Background

A. Consolidation of Proceedings

Pacific Pipeline and Pacific Terminals are regulated public utilities subject to the jurisdiction of this Commission. Commission rules require that each public utility seeking approval for a change of control file a separate application. Accordingly, Pacific Pipeline and Pacific Terminals each filed an application. Except for the descriptions of the respective utilities, the applications are identical and ask for approval of the same transaction. On July 10, 2006 the assigned Administrative Law Judge (ALJ) granted applicants' motion to consolidate the proceedings pursuant to Commission Rule 55.

B. The Seller

Both Pacific Pipeline and Pacific Terminals are owned 100% by Pacific Energy Group LLC, a Delaware limited liability company, which is in turn owned 100% by Pacific Energy, a Delaware limited partnership. Pacific Energy is a master limited partnership that is publicly traded on the New York Stock Exchange, under the trading symbol PPX. Its sole general partner is Pacific Energy GP, LP (Pacific Energy GP), a Delaware limited partnership that holds a 2% general partnership interest. The 98% limited partnership interest of Pacific Energy is represented by common and subordinated units. LB Pacific owns all 7,848,750 of the subordinated units, which constitute approximately 19.9% of the outstanding limited partner interests of Pacific Energy and 2,612,250 of the common units, which constitute approximately 6.65% of the outstanding limited partner interests of Pacific Energy. The remaining outstanding common units, which constitute approximately 73.38% of the outstanding limited partner interests of Pacific Energy, are owned by public unit holders.¹ LB Pacific also owns all the general and limited partnership interests in Pacific Energy GP.

The controlling interest in LB Pacific is held by entities and investment funds under the control of Lehman Brothers Merchant Banking Group, which is part of the Private Equity Division of Lehman Brothers, a global financial institution. Through the chain of interests described above, LB Pacific effectively controls both Pacific Pipeline and Pacific Terminals.

C. The Buyer

Plains is a Delaware limited partnership with its principal place of business in Houston, Texas. Through its operating subsidiaries, it engages in the business of gathering, transporting, marketing and storing crude oil, liquefied natural gas, and other petroleum products. It is one of the largest mid-stream crude oil companies in North America operating more than 15,000 miles of pipeline as well as terminals and related facilities. More than 3 million barrels of crude oil pass through its network every day.

¹ Under the terms of Pacific Energy's limited partnership agreement, subordinated units are converted to common units in Pacific Energy upon the occurrence of certain specified events. Effective June 30, 2006, pursuant to the terms of the Limited Partnership Agreement, 2,616,250 of Pacific Energy's subordinated units held by LB Pacific were converted to the common units referenced in the main text.