, DATED JUNE 11, 2006, WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS OF THE REVIEW UNDERTAKEN BY PETRIE PARKMAN IN RENDERING ITS OPINION IS, WITH PETRIE PARKMAN'S CONSENT, ATTACHED AS ANNEX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED IN THIS DOCUMENT BY REFERENCE. THE SUMMARY OF THE PETRIE PARKMAN OPINION SET FORTH IN THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. THE HOLDERS OF PACIFIC COMMON UNITS ARE URGED TO READ THE PETRIE PARKMAN OPINION CAREFULLY AND IN ITS ENTIRETY.

        PETRIE PARKMAN'S OPINION WAS PROVIDED TO THE PACIFIC CONFLICTS COMMITTEE FOR ITS USE AND BENEFIT IN CONNECTION WITH ITS CONSIDERATION OF THE MERGER AND RELATES SOLELY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO TO THE HOLDERS OF PACIFIC COMMON UNITS, OTHER THAN LB PACIFIC AND ITS AFFILIATES. THE PETRIE PARKMAN OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF PACIFIC COMMON UNITS AS TO HOW SUCH HOLDER SHOULD VOTE ON THE MERGER. PETRIE PARKMAN'S OPINION DOES NOT ADDRESS THE RELATIVE MERITS OF THE MERGER AS COMPARED TO ANY ALTERNATIVE BUSINESS TRANSACTION OR STRATEGIC ALTERNATIVE THAT MIGHT BE AVAILABLE TO PACIFIC NOR DOES IT ADDRESS THE UNDERLYING BUSINESS DECISION OF PACIFIC TO ENGAGE IN THE MERGER. PETRIE PARKMAN WAS NOT ASKED TO AND DID NOT SOLICIT THIRD-PARTY INDICATIONS OF INTEREST IN ACQUIRING ALL OR ANY PART OF PACIFIC. PETRIE PARKMAN'S OPINION AND ITS PRESENTATION TO THE PACIFIC CONFLICTS COMMITTEE WERE AMONG MANY FACTORS TAKEN INTO CONSIDERATION BY THE PACIFIC CONFLICTS COMMITTEE IN APPROVING THE MERGER AGREEMENT AND MAKING ITS RECOMMENDATION REGARDING THE MERGER.

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        In arriving at its opinion, Petrie Parkman, among other things:


        In connection with its opinion, Petrie Parkman assumed and relied upon, without assuming any responsibility for, or independently verifying, the accuracy and completeness of all information supplied or otherwise made available to Petrie Parkman by Pacific and Plains. Petrie Parkman further relied upon the assurances of representatives of the management of Pacific and Plains that they were unaware of any facts that would make the information provided to Petrie Parkman incomplete or misleading in any material respect. With respect to projected financial and operating data, Petrie Parkman assumed

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that it had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the managements and staffs of Pacific and Plains relating to the future financial and operational performance of each partnership and the strategic implications and operational benefits anticipated to result from the merger and purchase transaction. Petrie Parkman did not make an independent evaluation or appraisal of the assets or liabilities of Pacific or Plains, nor was Petrie Parkman furnished with any such evaluations or appraisals. In addition, Petrie Parkman did not assume any obligation to conduct, nor did Petrie Parkman conduct, any physical inspection of the properties or facilities of Pacific or Plains. Petrie Parkman also assumed that the final form of the merger agreement and the purchase agreement would be substantially similar to the last draft reviewed by Petrie Parkman, and that the merger and purchase transaction would be consummated in accordance with the terms of the respective agreements without waiver of any of the conditions precedent to the merger or purchase transaction contained in such agreements.

        Petrie Parkman's opinion was rendered on the basis of conditions in the securities markets and the energy markets as they existed and could be evaluated on the date of its opinion and the conditions and prospects, financial and otherwise, of Pacific and Plains as they were represented to Petrie Parkman as of the date of its opinion or as they were reflected in the materials and discussions described in Petrie Parkman's opinion. It should be understood that subsequent developments may affect Petrie Parkman's opinion and that Petrie Parkman does not have any obligation to update, revise or reaffirm its opinion.

        The following is a summary of the financial analyses performed by Petrie Parkman in connection with the preparation of its opinion dated June 11, 2006 and presented to the Pacific conflicts committee on that date.

        This summary includes information presented in tabular format. In order to fully understand these financial analyses, the tables must be read together with the text accompanying each summary. The tables alone do not constitute a complete description of these financial analyses. Considering the data set forth in the tables without considering the full narrative description of these analyses, including the methodologies and assumptions underlying these analyses, could create a misleading or incomplete view of these financial analyses performed by Petrie Parkman.

        Implied Premium Analysis.    Petrie Parkman calculated the premiums implied by comparing the $35.50 per unit of implied merger consideration to Pacific unitholders based on the 0.77 exchange ratio offered by Plains and the Plains June 9, 2006 closing price of $46.10 per unit to the historical trading prices of Pacific common units for specified periods between January 3, 2005 and June 9, 2006 and calculated the following results:

Period

  Market Price
  $35.50 Offer
Premium

 
Last Price (June 9, 2006)   $ 32.09   10.6 %
1 Week Prior   $ 32.09   10.6 %
1 Month (30 Calendar Days) Prior   $ 31.58   12.4 %
6 Months Prior   $ 30.26   17.3 %
1 Year Prior   $ 31.82   11.6 %

High Price

 

$

35.51

 

0.0

%
Low Price   $ 28.02   26.7 %

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        Historical Trading Ratio Analysis.    Petrie Parkman analyzed the historical ratios of the closing prices of Pacific common units divided by the corresponding closing prices of Plains common units for the period from January 3, 2005 to June 9, 2006 and calculated the following results:

Period

  Average
Trading Ratio

Current (June 9, 2006)   0.70
1 Week Prior   0.68
1 Month (30 Calendar Days) Prior   0.68
3 Months Prior   0.69
1 Year Prior   0.72
Since January 3, 2005   0.74
High   0.83
Low   0.64

        Discounted Cash Flow Analysis.    Petrie Parkman projected the potential financial performance of Pacific and Plains, without giving effect to the proposed merger, for the five year period beginning on January 1, 2006. Petrie Parkman prepared these projections using financial and operating projections prepared and/or provided by the managements and staffs of Pacific and Plains and certain assumptions based upon discussions with the managements of Pacific and Plains regarding the potential future operating and financial performance of Pacific and Plains.

        For each of Pacific and Plains, Petrie Parkman analyzed two cases of operating projections, in which the principal variables were the growth rate in estimated earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA") and associated capital expenditures to support the growth rate. Petrie Parkman calculated the net present value of projected limited partner distributions and terminal values using after-tax discount rates of 10.0% to 12.0% for Pacific and 9.0% to 11.0% for Plains and terminal multiples of 12.0x to 15.0x estimated 2010 limited partner distributions for Pacific and Plains. From the equity reference values implied by this analysis, Petrie Parkman determined composite per unit equity reference value ranges of $33.00 to $39.00 and $38.00 to $45.00 for Case 1 and Case 2, respectively, for Pacific and $46.00 to $54.00 and $50.00 to $58.00 for Case 1 and Case 2, respectively, for Plains.

        The per unit equity reference value ranges for Pacific and Plains were then used to derive implied exchange ratios of 0.61 to 0.85 and 0.66 to 0.90 for Case 1 and Case 2, respectively. The low end of the implied exchange ratio range is calculated by dividing the low end of the Pacific equity reference value range by the high end of the Plains equity reference value range. The high end of the implied exchange ratio range is calculated by dividing the high end of the Pacific equity reference value range by the low end of the Plains equity reference value range.

        Petrie Parkman noted the proposed exchange ratio of 0.77 was supported by its analysis.

        Comparable Transaction Analysis.    Petrie Parkman reviewed selected publicly available information on three merger transactions involving publicly traded master limited partnerships announced between October 1997 and June 2006 that Petrie Parkman deemed appropriate for an analysis of Pacific and Plains.

        Using publicly available information, Petrie Parkman calculated purchase price of equity multiples of latest twelve months ("LTM"), current year's and next year's estimated distributable cash flow per limited partner unit and total investment, which Petrie Parkman defined for the purposes of this analysis as purchase price of equity plus net obligations assumed, multiples of LTM, current year's and next year's EBITDA. In each case, estimated distributable cash flow and EBITDA were based on the average of research analyst estimates.

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        Petrie Parkman determined that the following company acquisition transactions were relevant to an evaluation of Pacific and Plains:

Acquirer

  Target

  Date of Announcement
Valero, L.P.
Enterprise Products Partners, L.P.
Kinder Morgan Energy Partners, L.P.
  Kaneb Pipeline Partners, L.P.
GulfTerra Energy Partners, L.P.
Santa Fe Pacific Pipeline Partners, L.P.
  November 1, 2004
December 15, 2003
October 20, 1997

        The maximum, mean, median and minimum implied multiples in these transactions are set forth below. The table below also includes benchmark multiple ranges selected by Petrie Parkman based on a review of the implied multiples in the selected transactions.

 
  Implied Multiples in Selected Transactions
   
 
 
  Selected
Benchmark
Ranges

 
 
  Maximum
  Mean
  Median
  Minimum
 
Purchase Price/LTM Distributable Cash Flow   17.2 x 14.8 x 15.0 x 12.1 x 15.0 - 17.0 x
Purchase Price/Current Year's Estimated Distributable Cash Flow   14.8 x 14.8 x 14.8 x 14.8 x 14.0 - 16.0 x
Purchase Price/Next Year's Estimated Distributable Cash Flow   14.8 x 14.6 x 14.6 x 14.4 x 14.0 - 15.0 x
Total Investment/LTM EBITDA   15.3 x 13.5 x 14.5 x 10.8 x 14.0 - 15.0 x
Total Investment/Current Year's Estimated EBITDA   14.9 x 13.9 x 13.9 x 12.8 x 12.5 - 14.5 x
Total Investment/Next Year's Estimated EBITDA   14.3 x 13.0 x 13.0 x 11.7 x 12.0 - 14.0 x

        Petrie Parkman applied the benchmark multiples to Pacific's and Plains' LTM, current year's and next year's estimated distributable cash flow and EBITDA and adjusted for long-term debt, net working capital and the estimated value for the partnerships' general partner interests and incentive distribution rights, where appropriate, to determine enterprise reference value ranges for Pacific and Plains.

        Petrie Parkman also performed a premium analysis for the same universe of merger transactions, which compared the offer price per target company unit with the target company's unit price measured one day, 30 days and 60 days prior to the public announcement of the transaction. The maximum, mean, median and minimum premiums (which Petrie Parkman defined for the purposes of this analysis as excess of offer price over target company's unit price stated as a percentage above the target company's unit price), together with benchmark premium ranges selected by Petrie Parkman based on a review of the implied premiums for these periods, were as follows:

 
  Implied Premiums in Selected Transactions
   
 
  Selected
Benchmark
Ranges

 
  Maximum
  Mean
  Median
  Minimum
One Day Prior   32 % 18 % 21 % 2 % 15% - 25%
30 Days Prior   39 % 20 % 19 % 3 % 15% - 25%
60 Days Prior   42 % 22 % 24 % -1 % 20% - 30%

        Petrie Parkman applied the range of benchmark premiums to the corresponding unit prices of Pacific and Plains for the periods of one day, 30 days and 60 days prior to June 9, 2006 and adjusted for long-term debt and net working capital to determine enterprise reference value ranges for Pacific and Plains.

        Petrie Parkman determined from the enterprise reference value ranges implied by these multiples a composite reference value range of $1,850 million to $2,100 million for Pacific and $5,500 million to $5,900 million for Plains. After deducting long-term debt and net working capital from the enterprise

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reference value ranges and dividing by the fully-diluted number of units outstanding, the resulting equity reference value ranges were $32.84 to $39.19 for Pacific and $52.53 to $57.55 for Plains.

        These per unit equity reference value ranges were then used to derive the implied exchange ratio range of 0.57 to 0.75. The low end of the implied exchange ratio range is calculated by dividing the low end of the Pacific equity reference value range by the high end of the Plains equity reference value range. The high end of the implied exchange ratio range is calculated by dividing the high end of the Pacific equity reference value range by the low end of the Plains equity reference value range.

        Petrie Parkman noted the proposed exchange ratio of 0.77 was supported by its analysis.

        Capital Market Comparison.    Using publicly available information, Petrie Parkman calculated market capitalization multiples of LTM, 2006 and 2007 estimated distributable cash flow per limited partner unit and enterprise value multiples of LTM, 2006 and 2007 estimated EBITDA for ten publicly traded companies for Pacific and ten publicly traded companies for Plains. In each case, estimated distributable cash flow and EBITDA were based on average research analyst estimates. Petrie Parkman calculated market value for purposes of this analysis by adding the market value of common units as of June 9, 2006, the market value of common units less a 5% discount for outstanding subordinated units as of June 9, 2006 and the estimated value for the partnerships' general partner interests and incentive distribution rights. Petrie Parkman obtained the enterprise value of each partnership by adding the equity market value to the sum of its long-term debt and subtracting net working capital.

        Petrie Parkman determined that the following companies were relevant to an evaluation of Pacific based on Petrie Parkman's view of the comparability of the operating and financial characteristics of these companies to those of Pacific:

  Buckeye Pipeline Partners, L.P.     Magellan Midstream Partners, L.P.
  Enbridge Energy Partners, L.P.     Plains All American Pipeline, L.P.
  Enterprise Product Partners, L.P.     Sunoco Logistics Partners, L.P.
  Holly Energy Partners, L.P.     TEPPCO Partners, L.P.
  Kinder Morgan Energy Partners, L.P.     Valero, L.P.

        The maximum, mean, median and minimum multiples for the ten partnerships are set forth below. The table also includes benchmark multiple ranges selected by Petrie Parkman based on a review of the comparable company multiples.

 
  Comparable Company Multiples
   
 
Measure

  Selected
Benchmark
Ranges

 
  Maximum
  Mean
  Median
  Minimum
 
Price/LTM Distributable Cash Flow per Limited Partner Unit   15.7 x 13.7 x 13.7 x 10.0 x 14.0 - 15.0 x
Price/2006 Estimated Distributable Cash Flow per Limited Partner Unit   15.0 x 13.2 x 13.2 x 11.6 x 13.0 - 14.0 x
Price/2007 Estimated Distributable Cash Flow per Limited Partner Unit   13.9 x 12.4 x 12.4 x 11.0 x 12.0 - 13.5 x
Enterprise Value/LTM EBITDA   21.4 x 17.6 x 17.3 x 14.5 x 16.0 - 18.0 x
Enterprise Value/2006 Estimated EBITDA   19.9 x 15.7 x 15.4 x 12.4 x 14.5 - 16.5 x
Enterprise Value/2007 Estimated EBITDA   18.4 x 14.6 x 14.5 x 11.3 x 13.5 - 15.0 x

        Petrie Parkman applied the benchmark multiples to Pacific's LTM, 2006 and 2007 estimated distributable cash flow and EBITDA and adjusted for long-term debt, net working capital and the estimated value of the partnership's general partner interest and incentive distribution rights, where appropriate, to determine enterprise reference value ranges for Pacific.

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        Petrie Parkman determined from the enterprise reference value ranges implied by these multiples a composite enterprise reference value range of $1,800 million to $2,000 million. After deducting long-term debt and net working capital from the enterprise reference value range and dividing by the fully-diluted number of units outstanding, the resulting equity reference value range was $31.57 to $36.65.

        Petrie Parkman determined that the following companies were relevant to an evaluation of Plains based on Petrie Parkman's view of the comparability of the operating and financial characteristics of these companies to those of Plains:

  Buckeye Pipeline Partners, L.P.     Magellan Midstream Partners, L.P.
  Enbridge Energy Partners, L.P.     Pacific Energy Partners, L.P.
  Enterprise Product Partners, L.P.     Sunoco Logistics Partners, L.P.
  Holly Energy Partners, L.P.     TEPPCO Partners, L.P.
  Kinder Morgan Energy Partners, L.P.     Valero, L.P.

        The maximum, mean, median and minimum multiples for the ten companies are set forth below. The table also includes benchmark multiple ranges selected by Petrie Parkman based on a review of the comparable company multiples.

 
  Comparable Company Multiples
   
 
Measure

  Selected
Benchmark
Ranges

 
  Maximum
  Mean
  Median
  Minimum
 
Price/LTM Distributable Cash Flow per Limited Partner Unit   16.3 x 14.3 x 14.1 x 13.0 x 14.0 - 15.0 x
Price/2006 Estimated Distributable Cash Flow per Limited Partner Unit   15.0 x 13.4 x 13.3 x 12.3 x 13.0 - 14.0 x
Price/2007 Estimated Distributable Cash Flow per Limited Partner Unit   13.9 x 12.5 x 12.6 x 11.0 x 12.0 - 13.5 x
Enterprise Value/LTM EBITDA   21.4 x 17.8 x 17.4 x 14.7 x 16.0 - 18.0 x
Enterprise Value/2006 Estimated EBITDA   19.9 x 15.6 x 15.4 x 12.4 x 14.5 - 16.5 x
Enterprise Value/2007 Estimated EBITDA   18.4 x 14.4 x 14.5 x 11.3 x 13.5 - 15.0 x

        Petrie Parkman applied the benchmark multiples to Plains' LTM, 2006 and 2007 estimated distributable cash flow and EBITDA and adjusted for long-term debt, net working capital and the estimated value of the partnership's general partner interest and incentive distribution rights, where appropriate, to determine enterprise reference value ranges for Plains.

        Petrie Parkman determined from the enterprise reference value ranges implied by these multiples a composite enterprise reference value range of $5,000 million to $5,600 million. After deducting long-term debt and net working capital from the enterprise reference value range and dividing by the fully-diluted number of units outstanding, the resulting equity reference value range was $46.25 to $53.78.

        The per unit equity reference value ranges were then used to derive the implied exchange ratio range of 0.59 to 0.79. The low end of the implied exchange ratio range is calculated by dividing the low end of the Pacific equity reference value range by the high end of the Plains equity reference value range. The high end of the implied exchange ratio range is calculated by dividing the high end of the Pacific equity reference value range by the low end of the Plains equity reference value range.

        Petrie Parkman noted the proposed exchange ratio of 0.77 was supported by its analysis.

