<PAGE>

                                                                    EXHIBIT 10.1

                             TAX SHARING AGREEMENT
                          By and Among BP America Inc.
                          and Affiliated Corporations



                         Dated Effective April 18, 2000

<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C>   <S>                                                                                                       <C>
 1.   DEFINITIONS............................................................................................   2
 2.   SCOPE AND COOPERATION..................................................................................   8
 3.   FILING OF RETURNS......................................................................................   9
 4.   PRO FORMA VRI RETURN; VRI PRO FORMA STATEMENT; PRO FORMA STATE RETURN..................................   9
 5.   PAYMENTS BY VRI........................................................................................   9
 6.   PAYMENTS TO VRI........................................................................................   9
 7.   USE OF ATTRIBUTES; ADDITIONAL RIGHTS AND OBLIGATIONS UPON DECONSOLIDATION..............................   9
 8.   ADJUSTMENTS............................................................................................   9
 9.   REMITTANCES BY AND TO VRI..............................................................................   9
10.   CARRYBACK AND CARRYFORWARDS............................................................................   9
11.   ALLOCATION OF BPA GROUP CONSOLIDATED TAX LIABILITY FOR PURPOSES OF DETERMINING EARNINGS AND PROFITS....   9
12.   BPA CONTROL OF CONDUCT OF AUDITS, LITIGATION; EXPENSES.................................................   9
13.   INDEMNIFICATION FOR CERTAIN INCOME TAXES...............................................................   9
14.   PARTNERSHIP INTERESTS..................................................................................   9
15.   LIMITATIONS ON CERTAIN PRO FORMA VRI RETURN DEDUCTIONS.................................................   9
16.   ADMINISTRATION; RESOLUTION OF DISPUTES.................................................................   9
17.   INTERPRETATION.........................................................................................   9
18.   EFFECT OF AGREEMENT....................................................................................   9
19.   TERM...................................................................................................   9
20.   ASSIGNMENT.............................................................................................   9
21.   CONFIDENTIALITY........................................................................................   9
</TABLE>

                                       i
<PAGE>

<TABLE>
<CAPTION>
<C>   <S>                                                                                                       <C>
22.   DOCUMENTATION..........................................................................................   9
23.   ADDITIONAL MEMBERS.....................................................................................   9
24.   TAX LAW CHANGES........................................................................................   9
25.   SUCCESSORS AND ASSIGNS.................................................................................   9
28.   COUNTERPARTS...........................................................................................   9
29.   HEADINGS...............................................................................................   9
30.   SEVERABILITY...........................................................................................   9
31.   ENTIRE AGREEMENT.......................................................................................   9
32.   CONFLICTS BETWEEN THIS AGREEMENT AND THE STOCK PURCHASE AGREEMENT......................................   9
33.   NOTICES................................................................................................   9
34.   GOVERNING LAW..........................................................................................   9
</TABLE>

                                       ii
<PAGE>

                             TAX SHARING AGREEMENT

   This TAX SHARING AGREEMENT is made and entered into as of the Effective Date,
by and among BP AMERICA INC., a Delaware corporation ("BPA"), as Common Parent,
VASTAR RESOURCES, INC., a Delaware corporation ("VRI"), and the Subsidiaries (as
hereinafter defined) of VRI that are signatories hereto.

   WHEREAS, BPA is the Common Parent of the BPA Group, which includes the VRI
Group, and files a Consolidated Return for the BPA Group;

   WHEREAS, VRI would be the Common Parent of an Affiliated Group comprised of
VRI and its Subsidiaries if it were not a Subsidiary of BPA;

   WHEREAS, certain state and local consolidated, combined or unitary income or
franchise tax returns shall be filed for various Members or for the BPA Group;

   WHEREAS, VRI and Atlantic Richfield Company, a Delaware corporation ("ARCO")
had previously entered into a tax sharing agreement dated as of October 1, 1993,
as amended as of June 1, 1995, January 1, 1997 and October 30, 1998 (such
agreement, as amended, the "Prior Agreement"), which agreement shall apply to
all Taxable Years (as that term is defined in the Prior Agreement) beginning
prior to the Effective Date;

   WHEREAS, the parties hereto wish to provide for the sharing of the BPA Group
Consolidated Tax Liability and the state and local income and franchise tax
liabilities relating to such consolidated, combined or unitary returns and
certain other matters relating to the inclusion of the VRI Group in the BPA
Group; and
<PAGE>

   WHEREAS, VRI and its Subsidiaries desire to be indemnified by BPA with
respect to certain income tax liabilities, and BPA is willing to so indemnify
VRI and each of the Subsidiaries of the VRI Group.

   NOW, THEREFORE, in consideration of the premises and of the mutual covenants
and agreements contained herein, the parties hereto agree as follows:

1. Definitions.

     The following terms as used in this Agreement, shall have the meanings set
forth below:

(a)  Actual Basis shall have the meaning attributed to that term in Section 7(b)
     of this Agreement.

(b)  Affiliated Group shall have the meaning attributed to that term in section
     1504(a) of the Code.

(c)  Agreement shall mean this Tax Sharing Agreement, as amended from time to
     time.

(d)  Benchmark amount shall have the meaning attributed to that term in Section
     4(h)(x) of this Agreement.

(e)  BPA Group, as of any particular date, shall mean the Affiliated Group of
     which BPA (or any successor thereto) is the Common Parent as of such date.

(f)  BPA Group Consolidated Tax Liability shall mean the consolidated federal
     income tax liability of the BPA Group for any Taxable Year for which the
     BPA Group files a Consolidated Return.

(g)  Calculated Basis shall have the meaning attributed to that term in Section
     7(b) of this Agreement.

                                       2
<PAGE>

(h)  Code shall mean the Internal Revenue Code of 1986, as amended, and shall
     include corresponding provisions of any subsequently enacted federal tax
     laws.

(i)  Common Parent shall have the meaning of that term as it is used in the
     Consolidated Return Regulations.

(j)  Completion, for any Taxable Year of the BPA Group, shall mean the date on
     which the Pro Forma VRI Tax Return (or, if applicable, any Pro Forma State
     Return) for such Taxable Year is delivered to BPA pursuant to Section 4 of
     this Agreement.

(k)  Consolidated Return, for any Taxable Year of the BPA Group, shall mean a
     consolidated federal income tax return filed pursuant to section 1501 of
     the Code by the Common Parent for such Taxable Year.

(l)  Consolidated Return Regulations shall mean Income Tax Regulations sections
     1.1502-1 through 1.1502-100 (26 C.F.R.), as amended from time to time.

(m)  Conveyance Agreement shall mean that certain General Conveyance and
     Assumption Agreement, dated as of October 8, 1993, between ARCO and VRI.

(n)  Designated Credit shall mean (i) in the case of income tax credits
     described in section 29 of the Code ("section 29 credits") that do not
     constitute Refundable Designated Credits, as defined below, the product of
     the amount of such credits multiplied by 96.75% (or by 100%  in the event
     that VRI has made a Section 4(h)(iv)(B) Election to receive payment for
     such credits, solely for purposes of calculating the amount of such
     payment), (ii) Refundable Designated Credits and (iii) income tax credits
     described in section 43 of the Code ("section 43 credits"), provided that
     all of such credits are generated by any member of the VRI Group (1) in the
     ordinary course of its  trade or business of exploration, development,
     production and marketing of

                                       3
<PAGE>

     natural resources and (2) from interests in properties that are acquired by
     any Member of the VRI Group in the ordinary course of its trade or
     business. All determinations of whether a Designated Credit was generated
     or whether a property was acquired by a Member of the VRI Group in the
     ordinary course of its trade or business shall be made by BPA in its sole
     and absolute discretion. Upon request from BPA, VRI shall provide
     certifications relating to the facts associated with the generation or
     acquisition of such credits and shall furnish such additional data or
     information as BPA may require in order to make such determinations.

(o)  Discount Factor shall have the meaning attributed to that term in Section
     4(h)(iv)(B) of this Agreement.

(p)  Eligible Credits shall have the meaning attributed to that term in Section
     4(h)(iv)(B) of this Agreement.

(q)  Eligible Refundable Designated Credit shall have the meaning attributed to
     that term in Section 4(h)(iii) of this Agreement.

(r)  Effective Date shall mean April 18, 2000.