        Pro Forma Analysis.    Petrie Parkman analyzed the pro forma financial effects of the proposed merger and purchase transaction for the fiscal years ended 2006 and 2007 using average research analyst estimates and the Discounted Cash Flow Analysis Case 1 for Pacific and Plains. For purposes of

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its analysis, Petrie Parkman assumed $30 million of pre-tax synergies. This analysis indicated that the merger would be accretive to 2006 and 2007 estimated distributable cash flow per Pacific limited partner unit and 2006 and 2007 estimated distributions per Pacific limited partner unit.

        The description set forth above constitutes a summary of the analyses employed and factors considered by Petrie Parkman in rendering its opinion to the Pacific conflicts committee. Petrie Parkman believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses and factors, could create an incomplete view of the process underlying its opinion. The preparation of a fairness opinion is a complex, analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and is not necessarily susceptible to partial analysis or summary description. In arriving at its opinion, Petrie Parkman did not attribute any particular weight to any analysis considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis. Any estimates resulting from the analyses are not necessarily indicative of actual values, which may be significantly more or less favorable than as set forth in this document. In addition, analyses based on forecasts of future results are not necessarily indicative of future results, which may be significantly more or less favorable than suggested by these analyses. Estimates of reference values of companies do not purport to be appraisals or necessarily reflect the prices at which companies may actually be sold. Because the estimates are inherently subject to uncertainty and based upon numerous factors or events beyond the control of the parties and Petrie Parkman, Petrie Parkman cannot assure that the estimates will prove to be accurate.

        No company used in the analyses of other publicly traded companies or any transaction used in the analyses of comparable transactions is identical to Pacific, Plains or the proposed merger. Accordingly, these analyses must take into account differences in the financial and operating characteristics of the selected publicly traded companies and differences in the structure and timing of the selected transactions and other factors that would affect the public trading values and acquisition values of the companies considered.

        Petrie Parkman, as part of its investment banking business, is continually engaged in the evaluation of energy-related businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and evaluations for corporate and other purposes. The Pacific conflicts committee selected Petrie Parkman as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger.

        Pursuant to the terms of an engagement letter agreement dated effective as of May 2, 2006, Pacific paid Petrie Parkman a customary fee upon the delivery of Petrie Parkman's fairness opinion dated June 11, 2006. No portion of Petrie Parkman's fee was contingent upon the consummation of the merger or the conclusions reached by Petrie Parkman in its opinion. In addition, Pacific agreed to reimburse Petrie Parkman for reasonable out-of-pocket expenses incurred in connection with the engagement, including fees and reasonable expenses of legal counsel. Pacific has also agreed to indemnify Petrie Parkman and its affiliates and its and their respective directors, officers, partners, agents, employees and controlling persons to the full extent lawful, from and against certain liabilities related to or arising out of its rendering of services under its engagement, including liabilities under the federal securities laws. In the ordinary course of business, Petrie Parkman or its affiliates may trade in the debt or equity securities of Pacific or Plains for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.

        Simmons & Company International ("Simmons & Company") acted as financial advisor to the Plains board in connection with the proposed merger and the transactions related to the merger. On

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June 11, 2006, Simmons & Company rendered its written opinion to the Plains board to the effect that as of the date of such opinion, the aggregate consideration to be paid by Plains in the proposed merger and the related transactions is fair, from a financial point of view, to Plains and the Plains common unitholders (excluding the Plains common unitholders who hold a direct or indirect interest in Plains' general partner).

        THE FULL TEXT OF THE SIMMONS & COMPANY OPINION DATED JUNE 11, 2006 IS INCLUDED AS ANNEX D TO THIS DOCUMENT. HOLDERS OF PLAINS COMMON UNITS MAY READ THE SIMMONS & COMPANY OPINION FOR A DISCUSSION OF THE FACTORS CONSIDERED, ASSUMPTIONS MADE AND QUALIFICATIONS OF THE REVIEW UNDERTAKEN BY SIMMONS & COMPANY IN CONNECTION WITH ITS OPINION.

        SIMMONS & COMPANY'S ADVISORY SERVICES AND OPINION WERE PROVIDED FOR THE INFORMATION AND ASSISTANCE OF THE PLAINS BOARD IN CONNECTION WITH THEIR CONSIDERATION OF THE MERGER AND RELATED TRANSACTIONS. SIMMONS & COMPANY'S OPINION IS NOT A RECOMMENDATION TO ANY UNITHOLDER OF PLAINS OR PACIFIC AS TO HOW SUCH UNITHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER. SIMMONS & COMPANY WAS NOT REQUESTED TO OPINE AS TO, AND ITS OPINION DOES NOT ADDRESS, PLAINS' UNDERLYING BUSINESS DECISION TO PROCEED WITH OR EFFECT THE MERGER AND RELATED TRANSACTIONS, OR THE FAIRNESS OF THE RESPECTIVE CONSIDERATION TO BE PAID BY PLAINS IN ANY PARTICULAR ASPECT OF THE MERGER AND RELATED TRANSACTIONS.

        Simmons & Company, in arriving at its opinion, reviewed and analyzed:

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        In addition, Simmons & Company had multiple discussions with the managements of Plains and Pacific concerning the business, operations, assets, financial condition and prospects of Plains and Pacific and undertook such other studies, analyses and investigations as Simmons & Company deemed appropriate.

        Simmons & Company, in arriving at its opinion, assumed and relied upon the accuracy and completeness of the financial and other information used by it without assuming any responsibility for independent verification of such information and further relied upon the assurance of the management of Plains that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of Plains, Pacific and the combined company, upon advice of the management of Plains, Simmons & Company assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Plains as to the future financial performance of Plains, Pacific and the combined company and that each will perform substantially in accordance with such projections. In addition, upon advice of the management of Plains, Simmons & Company also assumed that the amounts and timing of the Expected Synergies were reasonable and that the Expected Synergies will be realized substantially in accordance with such estimates. On the advice of management of Plains, Simmons & Company assumed that, as a result of the merger and the related transactions, no income, gain or loss is expected to be recognized for Federal income tax purposes by Plains common unitholders, other than gain resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code. Furthermore, on advice of the management of Plains, any tax consequences to the Plains common unitholders associated with Section 752 of the Code were assumed to be immaterial. In arriving at its opinion, Simmons & Company did not conduct a physical inspection of the properties and facilities of Plains or Pacific and did not make or obtain any evaluations or appraisals of the assets or liabilities of either partnership. Simmons & Company's opinion necessarily was based upon market, economic and other conditions as they existed on, and could be evaluated as of, June 11, 2006.

        The analyses performed by Simmons & Company are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by the analyses. The analyses were prepared solely as part of Simmons & Company's analysis of the fairness, from a financial point of view, to Plains and the Plains common unitholders (excluding the Plains common unitholders who hold a direct or indirect interest in Plains' general partner) of the aggregate consideration to be paid by Plains in the proposed merger and related transactions.

        Simmons & Company's opinion and financial analyses were only one of the many factors considered by Plains and the Plains board in their evaluation of the merger and the related transactions and should not be viewed as determinative of the views of Plains' management or the Plains board with respect to the merger and the related transactions and the aggregate consideration.

        The following is a summary of certain of the financial analyses used by Simmons & Company in connection with providing its written opinion to the Plains board on June 11, 2006. Some of the summaries of the financial analyses include information presented in tabular format. To fully understand the financial analyses, the tables should be read together with the text of each summary. Considering the data in the tables without considering the narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a

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misleading or incomplete view of the financial analyses. For purposes of this summary of Simmons & Company's analyses, the term "implied aggregate equity consideration" refers to the estimated value of the aggregate equity consideration of $1,729 million to be paid by Plains in the merger, consisting of:

        Discounted Cash Flow Analysis.    Simmons & Company performed a discounted cash flow analysis of the projected unlevered free cash flows of Pacific for the calendar years 2006 through 2015. Simmons & Company assumed discount rates of 9.0% and 12.5% and calculated terminal values using a range of multiples of projected EBITDA from 8.0x to 12.0x. The discount rates reflect an estimate of the weighted average cost of capital.

        The projections underlying the discounted cash flow analysis were provided to Simmons & Company by Plains' management. In performing the discounted cash flow analysis, Simmons & Company considered a range of cases with respect to the operating and financial projections in which, among other things, the Expected Synergies realized and the number of growth projects completed were varied. Simmons & Company did not include any estimated annual acquisitions in performing the discounted cash flow analysis. This analysis indicated the implied aggregate equity reference range for Pacific below, with the implied aggregate equity consideration payable by Plains in the merger and the related transactions within the range.

Implied Aggregate Equity Reference
Range for Pacific

  Implied Aggregate Equity Consideration Payable in
the Merger and Related Transactions

$1,392 million - $2,059 million   $1,729 million

        Comparable MLP Analysis.    Simmons & Company reviewed and compared certain financial information relating to Pacific to corresponding financial information, ratios and public market multiples for 13 publicly traded energy midstream master limited partnerships (MLPs) including:

  Boardwalk Pipeline Partners, L.P.     Magellan Midstream Partners, L.P.
  Buckeye Partners L.P.     ONEOK Partners, L.P.
  Enbridge Energy Partners, L.P.     Plains All American Pipeline, L.P.
  Energy Transfer Partners, L.P.     Sunoco Logistics Partners L.P.
  Enterprise Products Partners, L.P.     TEPPCO Partners, L.P.
  Holly Energy Partners, L.P.     Valero L.P.
  Kinder Morgan Energy Partners, L.P.        

        The partnerships listed above (the "Selected Partnerships"), were chosen because they are publicly traded MLPs with operations that for purposes of analysis may be considered similar to Pacific. Simmons & Company calculated various multiples and ratios for the Selected Partnerships and used the multiples and ratios as reference points to develop an indicative valuation for Pacific. All multiples were based on closing market prices on June 8, 2006 and balance sheets as of March 31, 2006. Estimated financial data for the Selected Partnerships were based on publicly available research analysts' estimates. Simmons & Company reviewed multiples and ratios for the Selected Partnerships based on estimates of EBITDA; distributable cash flow (defined as EBITDA less interest expense and maintenance capital expenditures); unlevered distributable cash flow (defined as EBITDA less maintenance capital expenditures); and distribution yield. In calculating the general partner equity value for each of the Selected Partnerships, Simmons & Company utilized two different approaches. The first approach was to value the cash flows that the general partner was currently receiving based

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on the distribution yield the limited partner units were currently receiving. The second approach divided the cash flows that the general partner was currently receiving (based on the latest quarterly distribution annualized) by the current yield on the equity of each partnership's corresponding general partner if it is publicly traded. For those Selected Partnerships that do not have publicly traded general partners, Simmons & Company applied the median yield on the equity of those that are publicly traded.

        This analysis indicated the implied aggregate equity reference range for Pacific below, with the implied aggregate equity consideration payable by Plains in the merger and the related transactions within the range.

Implied Aggregate Equity Reference
Range for Pacific

  Implied Aggregate Equity Consideration Payable in
the Merger and Related Transactions

$1,324 million - $1,785 million   $1,729 million

        Comparable MLP Merger Analysis.    Simmons & Company analyzed certain information relating to the following three business combination transactions involving publicly traded MLPs in the energy industry:

Acquiror
  Target
  Valero L.P.     Kaneb Pipe Line Partners, L.P. and Kaneb Services LLC
  Enterprise Products Partners, L.P.     GulfTerra Energy Partners, L.P.
  Kinder Morgan Energy Partners, L.P.     Santa Fe Pacific Pipeline Partners, L.P.

        Among other things, Simmons & Company analyzed the equity purchase price for the transactions as a multiple of latest twelve months (LTM) net income and LTM distributable cash flow. Additionally, Simmons & Company analyzed the total purchase price in each comparable transaction as a multiple of LTM EBITDA and LTM earnings before interest and taxes, which is referred to as EBIT. Simmons & Company used the range of multiples as reference points to derive an indicative valuation range for Pacific. Simmons & Company examined the comparable MLP mergers both excluding expected synergies and including announced expected synergies. This analysis indicated the implied aggregate equity reference range for Pacific below, with the implied aggregate equity consideration payable by Plains in the merger and the related transactions within the range.

Implied Aggregate Equity Reference Range
for Pacific

  Implied Aggregate Equity Consideration Payable in
the Merger and Related Transactions

$1,564 million - $1,883 million   $1,729 million

        Premium Paid Analysis.    Simmons & Company analyzed the premium implied by the 0.77 exchange ratio in the merger and compared that to the premiums paid in the comparable MLP mergers. Simmons & Company calculated the following implied aggregate equity reference range for Pacific using the historical premiums paid in the comparable MLP mergers for the limited partners' interests and calculating the value for Pacific's general partner as the cash flows that it is currently receiving (based on the latest quarterly distribution annualized) divided by the median yield on the equity of the publicly traded general partners of MLPs. This analysis indicated the implied aggregate equity reference range for Pacific below, with the implied aggregate equity consideration payable by Plains in the merger and the related transactions within the range.

Implied Aggregate Equity Reference Range
for Pacific

  Implied Aggregate Equity Consideration Payable in
the Merger and Related Transactions

$1,335 million - $1,782 million   $1,729 million

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        Comparable Transactions Analysis.    Simmons & Company analyzed certain information relating to selected transactions in the midstream/downstream transportation logistics industry since 2003 (collectively, "Selected Transactions"). Specifically, Simmons & Company calculated, when available, the LTM and runrate EBITDA multiples implied by the aggregate purchase price of the Selected Transactions and used these multiples as reference points to develop an indicative valuation range for Pacific. Simmons & Company excluded the Expected Synergies from the comparable transactions analysis. This analysis indicated the implied aggregate equity reference range for Pacific below, with the implied aggregate equity consideration payable by Plains in the merger and the related transactions above the range.

Implied Aggregate Equity Reference Range
for Pacific

  Implied Aggregate Equity Consideration Payable in
the Merger and Related Transactions

$1,062 million - $1,556 million   $1,729 million

        Contribution Analysis.    Simmons & Company reviewed certain historical and estimated future financial information, including, among other things, EBITDA and distributable cash flow for Plains and Pacific based on financial data provided by Plains' management for the estimated calendar years 2007 through 2010. Simmons & Company performed the analysis both including and not including the Expected Synergies. Based on these projections, Simmons & Company compared the relative contribution of each partnership to the whole and the implied equity value based on the percentage contribution of Plains and Pacific. The relative contributions of Plains and Pacific resulted in the implied aggregate equity reference range for Pacific below, with the implied aggregate equity consideration payable by Plains in the merger and the related transactions within the range.

Implied Aggregate Equity Reference Range for Pacific
  Implied Aggregate Equity Consideration Payable in the
Merger and Related Transactions

$1,534 million - $1,948 million   $1,729 million

        Pro Forma Accretion/Dilution Analysis.    Simmons & Company analyzed the pro forma impact of the merger and the related transactions on, among other things, Plains' projected distributable cash flow per limited partnership unit for the calendar years 2007 through 2012. Using financial projections provided by Plains' management, Simmons & Company compared the distributable cash flow per limited partnership unit of Plains, on a stand-alone basis, to the distributable cash flow per limited partnership unit of Plains pro forma for the merger and the related transactions. Simmons & Company considered that the amounts that would otherwise be distributed to Plains' general partner pursuant to the incentive distribution rights of Plains will be reduced by $65 million over five four-quarter periods pursuant to the merger and related transactions. Simmons & Company performed this analysis using two different sets of projections. The principal, but not only, difference between the two different sets of projections was inclusion of estimated annual acquisitions completed beginning in 2007. The estimated acquisitions were assumed to be consummated at an average EBITDA multiple of 8.2x. In addition, Simmons & Company performed pro forma sensitivity analyses on the acquisition projection case by varying several growth, financing and performance assumptions for the calendar years 2007, 2010 and 2012. Based on such analysis, and such projections provided by the management of Plains, the merger and the related transactions would be dilutive to distributable cash flow per limited partnership unit for Plains common unitholders for the calendar year 2007 under both the no acquisition projection case and each variation of the acquisition projection case as adjusted for the different assumptions, and would be accretive to distributable cash flow per limited partnership unit for Plains common unitholders for the calendar years 2008 through 2012 under both the no acquisition projection case and the acquisition projection case and for the calendar years 2010 and 2012 for each variation of the acquisition projection case as adjusted for the different assumptions.

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        Invested Capital/EBITDA and Unlevered Distributable Cash Flow Analysis.    Simmons & Company analyzed the projected ratios of total invested capital to Pacific's projected EBITDA and projected unlevered distributable cash flow for the calendar years 2007 through 2012. Simmons & Company defined total invested capital as the aggregate transaction value paid in the merger and the related transactions plus estimated cumulative capital expenditures for each of the analyzed projected years. Simmons & Company also calculated the ratios of total invested capital to projected EBITDA and projected unlevered distributable cash flow for calendar year 2007 for a group of comparable MLPs using publicly available research analysts' estimates. Simmons & Company compared the implied range of ratios from the comparable MLPs to the ratios implied by Pacific's projected results. The implied ratios for total invested capital to both Pacific's projected EBITDA and unlevered distributable cash flow, both including all the Expected Synergies and including only half the Expected Synergies, for the calendar year 2007 and the implied ratios for total invested capital to Pacific's projected EBITDA, including only half of the Expected Synergies, for the calendar years 2008 though 2010 were above the range implied by the comparable MLPs. The implied ratios for total invested capital to both Pacific's projected EBITDA and unlevered distributable cash flow, including all the Expected Synergies, for the calendar years 2008 through 2012, for total invested capital to Pacific's projected unlevered distributable cash flow, including only half the Expected Synergies, for the calendar years 2008 through 2012 and for total invested capital to Pacific's projected EBITDA, including only half the Expected Synergies, for the calendar years 2011 and 2012 were within the range implied by the comparable MLPs.

        Exchange Ratio Analysis.    Simmons & Company reviewed the daily ratio of the closing price of Pacific common units to the closing price of Plains common units for the three-year period ended June 8, 2006. Simmons & Company calculated the average of this ratio for ten-day, 30-day, 90-day, one-year, two-year and three-year periods, with the average ratio ranging from 0.665 to 0.778. The exchange ratio of 0.77 Plains common units per Pacific common unit offered as consideration in the merger was within this range.

        Simmons & Company is a specialized, energy-related investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. The Plains board selected Simmons & Company because of its expertise, reputation and familiarity with Plains and the oil and gas industry in general and because its investment banking professionals have substantial experience in transactions comparable to the merger and the related transactions.

        Pursuant to the terms of the engagement letter dated May 10, 2006, Plains has paid Simmons & Company $900,000 for acting as Plains' financial advisor in connection with the merger, including rendering its fairness opinion on June 11, 2006. Further, Plains has agreed to pay Simmons & Company an additional fee of $4,100,000 upon consummation of the merger. Whether or not the merger occurs, Plains will also reimburse Simmons & Company's reasonable expenses, including legal fees, incurred in connection with its engagement and indemnify Simmons & Company against liabilities arising out of Simmons & Company's services to Plains or, if indemnification is unavailable, contribute to the liabilities.

        Simmons & Company has performed various investment banking services for Plains in the past and has received and expects to continue to receive customary fees for such services. In the ordinary course of business, Simmons & Company may actively trade in the debt and equity securities of Plains and Pacific for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.

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Interests of Certain Persons in the Merger

        In considering the recommendations of the Pacific board and the Plains board with respect to the merger, unitholders of both partnerships should be aware that some of the executive officers and directors of the general partners of Pacific and Plains have interests in the transaction that differ from, or are in addition to, the interests of common unitholders generally. The Pacific board, the Pacific conflicts committee and the Plains board were aware of these interests and considered them in approving the merger agreement and the related transactions. All dollar amounts set forth below are gross amounts and are not reduced for applicable tax withholding.

        Ownership of Pacific Common Units.    The directors and executive officers of Pacific and their affiliates beneficially owned, as of the record date for the Pacific special meeting, approximately        % of the Pacific common units then outstanding (excluding common units held by LB Pacific). They will be entitled to receive the same consideration in the merger as all other Pacific common unitholders (other than LB Pacific).

        Severance Arrangements.    Messrs. Toole, Wright, Tywoniuk, Wood and Zollinger are parties to employment agreements with Pacific. Under these employment agreements, if the employee is terminated without cause following a change of control, or if he resigns for "good reason," as defined in the agreement, following a change of control, he will, among other things, be entitled to a one-time severance payment as well as continuation of welfare plan benefits for a specified period. The severance amount payable to Messrs. Toole and Wright would be equal to two times their current base salary plus two times their target cash bonus for the year in which termination occurs. The severance amount payable to Messrs. Tywoniuk, Wood and Zollinger would be equal to one times their current base salary plus one times their target cash bonus for the year in which termination occurs. Welfare plan benefits would be continued for up to two years for Messrs. Toole and Wright, and up to one year for Messrs. Tywoniuk, Wood and Zollinger. Messrs. Wright, Tywoniuk, Wood and Zollinger would also be entitled to receive executive outplacement services at Pacific's expense for a specified period (six months for Mr. Wright, three months for Messrs. Tywoniuk, Wood and Zollinger). "Good reason" for any resignation exists if the employee suffers a demotion in rank, title, responsibility or authority; an assignment of duties inconsistent with the employee's prior duties resulting in a diminution in position, authority, duties or responsibilities; the employer's failure to comply with the employment agreement; or the employer's requiring the employee to relocate in order to maintain employment.

        Pursuant to severance arrangements agreed with Plains, Messrs. Wylie, Diefenbach and Boarts and Ms. Lobel will be entitled to a one-time severance payment and continuation of welfare plan benefits if they are terminated without cause, or resign for good reason, within twelve months of the consummation of the merger. The severance amount payable to Mr. Wylie would be equal to two times his current base salary plus two times his target cash bonus for the year in which termination occurs. The severance amount payable to Messrs. Diefenbach and Boarts would be equal to one times their current base salary plus one times their target cash bonus for the year in which termination occurs. The severance amount payable to Ms. Lobel would be equal to one-half times her current base salary plus one-half times her target cash bonus for the year in which termination occurs, which amount increases to one times if her termination occurs after her one-year anniversary of employment in February 2007 or later. "Good reason" for any resignation exists if the employee suffers a material adverse change in responsibilities or title, a reduction in salary, or a change of more than 25 miles in primary work location.

        The severance amounts that would be payable under these arrangements to each of Pacific's executive officers if the employment of the executive officers is terminated after the consummation of the merger are listed below, including severance, estimated costs of welfare benefits and estimated costs

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of outplacement services if applicable. Amounts for Ms. Lobel could increase as described above depending on the date of any termination of her employment.

Name

  Severance Payment
Irvin Toole, Jr.   $ 1,114,200
Forrest E. Wylie     947,950
David E. Wright     700,200
Gerald A. Tywoniuk     315,800
Lynn T. Wood     278,100
Arthur G. Diefenbach     223,250
Gary L. Zollinger     233,250
Lyle B. Boarts     185,850
Marilyn A. Lobel     113,550

        Pacific's Long Term Incentive Plan.    Pacific's general partner has adopted a long-term incentive plan for employees and directors of the general partner and employees of its affiliates who perform services for Pacific. The consummation of the merger will cause an acceleration of the vesting periods of, and lapse of restrictions on, Pacific restricted common unit awards (including those issued to directors and executive officers of Pacific's general partner) under the long-term incentive plan. Information with respect to restricted common units held by directors and executive officers of Pacific's general partner is set forth below.

Name

  Number of
Restricted Units

  Dollar Value(1)
David L. Lemmon   2,000   $ 64,400
John C. Linehan   2,000     64,400
Douglas L. Polson   2,000     64,400
Jim E. Shamas   2,000     64,400
William L. Thacker   2,000     64,400
Irvin Toole, Jr.   7,757     249,775
Forrest E. Wylie   5,253     169,147
David E. Wright   3,527     113,569
Gerald A. Tywoniuk   2,807     90,385
Lynn T. Wood   2,200     70,840
Arthur G. Diefenbach   2,020     65,044
Gary L. Zollinger   2,010     64,722
Lyle B. Boarts   1,030     33,166
Marilyn A. Lobel   820     26,404

(1)
Based on the closing price of Pacific's common units on June 28, 2006.

        LB Pacific's Option Plan.    LB Pacific has adopted an option plan for officers, directors, employees, advisors, and consultants of Pacific Energy Management and their affiliates. Under the plan, participants may be granted options to acquire partnership interests in LB Pacific. Pacific is not obligated to pay any amounts to LB Pacific for the benefits granted or paid to executives and key employees under the plan.

        The estimated value on exercise of LB Pacific options held by directors and executive officers of Pacific's general partner are set forth below. The estimated value of options on exercise is based on a number of assumptions, including estimates of fees and expenses that LB Pacific expects to incur prior to and at closing, as well as LB Pacific's balance sheet at closing. The amounts below assume that all options under the plan have been granted, and that the persons below do not receive any options or

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any other benefits in addition to the options they currently own. Therefore, the actual amounts realized by the named individuals may change.

Name

  Estimated Value of Options on
Exercise (1)

Irvin Toole, Jr.   $ 2,457,600
Forrest E. Wylie     8,356,000
David E. Wright     2,949,200
Gerald A. Tywoniuk     2,457,600
Lynn T. Wood     983,100
Arthur G. Diefenbach     1,474,600
Gary L. Zollinger     1,474,600
Lyle B. Boarts     983,100
Marilyn A. Lobel     614,100

(1)
Represents the excess of the estimated liquidation value of LB Pacific for the option holders' interest over the exercise price of the options held by the individual.

Indirect Ownership Interests in LB Pacific

        Christopher Manning, the chairman of the Pacific board, and Joshua Collins, a member of the Pacific board, hold ownership interests in Lehman Brothers Merchant Banking Associates III, L.P. ("LBMB"), which is the general partner or manager of each of the entities that beneficially own an aggregate 59% interest in LB Pacific. Additionally, Douglas Polson, a member of the Pacific board, holds an ownership interest in Lehman Sidecar I LLC ("Sidecar"), which beneficially owns an 8.66% interest in LB Pacific. As a result of this transaction, LBMB and Sidecar will receive a portion of the net cash proceeds from the transaction, which will result in cash payments to Messrs. Manning, Collins and Polson.

Directors' Membership on Board of Directors of LB Pacific

        Christopher Manning, Joshua Collins and Timothy Day, members of the Pacific board, are also members of the board of directors of (and in the case of Messrs. Manning and Collins, are officers of) LB Pacific GP, LLC, the sole general partner of LB Pacific.

Directors' and Officers' Indemnification and Insurance

        The merger agreement requires Plains to maintain, for six years after the effective time of merger, directors' and officers' liability insurance for the benefit of persons who are or were covered by Pacific's existing directors' and officers' liability insurance policies at any time before the effective time of the merger, as described more fully under "The Merger Agreement—Covenants and Other Agreements—Employee Matters."

        Lehman Brothers Inc. acted as financial advisor to the Pacific board in connection with the proposed merger and the transactions related to the merger. Lehman Brothers Inc. delivered an opinion to the Pacific board on June 11, 2006 to the effect that, as of the date of its opinion and based on and subject to various assumptions made, matters considered and limitations described in the opinion, from a financial point of view, the aggregate consideration to be offered to all of the holders of the partnership interests in Pacific in the proposed transaction is fair to such holders. Pacific's general partner is deemed to be an affiliate of Lehman Brothers Inc. through a 59% ownership interest

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in Pacific's general partner held by certain entities controlled by Lehman Brothers Holdings Inc., the parent entity of Lehman Brothers Inc.

        Interests of Plains' General Partner's Executive Officers and Directors

        Ownership of Pacific Common Units.    Mr. Armstrong, the Chairman of the Plains board and Chief Executive Officer of Plains' general partner, owns 5,000 Pacific common units. Kayne Anderson Capital Advisors, L.P. ("KACALP"), an entity affiliated with Mr. Sinnott, a member of the Plains board, manages or controls various accounts that own a total of 1,880,500 Pacific common units. Mr. Sinnott is the President of Kayne Anderson Investment Management, Inc., which is the general partner of KACALP. In addition, executive officers of Plains' general partner (excluding Mr. Armstrong) own a total of 9,500 Pacific common units.

        Ownership of Plains' General Partner; Conflicts of Interest.    Certain of Plains' directors and executive officers own an indirect interest in Plains' general partner, which owns both the 2% general partner interest and the incentive distribution rights of Plains.

        Pursuant to Plains' partnership agreement, Plains' general partner is entitled to receive quarterly incentive distributions if the amount that Plains distributes with respect to any quarter exceeds certain levels specified in its partnership agreement. Under the quarterly incentive distribution provisions, Plains' general partner is generally entitled, without duplication, to 15% of the amounts distributed by Plains in excess of $0.450 ($1.80 annualized) per unit, 25% of the amounts distributed by Plains in excess of $0.495 ($1.98 annualized) per unit and 50% of the amounts distributed by Plains in excess of $0.675 ($2.70 annualized) per unit.

        The following table illustrates the allocation of aggregate distributions at different per-unit distribution levels and based upon the assumptions indicated. Incentive distributions made to Plains' general partner are affected by both the gross amount per unit that Plains distributes with respect to each outstanding unit and the aggregate number of units that are outstanding.

Annual Distribution
Per Unit

  Distribution to
Unitholders

  Distribution
to GP(1)

  Total
Distribution

  GP Percentage
of Total
Distribution

 
 
  (in thousands)

 
$2.83 (current Plains distribution level)(2)   $ 219,325   $ 33,984   $ 253,309   13.4 %
$3.20 (anticipated post-merger distribution level)(3)   $ 320,000   $ 80,850   $ 400,850   20.2 %
$3.60(3)   $ 360,000   $ 120,850   $ 480,850   25.1 %
$4.00(3)   $ 400,000   $ 160,850   $ 560,850   28.7 %

(1)
Includes distributions attributable to the 2% general partner interest and the incentive distribution rights. Does not give effect to $65 million reduction in incentive distribution payments over five four-quarter periods following the merger.

(2)
Assumes 77.5 million units outstanding. Actual number of units outstanding as of June 30, 2006 was 77,273,248.

(3)
Assumes 100 million units outstanding following the merger.

        As illustrated above, by operation of Plains' partnership agreement, the owners of Plains' general partner have interests that differ materially from owners of Plains' limited partner interests. In the context of certain transactions, including the merger (which involves the issuance of a significant number of Plains common units), a potential conflict exists between the interests of the owners of Plains' general partner and the interests of Plains' common unitholders. Even giving effect to the reduction in incentive distribution payments otherwise payable to Plains' general partner, the merger is expected to be accretive to Plains' general partner on a distributable cash flow basis beginning in 2007. Based on Plains' projected results, the effect of the merger is not expected to be accretive on a distributable cash flow per unit basis to Plains' existing limited partners until 2008.

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        The directors and executive officers of Plains also have interests that are aligned with the interests of Plains' common unitholders. As of the record date, Plains' directors and executive officers and their affiliates owned in the aggregate approximately        % of Plains' outstanding common units, and following the merger are expected to own approximately     % of the combined company's outstanding common units.

        The following table sets forth the effective ownership of Plains AAP, L.P. (after giving effect to proportionate ownership of Plains All American GP LLC, its 1% general partner).

Name and Address of Owner

  Percentage
Ownership of
Plains AAP

Paul G. Allen(1)   54.3%
  505 Fifth Avenue S, Suite 900
Seattle, WA 98104
   

Vulcan Energy Corporation(2)

 

54.3%
  c/o Plains All American GP LLC
333 Clay Street, Suite 1600
Houston, TX 77002
   

KAFU Holdings, L.P.(3)

 

20.3%
  1800 Avenue of the Stars, 2nd Floor
Los Angeles, CA 90067
   

E-Holdings III, L.P.(4)

 

9.0%
  1100 Louisiana, Suite 3150
Houston, TX 77002
   

E-Holdings V, L.P.(4)

 

2.1%
  1100 Louisiana, Suite 3150
Houston, TX 77002
   

PAA Management, L.P.(5)

 

4.9%
  333 Clay Street, Suite 1600
Houston, TX 77002
   

Wachovia Investors, Inc.

 

4.2%
  301 South College Street, 12th Floor
Charlotte, NC 28288
   

Mark E. Strome

 

2.6%
  100 Wilshire Blvd., Suite 1500
Santa Monica, CA 90401
   

Strome MLP Fund, L.P.

 

1.3%
  100 Wilshire Blvd., Suite 1500
Santa Monica, CA 90401
   

Lynx Holdings I, LLC

 

1.2%
  15209 Westheimer, Suite 110
Houston, TX 77082
   

(1)
Mr. Allen owns approximately 88.38% of the outstanding shares of common stock of Vulcan Energy Corporation. A subsidiary of Vulcan Energy Corporation owns 54.321% of the equity of our general partner. Mr. Allen disclaims any deemed beneficial ownership, beyond his pecuniary

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(2)
Mr. Capobianco disclaims any deemed beneficial ownership of the interests held by Vulcan Energy Corporation and its affiliates beyond his pecuniary interest therein, if any.

(3)
Mr. Sinnott disclaims any deemed beneficial ownership of the interests owned by KAFU Holdings, L.P. other than through his 4.5% limited partner interest in KAFU Holdings, L.P.

(4)
Mr. Petersen disclaims any deemed beneficial ownership of the interests owned by E-Holdings III, L.P. and E-Holdings V, L.P. beyond his pecuniary interest therein.

(5)
PAA Management, L.P. is owned entirely by certain members of senior management. Other than Mr. Armstrong, no directors of Plains' general partner own any interest in PAA Management, L.P. Directors and executive officers as a group own approximately 95% of PAA Management, L.P. Mr. Armstrong disclaims any beneficial ownership of the general partner interest owned by Plains AAP, L.P., other than through his ownership interest in PAA Management, L.P.

        In addition to the ownership interests described above, certain of the owners of Plains' general partner have the right to designate a director to the Plains board. Messrs. Capobianco, Petersen and Sinnott have been so designated. These directors have interests in the merger and related transactions that differ from the interests of Plains common unitholders generally.

No Appraisal Rights

        Delaware law does not provide for appraisal rights on a merger involving a Delaware limited partnership. Pursuant to §17-212 of the Delaware Revised Uniform Limited Partnership Act, however, a partnership agreement or an agreement of merger or consolidation may provide that contractual appraisal rights with respect to a partnership interest or another interest in a limited partnership shall be available for any class or group of partners or partnership interests in connection with any amendment of a partnership agreement, any merger or consolidation in which the limited partnership is a constituent party to the merger or consolidation, any conversion of the limited partnership to another business form, any transfer to or domestication in any jurisdiction by the limited partnership, or the sale of all or substantially all of the limited partnership's assets. However, neither Plains unitholders nor Pacific unitholders have contractual appraisal rights under their respective partnership agreements or the merger agreement.

Regulatory Matters

        Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules promulgated thereunder by the FTC, the merger cannot be completed until notifications have been given and certain information has been furnished to the FTC and the Antitrust Division of the DOJ and specified waiting period requirements have been satisfied. Plains and Pacific filed notification and report forms under the Hart-Scott-Rodino Act with the FTC and the DOJ on June 30, 2006. Plains and Pacific have made or are in the process of completing required filings with Canadian regulatory authorities, and with the Public Utilities Commission of the State of California and the Public Service Commission of the State of Wyoming, the approval of which are conditions to the merger (and in the case of Wyoming, any protest periods subsequent to such approval shall have lapsed without protest or, if a protest has been filed, such protest shall have been resolved to the reasonable satisfaction of the parties). Plains or Pacific may receive requests for information concerning the proposed merger and related transactions from the FTC or individual states.

        At any time before or after completion of the merger, the DOJ, the FTC, or any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the merger, to rescind the merger or to seek divestiture of

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particular assets of Plains or Pacific. Private parties also may seek to take legal action under the antitrust laws under certain circumstances. In addition, non-United States governmental and regulatory authorities may seek to take action under applicable antitrust laws. A challenge to the merger on antitrust grounds may be made and, if such a challenge is made, it is possible that Plains and Pacific will not prevail.

Listing of Common Units to be Issued in the Merger

        Plains expects to obtain approval to list on the NYSE the common units to be issued pursuant to the merger agreement, which approval is a condition to closing the merger.