(s)  Exchange Agreement shall mean that certain exchange agreement dated as of
     August 4, 1998 by and among Mobil Exploration & Producing US, Inc., as
     agent for Mobil Oil Exploration & Producing Southeast Inc. and Mobil Texas
     & New Mexico Inc., and Western Midway Company."

(t)  Final Determination shall mean with respect to any issue or item (i) the
     execution of a final and irrevocable closing agreement or other settlement
     agreement with the Service (as hereinafter defined) or the relevant state
     or local taxing authorities, (ii) the expiration of the time for filing a
     claim for refund or, if a refund claim has been

                                       4
<PAGE>

     timely filed, the expiration of the time for instigating suit in respect of
     such refund claim, (iii) the expiration of the time for filing a petition
     with the Tax Court or the relevant state or local tribunal if no such
     petition has been filed and no suit has been instigated in respect of the
     subject matter of such petition, or (iv) a final, unappealable decision of
     any court of competent jurisdiction.

(u)  Includible Corporation shall have the meaning attributed to that term in
     section 1504(b) of the Code.

(v)  Income Tax Regulations shall mean the regulations (26 C.F.R.), as amended
     from time to time, promulgated pursuant to the Code.

(w)  Member, for any Taxable Year of the BPA Group, shall mean any corporation
     (or any predecessor or successor in interest to such corporation under
     section 381 of the Code or otherwise which was or is an Includible
     Corporation) which at any time during such Taxable Year is an Includible
     Corporation that is included in the BPA Group and shall include any such
     corporation which at any time during such Taxable Year is the Common
     Parent.

(x)  New property shall have the meaning attributed to that term in Section
     4(h)(iii) of this Agreement.

(y)  Prior Agreement shall have the meaning attributed to that term in the
     preamble to this Agreement

(z)  Pro Forma State Return shall have the meaning attributed to that term in
     Section 4(i) of this Agreement.

(aa) Pro Forma VRI Return shall have the meaning attributed to that term in
     Section 4(a) of this Agreement.

                                       5
<PAGE>

(bb) Reconciliation Statement shall have the meaning attributed to that term in
     Section 4(d) of this Agreement.

(cc) Redetermined Basis shall have the meaning attributed to that term in
     Section 7(b) of this Agreement.

(dd) Refundable Designated Credit shall have the meaning attributed to that term
     in Section 4(h)(iii) of this Agreement.

(ee) Section 4(h)(iv)(B) Election shall have the meaning attributed to that term
     in Section 4(h)(iv)(B) of this Agreement.

(ff) Service shall mean the Internal Revenue Service.

(gg) Stock Purchase Agreement shall mean that certain stock purchase agreement
     dated as of August 4, 1998 between ARCO and VRI.

(hh) Subsidiary shall mean as to any entity (the parent corporation) a
     corporation that would be an Includible Corporation in an Affiliated Group
     of which the parent corporation would be the Common Parent.

(ii) Taxable Year shall mean any taxable year or portion thereof beginning on or
     after the Effective Date, with respect to which a Consolidated Return is
     filed on behalf of the BPA Group which includes VRI (or any successor
     corporation) or (in the case of any consolidated, combined or unitary state
     or local return) any such taxable year with respect to which a
     consolidated, combined or unitary state or local income tax return is filed
     by BPA or any Subsidiary of BPA (other than VRI or any Subsidiary of VRI)
     which includes VRI or any Subsidiary of VRI; provided, however, that if VRI
     or a Subsidiary of VRI is included in the BPA Group for only a portion of a
     Taxable Year of the BPA Group, the "Taxable Year" with respect to VRI or
     such Subsidiary shall include only that

                                       6
<PAGE>

     portion of the Taxable Year in which VRI or such Subsidiary is included in
     the BPA Group.

(jj) VRI Group shall mean VRI and those present and future corporations that
     would be considered Includible Corporations of an Affiliated Group of which
     VRI would be the Common Parent if it were not includible in the BPA Group.

(kk) VRI Group Consolidated Tax Liability shall for any Taxable Year mean the
     consolidated federal income tax liability imposed under sections 11, 55 and
     59A of the Code or any successor provisions thereto, determined on the
     basis of the Pro Forma VRI Return, as adjusted by BPA pursuant to this
     Agreement.  In making such computation for any such Taxable Year, such
     liability shall be determined:

     (i)  on the basis of the highest rate of corporate tax in effect for such
          taxable year under section 11 of the Code, as though such rate were
          the only income tax rate in effect for such Taxable Year,

     (ii) on the assumption that the "exemption amount" specified in section 55
          of the Code for such Taxable Year is zero, and

     (iii)  on the further assumption that the amount specified in section
            59A(a)(2) of the Code for such Taxable Year is zero.

(ll) VRI Group State and Local Tax Liability, for a Taxable Year, shall mean the
     aggregate state and local income tax liability and franchise tax liability
     with respect to franchise taxes that are based upon or measured by income
     (all such taxes are referred to herein as income taxes) with respect to
     each relevant state or local taxing jurisdiction for any Taxable Year for
     which VRI and/or any Subsidiary of VRI participates with BPA and/or any
     Subsidiary of BPA (other than VRI or any of its Subsidiaries) in the filing
     of a

                                       7
<PAGE>

     consolidated, combined or unitary state or local income tax return or
     report with such jurisdiction computed in a manner consistent with the
     steps taken in the computation of the VRI Group Consolidated Tax Liability
     that VRI and/or any of its Subsidiaries would have incurred with respect to
     each such jurisdiction for such Taxable Year if VRI and/or any such
     Subsidiary had filed with each such jurisdiction either a separate return
     (in a case where only one Member of the VRI Group joins in the filing of
     such consolidated, combined or unitary return) or a consolidated, combined
     or unitary return (in a case where more than one Member of the VRI Group
     joins in the filing of such consolidated, combined or unitary return)
     including only those Members of the VRI Group actually joining in such
     consolidated, combined or unitary return.

(mm) VRI Pro Forma Statement shall have the meaning attributed to that term in
     Section 4(e) of this Agreement.

2.  Scope and Cooperation.

(a)  Scope.  This Agreement relates solely to (i) federal income tax liabilities
     and (ii) income tax liabilities with respect to certain state and local
     jurisdictions in which VRI and/or any Subsidiary of VRI participates with
     BPA or any Subsidiary of BPA (other than VRI or any of its Subsidiaries) in
     the filing of a consolidated, combined or unitary return.  Under this
     Agreement, the VRI Group will, with certain modifications set forth in this
     Agreement, compute its tax liability as if the VRI Group was not part of
     the BPA Group.  However, so long as VRI or any Subsidiary of VRI is a
     Member of the BPA Group, the VRI Group is obligated to provide information
     and make payments of the VRI Group Consolidated Tax Liability and the VRI
     Group State and Local Tax Liability to BPA, and is subject to the standards
     and control of BPA in preparing and filing the

                                       8
<PAGE>

     Consolidated Return (and any applicable state or local consolidated,
     combined or unitary returns).

(b)  Cooperation.  BPA and VRI shall cooperate, and each shall cause its
     respective Subsidiaries to cooperate, fully in the implementation of this
     Agreement on a consolidated basis, including but not limited to, providing
     promptly to the requesting party such assistance and documentation (at the
     expense of the providing party if related to any Taxable Year) as may be
     requested by such party in connection with the preparation or filing of the
     Consolidated Return (and any applicable state or local consolidated,
     combined or unitary returns), audit or other examination, or judicial or
     administrative proceeding or determination relating thereto.

3.  Filing of Returns.

(a)  Appointment of BPA as Agent For Consolidated Return.  VRI and each of its
     Subsidiaries hereby appoint BPA as their agent, with respect to all periods
     during which VRI or such Subsidiary, as the case may be, is a Member of the
     BPA Group, for the purpose of filing the Consolidated Return and for making
     any election or application or taking any action in connection therewith on
     behalf  of VRI and such Subsidiary.  Nothing herein shall be construed as
     requiring  BPA to file a Consolidated Return for any Taxable Year;
     provided, however, that if BPA decides not to file a Consolidated Return it
     shall notify VRI in writing within a period reasonably sufficient to permit
     VRI to file timely returns for Members of the VRI Group.

(b)  BPA Control Over Consolidated Return.  BPA shall prepare and file, or cause
     to be prepared and filed, the Consolidated Return and any other documents
     or statements required to be filed with the Service that pertain to the
     determination of the

                                       9
<PAGE>

     BPA Group Consolidated Tax Liability for each Taxable Year of the BPA
     Group. In its sole and absolute discretion, BPA shall have the right with
     respect to any Consolidated Return that it has filed or will file to
     determine (regardless of the manner in which an item or matter may have
     been reported by VRI on a Pro Forma VRI Return):

     (i)  the manner in which such Consolidated Return, as well as any other
     documents or statements incidental or related thereto, shall be prepared
     and filed, including without limitation, the manner in which any item of
     income, gain, loss, deduction, expense or credit of VRI or any Subsidiary
     of VRI shall be reported therein or thereon;

     (ii) whether any extensions with respect to any Consolidated Return will be
     requested;

     (iii) the elections that will be made in any such Consolidated Return by
     any Member, including without limitation, elections by VRI or any
     Subsidiary of VRI;

     (iv) whether to file an amended Consolidated Return and to prosecute,
     compromise or settle any claim for refund set forth therein; and

     (v) whether any refunds to which the BPA Group may be entitled shall be
     paid by way of cash refund or credited against the BPA Group Consolidated
     Tax Liability for any Taxable Year or Taxable Years of the BPA Group.

     VRI and each Subsidiary of VRI hereby irrevocably appoints BPA as its agent
     and attorney-in-fact to take any action (including the execution of
     documents) as BPA may deem appropriate to effect the foregoing.  Nothing
     contained in this

                                       10
<PAGE>

     Agreement shall limit BPA's discretion to determine the manner in which any
     item shall be reported on the Consolidated Return.

(c)  Appointment of BPA as Agent for Certain Consolidated, Combined or Unitary
     State and Local Returns.  VRI and each Subsidiary of VRI hereby appoint BPA
     as its agent, with respect to all periods during which VRI or such
     Subsidiary, as the case may be, is a Member of the BPA Group, for the
     purpose of filing any consolidated, combined or unitary state or local
     income tax returns that include any Member of the VRI Group that BPA (or
     any Subsidiary of BPA, other than VRI or any of its Subsidiaries) may elect
     to file, and for making any election or application or taking any action in
     connection therewith on behalf of VRI and such Subsidiary.  VRI and each of
     its Subsidiaries hereby consent to the filing of such returns, and to the
     making of such elections and applications.  Nothing contained in the
     Agreement shall be construed as requiring BPA or any Subsidiary of BPA to
     file consolidated, combined or unitary state or local income tax returns on
     behalf of VRI or any Subsidiary of VRI for any Taxable Year.  BPA shall in
     its sole and absolute discretion determine whether and with respect to
     which jurisdictions VRI or any of its Subsidiaries shall participate in the
     filing of any consolidated, combined or unitary state or local returns with
     BPA or any Subsidiary of BPA (other than VRI or any Member of the VRI
     Group); provided, however, that if BPA or any Subsidiary of BPA decides not
     to file a consolidated, combined or unitary state or local return  with VRI
     or any of its Subsidiaries, BPA shall notify VRI in writing within a period
     reasonably sufficient to permit VRI to file or cause to be filed timely
     returns for VRI or any of its Subsidiaries.

                                       11
<PAGE>

(d)  Other Returns.  VRI and its Subsidiaries shall be solely responsible for
     filing all tax returns not described in subsections (b) and (c) of this
     Section 3 and that relate solely to VRI and/or its Subsidiaries.

(e)  Assistance and Responsibility for Support of Returns; Provision of
     Financial Data.  VRI and its Subsidiaries shall assist BPA in the filing,
     to the extent permitted by law, of a Consolidated Return and such
     consolidated, combined or unitary income tax returns for Members of the BPA
     Group (including the VRI Group) as BPA elects to file or cause to be filed,
     by maintaining such books and records and providing such information as may
     be necessary or useful in the filing of such returns and executing any
     documents and taking any actions which BPA may reasonably request in
     connection therewith, including without limitation,  maintaining adequate
     programs for the compilation and review of financial data; the review of
     transactions and accounting methods; and the preparation of returns and of
     supporting documentation to assure that such returns and all related
     reports and schedules are complete and accurate.  VRI shall, at its own
     expense, provide BPA with all information required by BPA to reflect
     completely and accurately the financial results of the VRI Group in the BPA
     Group's Consolidated Return (or a state and local consolidated, combined or
     unitary return that includes a Member of the VRI Group).  Such information
     shall be in such form as determined by BPA from time to time and shall be
     delivered to BPA on a mutually agreed upon date, but in no event later than
     60 days prior to the due date of the BPA Group's Consolidated Return
     (taking into account any extensions thereof that have been granted to BPA)
     or the corresponding due date with respect to an applicable state and local
     consolidated, combined or unitary return.  VRI shall, at its own expense,

                                       12
<PAGE>

     maintain sufficient books, records and expertise to support all returns,
     positions taken thereon and methods used to prepare such returns until
     there has been a Final Determination with respect to all issues included on
     such returns.  BPA and VRI shall provide one another with such other
     information concerning such returns and the application of payments made
     under this Agreement as BPA or VRI may reasonably request of one another.
     BPA shall timely provide any applicable tax projection information
     previously prepared by BPA to VRI upon VRI's reasonable request to assist
     VRI with its budget and planning processes and with making any decisions
     required or allowed under Section 4(h)(iv)(B) of this Agreement.  For each
     Taxable Year ending on or before December 31, 2002, BPA shall also provide
     VRI with sufficient data so that VRI may determine the amount of Designated
     Credits (and other credits that would be treated as Designated Credits if
     such credits were generated by a member of the VRI Group) that were
     actually used on the BPA Group's Consolidated Return for such Taxable Year.

4.  Pro Forma VRI Return; VRI Pro Forma Statement; Pro Forma State Return.

(a)  Initial Preparation of Pro Forma VRI Return.  For 2000 and each Taxable
     Year thereafter for which a Consolidated Return is filed and VRI or any
     Subsidiary of VRI is a Member of the BPA Group, VRI shall prepare on behalf
     of the VRI Group a pro forma consolidated federal income tax return as the
     Common Parent of the VRI Group (the "Pro Forma VRI Return") covering that
     portion of the Taxable Year in which the VRI Group is included in the BPA
     Group.  The Pro Forma VRI Return shall be complete and accurate, and shall
     be in such form and include such information as shall be determined from
     time to time by BPA.  The Pro Forma VRI Return shall be prepared in

                                       13
<PAGE>

     accordance with subsections (b), (c) and (h) of this Section 4 and shall
     report the consolidated federal taxable income (including, for all purposes
     of this Agreement, alternative minimum taxable income) for such Taxable
     Year that the VRI Group would have reported if it had not been included in
     the Consolidated Return filed for the BPA Group with respect to such
     Taxable Year and all prior Pro Forma VRI Returns had been actual returns;
     provided, however, that, except as provided in Section 4(h) and Section
     8(b), the Pro Forma VRI Return shall not reflect carryovers or carrybacks
     of net operating losses, net capital losses, excess tax credits or other
     tax  attributes from prior or subsequent taxable years.  The provisions of
     the Code that require consolidated calculations, including without
     limitation, sections 861, 1201-1212 and 1231, shall be applied separately
     to the VRI Group.  The elections made and the positions taken by VRI on the
     Pro Forma VRI Return shall be consistent with those described on the VRI
     Pro Forma Statement, as adjusted pursuant to subsection (f) of this Section
     4, and the Pro Forma VRI Return shall not reflect items of income,
     deduction, loss, gain or credit other than those reflected on the relevant
     portion of the BPA Group's Consolidated Return or the VRI Pro Forma
     Statement, as adjusted pursuant to subsection (f) of this Section 4.  The
     Pro Forma VRI Return shall include gains and losses with respect to
     deferred intercompany transactions if, and only if, and to the extent that,
     such gains or losses are actually restored and reflected on the BPA Group's
     Consolidated Return.  For purposes of the Pro Forma VRI Return, the tax
     basis of each of the assets contributed from  ARCO  to VRI pursuant to the
     Conveyance Agreement immediately after such contribution shall be the same
     as the tax basis of each such asset in the hands of ARCO  immediately prior
     to such contribution.