Accounting Treatment

        Plains will account for the merger using the purchase method of accounting. Under the purchase method of accounting, the aggregate consideration that Plains pays for Pacific will be allocated to Pacific's assets and liabilities based on their fair values, with any excess being treated as goodwill. Plains currently expects to record approximately $800 million of goodwill upon completion of the merger, but that estimate is subject to change.

Pending Litigation

        On June 15, 2006, a lawsuit was filed in the Superior Court of California, County of Los Angeles, entitled Kosseff v. Pacific Energy, et al., case no. BC 3544016. The plaintiff alleges that he is a unitholder of Pacific, and he seeks to represent a class comprising all of Pacific's unitholders. The complaint names as defendants Pacific and certain of the officers and directors of Pacific's general partner, and asserts claims of self-dealing and breach of fiduciary duty in connection with the merger and related transactions. Among other allegations, the plaintiff alleges that (1) the proposed transaction was the product of a flawed process that would result in the sale of Pacific at an unfairly low price, (2) subsequent quarterly financial results for Pacific would have had a material positive impact on Pacific's common unit price had the proposed transaction not been announced, and thus the premium being offered to Pacific's unitholders was manufactured by the defendants based on the timing of the announcement of the proposed transaction, (3) because of various conflicts of interest, the defendants have acted to better their own interests at the expense of Pacific's public unitholders, (4) the defendants favored the proposed transaction in order to secure accelerated vesting of equity compensation under change in control provisions in contracts they have with Pacific, and (5) the defendants were assured that Lehman Brothers Inc. "would rubber-stamp the transaction as fair and, for that reason, Lehman [Brothers Inc.] was hand-picked by the defendants to issue the so-called 'fairness opinion'." The plaintiff seeks injunctive relief against completing the merger or, if the merger is completed, rescission of the merger, other equitable relief, and recovery of the plaintiff's costs and attorneys' fees. Pacific believes that the lawsuit is without merit and intends to defend against it vigorously. There can be no assurance that additional claims may not be made or filed, the substance of which may be similar to the allegations described above or that otherwise might arise from, or in connection with, the merger agreement and the transactions it contemplates.

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THE MERGER AGREEMENT

        The following is a summary of the material terms of the merger agreement and the related transactions. This summary is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this joint proxy statement/prospectus as Annex A and is incorporated into this document by reference. You should read the merger agreement because it, and not this document, is the legal document that governs the terms of the merger. The merger agreement contains representations and warranties Pacific and Plains made to each other. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules that both Pacific and Plains have exchanged in connection with signing the merger agreement. The disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the attached merger agreement. Accordingly, you should keep in mind that the representations and warranties are modified in important part by the underlying disclosure schedules. The disclosure schedules contain information that has been included in Pacific's and Plains' general prior public disclosures, as well as additional information, some of which is non-public. Pacific and Plains do not believe the disclosure schedules contain information that the securities laws require to be publicly disclosed except as discussed in this joint proxy statement/prospectus. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, and this information may or may not be fully reflected in the companies' public disclosures.

Transactions Related to the Merger

        On June 11, 2006, in connection with the execution of the merger agreement, Plains entered into a purchase agreement with LB Pacific, pursuant to which Plains has agreed, subject to the terms and conditions set forth in the purchase agreement, to purchase from LB Pacific (i) all of the issued and outstanding limited partner interest in Pacific Energy GP, LP, a Delaware limited partnership and the general partner of Pacific, (ii) the sole member interest in Pacific Energy Management LLC, a Delaware limited liability company and the general partner of Pacific Energy GP, LP, (iii) 2,616,250 Pacific common units and (iv) 7,848,750 Pacific subordinated units for an aggregate purchase price of $700 million in cash. This purchase and sale will occur immediately prior to the consummation of the merger.

        Each of Plains and LB Pacific made customary representations and warranties in the purchase agreement. The purchase agreement may be terminated by LB Pacific or Plains upon or after termination of the merger agreement, and is subject to customary closing conditions, including satisfaction of all conditions specified in the merger agreement.

        A copy of the purchase agreement is filed as Exhibit 2.2 to the registration statement of which this joint proxy statement/prospectus is a part.

Structure of the Merger

        At the effective time of the merger, Pacific will merge with and into Plains, and each of the outstanding common units of Pacific, other than those common units purchased by Plains prior to the merger, will be converted into the right to receive 0.77 Plains common units. Plains will be the surviving limited partnership of the merger.

        Plains' certificate of limited partnership will be the surviving entity's certificate of limited partnership until further amended. Plains' partnership agreement will be the surviving entity's partnership agreement until further amended. Plains' management team and board of directors will continue in their current roles and manage the combined company following the merger.

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When the Merger Becomes Effective

        Pacific and Plains will execute and file a certificate of merger with the Delaware Secretary of State on the third business day after the day on which the last condition to completing the merger is satisfied or waived or at such other time as Plains and Pacific may agree. The merger will become effective at the time and on the date on which the certificate of merger is filed or at such later time and date on which the parties agree and specify in the certificate of merger. This time is referred to as the "effective time of the merger."

Effect of Merger on Outstanding Pacific Units

        At the effective time of the merger, each outstanding Pacific common unit, other than units purchased by Plains from LB Pacific prior to the effective time of the merger, will be converted into the right to receive 0.77 Plains common units. The 2% general partner interest of Pacific, the incentive distribution rights in Pacific and the common and subordinated units purchased by Plains from LB Pacific prior to the effective time of the merger will be cancelled without consideration. Certificates representing Pacific common units will be exchanged for certificates representing Plains common units in accordance with the fixed exchange ratio of 0.77 contained in the merger agreement.

        Prior to the effective time of the merger, vesting of restricted units granted under Pacific's long-term incentive plan will be accelerated in accordance with the terms of the plan.

        If, before the effective time of the merger, the issued and outstanding Plains or Pacific common units are changed into a different number of units as a result of any unit split, distribution, combination, reorganization or other similar transaction, an appropriate adjustment will be made to the exchange ratio.

        For a description of Plains' and Pacific's common units and a description of the comparative rights of holders of Plains common units and Pacific common units, please read "Comparison of the Rights of Plains and Pacific Common Unitholders" and "Description of Plains' Common Units."

Exchange of Units; Fractional Units

        Exchange Agent.    Plains has appointed American Stock Transfer and Trust Company to act as exchange agent for the issuance of Plains common units and for cash payments for fractional common units of Pacific. At or prior to the effective time of the merger, Plains will deposit with the exchange agent, for the benefit of the holders of Pacific's common units, an amount in cash equal to the estimated aggregate cash payment to be made in lieu of fractional common units of Plains, and Plains will authorize the exchange agent to exchange certificates representing Plains common units as described above under "—Effect of Merger on Outstanding Pacific Units." Plains will deposit with the exchange agent additional funds as and when necessary to pay cash in lieu of fractional common units of Plains. Plains will pay all costs and fees of the exchange agent and all expenses associated with the exchange process.

        After the effective time of the merger, there will be no further transfers on the records of Pacific or its transfer agent of certificates representing Pacific common units. If certificates representing Pacific common units are presented to Pacific or its transfer agent for transfer after the effective time of the merger, they will be canceled against delivery of the certificate or certificates for Plains common units and any cash payments for fractional common units and unpaid distributions.

        Exchange of Units.    If you own Pacific common units of record as of the effective time of the merger, the exchange agent will mail to you a transmittal letter and instructions explaining how to surrender your Pacific common units to the exchange agent after the effective time of the merger. Pacific common unit certificates should not be returned with the enclosed proxy card.

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        Pacific common unitholders who deliver a properly completed and signed transmittal letter and any other documents required by the instructions to the transmittal letter to the exchange agent, together with their Pacific common unit certificates, will receive:

        You should surrender your Pacific common unit certificates for exchange only after the effective time of the merger. Until you deliver a properly completed and signed transmittal letter and any other documents required by the instructions to the transmittal letter to the exchange agent, together with your Pacific common unit certificates, the distributions declared by Plains with a record date after the effective time of the merger will accrue, but will not be paid, on Plains common units that you are entitled to receive as a result of the merger. No interest will be paid or accrue on:

        The exchange agent will deliver to Plains any Plains common units to be issued in the merger, cash in lieu of fractional units to be paid in connection with the merger and any distributions paid on Plains common units to be issued in the merger that are not claimed by former Pacific unitholders within twelve months after the effective time of the merger. Thereafter, Plains will act as the exchange agent and former Pacific unitholders may look only to Plains for their Plains common units, cash in lieu of fractional units and unpaid distributions. None of Plains, Pacific, the exchange agent or any other person will be liable to any former Pacific unitholder for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. To the extent permitted by applicable law, any amount that would escheat or become the property of any governmental entity shall, immediately prior thereto, become the property of Plains free and clear of all claims or interests of any person previously entitled thereto.

        If any certificates representing Plains common units are to be issued in a name other than that in which the certificates representing Pacific common units exchanged for such units are registered, the person requesting the exchange must (1) pay any transfer or other taxes required by reason of the issuance of certificates representing Plains common units in a name other than that of the registered holder of the surrendered Pacific common units or (2) establish to the satisfaction of Plains or the exchange agent that such tax has been paid or is not applicable.

        The instructions for effecting the surrender of Pacific common unit certificates will set forth procedures that must be taken by the holder of any Pacific common unit certificate that has been lost, destroyed or stolen. If a Pacific unit certificate has been lost, destroyed or stolen, the exchange agent will issue certificates representing the Plains common units properly issuable in accordance with the merger agreement and any cash payment in lieu of fractional common units only upon receipt of, along with the letter of transmittal, a duly executed lost certificate affidavit, including an agreement to

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indemnify Plains, signed exactly as the name or names of the registered holder or holders appeared on the books of Pacific immediately prior to the effective time of the merger, together with a customary bond and such other documents as Plains may reasonably require.

        Pacific common unit certificates surrendered for exchange by certain affiliates of Pacific will not be exchanged until Plains has received a written agreement of the kind described below under "—Covenants and Other Agreements—Affiliate Agreements."

Conditions to the Merger

        Conditions to Each Party's Obligation to Effect the Merger.    The obligations of Plains and Pacific to complete the merger are subject to the following conditions:

        Plains' obligation to complete the merger is further subject to the following conditions:

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        Pacific's obligation to complete the merger is further subject to the following conditions:

        Waiver of Conditions.    Either Plains or Pacific may choose to complete the merger even though any condition to its obligation has not been satisfied if the necessary unitholder approvals have been obtained and the law allows it to do so.

Representations and Warranties

        The merger agreement contains reciprocal representations and warranties by each of the parties to the merger agreement, many of which provide that the representation and warranty does not extend to matters where the failure of the representation and warranty to be accurate would not result in a material adverse effect on the party making the representation and warranty. These representations and warranties concern, among other things:

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        For purposes of the merger agreement, "material adverse effect," when used with respect to any party, means any change, effect, event or occurrence with respect to the condition (financial or otherwise), properties, assets, liabilities, obligations (whether absolute, accrued, conditional or otherwise), businesses, operations or results of operations of the such party's consolidated group, that is, or would reasonably be expected to be, material and adverse to such party's consolidated group or that materially and adversely affects the ability of such party to consummate the merger and sale transactions; however, a material adverse effect does not include any change, effect, event or occurrence with respect to the condition (financial or otherwise), properties, assets, liabilities, obligations (whether absolute, accrued, conditional or otherwise), businesses, operations or results of operations of any member of such party's consolidated group directly or indirectly arising out of or attributable to:

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Covenants and Other Agreements

        Affirmative Covenants.    Prior to the merger, except as permitted by the negative covenants described below, each of Plains and Pacific has agreed with respect to itself and its consolidated group:

        Negative Covenants.    Prior to the merger and unless the other party consents in writing (which consent may not be unreasonably withheld, delayed or conditioned), and subject to specified exceptions, each of Plains and Pacific has agreed (and has agreed to cause their respective general partners and consolidated group):

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        Other Agreements Relating to the Period Before the Effective Time.    The merger agreement contains additional agreements between Plains and Pacific relating to, among other things:

Employee Matters

        The merger agreement requires Plains to provide employee benefits to employees of Pacific who become Plains employees at the effective time of the merger that are substantially comparable in the aggregate to the employee benefits provided to similarly situated employees of Plains, with full service credit under Plains' benefit plans for prior service with Pacific to the extent such service was recognized under a comparable Pacific plan. At the closing of the merger, Plains is required to deliver documents

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providing for the assumption by Plains of each employment agreement or severance plan or arrangement of Pacific. The merger agreement also requires Plains to pay specified severance benefits to employees of Pacific who are terminated within twelve months following the effective time of the merger.

        The merger agreement provides that Pacific will pay, before the merger occurs, (a) retention payments to employees not to exceed $1,250,000 in the aggregate; and (b) the pro-rated portion of cash bonuses payable to employees who participate in Pacific's Annual Incentive Plan. Pacific will adjust the terms of all restricted units of Pacific as necessary to provide that the restrictions on such units will lapse as of the effective time of the merger.

        Plains will maintain directors' and officers' liability insurance for six years after the effective time of the merger to cover persons who are or were covered by Pacific's existing directors' and officers' liability insurance policies at any time before the effective time of the merger. The terms of the insurance will be substantially no less advantageous to such persons than the existing insurance with respect to acts or omissions committed prior to the effective time of the merger.

Non-Solicitation

        In the merger agreement, Pacific and its general partner entities have agreed that they and Pacific's subsidiaries will not, directly or indirectly, and will direct and use their reasonable best efforts to cause such parties' representatives not to:

Pacific and its general partner entities also have agreed to immediately cease and cause to be terminated all existing discussions or negotiations with any person conducted before the date of the merger agreement with respect to any takeover proposal. Pacific and its general partner entities also have agreed to enforce, and not terminate or grant any waiver with respect to, existing confidentiality, standstill or similar agreements.

        Notwithstanding those agreements, at any time prior to the Pacific unitholder approval, Pacific and its general partner entities may, in response to a bona fide unsolicited written takeover proposal that is made after the date of the merger agreement and that did not result from a breach of the non-solicitation provisions, furnish information and participate in discussions or negotiations with respect to a takeover proposal if:


        Neither the board of directors nor the conflicts committee of the general partner of Pacific may withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify its recommendation of the merger or sale transactions, recommend, adopt, approve or execute, as applicable (or propose

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publicly to do so), any takeover proposal or any agreement that may lead to a takeover proposal, or fail to reaffirm its recommendation upon request made by Plains, unless:

        Pacific has agreed that it will notify Plains immediately if it receives a takeover proposal or any request for non-public information relating to Pacific or for access to the properties, books or records of Pacific by any person that has made a takeover proposal, and will thereafter keep Plains reasonably and promptly informed of any material changes to the terms of any such takeover proposal or request.

Termination

        Before the effective time of the merger, the merger agreement may be terminated:

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Termination Fees and Expenses

        Pacific will pay Plains a fee of $40 million if:

        Additionally, if Pacific's unitholders vote not to approve and adopt the merger agreement and the merger, Pacific will pay Plains a fee of $10 million. If the negative vote occurs after a competing proposal to acquire Pacific has been made, Pacific will pay Plains an additional fee of $30 million if Pacific consummates another acquisition transaction pursuant to which Pacific is acquired within twelve months of the negative vote.

        Plains will pay Pacific a fee of $40 million if:

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        Additionally, if Plains' unitholders vote not to approve and adopt the merger agreement and the merger, Plains will pay Pacific a fee of $10 million. If the negative vote occurs after a competing proposal to acquire Plains has been made, Plains will pay Pacific an additional fee of $30 million if Plains consummates another acquisition transaction pursuant to which Plains is acquired within twelve months of the negative vote.

Amendment; Extension and Waiver

        Amendment.    The merger agreement may be amended at any time by the action or authorization of each party's (or its general partner's) board of directors or conflicts committee; however, if the merger agreement has been adopted by Pacific's unitholders and Plains' unitholders, then, no amendment shall be made which by law requires further approval by such unitholders without such further approval.

        Extension and Waiver.    At any time prior to the effective time of the merger, each of Pacific and Plains may, to the extent permitted by law,

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THE MERGER PARTIES' BUSINESSES

Pacific's Business

        This section summarizes information from Pacific's Annual Report on Form 10-K for the year ended December 31, 2005 and its other filings incorporated into this joint proxy statement/prospectus by reference. For a more detailed discussion of Pacific's business, please read Pacific's 2005 Annual Report on Form 10-K and its other filings incorporated into this document by reference.

Overview

        Pacific is a publicly traded Delaware limited partnership formed in February 2002. Pacific is engaged principally in the business of gathering, transporting, storing, and distributing crude oil, refined products and other related products. It generates revenue primarily by transporting such commodities on its pipelines, by leasing capacity in its storage tanks, and by providing other terminalling services. Pacific also buys and sells crude oil, activities that are generally complementary to its other crude oil operations. Pacific conducts its business through two business units, the West Coast Business Unit, incorporating activities in California and the Philadelphia, Pennsylvania area, and the Rocky Mountain Business Unit, which includes activities in five Rocky Mountain states and the province of Alberta, Canada.

        Pacific is managed by its general partner, Pacific Energy GP, LP, which is managed by its general partner, Pacific Energy Management LLC, and thus the officers and Board of Directors of Pacific Energy Management LLC manage the business affairs of Pacific Energy GP, LP and Pacific. Pacific's general partner is owned by LB Pacific, which is owned by certain entities controlled by Lehman Brothers Holdings Inc., the parent entity of Lehman Brothers Inc., and First Reserve Corporation. References to Pacific's general partner in this joint proxy statement/prospectus refer to Pacific Energy GP, LP and Pacific Energy Management LLC.

West Coast Business Unit

        Pacific's West Coast Business Unit includes the only common carrier pipelines that deliver crude oil produced in California's San Joaquin Valley and the two primary California outer continental shelf producing fields, Point Arguello and the Santa Ynez Unit, to refineries and terminal facilities in the Los Angeles Basin and in Bakersfield. It also includes a proprietary crude oil gathering and blending operation in the San Joaquin Valley, as well as an oil storage and distribution system servicing the Los Angeles Basin, which Pacific believes strategically positions it to benefit from the projected increase in marine imports of crude oil into this region. Pacific's West Coast Business Unit also includes refined products terminals that serve the San Francisco, California and Philadelphia, Pennsylvania areas.