                                       14
<PAGE>

(b)  Standards For Positions Taken on Pro Forma VRI Return.  VRI shall prepare
     the Pro Forma VRI Return by reporting the tax treatment of any item by
     utilizing such positions that, in VRI's discretion, are appropriate for the
     VRI Group; provided, that each position is more likely than not to be
     ultimately sustained.  VRI may utilize a position on the Pro Forma VRI
     Return that does not meet this standard but that does have a reasonable
     basis in law and in fact; but only if VRI has obtained, after prior notice
     to and consultation with BPA, BPA's written consent to utilize such
     position on the BPA Group's Consolidated Return for such Taxable Year.
     Each proposal by VRI to BPA to consent to a position on the basis that it
     has a reasonable basis in law or in fact must include, if requested by BPA,
     a written confirmation described in the first sentence of Section 4(f),
     below.  VRI may not utilize a position on the Pro Forma VRI Return that is
     inconsistent with any position utilized on a Pro Forma VRI Return or
     Consolidated Return for a prior taxable year if the effect of such
     treatment is to allow a double deduction or benefit or avoid an inclusion
     with respect to any item (e.g., VRI may not expense an item and then claim
     a depreciation deduction with respect to such item in a subsequent taxable
     year) unless such treatment is consistent with the manner in which such
     item is treated on the BPA Group's Consolidated Return for the relevant
     taxable years (or unless VRI has eliminated such double deduction or
     benefit in a manner acceptable to BPA).

(c)  Standards for Methods and Elections on Pro Forma VRI Return.  The Pro Forma
     VRI Return shall reflect any elections made and tax accounting methods used
     by BPA with respect to the BPA Group's Consolidated Return that in the sole
     and absolute discretion of BPA should be made, taken or used consistently
     by a group filing

                                       15
<PAGE>

     a Consolidated Return. VRI may utilize any other election or method,
     subject to BPA's approval, which approval shall not be unreasonably
     withheld, in preparing the Pro Forma VRI Return. Notwithstanding the
     foregoing, VRI may not utilize any election or method in preparing the Pro
     Forma VRI Return for a Taxable Year that is inconsistent with any election,
     position or method utilized on a Pro Forma VRI Return or Consolidated
     Return for a prior taxable year if the effect of such treatment is to allow
     a double deduction or benefit with respect to any item (or unless VRI has
     eliminated such double deduction or benefit in a manner acceptable to BPA).

(d)  Delivery to BPA of Pro Forma VRI Return; Reconciliation Statement; and
     Assistance. VRI will deliver to BPA the Pro Forma VRI Return on a mutually
     agreed date, but in no event later than 60 days after the due date of the
     BPA Group's Consolidated Return (taking into account any extensions thereof
     that have been granted to BPA). The Pro Forma VRI Return will be
     accompanied by a written statement (the "Reconciliation Statement") that
     reconciles the difference in taxable income and tax liability and other
     items shown on the Pro Forma VRI Return and on the portions of the BPA
     Group's Consolidated Return that pertain to the Members of the VRI Group
     (such reconciliation shall include disclosure of any elections, methods or
     positions used in the preparation of the Pro Forma VRI Return that differ
     from elections, methods or positions taken on the portions of the BPA
     Group's Consolidated Return that pertain to such Members). Appropriate
     personnel of VRI or a VRI Subsidiary that are responsible for the
     preparation of the Pro Forma VRI Return and the Reconciliation Statement
     shall be available upon reasonable notice to meet with appropriate
     personnel of BPA to discuss all aspects of such return and such statement
     and upon

                                       16
<PAGE>

     request by BPA shall furnish or make available for inspection any and all
     documents used in preparation of the Pro Forma VRI Return (documents relied
     upon by VRI in ascertaining whether any position is more likely than not to
     be ultimately sustained or has a reasonable basis in law or in fact shall
     be furnished only to the principal tax legal officer of BPA under cover of
     the attorney-client privilege).

(e)  VRI Pro Forma Statement.  VRI shall prepare and deliver to the principal
     tax legal officer of BPA on a mutually agreed upon date but in no event
     later than 60 days before the due date for the BPA Group's Consolidated
     Return (taking into account any extensions thereof that have been granted
     to BPA), a written, privileged and confidential statement (the "VRI Pro
     Forma Statement") setting forth: (i) a description of all elections and
     methods proposed to be used in the preparation of the Pro Forma VRI Return
     and (ii) a statement of all positions proposed to be taken on such return
     (A) that meet the "more likely than not" standard or (B) that are not
     described in subclause (A), above, but which have a reasonable basis in law
     or in fact and with respect to which BPA has provided written consent
     pursuant to Section 4(b) of this Agreement.  Appropriate personnel of VRI
     or a VRI Subsidiary that are responsible for the preparation of the VRI Pro
     Forma Statement shall be available upon reasonable notice to meet with
     appropriate personnel of BPA to discuss all aspects of such statement and
     upon request by BPA shall furnish or make available for inspection any and
     all documents used in preparation of the VRI Pro Forma Statement (documents
     relied upon by VRI in ascertaining whether any position is more likely than
     not to be ultimately sustained or has a reasonable basis in law or in fact
     shall be furnished only to the principal tax legal officer of BPA under
     cover of the attorney-client privilege).

                                       17
<PAGE>

(f)  Further Verification of VRI Positions; Opinion Procedure.  By written
     notice no later than 15 days following the receipt by BPA of the VRI Pro
     Forma Statement, BPA may request VRI to provide written confirmation to the
     principal tax legal officer of BPA, with detailed analysis and weighing of
     the facts and legal authorities, that any positions specified by BPA and
     that are proposed to be reflected on the Pro Forma VRI Return are more
     likely than not to be ultimately sustained.  VRI shall provide such
     confirmation no later than 15 days following the receipt by VRI of the
     written request by BPA.  A position will be presumed not to be more likely
     than not to be ultimately sustained (and the VRI Pro Forma Statement shall
     be appropriately adjusted) if BPA and VRI are unable to agree within 10
     days following the date that VRI provides such written confirmation (or
     within 25 days from the date that BPA requests such confirmation, if
     earlier) that such position is more likely than not to be ultimately
     sustained.  In such event, VRI may rebut this presumption if VRI provides
     to BPA, at VRI's expense, within 30 days after the expiration of such 10-
     day or 25-day period, as the case may be, a written opinion from Miller &
     Chevalier Chartered or Thompson & Knight or any other law firm acceptable
     to BPA to the effect that such position is more likely than not to be
     ultimately sustained.

(g)  Adjustment By BPA of Pro Forma VRI Return.  BPA, within 60 days of receipt
     of the Pro Forma VRI Return shall adjust the Pro Forma VRI Return, as
     appropriate in accordance with the terms of this Agreement and after prior
     notice to and consultation with VRI, to correct any error of fact or law
     thereon or any error in mechanical calculation and any failure to reflect
     the principles set forth in this Section 4.  Acceptance by BPA of the Pro
     Forma VRI Return, the Reconciliation Statement or the

                                       18
<PAGE>

     VRI Pro Forma Statement shall not necessarily indicate agreement by BPA nor
     relieve VRI of liability for any adjustment made upon audit or other
     assessment. Similarly, any failure by BPA to properly and fully adjust the
     Pro Forma VRI Return within the 60-day period set forth in this Section
     4(g) shall not prevent BPA, in its sole and absolute discretion, from
     making subsequent adjustments contemplated by this Section 4(g), as
     circumstances warrant within the applicable statute of limitations
     (determined as if the Pro Forma VRI Return were an actual return that is
     subject to any extensions that have been granted by BPA with respect to the
     Consolidated Return) nor relieve VRI of liability for such adjustments. If
     as a result of such adjustment any amounts due to or from VRI under this
     Agreement differ from the corresponding amounts prior to such adjustment,
     payment of such difference shall be made to VRI or by VRI in the manner
     provided in Section 9(a) within 10 days following such adjustment.

(h)  Utilization of Credits to Reduce VRI Group Consolidated Tax Liability Under
     Certain Circumstances.

     (i)  Use of Designated Credits in Current Taxable Year. Amounts of
          Designated Credits generated in a Taxable Year may be applied to
          reduce the VRI Group Consolidated Tax Liability for the Taxable Year
          in the same manner as if the Pro Forma VRI Return were an actual
          return. In addition, Designated Credits may further reduce the VRI
          Group Consolidated Tax Liability (including a reduction below zero
          which will result in a negative amount that is refundable to VRI to
          the extent provided herein), without regard to the impact of any
          statutory or income limitations but only if and to the extent that (A)
          such Designated Credits

                                       19
<PAGE>

          reduce the BPA Group Consolidated Tax Liability for such Taxable Year
          (or in the case of carryover Designated Credits, a prior Taxable Year)
          or (B) VRI has made a Section 4(h)(iv)(B) Election with respect to
          such credits. Notwithstanding the foregoing, the refund, if any, that
          VRI is permitted to receive with respect to any Taxable Year that is
          attributable to the utilization of Refundable Designated Credits
          pursuant to this Section 4(h) (including credits utilized pursuant to
          the carryover provisions of Sections 4(h)(iv) and 4(h)(v) of this
          Agreement) may not exceed $20 million, and (B) VRI will not be
          permitted to receive a refund that is attributable to the use of
          section 43 credits.

               Refundable Designated Credits that are utilized pursuant to the
          carryover provisions of Sections 4(h)(iv) and 4(h)(v) shall be applied
          against the $20 million limitation in the year that they are utilized.
          In the event that the amount of VRI's refund that is attributable to
          its use of Refundable Designated Credits pursuant to this Section 4(h)
          with respect to a Taxable Year is less than $20 million, such
          shortfall shall not increase the $20 million limitation in any
          subsequent Taxable Year.

               BPA shall refund in cash to VRI the tax benefit associated with
          the Designated Credits that are permitted to be refunded pursuant to
          this Section 4(h) within 60 days of the actual reduction in the BPA
          Group Consolidated Tax Liability (or, in the case of Refundable
          Designated Credits that are utilized pursuant to Section 4(h)(v),
          within 60 days of Completion date) for such Taxable Year.  For
          purposes of this

                                       20
<PAGE>

     Section 4(h)(i), the actual reduction in the BPA Group Consolidated Tax
     Liability occurs when credits are either applied on the BPA Group's
     Consolidated Return for a Taxable Year or used to reduce the BPA Group's
     estimated income tax payments for such year (as determined by BPA). To the
     extent that VRI has received a refund pursuant to Section 4(h) with respect
     to Designated Credits, the amount of carryovers on the Pro Forma VRI Return
     shall be correspondingly reduced (adjustments shall also be made to reflect
     subsequent adjustments pursuant to this Section 4(h) or Section 8).

(ii) Effect of Subsequent Adjustments on Section 4(h)(i) Refunds.  If VRI has
     received a refund from BPA pursuant to this Section 4(h)(i) with respect to
     a Taxable Year as a result of any Designated Credit and (A) BPA determines
     that such credits did not reduce the BPA Group Consolidated Tax Liability
     for such year (or, if applicable, for a prior Taxable Year) or (B) if the
     amount of Designated Credits for which VRI has received a refund with
     respect to a Taxable Year exceeds the amount of section 29 or section 43
     credits from Members of the VRI Group that are eligible to be treated as
     Designated Credits in such year and utilized under this Section 4(h) in
     such year, then VRI shall reimburse BPA for any payment received within 60
     days of receiving from BPA a schedule setting forth BPA's calculation of
     VRI's reimbursement obligations pursuant to this sentence.  BPA shall make
     such calculation within 30 days of the Completion date for such Taxable
     Year; however, any failure by BPA to

                                       21
<PAGE>

       redetermine the amount of credits that reduce the BPA Group Consolidated
       Tax Liability or to reconcile the amount of Designated Credits utilized
       within the 30-day period set forth in the preceding sentence shall not
       prevent BPA, in its sole and absolute discretion, from making subsequent
       calculations of VRI's refund obligations contemplated by the preceding
       sentence, as circumstances warrant, within the applicable statute of
       limitations (determined as if the Pro Forma VRI Return were an actual
       return that is subject to any extensions that have been granted by BPA
       with respect to the Consolidated Return).

(iii)  Definition of Refundable Designated Credits and Eligible Refundable
       Designated Credits; VRI Schedule. For purposes of this Agreement,
       Refundable Designated Credits are Designated Credits that (A) are
       described in section 29 of the Code, and (B) are attributable to
       production from mineral properties acquired, directly or indirectly, by
       VRI in the ordinary course of its trade or business on or after June 1,
       1995 that represent either a new economic interest in such mineral
       property or an increased economic interest therein (collectively "new
       property"). For purposes of this Agreement, Refundable Designated Credits
       that are attributable to new property acquired, directly or indirectly by
       VRI on or before January 1, 2000 are referred to as "Eligible Refundable
       Designated Credits".

           On or prior to January 1 of each Taxable Year, VRI shall deliver a
       written schedule to BPA that sets forth (W) the amount of section 29

                                       22
<PAGE>

       credits that the VRI Group expects to generate during such year, (X) the
       amount of such credits that will be attributable to new property, (Y) the
       amount of Eligible Refundable Designated Credits and (Z) the amount of
       section 29 credits that are carried over pursuant to the carryover
       provisions of Section 4(h)(iv)(A) and 4(h)(v) in category (Y) of the
       preceding clause. In addition, VRI shall include in its VRI Pro Forma
       Statement with respect to each Taxable Year a schedule that sets forth
       the actual amount of section 29 credits in each of the categories
       referenced in the previous sentence with respect to such Taxable Year and
       a written statement that reconciles the amounts set forth on the schedule
       included with the VRI Pro Forma Statement with the corresponding
       projected amounts on the schedule referenced in the preceding sentence.

(iv)   Designated Credits Carried Forward by the BPA Group.  (A) Amounts of
       Designated Credits (whether or not such credits may also qualify as
       Refundable Designated Credits) which were not allowed to reduce the VRI
       Group Consolidated Tax Liability under Sections 4(h)(i) for the Taxable
       Year solely because such Designated Credits did not reduce the BPA Group
       Consolidated Tax Liability in the Taxable Year or the ARCO Group
       Consolidated Tax Liability (as that term is defined in the Prior
       Agreement) under the Prior Agreement, but which are carried forward by
       the BPA Group (including credits described in section 29 of the Code that
       are carried forward as a minimum tax credit), may be carried forward by

                                       23
<PAGE>

     the VRI Group and may be applied in a subsequent Taxable Year to reduce the
     VRI Group Consolidated Tax Liability, including a reduction below zero,
     notwithstanding the impact of any statutory or income limitations, but only
     when and to the extent that such Designated Credits reduce or are deemed to
     reduce the BPA Group Consolidated Tax Liability. For purposes of the
     preceding sentence, the provisions of Sections 4(h)(i) and 4(h)(iii) shall
     apply to section 29 credits carried over pursuant to this Section
     4(h)(iv)(A) as if such credits were generated by sales of production from
     the well in the Taxable Year to which they are carried. The preceding
     sentence is not intended to affect the application of the ordering rule
     contained in the first sentence of Section 4(h)(vi) of this Agreement.

           (B) Election To Receive Discounted Payment For Certain Designated
     Credits. BPA shall notify VRI within 31 days after the close of each
     Taxable Year ending on or before December 31, 2002 of the amount of
     Designated Credits described in section 29 of the Code (including Eligible
     Refundable Designated Credits) (for the avoidance of doubt, Refundable
     Designated Credits that do not constitute Eligible Refundable Designated
     Credits shall not be included) ("Eligible Credits") that are being carried
     forward by the BPA Group on the BPA Group's Consolidated Return for such
     Taxable Year to the immediately succeeding Taxable Year. VRI may make an
     irrevocable, written election (a "Section 4(h)(iv)(B) Election") within 30
     days of the date of receipt of

                                       24
<PAGE>

     such notice from BPA to receive a current payment from BPA for all or a
     portion of such Eligible Credits as provided in this Section 4(h)(iv)(B)
     without regard to whether such credits have reduced the BPA Group
     Consolidated Tax Liability in the current Taxable Year or a prior Taxable
     Year. The Section 4(h)(iv)(B) Election shall be signed by the principal tax
     Officer of VRI and shall set forth the amount of Eligible Credits for which
     VRI elects to receive payment pursuant to this Section 4(h)(iv)(B). BPA
     shall pay to VRI within 10 days after the receipt of the Section
     4(h)(iv)(B) Election the product of the elected amount of Eligible Credits
     and the Discount Factor. For purposes of this Agreement, the "Discount
     Factor" shall be (X) 85% for the Taxable Year ending on December 31, 2000,
     (Y) 88% for the Taxable Year ending on December 31, 2001 and (Z) 90% for
     the Taxable Year ending on December 31, 2002. VRI shall not thereafter be
     entitled to any additional compensation for the Eligible Credits that are
     the subject of a Section 4(h)(iv)(B) Election, including without
     limitation, pursuant to Section 4(h)(iv)(A).