        Pacific's West Coast Business Unit is comprised of the following assets, all of which it operates and owns 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 throughput capacity of 130,000 barrels per day ("bpd") that transports crude oil produced in the San Joaquin Valley and California outer continental shelf to refineries and terminal facilities in the Los Angeles Basin.

        The 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, which transports crude oil from the San Joaquin Valley to Los Angeles, 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 Pacific's pipelines.

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        Pacific Terminals Storage and Distribution System:    The Pacific Terminals storage and distribution system is a crude oil 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, 0.5 million barrels are used primarily for throughput to other storage tanks and do not generate revenue independently, approximately 1.5 million barrels are idle but could be reconditioned and brought into service and approximately 0.3 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 six storage and blending facilities with a total of approximately 0.3 million barrels of storage capacity and up to 51,000 bpd of blending capacity. The PMT gathering and blending system is interconnected to Pacific's Line 63 system. Pacific's subsidiary, Pacific Marketing and Transportation LLC, uses the PMT gathering and blending system in connection with its crude oil buying, blending and selling activities, which are generally complementary to Pacific's pipeline transportation business.

        Pacific Atlantic Terminals:    Pacific recently acquired the Martinez terminal and Richmond terminal in the San Francisco, California area. The Martinez and Richmond terminals currently have 4.1 million barrels of combined storage capacity. Pacific also recently acquired the North Philadelphia, South Philadelphia and the Paulsboro, New Jersey terminals in the Philadelphia, Pennsylvania area. These terminals handle refined products and have a combined storage capacity of 3.1 million barrels.

        Pier 400:    Pacific is developing a deepwater petroleum import terminal at Pier 400 and Terminal Island in the Port of Los Angeles to handle marine receipts of crude oil and refinery feedstocks. As currently envisioned, the project would include a deep water berth, high capacity transfer infrastructure and storage tanks, with a pipeline distribution system that will connect to various customers, some directly, and some through the Pacific Terminals storage and distribution system. The total project cost is estimated to be $315 million. If successful, this project would allow Pacific to increase its participation in the growing Los Angeles marine import business. Pacific has entered into agreements with ConocoPhillips and two subsidiaries of Valero Energy Corporation that provide long term customer commitments to off-load a total of 140,000 bpd of crude oil at the Pier 400 dock. The ConocoPhillips and Valero agreements are subject to satisfaction of various conditions, such as the achievement of various progress milestones, financing, continued economic viability and completion of other ancillary agreements related to the project. Pacific is negotiating similar long term off-loading agreements with other potential customers. Pacific expects construction of the Pier 400 terminal to be completed and the facility to be placed in service in the first quarter of 2009.

        Expansion Projects:    In the West Coast Business Unit, Pacific is currently constructing 450,000 barrels of storage capacity at the Martinez terminal which is expected to be completed in the third quarter of 2006. At Pacific's Philadelphia area terminals, it is completing an ethanol expansion project which will enable it to increase ethanol storage, handling and blending capabilities. At the Pacific Terminals system, Pacific is refurbishing 600,000 barrels of black oil storage as well as making infrastructure changes to increase pumping capacity and improve operating efficiencies. These projects are expected to be completed in the second half of 2006.

Rocky Mountain Business Unit

        Pacific's Rocky Mountain Business Unit consists 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. Deliveries also are made to the refining and marketing center of Edmonton, Alberta through Pacific's Rangeland system. Pacific delivers crude oil to these refineries directly through its pipelines or indirectly through connections with third-party pipelines. Pacific's Rocky

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Mountain Business Unit also includes a pipeline system that delivers refined products to various markets in the U.S. Rocky Mountain region.

        Pacific's Rocky Mountain Business Unit is comprised of the following assets:

        Rangeland System:    The Rangeland system includes the Rangeland pipeline and the Mid Alberta pipeline. The Mid Alberta pipeline is a 138-mile proprietary pipeline with a throughput capacity of approximately 50,000 bpd if transporting light crude oil. The Mid Alberta pipeline originates in Edmonton, Alberta and terminates in Sundre, Alberta where it connects to the Rangeland pipeline. The Rangeland pipeline 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. The trunk system from Sundre, Alberta north to Rimbey, Alberta is a bi-directional system that consists of three parallel trunk pipelines: a 56-mile pipeline for low sulfur crude oil, a 63-mile pipeline for high sulfur crude oil, and a 56-mile pipeline for condensate and butane.

        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 pipeline, and at Cutbank, Montana, where it receives deliveries from Cenex pipeline, and terminating at Guernsey, Wyoming with connections in Wyoming to Frontier pipeline, Suncor pipeline, Platte pipeline and Pacific's Salt Lake City Core system. The Western Corridor system consists of three contiguous trunk pipelines: Glacier pipeline, Beartooth pipeline and Big Horn pipeline. Pacific owns various undivided interests in each of these three pipelines, which give it rights to a specified portion of each pipeline's throughput capacity. Glacier and Beartooth pipelines provide Pacific with approximately 25,000 bpd of throughput capacity from the U.S./Canadian border to Elk Basin, Wyoming. Big Horn pipeline provides Pacific with approximately 33,900 bpd of throughput capacity from Elk Basin, Wyoming to Guernsey, Wyoming. Pacific operates the Beartooth and Big Horn pipelines. ConocoPhillips Pipe Line Company owns the remaining undivided interests in each pipeline and operates Glacier pipeline. Pacific also owns various undivided interests in 22 storage tanks that provide it 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 955 miles of trunk pipelines with a combined throughput capacity of approximately 114,000 bpd to Salt Lake City, 209 miles of gathering pipelines, and 32 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 extends west to Wamsutter, Wyoming, where it divides, with a northern segment continuing west, eventually delivering to Salt Lake City, and a southern segment extending south to Rangely, Colorado, where it delivers to a ChevronTexaco pipeline that serves refineries in Salt Lake City. Pacific operates and owns 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, a hub for the distribution of crude oil produced in Canada and in the U.S. Rocky Mountain region, and receives deliveries from the Western Corridor system. Frontier pipeline also receives Canadian crude oil, including Canadian synthetic crude, via connections with Express pipeline and other connecting carriers in Casper, Wyoming. Frontier pipeline delivers crude oil into the Salt Lake City Core system for ultimate delivery into Salt Lake City. Pacific operates Frontier pipeline and

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owns a 22.22% partnership interest in Frontier Pipeline Company, a general partnership that owns Frontier pipeline. Enbridge, Inc. owns the remaining partnership interest in Frontier Pipeline Company.

        Rocky Mountain Products Pipeline (formerly the "West Pipeline System"):    On September 30, 2005 Pacific acquired the West Pipeline System, which consists of a 550 mile refined products pipeline extending from Casper, Wyoming east to Rapid City, South Dakota and south to Colorado Springs, Colorado. The West Pipeline System includes products terminals at Rapid City, South Dakota, Cheyenne, Wyoming and Denver and Colorado Springs, Colorado with a combined storage capacity of 1.7 million barrels.

        Recent Developments:    The Rocky Mountain Business Unit accomplished several positive initiatives in the first quarter of 2006. The construction of the initiating facility for synthetic crude oil in Edmonton, Alberta was completed in March 2006, and initial movements of synthetic crude oil began immediately thereafter. This connection provides direct access to synthetic crude oil in Edmonton for delivery through Pacific's pipeline systems to U.S. Rocky Mountain refineries. In addition, to facilitate the movement and maintain the quality of synthetic crude oil, three 120,000 barrel tanks were constructed at storage facilities along the Rangeland and Western Corridor systems.

        The Rocky Mountain Business Unit, through one of Pacific's subsidiaries, Rocky Mountain Pipeline System LLC, or RMPS, proceeded with its plans to construct a Salt Lake City core expansion project that will expand its crude oil pipeline system from the terminus of Frontier Pipeline near Evanston, Wyoming to the Salt Lake City, Utah refining complex. The new 16-inch pipeline, which will be 91 miles in length, will be able to transport multiple grades of crude oil in segregated batches and will provide 95,000 barrels per day of capacity to meet increased crude oil demand in Salt Lake City. The project will be constructed in two phases, the first phase estimated to be completed in the fourth quarter of 2006, the second phase by October 2007. The total cost for both phases of the project is expected to be approximately $77 million and is supported by firm, 10-year transportation agreements that have been executed with four Salt Lake City refiners.

        In addition, RMPS signed a transportation agreement with Frontier Oil and Refining Company pursuant to which RMPS will construct a 24-inch crude oil pipeline, approximately 10 miles in length, from Guernsey, Wyoming to RMPS's Fort Laramie, Wyoming tank farm and a 16-inch crude oil pipeline, approximately 85 miles in length, from Fort Laramie to Frontier Oil's Cheyenne refinery, in exchange for Frontier Oil's ten-year firm commitment to ship 35,000 barrels per day and lease approximately 300,000 barrels of storage capacity at Fort Laramie. The total project cost is estimated to be $59 million. Construction will begin in the second quarter of 2006 and is expected to be completed in the second quarter of 2007. Initial capacity will be 55,000 barrels per day, which can be expanded to a capacity of 90,000 barrels per day.


Plains' Business

        This section summarizes information from Plains' Annual Report on Form 10-K for the year ended December 31, 2005. For a more detailed discussion of Plains' business, please read the "Business and Properties" section contained in its 2005 Annual Report on Form 10-K.

        Plains is engaged in intrastate and interstate crude oil transportation and crude oil gathering, marketing, terminalling and storage, as well as the marketing and storage of liquefied petroleum gas and other natural gas related petroleum products. In addition, through its 50% equity ownership in PAA/Vulcan, Plains is engaged in the development and operation of natural gas storage facilities.

        Plains is one of the largest midstream crude oil companies in North America. As of March 31, 2006, Plains owned approximately 15,000 miles of active crude oil pipelines, approximately 39 million barrels of active terminalling and storage capacity and approximately 500 transport trucks. Currently, Plains handles an average of over 3 million barrels per day of physical crude oil through its extensive network of assets located in major oil producing regions of the United States and Canada.

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Business Segments

        Plains' operations consist of two operating segments:

        Through its Pipeline segment, Plains is engaged in interstate and intrastate crude oil pipeline transportation and certain related margin activities. Through its GMT&S segment, Plains is engaged in the purchase and resale of crude oil and LPG at various points along the distribution chain and in the operation of certain terminalling and storage assets.

Pipeline Operations

        Plains owns approximately 15,000 miles of active gathering and mainline crude oil pipelines located throughout the United States and Canada. Approximately 13,000 miles of these pipelines are used in Plains' pipeline operations segment with the remainder used in Plains' GMT&S segment. Plains' activities from pipeline operations generally consist of transporting crude oil for a fee and third party leases of pipeline capacity, as well as barrel exchanges and buy/sell arrangements.

Major Pipeline Assets

        The All American Pipeline is a common carrier crude oil pipeline system that transports crude oil produced from certain outer continental shelf, or OCS, fields offshore California via connecting pipelines to refinery markets in California. The system extends approximately 10 miles along the California coast from Las Flores to Gaviota (24-inch diameter pipe) and continues from Gaviota approximately 126 miles to Plains' station in Emidio, California (30-inch diameter pipe). Between Gaviota and Plains' Emidio Station, the All American Pipeline interconnects with Plains' San Joaquin Valley, or SJV, Gathering System as well as various third party intrastate pipelines. The system is subject to tariff rates regulated by the FERC.

        The Basin Pipeline System, in which Plains owns an approximate 87% undivided joint interest, is a primary route for transporting Permian Basin crude oil to Cushing, Oklahoma, for further delivery to Mid-Continent and Midwest refining centers. Plains acquired its interest in the Basin Pipeline System in August 2002. Since acquisition, Plains has been the operator of the system. The Basin system is a 515-mile mainline, telescoping crude oil system with a capacity ranging from approximately 144,000 barrels per day to 400,000 barrels per day depending on the segment. System throughput (as measured by system deliveries) was approximately 290,000 barrels per day (net to Plains' interest) during 2005.

        The Basin system consists of three primary movements of crude oil: (i) barrels that are shipped from Jal, New Mexico to the West Texas markets of Wink and Midland, where they are exchanged and/or further shipped to refining centers; (ii) barrels that are shipped to the Mid-Continent region on the Midland to Wichita Falls segment and the Wichita Falls to Cushing segment; and (iii) foreign and Gulf of Mexico barrels that are delivered into Basin at Wichita Falls and delivered to a connecting carrier or shipped to Cushing for further distribution to Mid-Continent or Midwest refineries. The system also includes approximately 5.5 million barrels (4.8 million barrels, net to Plains' interest) of crude oil storage capacity located along the system.

        In 2004, Plains expanded an approximate 425-mile section of the system from Midland to Cushing. With the completion of this expansion, the capacity of this section has increased approximately 15%,

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from 350,000 barrels per day to approximately 400,000 barrels per day. The Basin system is subject to tariff rates regulated by the FERC.

        The Capline Pipeline System, in which Plains own a 22% undivided joint interest, is a 633-mile, 40-inch mainline crude oil pipeline originating in St. James, Louisiana, and terminating in Patoka, Illinois. The Capline Pipeline System is one of the primary transportation routes for crude oil shipped into the Midwestern U.S., accessing over 2.7 million barrels of refining capacity in PADD II. Shell is the operator of this system. Capline has direct connections to a significant amount of crude production in the Gulf of Mexico. In addition, with its two active docks capable of handling 600,000-barrel tankers as well as access to the Louisiana Offshore Oil Port ("LOOP"), it is a key transporter of sweet and light sour foreign crude to PADD II. With a total system operating capacity of 1.14 million barrels per day of crude oil, approximately 248,000 barrels per day are subject to Plains' interest. During 2005, throughput on Plains' interest averaged approximately 132,000 barrels per day.

        The Capwood Pipeline System, in which Plains owns a 76% undivided joint interest, is a 58-mile, 20-inch mainline crude oil pipeline originating in Patoka, Illinois, and terminating in Wood River, Illinois. The Capwood Pipeline System has an operating capacity of 277,000 barrels per day of crude oil. Of that capacity, approximately 211,000 barrels per day are subject to Plains' interest. The system has the ability to deliver crude oil at Wood River to several other PADD II refineries and pipelines. Movements on the Capwood system are driven by the volumes shipped on Capline as well as by volumes of Canadian crude that can be delivered to Patoka via the Mustang Pipeline. Plains assumed the operatorship of the Capwood system from Shell Pipeline Company LP at the time of purchase. During 2005 throughput net to Plains' interest averaged approximately 107,000 barrels per day.

Gathering, Marketing, Terminalling and Storage Operations

        The combination of Plains' gathering and marketing operations and Plains' terminalling and storage operations provides a counter-cyclical balance that has a stabilizing effect on Plains' operations and cash flow. The strategic use of Plains' terminalling and storage assets in conjunction with Plains' gathering and marketing operations generally provides Plains with the flexibility to maintain a base level of margin irrespective of whether a strong or weak market exists and, in certain circumstances, to realize incremental margin during volatile market conditions. Following is a description of Plains' activities with respect to this segment.

        Crude Oil.    Plains' gathering and marketing activities include:


        Plains purchases crude oil from multiple producers and believes that it generally has established broad-based relationships with the crude oil producers in Plains' areas of operations. Gathering and

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marketing activities involve relatively large volumes of transactions, often with lower margins than pipeline and terminalling and storage operations.

        Liquefied Petroleum Gas and Other Petroleum Products.    Plains also markets and stores LPG and other petroleum products in the United States and Canada. These activities include:

        Plains purchases LPG from numerous producers and has established long-term, broad based relationships with LPG producers in Plains' areas of operation. Plains purchases LPG directly from gas plants, major pipeline terminals, refineries and storage locations. Marketing activities for LPG typically consist of smaller volumes per transaction relative to crude oil.

        Plains owns approximately 39 million barrels of active above-ground crude oil terminalling and storage assets. Approximately 15 million barrels of capacity are used in Plains' GMT&S segment, and the remaining 24 million barrels are used in Plains' Pipeline segment. Plains' storage and terminalling operations increase Plains' margins in its business of purchasing and selling crude oil and also generate revenue through a combination of storage and throughput charges to third parties. Storage fees are generated when Plains leases tank capacity to third parties. Terminalling fees, also referred to as throughput fees, are generated when Plains receives crude oil from one connecting pipeline and redelivers crude oil to another connecting carrier in volumes that allow the refinery to receive its crude oil on a ratable basis throughout a delivery period. Both terminalling and storage fees are generally earned from:

        The tankage that is used to support Plains' arbitrage activities positions Plains to capture margins in a contango market (when the oil prices for future deliveries are higher than the current prices) or when the market switches from contango to backwardation (when the oil prices for future deliveries are lower than the current prices).

        Plains' most significant terminalling and storage asset is Plains' Cushing Terminal located at the Cushing Interchange. The Cushing Interchange is one of the largest wet-barrel trading hubs in the U.S. and the delivery point for crude oil futures contracts traded on the NYMEX. The Cushing Terminal has been designated by the NYMEX as an approved delivery location for crude oil delivered under the NYMEX light sweet crude oil futures contract. As the NYMEX delivery point and a cash market hub, the Cushing Interchange serves as a primary source of refinery feedstock for the Midwest refiners and plays an integral role in establishing and maintaining markets for many varieties of foreign and domestic crude oil. The Cushing Terminal currently consists of fourteen 100,000-barrel tanks, four 150,000-barrel tanks and twenty 270,000-barrel tanks, all of which are used to store and terminal crude oil. The Cushing Terminal also includes a pipeline manifold and pumping system that has an estimated throughput capacity of over 1.0 million barrels per day. The Cushing Terminal is connected to the

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major pipelines and other terminals in the Cushing Interchange through pipelines that range in size from 10 inches to 24 inches in diameter.

        In 2005, Plains began construction of a 3.2 million barrel crude oil terminal at the St. James crude oil interchange in Louisiana, which is one of the three most liquid crude oil interchanges in the United States. Plains plans to build seven tanks ranging from 190,000 barrels to 625,000 barrels at the St. James Terminal, which is expected to be operational in mid-2007. The facility also will include a manifold and header system that will allow for receipts and deliveries with connecting pipelines at their maximum operating capacity.