           In specific application of Section 4(h)(vii) of this Agreement, if
     any adjustment is made that affects the amount of Eligible Credits carried
     forward on the BPA Group's Consolidated Return that causes the amount of
     such Eligible Credits in any Taxable Year to be greater or less than the
     amount of Eligible Credits that are the subject of a Section 4(h)(iv)(B)
     Election for such year, amounts due with respect to such Section
     4(h)(iv)(B) Election shall be recalculated to take into account such

                                       25
<PAGE>

     adjustment. If the adjustment increases the amount of Eligible Credits,
     then VRI shall not be deemed to have made a Section 4(h)(iv)(B) Election
     with respect to such additional Eligible Credits for purposes of this
     calculation unless VRI shall have made a Section 4(h)(iv)(B) Election with
     respect to all of the Eligible Credits for such year. If the adjustment
     causes the amount of such Eligible Credits to be less than the amount of
     Eligible Credits that are the subject of a Section 4(h)(iv)(B) Election for
     such year, VRI shall be deemed to have made a Section 4(h)(iv)(B) Election
     for such lesser amount. If the recalculated amount is less than the amount
     paid by BPA to VRI, VRI shall refund to BPA the difference, with interest
     as provided in Section 9(b). If the recalculated amount is greater than the
     amount paid by BPA to VRI, BPA shall make an additional payment to VRI of
     the difference, with interest as provided in Section 9(b).

(v)  Refundable Designated Credits Previously Utilized by the BPA Group or by
     the ARCO Group.  Amounts of Refundable Designated Credits that have been
     applied to reduce the BPA Group Consolidated Tax Liability in a prior
     Taxable Year or the ARCO Group Consolidated Tax Liability under the Prior
     Agreement, but which have not been applied to reduce the VRI Group
     Consolidated Tax Liability, including a reduction below zero, under Section
     4(h)(iv)(B) or under Section 4(h)(i) solely because of the limitation
     contained in Section 4(h)(i) that limits refunds with respect to Refundable
     Designated Credits, may be applied to reduce the VRI Group

                                       26
<PAGE>

     Consolidated Tax Liability in any subsequent Taxable Year, including a
     reduction below zero, notwithstanding any statutory or income limitations.
     For purposes of the preceding sentence, the provisions of Sections 4(h)(i)
     and 4(h)(iii) shall apply to Refundable Designated Credits carried over
     pursuant to this Section 4(h)(v) as if such credits were generated by sales
     of production from the well in the Taxable Year to which they are carried.
     The preceding sentence is not intended to affect the application of the
     ordering rule contained in the first sentence of Section 4(h)(vi) of this
     Agreement

(vi) Rules for Determining Utilization of Designated Credits and Refundable
     Designated Credits.  BPA shall determine whether Designated Credits
     (whether or not such credits may also qualify as Refundable Designated
     Credits) reduce the BPA Group Consolidated Tax Liability for any Taxable
     Year by applying credits in the order and subject to other rules under the
     Code and, for credits of the same priority or category thereunder, by using
     a pro rata convention.  If a Designated Credit (or a credit described in
     section 29 of the Code that (A) is generated after the Effective Date, but
     prior to January 1, 2003 and (B) would be treated as a Designated Credit if
     such credit were generated by a member of the VRI Group) described in
     section 29 of the Code (whether or not such credit may also qualify as a
     Refundable Designated Credit) is carried forward by the BPA Group as a
     minimum tax credit, such credit shall be deemed utilized only after all
     other credits generated by the BPA Group in the current year have been

                                       27
<PAGE>

       used, but shall then be ordered and prioritized in the same manner as a
       section 29 credit that is generated in the current year.  Section 29
       credits (including carryovers) that are not eligible to be treated as
       Refundable Designated Credits shall be deemed to be used prior to section
       29 credits (including carryovers) that are eligible to be treated as
       Refundable Designated Credits in situations where either type of credits
       may be considered (taking into account the ordering rule set forth in the
       first sentence of this Section 4(h)(vi)) to have reduced the VRI Group
       Consolidated Tax Liability in a Taxable Year.  Section 29 credits
       (including carryovers) that are not eligible to be treated as Eligible
       Refundable Designated Credits shall be deemed to be used prior to section
       29 credits (including carryovers) that are eligible to be treated as
       Eligible Refundable Designated Credits in situations where either type of
       credits may be considered (taking into account the ordering rule set
       forth in the first sentence of this Section 4(h)(vi)) to have reduced the
       VRI Group Consolidated Tax Liability in a Taxable Year. BPA's
       determinations pursuant to this Section 4(h)(vi) shall be binding upon
       the parties hereto.

(vii)  Subsequent Adjustments. If any adjustment is made to any item of income,
       gain, loss, deduction, expense or credit of the BPA Group, whether or not
       such item relates to VRI or any Member of the VRI Group, by reason of the
       filing of an amended Consolidated Return, a claim for refund, a post-
       filing change, an audit by the Service or otherwise, and such adjustment
       either reduces or increases the amount of Designated

                                       28
<PAGE>

       Credits or Refundable Designated Credits or the amount of either category
       of such credits that reduce the BPA Group Consolidated Tax Liability for
       such Taxable Year, BPA shall redetermine the amount of Designated
       Credits, Refundable Designated Credits and Eligible Credits in all
       affected Taxable Years and the application of such credits under this
       Agreement by taking into account such adjustment. BPA shall have sole and
       absolute discretion to determine whether and in what amount an adjustment
       affects the amount of Designated Credits, Refundable Designated Credits
       or Eligible Credits or the BPA Group's utilization of same in any given
       Taxable Year. If the net amounts due from VRI under this Agreement (in
       the Taxable Year to which the redetermination relates and, if applicable,
       a prior year or a subsequent year) after a redetermination exceed the
       amounts previously paid, or if the net amount of any refund to VRI (in
       the Taxable Year to which the redetermination relates and, if applicable,
       a prior year or a subsequent year) under this Section 4(h) after a
       redetermination is less than the amount previously paid, then VRI shall
       make payment of such difference to BPA. VRI shall be liable for any
       interest, penalty or addition to tax as BPA, in its discretion, deems
       just and proper in view of all applicable circumstances (to the extent
       practicable, however, such allocations shall, if applicable, reflect the
       amount of interest that the VRI Group would have paid on a stand alone
       basis; to the extent that VRI is required to repay to BPA all or a
       portion of any refund that it received pursuant to Section 4(h), VRI
       shall

                                       29
<PAGE>

        be liable for interest at the rate specified in Section 9(b) hereof
        on the amount of such repayment from the date that the refund was
        received to the date that payment is made to BPA). If the net amounts
        due from VRI under this Agreement (in the Taxable Year to which the
        redetermination relates and, if applicable, a prior year or a subsequent
        year) after a redetermination are less than the amounts previously paid,
        or if the net amount of any refund to VRI under this Section 4(h)
        (taking into account the limitation on refunds in Section 4(h)(i)) (in
        the Taxable Year to which the redetermination relates and, if
        applicable, a prior year or a subsequent year) after a redetermination
        is more than the amount previously paid, then BPA shall make payment of
        such difference to VRI, with interest as provided in Section 9(b) of
        this Agreement.

(viii)  Displaced Credits. If VRI has reduced the VRI Group Consolidated Tax
        Liability or received a refund pursuant to this Section 4(h) for any
        Taxable Year pursuant to this Section 4(h) as a result of any Designated
        Credit of any Member of the VRI Group, and such Designated Credit is
        subsequently displaced by another attribute of the BPA Group in a
        situation where Section 4(h)(vii) does not apply, VRI shall reimburse
        BPA for any amount by which VRI's liability to BPA was reduced as a
        result of the use of the displaced Designated Credit or repay to BPA the
        amount of the refund from BPA that was attributable to the use of the
        displaced Designated Credit. For purposes of this Section 4(h)(viii),
        Eligible Refundable Designated Credits shall be deemed to be displaced
        prior to

                                       30
<PAGE>

        other Refundable Designated Credits and other Refundable Designated
        Credits shall be deemed to be displaced prior to Designated Credits. A
        Designated Credit that is displaced may be carried forward pursuant to
        Section 4(h)(iv) thereafter, or, with the consent of BPA, carried back
        if BPA determines that the circumstances giving rise to such
        displacement will allow it to utilize a greater amount of Designated
        Credits in a prior Taxable Year than it would have utilized absent such
        circumstances.

(ix)    Restriction on Double Benefit. Nothing in this Section 4(h) or any other
        provision of this Agreement shall be construed to entitle VRI or any
        Subsidiary of VRI to receive a double benefit or compensation with
        respect to any Designated Credit, Refundable Designated Credit or a
        carryforward or carryback thereof, taking into account benefits received
        under the Prior Agreement. Nothing in this Section 4(h) is intended to
        limit the VRI Group's ability to carry back or carry forward credits,
        including Designated Credits or Refundable Designated Credits, pursuant
        to Section 8(b).

(x)     Special Provisions; Refundable Designated Credits. Section 4(h)(i), and
        the other provisions in this Agreement that relate to Refundable
        Designated Credits, are intended to benefit the VRI Group in
        circumstances where it grows its business by means of new property
        acquisitions that produce additional section 29 credits. To the extent
        that any Member of the VRI Group engages in a transaction or a series of
        transactions that produce or maintain a Refundable Designated Credit

                                       31
<PAGE>

     benefit under this Section 4(h), but which in substance do not expand the
     business of the VRI Group consistent with such intention, refunds of
     Refundable Designated Credits shall not be allowed under this Section 4(h),
     notwithstanding any other contrary provision in this Agreement. BPA shall
     make all determinations contemplated by the preceding sentence, in its sole
     and absolute discretion, and may do so by reference to (A) the projected
     aggregate annual amount of section 29 credits that would be generated from
     the sale of qualified fuels from economic interests in properties held by
     Members of the VRI Group as of June 1, 1995, based on the projected
     production profiles on such properties as of such date (the "benchmark
     amount"), and (B) the overall section 29 credits generated in such year by
     Members of the VRI Group in excess of such benchmark amount, where such
     excess arises from new properties.

(i)  Pro Forma State Return.  For 2000 and each Taxable Year thereafter, VRI
     shall prepare in each case on behalf of the VRI Group a pro forma
     consolidated, combined or unitary return or returns (as the case may be)
     (the "Pro Forma State Return") that sets forth the VRI Group State and
     Local Tax Liability calculated in accordance with this Agreement.  The
     provisions of this Section 4 other than Section 4(h) shall apply with equal
     force to the Pro Forma State Return, provided however, the due date for
     each Pro Forma State Return shall be 60 days after the due date (including
     extensions thereof) for filing the corresponding state or local income tax
     return for the Taxable Year, or, if later, December 15th of the year
     following the close of

                                       32
<PAGE>

     the Taxable Year.

(j)  Special Provisions Applicable to the Assets Acquired By Vastar Offshore,
     Inc. and Vastar Pipeline, LLC.  Notwithstanding anything else to the
     contrary in this Agreement, the Pro Forma VRI Return and the Pro Forma
     State Return shall be prepared (i) as if the aggregate adjusted tax basis
     of Vastar Offshore, Inc. ("VOI") and Vastar Pipeline, LLC ("VPL") in all of
     the assets acquired by VOI and VPL pursuant to the Exchange Agreement on
     the initial date of such acquisition was $440,021,187 and (ii) as if such
     adjusted tax basis were allocated among such assets in the manner specified
     on Appendix A to the Third Amendment to the Tax Sharing Agreement dated as
     of October 30, 1998 by and among ARCO, VRI, VOI, VPL and the Subsidiaries
     of VRI that are signatories thereto.  Moreover, tax reimbursement payments
     made to the VRI Group pursuant to Section 10.1 or 10.2 of the Stock
     Purchase Agreement, and tax reimbursement payments made by the VRI Group
     pursuant to such Sections of the Stock Purchase Agreement, shall not be
     considered items of income or deduction, respectively, on the Pro Forma VRI
     Return or the Pro Forma State Return.

5.  Payments by VRI.

(a)  General and VRI Group Consolidated Tax Liability.  For each Taxable Year of
     the BPA Group, VRI shall pay to BPA the amount of the VRI Group
     Consolidated Tax Liability and the VRI Group State and Local Tax Liability,
     in the amounts, at the time or times and in the manner as herein provided.

     (i)  In the event that the estimated VRI Group Consolidated Tax Liability
          for such Taxable Year is greater than zero, VRI shall make quarterly
          payments of its estimated VRI Group Consolidated Tax Liability for
          such

                                       33
<PAGE>

          Taxable Year. The amount of each such quarterly payment shall be
          determined by VRI and shall equal the amount which VRI would be
          required under section 6655(d) of the Code (or under any successor
          section of the Code) to pay to the Service for such quarter were VRI
          to make installment payments of the VRI Group Consolidated Tax
          Liability for such Taxable Year in accordance with the provisions of
          such section.

     (ii) If (A) the sum of (x) the actual VRI Group Consolidated Tax Liability
          for such Taxable Year plus (y) the additions to tax under section 6655
          of the Code (or under any successor section of the Code) that would
          have been imposed if the VRI Group Consolidated Tax Liability were an
          actual tax liability and the payments made pursuant to Section 5(a)(i)
          were actual estimated tax payments exceeds (B) the total estimated
          payments, if any, which VRI made pursuant to Section 5(a)(i) hereof
          for such Taxable Year, VRI shall pay an amount equal to such excess to
          BPA.

     (iii)  Each of the quarterly payments required to be made by VRI pursuant
            to Section 5(a)(i) hereof shall be made in the manner provided in
            Section 9(a) hereof on or before the due date for the payment of the
            respective quarterly estimate of the BPA Group Consolidated Tax
            Liability for such Taxable Year. Any amount required to be paid by
            VRI for such Taxable Year pursuant to Section 5(a)(ii) hereof shall
            be paid by VRI in the manner provided in Section 9(a) hereof as
            follows: (A) on the fifteenth day of the third month after the end
            of such Taxable Year VRI shall pay an amount equal to VRI's best
            estimate, as determined by VRI, of the

                                       34
<PAGE>

            amount, if any, that VRI owes pursuant to Section 5(a)(ii) hereof
            for such Taxable Year, and (B) on Completion for such Taxable Year
            an amount equal to the excess, if any, of (x) the amount determined
            for such Taxable Year as the amount payable by VRI pursuant to
            Section 5(a)(ii) hereof for such Taxable Year over (y) the amount,
            if any, paid by VRI for such Taxable Year pursuant to clause (A)
            above, together with interest thereon on such amount at the rate
            specified in Section 9(b) hereof from the date on which the payment
            referred to in clause (A) above was made to Completion.

(b)  VRI Group State and Local Tax Liability.  For each Taxable Year with
     respect to which VRI or any of its Subsidiaries participates in the filing
     of any consolidated, combined or unitary state or local income tax return
     with BPA or any Subsidiary of BPA (other than VRI or any of its
     Subsidiaries), (A) VRI shall pay to BPA, no later than the date on which
     payment of the respective estimated state or local payment is due, the
     amount of estimated taxes that VRI or any such Subsidiary of VRI would have
     been required to pay if VRI or any Subsidiary of VRI had filed for such
     period either a separate return (in the case where only one Member of the
     VRI Group joins in the filing of such consolidated, combined or unitary
     return) or a consolidated, combined or unitary return (in a case where more
     than one Member of the VRI Group joins in the filing of such consolidated,
     combined or unitary return) using only factors and items of income,
     expense, or credit that relate to the Members of the VRI Group included in
     such return and (B) VRI shall pay to BPA, on the dates set forth in Section
     5(a)(iii), above, (as adjusted, as appropriate, to reflect differing due
     dates for payment of such

                                       35
<PAGE>

     taxes) an amount equal to the excess, if any, of the aggregate amount of
     the VRI Group State and Local Tax Liability for such Taxable Year over the
     aggregate amount of the VRI Group's estimated tax payments actually made to
     BPA with respect to such state or local income tax for such period together
     with any applicable penalties, additions to tax and interest calculated in
     the manner provided in Section 5(a)(ii) and (iii), above.

(c)  Other Taxes.  VRI shall be solely responsible for paying tax with respect
     to all tax returns that VRI or any of its Subsidiaries have responsibility
     for filing pursuant to this Agreement.