Natural Gas Storage

        The Pine Prairie facility is expected to become partially operational in 2007 and fully operational in 2009, and Plains believes it is well positioned to benefit from evolving market dynamics. The facility is located near Gulf Coast supply sources and near the existing Lake Charles LNG terminal, which is the largest LNG import facility in the United States. When completed, Plains expects the Pine Prairie facility to be a 24 Bcf salt cavern storage facility designed for high deliverability operating characteristics and multi-cycle capabilities. The site is located approximately 50 miles from the Henry Hub, the delivery point for NYMEX natural gas futures contracts, and is currently intended to interconnect with seven major pipelines serving the Midwest and the East Coast. Three additional pipelines are also located in the vicinity and offer the potential for future interconnects. Plains believes that the facility's operating characteristics and strategic location position Pine Prairie to support the commercial functions of power generators, pipelines, utilities, energy merchants and LNG re-gasification terminal operators and provide potential customers with superior flexibility in managing their price and volumetric risk and balancing their natural gas requirements.

        The Bluewater gas storage facility, which is located in Michigan, is a depleted reservoir facility with an approximate 24 Bcf of capacity and is also strategically positioned. Natural gas storage facilities in the northern tier of the U.S. are traditionally used to meet seasonal demand and are typically cycled once or twice during a given year. Natural gas is injected during the summer months in order to provide for adequate deliverability during the peak demand winter months. Michigan is a very active market for natural gas storage as it meets nearly 75% of its peak winter demand from storage withdrawals. The Bluewater facility has direct interconnects to four major pipelines and has indirect access to another four pipelines as well as to Dawn, a major natural gas market hub in Canada.


Selected Combined Company Growth Projects

        The following tables set forth selected internal growth projects of the combined company and Plains' estimates of their in-service dates, which reflect certain of Plains' risk adjustments.

Plains Projects

  Estimated In-Service Date
St. James terminal   Second Quarter 2007
Kerrobert tankage   First Quarter 2007
Spraberry system expansion   First Quarter 2007
High Prairie truck and rail terminal   First Quarter 2007
East Texas/Louisiana tankage   First Quarter 2007
Wichita Falls tankage   First Quarter 2007
Midale/Regina truck terminal   Fourth Quarter 2006
PAA/Vulcan Gas Storage—Pine Prairie Facility   Third Quarter 2007-Fourth Quarter 2009
Pacific Projects

  Estimated In-Service Date
Guernsey to Cheyenne pipeline   Third Quarter 2007
Evanston to Salt Lake City pipeline   First Quarter 2008
Martinez terminal expansion—Phase I   Third Quarter 2006
Martinez terminal expansion—Phase II   First Quarter 2008
Paulsboro terminal expansion   Third Quarter 2008
Fort Laramie tankage   Third Quarter 2007
Pier 400 project   First Quarter 2009

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SELECTED FINANCIAL INFORMATION OF PLAINS AND PACIFIC

        The following tables set forth, for the periods and at the dates indicated, selected historical and pro forma financial information for Plains and selected historical financial information for Pacific. The selected historical financial information has been derived from the audited and unaudited financial statements of each partnership for the periods indicated. The selected historical financial information for each of the three years in the period ended December 31, 2005 are derived from and should be read in conjunction with the audited financial statements and accompanying footnotes for such periods incorporated by reference into this document. The selected historical financial information for the three-month periods ended March 31, 2005 and 2006 are derived from and should be read in conjunction with the unaudited financial statements and accompanying footnotes for such periods incorporated by reference into this document. Certain reclassifications have been made to prior year financial statements to conform to the 2005 presentation.

        For a complete discussion of the pro forma adjustments underlying the amounts in the table below, please read the section titled "Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page F-1 of this document.

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Selected Historical and Pro Forma Financial Information of Plains

 
  Plains Consolidated Historical
  Plains Pro Forma
 
  For the Year Ended December 31,
  For the Three
Months Ended
March 31,

  For the Year
Ended
December 31,

  For the
Three
Months
Ended
March 31,

 
  2001
  2002
  2003
  2004
  2005
  2005
  2006
  2005
  2006
 
  (Dollars in millions, except per unit amounts)

Statement of operations data:                                                      
Total revenues(1)   $ 6,868.2   $ 8,384.2   $ 12,589.9   $ 20,975.5   $ 31,177.3   $ 6,638.5   $ 8,635.4   $ 31,389.0   $ 8,697.4
Income before cumulative effect of change in accounting principle(2)(6)   $ 43.7   $ 65.3   $ 59.4   $ 133.1   $ 217.8   $ 32.8   $ 57.1   $ 202.3   $ 57.7
Basic net income per limited partner unit before cumulative effect of change in accounting principle(2)   $ 1.12   $ 1.34   $ 1.01   $ 1.94   $ 2.77   $ 0.43   $ 0.65   $ 2.10   $ 0.55
Diluted net income per limited partner unit before cumulative effect of change in accounting principle(2)   $ 1.12   $ 1.34   $ 1.00   $ 1.94   $ 2.72   $ 0.43   $ 0.63   $ 2.07   $ 0.54

Balance sheet data (at end of period):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Total assets   $ 1,261.2   $ 1,666.6   $ 2,095.6   $ 3,160.4   $ 4,120.3   $ 3,934.2   $ 4,733.7         $ 7,316.2
Total debt(3)   $ 456.2   $ 609.0   $ 646.3   $ 1,124.5   $ 1,330.1   $ 1,491.2   $ 1,827.3         $ 3,170.3
Partners' capital   $ 402.8   $ 511.6   $ 746.7   $ 1,070.2   $ 1,330.7   $ 1,010.6   $ 1,438.7         $ 2,461.3

Other financial data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Distributions per limited partner unit(4)(5)   $ 2.0000   $ 2.1375   $ 2.2125   $ 2.3525   $ 2.6500   $ 0.6375   $ 0.7075            

(1)
Includes buy/sell transactions. See Note 2 to Plains' consolidated financial statements in Plains' Annual Report on Form 10-K for the year ended December 31, 2005 incorporated by reference herein.

(2)
Income from continuing operations before cumulative effect of change in accounting principle, on a pro forma basis for the impact of Plains' January 1, 2004 change in method of accounting for pipeline linefill in third party assets, would have been $38.4 million, $64.8 million and $61.4 million for 2001, 2002 and 2003, respectively. In addition, basic net income per limited partner unit before cumulative effect of change in accounting principle would have been $0.97 ($0.97 diluted), $1.33 ($1.33 diluted) and $1.05 ($1.04 diluted) for 2001, 2002 and 2003, respectively.

(3)
Total debt includes short-term debt of $101.5 million, $99.3 million, $127.3 million, $175.5 million and $378.4 million for the year ended 2001, 2002, 2003, 2004 and 2005, respectively, and $561.0 and $875.8 for the three months ended March 31, 2005 and 2006, respectively. Total debt also includes short-term debt of $875.8 million for the Plains pro forma three months ended March 31, 2006.

(4)
Distributions represent those declared with respect to the period and paid in the following period.

(5)
Plains' general partner is entitled to receive 2% proportional distributions and incentive distributions if the amount Plains distributes with respect to any quarter exceeds levels specified in Plains' partnership agreement. See Note 5 to Plains' consolidated financial statements in Plains' Annual Report on Form 10-K for the year ended December 31, 2005 incorporated by reference herein.

(6)
The Plains pro forma income before cumulative effect of change in accounting principle for the year ended December 31, 2005 includes, as required, the following pro forma adjustments related to the acquisition of the Valero assets that Pacific acquired effective September 30, 2005: (i) depreciation expense for the entire year of approximately $11 million associated with Plains' estimated purchase price allocated to the Valero assets; and (ii) interest expense of approximately $11 million for the entire year on the $175 million 61/4% senior notes issued to fund the asset acquisition. However, since the Valero transaction was an asset acquisition, the Plains pro forma income before cumulative effect of change in accounting principle for the year ended December 31, 2005 does not include revenues and related operating expenses for the period prior to the asset acquisition by Pacific. In addition, the Plains pro forma income before cumulative effect of change in accounting principle for the year ended December 31, 2005 and the three months ended March 31, 2006 does not include any synergies that Plains expects to achieve as a result of the merger with Pacific. For further discussion of potential business combination synergies, see the section captioned "The Merger—Additional Financial Considerations of the Parties."

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Selected Historical Consolidated Financial Information of Pacific

 
  Year Ended December 31,
  Three Months Ended
March 31,

 
  2001
  2002
  2003
  2004
  2005
  2005
  2006
 
  (Dollars in millions, except per unit amounts)

Statement of operations data:                                          
Total revenues   $ 73.6   $ 124.2   $ 135.8   $ 181.4   $ 224.3   $ 49.2   $ 70.5
Income from continuing operations   $ 15.6   $ 33.6   $ 25.0   $ 35.7   $ 39.6   $ 3.4   $ 11.6
Income from continuing operations per unit:                                          
Basic net income per limited partner unit(1)   $   $ 0.55   $ 1.10   $ 1.23   $ 1.25   $ 0.17   $ 0.30
Diluted net income per limited partner unit(1)   $   $ 0.55   $ 1.09   $ 1.23   $ 1.25   $ 0.17   $ 0.30

Balance Sheet Data (at period end):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Total assets   $ 372.2   $ 487.0   $ 650.2   $ 869.9   $ 1,476.5   $ 920.1   $ 1,506.3
Total debt, including current portion   $ 181.3   $ 225.0   $ 298.0   $ 357.2   $ 565.6   $ 356.4   $ 601.0
Net partners' capital (net parent investment)   $ 157.4   $ 215.3   $ 295.1   $ 422.5   $ 698.2   $ 413.0   $ 688.2

Other financial data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Distributions per limited partner unit(1)(2)   $   $ 0.7993   $ 1.9000   $ 1.9625   $ 2.0925   $ 0.5125   $ 0.5675

(1)
On July 26, 2002, Pacific completed its initial public offering of common units. Net income per limited partner unit is based on net income of $11.8 million for the period from July 26, 2002 to December 31, 2002. Weighted average limited partner units outstanding for 2002 was calculated for the period from July 26, 2002 to December 31, 2002.

(2)
Distributions represent those declared with respect to the period and paid in the following period.

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DIRECTORS AND OFFICERS OF THE COMBINED COMPANY

Directors and Executive Officers

        The following persons currently serve as directors and executive officers of Plains and will serve as directors and executive officers of the combined company at the effective time of the merger. Certain owners of Plains' general partner each have the right to separately designate a member of its board. Such designees are indicated in the footnote to the following table.

Name

  Age
(as of
6/30/06)

  Position with Plains' General Partner
Greg L. Armstrong(1)   48   Chairman of the Board, Chief Executive Officer and Director
Harry N. Pefanis   49   President and Chief Operating Officer
Phillip D. Kramer   50   Executive Vice President and Chief Financial Officer
George R. Coiner   55   Senior Group Vice President
W. David Duckett   51   President—PMC (Nova Scotia) Company
Mark F. Shires   49   Senior Vice President—Operations
Alfred A. Lindseth   36   Senior Vice President—Technology, Process & Risk Management
Lawrence J. Dreyfuss   51   Vice President, Associate General Counsel and Assistant Secretary; Vice President, General Counsel and Secretary of PMC (Nova Scotia) Company (the general partner of Plains Marketing Canada, L.P.)
James B. Fryfogle   54   Vice President—Refinery Supply
Jim G. Hester   46   Vice President—Acquisitions
Tim Moore   48   Vice President, General Counsel and Secretary
Daniel J. Nerbonne   49   Vice President—Engineering
John F. Russell   57   Vice President—Pipeline Operations
Robert M. Sanford   56   Vice President—Lease Supply
Al Swanson   42   Vice President—Finance and Treasurer
Tina L. Val   37   Vice President—Accounting and Chief Accounting Officer
Troy E. Valenzuela   45   Vice President—Environmental, Health and Safety
John P. vonBerg   52   Vice President—Trading
David N. Capobianco(1)   37   Director
Everardo Goyanes   62   Director
Gary R. Petersen(1)   59   Director
Robert V. Sinnott(1)   57   Director
Arthur L. Smith   53   Director
J. Taft Symonds   66   Director

(1)
The limited liability company agreement of Plains' general partner specifies that the Chief Executive Officer of the general partner will be a member of the board of directors. The agreement also provides that certain of the owners of Plains' general partner have the right to designate a member of its board of directors. Mr. Capobianco has been so designated by Vulcan Energy Corporation, of which he is Chairman of the Board. Vulcan Energy Corporation entered into an agreement with Plains' general partner pursuant to which Vulcan Energy Corporation has agreed to restrict certain of its voting rights to help preserve a balanced board. Vulcan Energy Corporation has agreed that, with respect to any action taken with respect to the election or removal of an independent director, Vulcan Energy Corporation will vote all of its interest in

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        Greg L. Armstrong has served as Chairman of the Board and Chief Executive Officer since Plains' formation in 1998. He has also served as a director of Plains' general partner or former general partner since Plains' formation. In addition, he was President, Chief Executive Officer and director of Plains Resources Inc. from 1992 to May 2001. He previously served Plains Resources as: President and Chief Operating Officer from October to December 1992; Executive Vice President and Chief Financial Officer from June to October 1992; Senior Vice President and Chief Financial Officer from 1991 to 1992; Vice President and Chief Financial Officer from 1984 to 1991; Corporate Secretary from 1981 to 1988; and Treasurer from 1984 to 1987. Mr. Armstrong is also a director of National Oilwell Varco, Inc.

        Harry N. Pefanis has served as President and Chief Operating Officer since Plains' formation in 1998. He was also a director of Plains' former general partner. In addition, he was Executive Vice President—Midstream of Plains Resources from May 1998 to May 2001. He previously served Plains Resources as: Senior Vice President from February 1996 until May 1998; Vice President—Products Marketing from 1988 to February 1996; Manager of Products Marketing from 1987 to 1988; and Special Assistant for Corporate Planning from 1983 to 1987. Mr. Pefanis was also President of several former midstream subsidiaries of Plains Resources until Plains' formation.

        Phillip D. Kramer has served as Executive Vice President and Chief Financial Officer since Plains' formation in 1998. In addition, he was Executive Vice President and Chief Financial Officer of Plains Resources from May 1998 to May 2001. He previously served Plains Resources as: Senior Vice President and Chief Financial Officer from May 1997 until May 1998; Vice President and Chief Financial Officer from 1992 to 1997; Vice President from 1988 to 1992; Treasurer from 1987 to 2001; and Controller from 1983 to 1987.

        George R. Coiner has served as Senior Group Vice President since February 2004 and as Senior Vice President from Plains' formation in 1998 to February 2004. In addition, he was Vice President of Plains Marketing & Transportation Inc. from November 1995 until Plains' formation. Prior to joining Plains Marketing & Transportation Inc., he was Senior Vice President, Marketing with Scurlock Permian LLC.

        W. David Duckett has served as President of PMC (Nova Scotia) Company since June 2003, and Executive Vice President of PMC (Nova Scotia) Company from July 2001 to June 2003. Mr. Duckett was with CANPET Energy Group Inc. from 1985 to 2001, where he served in various capacities, including most recently as President, Chief Executive Officer and Chairman of the Board.

        Mark F. Shires has served as Senior Vice President—Operations since June 2003 and as Vice President—Operations from August 1999 to June 2003. He served as Manager of Operations from April 1999 to August 1999. In addition, he was a business consultant from 1996 until April 1999. He served as a consultant to Plains Marketing & Transportation Inc. and Plains All American Pipeline, LP from May 1998 until April 1999. He previously served as President of Plains Terminal & Transfer Corporation, from 1993 to 1996.

        Alfred A. Lindseth has served as Senior Vice President—Technology, Process & Risk Management since June 2003 and as Vice President—Administration from March 2001 to June 2003. He served as Risk Manager from March 2000 to March 2001. He previously served PricewaterhouseCoopers LLP in

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its Financial Risk Management Practice section as a Consultant from 1997 to 1999 and as Principal Consultant from 1999 to March 2000. He also served GSC Energy, an energy risk management brokerage and consulting firm, as Manager of its Oil & Gas Hedging Program from 1995 to 1996 and as Director of Research and Trading from 1996 to 1997.

        Lawrence J. Dreyfuss has served as Vice President, Associate General Counsel and Assistant Secretary of Plains' general partner since February 2004 and as Associate General Counsel and Assistant Secretary of Plains' general partner from June 2001 to February 2004 and held a senior management position in the Law Department since May 1999. In addition, he was a Vice President of Scurlock Permian LLC from 1987 to 1999.

        James B. Fryfogle has served as Vice President—Refinery Supply since March 2005. He served as Vice President—Lease Operations from July 2004 until March 2005. Prior to joining Plains in January 2004, Mr. Fryfogle served as Manager of Crude Supply and Trading for Marathon Ashland Petroleum. Mr. Fryfogle had held numerous positions of increasing responsibility with Marathon Ashland Petroleum or its affiliates or predecessors since 1975.

        Jim G. Hester has served as Vice President—Acquisitions since March 2002. Prior to joining Plains, Mr. Hester was Senior Vice President—Special Projects of Plains Resources. From May 2001 to December 2001, he was Senior Vice President—Operations for Plains Resources. From May 1999 to May 2001, he was Vice President—Business Development and Acquisitions of Plains Resources. He was Manager of Business Development and Acquisitions of Plains Resources from 1997 to May 1999, Manager of Corporate Development from 1995 to 1997 and Manager of Special Projects from 1993 to 1995. He was Assistant Controller from 1991 to 1993, Accounting Manager from 1990 to 1991 and Revenue Accounting Supervisor from 1988 to 1990.

        Tim Moore has served as Vice President, General Counsel and Secretary since May 2000. In addition, he was Vice President, General Counsel and Secretary of Plains Resources from May 2000 to May 2001. Prior to joining Plains Resources, he served in various positions, including General Counsel—Corporate, with TransTexas Gas Corporation from 1994 to 2000. He previously was a corporate attorney with the Houston office of Weil, Gotshal & Manges LLP. Mr. Moore also has seven years of energy industry experience as a petroleum geologist.

        Daniel J. Nerbonne has served as Vice President—Engineering since February 2005. Prior to joining Plains, Mr. Nerbonne was General Manager of Portfolio Projects for Shell Oil Products US from January 2004 to January 2005 and served in various capacities, including General Manager of Commercial and Joint Interest, with Shell Pipeline Company or its predecessors from 1998. From 1980 to 1998 Mr. Nerbonne held numerous positions of increasing responsibility in engineering, operations, and business development, including Vice President of Business Development from December 1996 to April 1998, with Texaco Trading and Transportation or its affiliates.

        John F. Russell has served as Vice President—Pipeline Operations since July 2004. Prior to joining Plains, Mr. Russell served as Vice President of Business Development & Joint Interest for ExxonMobil Pipeline Company. Mr. Russell had held numerous positions of increasing responsibility with ExxonMobil Pipeline Company or its affiliates or predecessors since 1974.

        Robert Sanford has served as Vice President—Lease Supply since June 2006. He served as Managing Director—Lease Acquisitions and Trucking from July 2005 to June 2006 and as Director of South Texas and Mid Continent Business Units from April 2004 to July 2005. Mr. Sanford was with Link Energy/EOTT Energy from 1994 to April 2004, where he held various positions of increasing responsibility.

        Al Swanson has served as Vice President—Finance and Treasurer since August 2005, as Vice President and Treasurer from February 2004 to August 2005 and as Treasurer from May 2001 to February 2004. In addition, he held finance related positions at Plains Resources including Treasurer

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from February 2001 to May 2001 and Director of Treasury from November 2000 to February 2001. Prior to joining Plains Resources, he served as Treasurer of Santa Fe Snyder Corporation from 1999 to October 2000 and in various capacities at Snyder Oil Corporation including Director of Corporate Finance from 1998, Controller—SOCO Offshore, Inc. from 1997, and Accounting Manager from 1992. Mr. Swanson began his career with Apache Corporation in 1986 serving in internal audit and accounting.

        Tina L. Val has served as Vice President—Accounting and Chief Accounting Officer since June 2003. She served as Controller from April 2000 until she was elected to her current position. From January 1998 to January 2000, Ms. Val served as a consultant to Conoco de Venezuela S.A. She previously served as Senior Financial Analyst for Plains Resources from October 1994 to July 1997.

        Troy E. Valenzuela has served as Vice President—Environmental, Health and Safety, or EH&S, since July 2002, and has had oversight responsibility for the environmental, safety and regulatory compliance efforts of Plains and Plains' predecessors since 1992. He was Director of EH&S with Plains Resources from January 1996 to June 2002, and Manager of EH&S from July 1992 to December 1995. Prior to his time with Plains Resources, Mr. Valenzuela spent seven years with Chevron USA Production Company in various EH&S roles.

        John P. vonBerg has served as Vice President—Trading since May 2003 and Director of these activities since joining Plains in January 2002. He was with Genesis Energy in differing capacities as a Director, Vice Chairman, President and CEO from 1996 through 2001, and from 1993 to 1996 he served as a Vice President and a Crude Oil Manager for Phibro Energy USA. Mr. vonBerg began his career with Marathon Oil Company, spending 13 years in various disciplines.

        David N. Capobianco has served as a director of Plains' general partner since July 2004. Mr. Capobianco is Chairman of the board of directors of Vulcan Energy Corporation and a Managing Director and co-head of Private Equity of Vulcan Capital, an affiliate of Vulcan Inc., where he has been employed since April 2003. Previously, he served as a member of Greenhill Capital from 2001 to April 2003 and Harvest Partners from 1995 to 2001. Mr. Capobianco is Chairman of the board of Vulcan Resources Florida, and is a director of PAA/Vulcan and ICAT Holdings. Mr. Capobianco received a BA in Economics from Duke University and an MBA from Harvard.

        Everardo Goyanes has served as a director of Plains' general partner or former general partner since May 1999. Mr. Goyanes has been President and Chief Executive Officer of Liberty Energy Holdings, LLC (an energy investment firm) since May 2000. From 1999 to May 2000, he was a financial consultant specializing in natural resources. From 1989 to 1999, he was Managing Director of the Natural Resources Group of ING Barings Furman Selz (a banking firm). He was a financial consultant from 1987 to 1989 and was Vice President—Finance of Forest Oil Corporation from 1983 to 1987. Mr. Goyanes received a BA in Economics from Cornell University and a Masters degree in Finance (honors) from Babson Institute.

        Gary R. Petersen has served as a director of Plains' general partner since June 2001. Mr. Petersen is Senior Managing Director of EnCap Investments L.P., an investment management firm which he co-founded in 1988. He had previously served as Senior Vice President and Manager of the Corporate Finance Division of the Energy Banking Group for RepublicBank Corporation. Prior to his position at RepublicBank, he was Executive Vice President and a member of the Board of Directors of Nicklos Oil & Gas Company from 1979 to 1984. He served from 1970 to 1971 in the U.S. Army as a First Lieutenant in the Finance Corps and as an Army Officer in the National Security Agency.

        Robert V. Sinnott has served as a director of Plains' general partner or former general partner since September 1998. Mr. Sinnott is President, Chief Investment Officer and Senior Managing Director of energy investments of Kayne Anderson Capital Advisors, L.P. (an investment management firm). He also served as a Managing Director from 1992 to 1996 and as a Senior Managing Director from 1996

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until assuming his current role in 2005. He is also President of Kayne Anderson Investment Management, Inc., the general partner of Kayne Anderson Capital Advisors, L.P. He was Vice President and Senior Securities Officer of the Investment Banking Division of Citibank from 1986 to 1992. Mr. Sinnott received a BA from the University of Virginia and an MBA from Harvard.

        Arthur L. Smith has served as a director of Plains' general partner or former general partner since February 1999. Mr. Smith is Chairman and CEO of John S. Herold, Inc. (a petroleum research and consulting firm), a position he has held since 1984. From 1976 to 1984 Mr. Smith was a securities analyst with Argus Research Corp., The First Boston Corporation and Oppenheimer & Co., Inc. Mr. Smith holds the CFA designation. He serves on the boards of Kuwait Energy (a private oil and gas exploration and production firm), non-profit Dress for Success Houston and the Board of Visitors for the Nicholas School of the Environment and Earth Sciences at Duke University. Mr. Smith received a BA from Duke University and an MBA from NYU's Stern School of Business.

        J. Taft Symonds has served as a director of Plains' general partner since June 2001. Mr. Symonds is Chairman of the Board of Symonds Trust Co. Ltd. (a private investment firm) and Chairman of the Board of Tetra Technologies, Inc. (an oil and gas services firm). From 1978 to 2004 he was Chairman of the Board and Chief Financial Officer of Maurice Pincoffs Company, Inc. (an international marketing firm). Mr. Symonds has a background in both investment and commercial banking, including merchant banking in New York, London and Hong Kong with Paine Webber, Robert Fleming Group and Banque de la Societe Financiere Europeenne. He is Chairman of the Houston Arboretum and Nature Center. Mr. Symonds received a BA from Stanford University and an MBA from Harvard.

128



COMPARISON OF THE RIGHTS OF PLAINS
AND PACIFIC COMMON UNITHOLDERS

        The following describes the material differences between the rights of Plains common unitholders and the rights of Pacific common unitholders. It is not a complete summary of the provisions affecting, and the differences between, the rights of Plains unitholders and Pacific unitholders. The rights of Plains unitholders are governed by the Third Amended and Restated Agreement of Limited Partnership of Plains All American Pipeline, L.P., as amended, and the rights of Pacific unitholders are governed by the First Amended and Restated Agreement of Limited Partnership of Pacific Energy Partners, L.P., as amended, and you should refer to each document for a complete description of the rights of Plains and Pacific unitholders, respectively. If the merger is consummated, Pacific unitholders will become Plains unitholders, and their rights as Plains unitholders will be governed by Delaware law and Plains' partnership agreement. You should refer to Plains' current report on Form 8-K filed with the Commission on August 27, 2001 and Plains' Quarterly Report on Form 10-Q filed with the SEC on May 10, 2004, for a copy of Plains' partnership agreement and the amendment thereto, respectively, which are incorporated by reference herein. For Pacific's partnership agreement and the amendments thereto, please refer to Pacific's quarterly report on Form 10-Q filed with the Commission on September 5, 2002, Pacific's Form S-3 filed with the Commission on August 1, 2003, Pacific's annual report on Form 10-K filed with the Commission on March 15, 2004 and Pacific's Form 10-Q filed with the Commission on May 5, 2004. This summary is qualified in its entirety by reference to the Delaware Revised Uniform Limited Partnership Act, the Plains partnership agreement and the Pacific partnership agreement.


PURPOSE AND TERM OF EXISTENCE

PLAINS

  PACIFIC

Plains' stated purposes under its partnership agreement are to serve as a partner of its operating partnerships and as the sole stockholder of the general partner of its operating partnerships, and to engage in any lawful business activities that may be engaged by its operating partnership, or that are approved by its general partner, provided that the general partner must reasonably determine that such activity generates or enhances "qualifying income" within the meaning of Section 7704 of the Code.

 

Pacific's stated purposes under its partnership agreement are to serve as a member of its operating company and to engage in any lawful business activities that may be engaged by its operating company or that are approved by its general partner.

Plains' partnership existence will continue until December 31, 2088, unless sooner dissolved pursuant to the terms of Plains' partnership agreement.

 

Pacific's partnership existence will continue until dissolved pursuant to the terms of its partnership agreement.


DISTRIBUTIONS OF AVAILABLE CASH

PLAINS

  PACIFIC

Within 45 days following the end of each quarter, Plains will distribute all of its available cash to its partners of record as of the applicable record date.

 

Within 45 days following the end of each quarter, Pacific will distribute all of its available cash to its partners of record as of the applicable record date.
             

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Available cash is defined in Plains' partnership agreement and generally means, for any quarter ending prior to liquidation, all cash on hand at the end of such calendar quarter, less the amount of cash reserves that is necessary or appropriate in the reasonable discretion of Plains' general partner to:

 

Available cash is defined in Pacific's partnership agreement and generally means, with respect to each fiscal calendar quarter, all cash on hand at the end of such calendar quarter, less the amount of cash reserves that is necessary or appropriate in the reasonable discretion of Pacific's general partner to:


 

provide for the proper conduct of business;

 


 

provide for the proper conduct of business;


 

comply with applicable law or debt instrument or other agreement or obligation; or

 


 

comply with applicable law or any debt instrument or other agreement or obligation; or


 

provide funds for distributions to unitholders and the general partner in respect of any one or more of the next four quarters.

 


 

provide funds for distributions to unitholders and to Pacific's general partner for any one or more of the next four quarters.


OPERATING SURPLUS AND CAPITAL SURPLUS

PLAINS

  PACIFIC

Cash distributions are characterized as distributions from either operating surplus or capital surplus. Plains distributes available cash from operating surplus differently than available cash from capital surplus.

 

Cash distributions are characterized as distributions from either operating surplus or capital surplus. Pacific distributes available cash from operating surplus differently than available cash from capital surplus.

Operating surplus is defined in Plains' partnership agreement and generally means:

 

Operating surplus is defined in Pacific's partnership agreement and generally means:


 

$25.0 million plus all cash and cash equivalents on hand on the closing date of Plains' initial public offering; plus

 


 

$15.0 million plus all cash and cash equivalents on hand on the closing date of Pacific's initial public offering; plus


 

all cash receipts since the closing of Plains' initial public offering, excluding cash from borrowings that are not working capital borrowings, sales of equity and debt securities and sales or other dispositions of assets outside the ordinary course of business; less

 


 

all cash receipts since the closing of Pacific's initial public offering, excluding cash from borrowings that are not working capital borrowings, sales of equity and debt securities and sales or other dispositions of assets outside the ordinary course of business; plus


 

all of Plains' operating expenses and debt service payments, but not including payments required in connection with the sale of assets or any refinancing with the proceeds of new indebtedness or an equity offering, and including maintenance capital expenditures; and less

 


 

working capital borrowings made after the end of a quarter but before the date of determination of operating surplus for that quarter; less
             

130




 

the amount of cash reserves the Plains general partner deems necessary or advisable to provide funds for future operating expenditures.

 


 

all operating expenditures since the closing of Pacific's initial public offering, including the repayment of working capital borrowings, but not the repayment of other borrowings, and including maintenance capital expenditures; and less

 

 

 

 


 

the amount of cash reserves the Pacific general partner deems necessary or advisable to provide funds for future operating expenditures.

Capital surplus is generally generated only by borrowings (other than borrowings for working capital purposes), sales of debt and equity securities and sales or other dispositions of assets for cash (other than inventory, accounts receivable and other assets disposed of in the ordinary course of business).

 

Capital surplus is generally generated only by borrowings (other than borrowings for working capital purposes), sales of debt and equity securities and sales or other dispositions of assets for cash (other than inventory, accounts receivable and other assets disposed of in the ordinary course of business).

To avoid the difficulty of trying to determine whether available cash Plains distributes is from operating surplus or from capital surplus, all available cash Plains distributes from any source will be treated as distributed from operating surplus until the sum of all available cash distributed since the closing date of Plains' initial public offering equals the operating surplus as of the end of the quarter prior to such distribution. Any available cash in excess of such amount (regardless of its source) will be deemed to be from capital surplus and distributed accordingly.

 

To avoid the difficulty of trying to determine whether available cash Pacific distributes is from operating surplus or from capital surplus, all available cash Pacific distributes from any source will be treated as distributed from operating surplus until the sum of all available cash distributed since the closing date of Pacific's initial public offering equals the operating surplus as of the end of the quarter prior to such distribution. Any available cash in excess of such amount (regardless of its source) will be deemed to be from capital surplus and distributed accordingly.

If available cash from capital surplus is distributed in respect of each common unit in an aggregate amount per common unit equal to the initial public offering price of the common units, the distinction between operating surplus and capital surplus will cease, and all distributions of available cash will be treated as if they were from operating surplus. To date there have been no distributions from capital surplus, and Plains does not anticipate that there will be significant distributions from capital surplus.

 

If available cash from capital surplus is distributed in respect of each common unit in an aggregate amount per common unit equal to the initial public offering price of the common units, the distinction between operating surplus and capital surplus will cease, and all distributions of available cash will be treated as if they were from operating surplus. To date there have been no distributions from capital surplus, and Pacific does not anticipate that there will be significant distributions from capital surplus.

131



SUBORDINATION PERIOD

PLAINS

  PACIFIC

Plains has no subordinated units outstanding. Pursuant to the terms of Plains' partnership agreement and having satisfied the financial tests contained therein, in November 2003 25% of the subordinated units converted to common units on a one-for-one basis. In February 2004, all of the remaining subordinated units converted to common units on a one-for-one basis.

 

Pacific currently has 7,848,750 subordinated units outstanding. Accordingly, Pacific is currently in its "subordination period," which generally will not end prior to June 30, 2007. During the subordination period, the common units have the right to receive distributions of available cash from operating surplus in an amount equal to the minimum quarterly distribution of $0.4625 per unit per quarter, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. LB Pacific currently holds all the 7,848,750 outstanding subordinated units.

 

 

Upon expiration of the subordination period, each outstanding subordinated unit will convert into one common unit and will then participate pro rata with the other common units in distributions of available cash. In addition, upon removal of the general partner other than for cause, each subordinated unit will immediately convert into one common unit.

 

 

The subordination period is defined in Pacific's partnership agreement, and will end on the first day of any quarter beginning after June 30, 2007 on which each of the following tests are met:

 

 


 

distributions of available cash from operating surplus on each of the outstanding common units and subordinated units equaled or exceeded the minimum quarterly distribution for each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date;

 

 


 

the adjusted operating surplus generated during each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date equaled or exceeded the sum of the minimum quarterly distributions on all of the outstanding common units and subordinated units during those periods on a fully diluted basis plus the related distribution on the 2% general partner interest during those periods; and

 

 


 

there are no arrearages in payment of the minimum quarterly distribution on the common units.

132



INCENTIVE DISTRIBUTIONS

PLAINS


Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from operating surplus, up to 48%, after the minimum quarterly distribution and the target distribution levels have been achieved. Plains' general partner currently holds the incentive distribution rights, but may transfer these rights separately from its general partner interest, subject to restrictions in the partnership agreement.

For any quarter that Plains distributes available cash from operating surplus to the common unitholders in an amount equal to the minimum quarterly distribution on all units, then Plains will distribute any additional available cash from operating surplus for that quarter among the unitholders, the general partner and the holders of the incentive distribution rights (if other than the general partner) in the following manner:


 

First, 85% to all unitholders, pro rata, 13% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner, until each unitholder receives a total of $0.495 per unit for that quarter (the first target distribution);


 

Second, 75% to all unitholders, pro rata, 23% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner, until each unitholder receives a total of $0.675 per unit for that quarter (the second target distribution); and


 

Thereafter, 50% to all unitholders, pro rata, 48% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner.

Plains is currently making distributions to its general partner at the 50% level.

PACIFIC

Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from operating surplus, up to 48%, after the minimum quarterly distribution and the target distribution levels have been achieved. Pacific's general partner currently holds the incentive distribution rights, but may transfer these rights separately from its general partner interest, subject to restrictions in the partnership agreement.

For any quarter that Pacific distributes available cash from operating surplus on each common unit and subordinated unit in an amount equal to the minimum quarterly distribution plus the amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution, then Pacific will distribute any additional available cash from operating surplus for that quarter among the unitholders, the general partner and the holders of the incentive distributions rights (if other than the general partner) in the following manner:


 

First, 98% to all unitholders, pro rata, and 2% to the general partner, until each unitholder has received a total of $0.5125 per unit for that quarter (the first target distribution) ;


 

Second, 85% to all unitholders, pro rata, and 13% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner, until each unitholder has received a total of $0.5875 per unit for that quarter (the second target distribution);


 

Third, 75% to all unitholders, pro rata, and 23% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner, until each unitholder has received a total of $0.7000 per unit for that quarter (the third target distribution); and


 

Thereafter, 50% to all unitholders, pro rata, and 48% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner.

Pacific is currently making incentive distributions to its general partner at the 15% level.

133



DISTRIBUTIONS OF AVAILABLE CASH FROM OPERATING SURPLUS

PLAINS

  PACIFIC

Currently Plains distributes available cash from operating surplus with respect to any fiscal quarter in the following manner:

 

During the subordination period. Currently Pacific distributes available cash from operating surplus with respect to any fiscal quarter in the following manner:


 

First, 98% to all unitholders, pro rata, and 2% to the general partner, until Plains distributes for each unit an amount equal to the minimum quarterly distribution for that quarter; and

 


 

First, 98% to the common unitholders, pro rata, and 2% to the general partner, until Pacific has distributed for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter;


 

Thereafter, in the manner described in "—Incentive Distributions" above.

The minimum quarterly distribution and the first target distribution are subject to adjustment as described below in "Adjustments to the Minimum Quarterly Distribution and Target Distribution Levels."

 


 

Second, 98% to the common unitholders, pro rata, and 2% to the general partner, until Pacific has distributed for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period;

 

 

 

 


 

Third, 98% to the subordinated unitholders, pro rata, and 2% to the general partner, until Pacific has distributed for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and

 

 

 

 


 

Thereafter, in the manner described in "—Incentive Distributions" above.

 

 

 

 

After the subordination period. After the end of the subordination period, Pacific will distribute available cash from operating surplus with respect to any fiscal quarter in the following manner:

 

 

 

 


 

First, 98% to all unitholders, pro rata, and 2% to the general partner, until Pacific has distributed for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; and

 

 

 

 


 

Thereafter, in the manner described in "—Incentive Distributions" above.

 

 

 

 

The minimum quarterly distribution and the first target distribution are subject to adjustment as described below in "Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels."

134



DISTRIBUTIONS OF AVAILABLE CASH FROM CAPITAL SURPLUS

PLAINS

  PACIFIC

Plains will make distributions of available cash from capital surplus, if any, in the following manner:

 

Pacific will make distributions of available cash from capital surplus, if any, in the following manner:


 

First, 98% to all unitholders, pro rata, and 2% to the general partner, until Plains has distributed, for each common unit that was issued in the initial public offering, an amount of available cash from capital surplus equal to the initial public offering price; and

 


 

First, 98% to all unitholders, pro rata, and 2% to the general partner, until Pacific has distributed for each common unit that was issued in the initial public offering, an amount of available cash from capital surplus equal to the initial public offering price;


 

Thereafter, Plains will make all distributions of available cash from capital surplus as if they were from operating surplus.

 


 

Second, 98% to the common unitholders, pro rata, and 2% to the general partner, until Pacific has distributed for each common unit, an amount of available cash from capital surplus equal to any unpaid arrearages in payment of the minimum quarterly distribution on the common units; and

 

 

 

 


 

Thereafter, Pacific will make all distributions of available cash from capital surplus as if they were from operating surplus.

Plains' partnership agreement treats a distribution of available cash from capital surplus as the repayment of the initial unit price from the initial public offering, which is a return of capital. The initial public offering price less any distributions of capital surplus per unit is referred to as the unrecovered initial unit price. Each time a distribution of capital surplus is made, the minimum quarterly distribution and the target distribution levels will be reduced in the same proportion as the corresponding reduction in the unrecovered initial unit price.

 

Pacific's partnership agreement treats a distribution of available cash from capital surplus as the repayment of the initial unit price from the initial public offering, which is a return of capital. The initial public offering price less any distributions of capital surplus per unit is referred to as the unrecovered initial unit price. Each time a distribution of capital surplus is made, the minimum quarterly distribution and the target distribution levels will be reduced in the same proportion as the corresponding reduction in the unrecovered initial unit price.

Once Plains distributes capital surplus on a unit in an amount equal to the initial unit price, Plains will reduce the minimum quarterly distribution and the target distribution levels to zero and Plains will make all future distributions from operating surplus, with 50% being paid to the holders of units, 48% to the holders of the incentive distribution rights and 2% to the general partner.

 

Once Pacific distributes capital surplus on a unit in an amount equal to the initial unit price, Pacific will reduce the minimum quarterly distribution and the target distribution levels to zero and Pacific will make all future distributions from operating surplus, with 50% being paid to the holders of units, 48% to the holders of the incentive distribution rights and 2% to the general partner.

135



ADJUSTMENT TO THE MINIMUM QUARTERLY DISTRIBUTION
AND TARGET DISTRIBUTION LEVELS

PLAINS

  PACIFIC

In addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus, if Plains combines its units into fewer units or subdivides its units into a greater number of units, Plains will proportionately adjust:

 

In addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus, if Pacific combines its units into fewer units or subdivides its units into a greater number of units, Pacific will proportionately adjust:


 

the minimum quarterly distribution;

 


 

the minimum quarterly distribution;


 

the target distribution levels;

 


 

the target distribution levels;


 

the unrecovered initial unit price; and

 


 

the unrecovered initial unit price;


 

other amounts calculated on a per unit basis.

 


 

the number of common units issuable during the subordination period without a unitholder vote; and

 

 

 

 


 

other amounts calculated on a per unit basis.

For example, if a two-for-one split of the common units should occur, the minimum quarterly distribution, the target distribution levels and the unrecovered initial unit price would each be reduced to 50% of its level immediately prior to the two-for-one split.

 

For example, if a two-for-one split of the common units should occur, the minimum quarterly distribution, the target distribution levels and the unrecovered initial unit price would each be reduced to 50% of its level immediately prior to the two-for-one split.

In addition, if legislation is enacted or if existing law is modified or interpreted by the relevant governmental authority so that Plains becomes taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax purposes, Plains will adjust the minimum quarterly distribution and each of the target distribution levels, respectively, to equal the product obtained by multiplying the amount thereof by one minus the sum of (a) the maximum effective federal income tax rate to which Plains was subject plus (b) any increase in state and local income taxes to which Plains is subject for the taxable year of the event, after adjusting for any allowable deductions for federal income tax purposes for the payment of state and local income taxes. For example, if Plains became subject to a maximum marginal federal, and effective state and local, income tax rate of 38%, then the minimum quarterly distribution and the target distribution levels would each be reduced to 62% of the amount immediately prior to that adjustment.

 

In addition, if legislation is enacted or if existing law is modified or interpreted by the relevant governmental authority so that Pacific becomes taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax purposes, Pacific will adjust the minimum quarterly distribution and each of the target distribution levels, respectively, to equal the product obtained by multiplying the amount thereof by one minus the sum of (a) the maximum effective federal income tax rate to which Pacific was subject plus (b) any increase in state and local income taxes to which Pacific is subject for the taxable year of the event, after adjusting for any allowable deductions for federal income tax purposes for the payment of state and local income taxes. For example, if Pacific became subject to a maximum marginal federal, and effective state and local, income tax rate of 38%, then the minimum quarterly distribution and the target distribution levels would each be reduced to 62% of the amount immediately prior to that adjustment.

136



DISTRIBUTIONS OF CASH UPON LIQUIDATION

PLAINS

  PACIFIC

If Plains dissolves in accordance with its partnership agreement, it will sell or otherwise dispose of its assets in a process called a liquidation. Plains will first apply the proceeds of liquidation to the payment of its creditors. Plains will distribute any remaining proceeds to the unitholders and its general partner in accordance with their capital account balances, as adjusted.

 

If Pacific dissolves in accordance with its partnership agreement, it will sell or otherwise dispose of its assets in a process called a liquidation. Pacific will first apply the proceeds of liquidation to the payment of its creditors. Pacific will distribute any remaining proceeds to the unitholders and its general partner, in accordance with their capital account balances, as adjusted.

The manner of the adjustment is set forth in the partnership agreement. Plains will allocate any gain or unrealized gain attributable to assets distributed in kind, in the following manner:

 

The manner of the adjustment is set forth in the partnership agreement. If Pacific's liquidation occurs before the end of the subordination period, it will allocate any gain or unrealized gain attributable to assets distributed in kind, in the following manner:


 

First, to its general partner and the holders of units who have negative balances in their capital accounts to the extent of and in proportion to those negative balances;

 


 

First, to its general partner and the holders of units who have negative balances in their capital accounts to the extent of and in proportion to those negative balances;


 

Second, 98% to the common unitholders, pro rata, and 2% to the general partner, until the capital account in respect of each outstanding common unit is equal to the sum of:

 


 

Second, 98% to the common unitholders, pro rata, and 2% to the general partner, until the capital account for each outstanding common unit is equal to the sum of:

 

 


 

the unrecovered initial unit price for that common unit; plus

 

 

 


 

the unrecovered initial unit price for that common unit; plus

 

 


 

the amount of the minimum quarterly distribution for the quarter during which liquidation occurs;

 

 

 


 

the amount of the minimum quarterly distribution for the quarter during which the liquidation occurs; plus

 

 

 

 

 

 

 

 


 

any unpaid arrearages in payment of the minimum quarterly distribution on that common unit;


 

Third, 85% to all unitholders, pro rata, and 13% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner, until Plains allocates under this paragraph an amount per unit equal to

 


 

Third, 98% to the subordinated unitholders, pro rata, and 2% to the general partner, until the capital account for each outstanding subordinated unit is equal to the sum of:

 

 

the sum of:

 

 

 


 

the unrecovered initial unit price on that subordinated unit; plus

 

 


 

the sum of the excess of the first target

 

 

 


 

the amount of the minimum quarterly

 

 

 

 

distribution per unit over the minimum

 

 

 

 

 

distribution for the quarter during which

 

 

 

 

quarterly distribution per unit for each

 

 

 

 

 

the liquidation occurs;

 

 

 

 

quarter of Plains' existence; less

 

 

 

 

 

 
                     

137



 

 







 

the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that was distributed 85% to the unitholders, pro rata, 13% to the holders of the incentive distribution rights, and 2% to the general partner for each quarter of Plains' existence (collectively, the first target distribution amount");


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Fourth, 75% to all unitholders, pro rata, 23% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner until the capital account in respect of each common unit then outstanding is equal to the sum of:

 


 

Fourth, 98% to all unitholders, pro rata, and 2% to the general partner, pro rata, until Pacific allocates under this paragraph an amount per unit equal to:

 

 


 

the sum of the excess of the second target distribution per unit over the first target distribution per unit for each quarter of Plains' existence; less

 

 

 


 

the sum of the excess of the first target distribution per unit over the minimum quarterly distribution per unit for each quarter of Pacific's existence; less

 

 


 

the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that was distributed 75% to the unitholders, pro rata, 23% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner for each quarter of Plains' existence; and

 

 

 


 

the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that was distributed 98% to the unitholders, pro rata, and 2% to the general partner for each quarter of Pacific's existence;


 

Thereafter, any remaining amount 50% to all unitholders, pro rata, 48% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner.

 


 

Fifth, 85% to all unitholders, pro rata, and 13% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner, until Pacific allocates under this paragraph an amount per unit equal to:

Upon Plains' liquidation, Plains will allocate any loss to the general partner and each unitholder as follows:

 

 

 


 

the sum of the excess of the second target distribution per unit over the first target distribution per unit for each quarter of Pacific's existence; less
                     

138




 

First, 98% to the holders of common units who have positive balances in their capital accounts in proportion to those positive balances and 2% to the general partner, until the capital accounts of the common unitholders have been reduced to zero; and

 

 

 


 

the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that was distributed 98% to the unitholders, pro rata, and 2% to the general partner for each quarter of Pacific's existence;


 

Thereafter, 100% to the general partner.

 


 

Sixth, 75% to all unitholders, pro rata, 23% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner, until Pacific allocates under this paragraph an amount per unit equal to:

 

 

In addition, interim adjustments to capital accounts will be made at the time Plains issues additional partnership interests or makes distributions of property. These adjustments will be based on the fair market value of the

 

 

 


 

the sum of the excess of the third target distribution per unit over the second target distribution per unit for each quarter of Pacific's existence; less
    interests or the property distributed and any gain or loss would be allocated to the unitholders and the general partner in the same way that a gain or loss is allocated upon liquidation. If positive interim adjustments are made to the capital accounts, any subsequent negative adjustments to the capital accounts resulting from the issuance of additional interests, distributions of property, or upon liquidation, will be allocated in a way that, to         the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the second target distribution per unit that was distributed 75% to the unitholders, pro rata, and 23% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner for each quarter of Pacific's existence; and
    the extent possible, in the capital account balances of the general partner equaling the amount which would have been the general partner's capital account balances if no prior positive adjustments to the capital accounts had been made.     Thereafter, 50% to all unitholders, pro rata, 48% to the holders of the incentive distribution rights, pro rata, and 2% to the general partner. If the liquidation occurs after the end of the subordination period, the distinction between common units and subordinated units will disappear, so that clause (3) of the second bullet point above and all of the third bullet point above will no longer be applicable.

 

 

 

 

 

 

 

 

Upon Pacific's liquidation, Pacific will allocate any loss to the general partner and each unitholder as follows:

 

 

 

 

 

 


 

First, 98% to holders of subordinated units, pro rata, and 2% to the general partner, until the capital accounts of the holders of the subordinated units have been reduced to zero;
                     

139



 

 

 

 

 

 


 

Second, 98% to the holders of common units, pro rata, and 2% to the general partner, until the capital accounts of the common unitholders have been reduced to zero; and

 

 

 

 

 

 


 

Thereafter, 100% to the general partner.

 

 

 

 

 

 

If the liquidation occurs after the end of the subordination period, the distinction between common units and subordinated units will disappear, so that all of the first bullet point above will no longer be applicable.

 

 

 

 

 

 

In addition, interim adjustments to capital account will be made upon the issuance of additional units. In doing so, Pacific will allocate any unrealized gain and, for tax purposes, unrecognized gain or loss resulting from the adjustments to the unitholders and the general partner in the same manner as Pacific will allocate gain or loss upon liquidation. If Pacific makes positive adjustments to the capital accounts upon the issuance of additional units, Pacific will allocate any later negative adjustments to the capital accounts resulting from the issuance of additional units or upon liquidation in a manner which results, to the extent possible, in the general partner's capital account balance equaling the amount which it would have been if no earlier positive adjustments to the capital accounts had been made.


MERGER/CONSOLIDATION

PLAINS

  PACIFIC

Merger or consolidation of Plains requires the prior approval of Plains' general partner. The general partner must also approve the merger agreement, which must include certain information as set forth in Plains' partnership agreement. Once approved by the general partner, the merger agreement must be submitted to a vote of Plains' limited partners, and the merger agreement will be approved upon receipt of the affirmative vote of a majority of Plains' outstanding common units (unless the affirmative vote of the holders of a greater percentage of common units is required under Delaware law).

 

Merger or consolidation of Pacific requires the prior approval of Pacific's general partner. The general partner must also approve the merger agreement, which must include certain information as set forth in Pacific's partnership agreement. Once approved by the general partner, the merger agreement must be submitted to a vote of Pacific limited partners, and the merger agreement will be approved upon receipt of the affirmative vote of a majority of Pacific's outstanding common units (unless the affirmative vote of the holders of a greater percentage of common units is required under Delaware law and excluding common units held by the general partner and its affiliates) and a majority of Pacific's outstanding subordinated units, voting as separate classes.

140



DISPOSAL OF ASSETS

PLAINS

  PACIFIC

Plains' general partner may not sell, exchange or otherwise dispose of all or substantially all of Plains' assets in a single transaction or a series of related transactions or approve on behalf of Plains, the sale, exchange or other disposition of all or substantially all the assets of Plains without the approval of a majority of Plains' outstanding units. However, Plains' general partner may mortgage, pledge, hypothecate or grant a security interest in all or substantially all of Plains' assets without that approval. In addition, the general partner may sell any or all of Plains' assets in a forced sale pursuant to the foreclosure or other realization of any encumbrance without the approval of Plains' unitholders.

 

Pacific's general partner may not sell, exchange or otherwise dispose of all or substantially all of Pacific's assets in a single transaction or a series of related transactions or approve on behalf of Pacific, the sale, exchange or other disposition of all or substantially all of the Pacific's assets without the approval of a majority of Pacific's outstanding common units and a majority of Pacific's outstanding subordinated units, voting as separate classes. However, Pacific's general partner may mortgage, pledge, hypothecate or grant a security interest in all or substantially all of Pacific's assets without that approval. In addition, the general partner may sell all or substantially all of Pacific's assets in a forced sale pursuant to the foreclosure or other realization of any encumbrance without the approval of Pacific's unitholders.


TRANSFER OF GENERAL PARTNER INTEREST

PLAINS

  PACIFIC

Prior to December 31, 2008, Plains' general partner may not transfer all or any part of its general partner interest in Plains unless such transfer (a) has been approved by the prior written consent or vote of at least a majority of the outstanding common units (excluding any common units held by the general partner and its affiliates) or (b) is of all, but not less than all, of its general partner interest to (i) an affiliate of the general partner or (ii) another person in connection with the merger or consolidation of the general partner with or into another person or the transfer by the general partner of all or substantially all of its assets to another person.

 

Prior to June 30, 2012, Pacific's general partner may not transfer all or any part of its general partner interest in Pacific unless such transfer (a) has been approved by the prior written consent or vote of at least a majority of the outstanding common units (excluding any common units held by the general partner and its affiliates) or (b) is of all, but not less than all, of its general partner interest to (i) an affiliate of the general partner or (ii) another person in connection with the merger or consolidation of the general partner with or into another person or the transfer by the general partner of all or substantially all of its assets to another person.

On or after December 31, 2008, Plains' general partner may transfer all or any part of its general partner interest in Plains without unitholder approval.

 

On or after June 30, 2012, Pacific's general partner may transfer all or any part of its general partner interest in Pacific without unitholder approval.

141



WITHDRAWAL OF GENERAL PARTNER

PLAINS

  PACIFIC

Plains' general partner has agreed not to withdraw voluntarily as general partner prior to December 31, 2008, without first providing 90 days' written notice and obtaining the approval of the holders of a majority of Plains' outstanding common units, excluding those held by the general partner and its affiliates, and furnishing an opinion of counsel stating that such withdrawal (following the selection of the successor general partner) would not result in the loss of the limited liability of any of Plains' limited partners or of a member of Plains' operating partnerships or cause Plains or its operating partnerships to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes.

 

Pacific's general partner has agreed not to withdraw voluntarily as general partner prior to June 30, 2012, without first providing 90 days' written notice and obtaining the approval of the holders of a majority of Pacific's outstanding common units, excluding those held by the general partner and its affiliates, and furnishing an opinion of counsel stating that such withdrawal (following the selection of the successor general partner) would not result in the loss of the limited liability of any of Pacific's limited partners or of a member of Pacific's operating company or cause Pacific or its operating com