6.  Payments to VRI.

(a)  For each Taxable Year of the BPA Group, if (A) the sum of (x) the payments
     made by VRI pursuant to Section 5(a)(i) hereof of the estimated VRI Group
     Consolidated Tax Liability for such Taxable Year plus (y) any payments
     pursuant to clause (A) of the second sentence of Section 5(a)(iii) exceeds
     (B) the sum of (x) the actual VRI Group Consolidated Tax Liability for such
     Taxable Year plus (y) any amounts described in subclause (y) of clause (A)
     of Section 5(a)(ii), BPA shall pay to VRI an amount equal to such excess.
     If the aggregate payments made by VRI pursuant to Section 5(b) hereof of
     the estimated VRI Group State and Local Tax Liability for such Taxable Year
     exceed the actual VRI Group State and Local Tax Liability for such Taxable
     Year, BPA shall pay to VRI an amount equal to the difference between (A)
     the payments that VRI made pursuant to Section 5(b) hereof for such Taxable
     Year and (B) the amount of the actual VRI Group State and Local Tax
     Liability (including amounts with respect to penalties or additions to tax
     with respect to underpayments of estimated tax) for such Taxable Year.

                                       36
<PAGE>

(b)  Any payment that VRI may be entitled to receive for such Taxable Year
     pursuant to Section 6(a) hereof shall be paid to VRI in the manner provided
     in Section 9(a) hereof on or before 45 calendar days after Completion.

7.  Use of Attributes; Additional Rights and Obligations Upon Deconsolidation.

(a)  In determining the BPA Group Consolidated Tax Liability and in preparing
     the Consolidated Return for each taxable year, BPA may utilize on behalf of
     the BPA Group all the tax attributes and other items of income, gain, loss,
     deduction, expense, credit, etc. of VRI and its Subsidiaries arising in
     such taxable year or which arose in another taxable year or taxable years
     and which properly may be carried back or carried forward to such taxable
     year, without regard to whether such attributes and items are concurrently
     being, have previously been or may subsequently be utilized in determining
     for any Taxable Year or Taxable Years, the VRI Group Consolidated Tax
     Liability.  Except as expressly provided in Section 4 and Section 7(b) of
     this Agreement, neither VRI nor any of its Subsidiaries shall in any manner
     be entitled to any compensation for the use of any attributes and other
     items of income, gain,

                                       37
<PAGE>

     loss, deduction expense, credit, etc. of VRI and its Subsidiaries.
     Moreover, in the event VRI or any of its Subsidiaries ceases for any reason
     to be a Member of the BPA Group either (i) after any of its tax attributes
     or items of income, gain, loss, deduction, expense, credit, etc. has been
     utilized by BPA on behalf of the BPA Group in determining the BPA Group
     Consolidated Tax Liability for any Taxable Year or Taxable Years of the BPA
     Group, but before VRI has utilized such attribute or item (in whole or in
     part) in determining for any Taxable Year or Taxable Years, the VRI Group
     Consolidated Tax Liability or (ii) after any of its tax attributes or items
     of income, gain, loss, deduction, expense, credit, etc. has been utilized
     by VRI on behalf of the VRI Group in determining the VRI Group Consolidated
     Tax Liability for any Taxable Year or Taxable Years, but before BPA has
     utilized such attribute or item (in whole or in part) in determining for
     any Taxable Year or Taxable Years, the BPA Group Consolidated Tax
     Liability, neither BPA nor VRI, as the case may be, shall be obligated or
     required to compensate such other party in any manner for any amount as a
     result of the occurrence of such event, except as expressly provided in
     Section 7(b) below.

(b)  In the event VRI or any of its Subsidiaries ceases for any reason to be a
     Member of the BPA Group, then after the filing of the Consolidated Return
     for the last Taxable Year that VRI or such Subsidiary was included therein,
     BPA shall inform VRI or such Subsidiary, as the case may be, of the amount
     of consolidated loss and credit carryovers as of the end of the Taxable
     Year that are allocable to VRI or such Subsidiary, pursuant to the
     Consolidated Return Regulations.  In the event that BPA determines that the
     amount of any particular category of loss or credit carryover attributes so
     allocated to VRI or such Subsidiary exceeds the amount of loss and credit
     attributes of such category (other than Designated Credits (including
     carryovers) that reduced the VRI Group Consolidated Tax Liability or with
     respect to which VRI has received a refund from BPA for any Taxable Year
     pursuant to Section 4(h) of this Agreement or any payment from ARCO under
     the Prior Agreement) that would have been available to VRI or such
     Subsidiary if the VRI Group had not been included in the BPA Group for the
     current Taxable Year and all prior Taxable Years and in the ARCO Group (as
     that term is defined in the Prior Agreement) for all prior Taxable Years
     under the Prior Agreement and all Pro Forma VRI Returns had been actual
     returns, then VRI

                                       38
<PAGE>

     or such Subsidiary shall pay to BPA at the time such additional loss and
     credit attributes are actually utilized the amount of the benefit derived
     therefrom. In the event that BPA determines that (i) the amount of loss and
     credit carryover attributes of any particular category so allocated to VRI
     or such Subsidiary is less than (ii) the amount of the loss and credit
     attributes of such category (other than Designated Credits (including
     carryovers) that reduced the VRI Group Tax Liability for any Taxable Year
     pursuant to Section 4(h) of this Agreement or with respect to which VRI has
     received a refund from BPA for any Taxable Year pursuant to Section 4(h) of
     this Agreement or any payment from ARCO under the Prior Agreement) that
     would have been available to VRI or such Subsidiary if the VRI Group had
     not been included in the BPA Group for the current Taxable Year and all
     prior Taxable Years and in the ARCO Group for all prior Taxable Years under
     the Prior Agreement and all Pro Forma VRI Returns had been actual returns,
     then, following written notification from VRI or such Subsidiary of the
     amount of such liability, BPA shall pay to VRI or its Subsidiaries, at the
     time any additional loss or credit carryovers would have been utilized if
     the amount of carryovers described in clause (ii) had been available, the
     benefit that would have been derived therefrom. Payments pursuant to the
     foregoing two sentences shall be due only at such time as such additional
     loss or credit carryovers are or would have been utilizable.
     Notwithstanding anything to the contrary in the Code or other applicable
     authority, BPA shall make the determinations required by this Section 7(b)
     as if all Designated Credits described in Section 4(h)(iv) are credits that
     would have been available for carry forward by the VRI Group and as if all
     Pro Forma VRI Returns had been actual returns.

                                       39
<PAGE>

     In the event that BPA and VRI determine that the aggregate tax basis of the
Gulf Assets (as defined in the Stock Purchase Agreement) immediately following
an event that causes VRI to cease to be a Member of the BPA Group (taking into
account any step up in such basis relating to such event, whether pursuant to a
section 338(h)(10) election or otherwise) (the "Actual Basis") is less than the
aggregate tax basis that would have resulted (taking into account all allowed or
allowable depreciation or amortization deductions) on such date if the initial
tax basis of such assets as of the Closing Date of the Stock Purchase Agreement
had been $440,021,187 (the "Calculated Basis"), then BPA shall pay to VRI an
amount equal to the discounted present value (based on a discount rate of 10%,
compounded annually) of the dollar amount of deductions for depreciation and
depletion attributable to the difference between the Actual Basis and the
Calculated Basis, as determined in a commercially reasonable manner.  In the
event that (A) VRI becomes the Common Parent of its own Affiliated Group for the
year beginning on the date it ceases to be a member of the BPA Group and (B)
there is a Final Determination after such date that the initial tax basis of the
Gulf Assets as of the Closing Date of the Stock Purchase Agreement is less than
$440,021,187 and as a result the aggregate tax basis of the Gulf Assets as of
the date of the calculation set forth in the preceding sentence (taking into
account any increase in such tax basis related to such event) ("Redetermined
Basis") is less than the Actual Basis used by the parties in such calculation,
then BPA shall recalculate the amounts, if any, that it owes pursuant to the
preceding sentence using the Redetermined Basis in lieu of the Actual Basis and
shall promptly pay to VRI the excess of the recalculated amount over the amount,
if any, paid to VRI pursuant to the initial calculation.

                                       40
<PAGE>

     In the event that VRI ceases for any reason to be a Member of the BPA Group
at a time when the aggregate amount of deductions that have been disallowed
pursuant to the second sentence of Section 15 of this Agreement is less than
$5,300,000, then VRI shall pay to BPA at the time that VRI leaves the BPA Group
an amount equal to the product of BPA's combined effective tax rate at such time
multiplied by the difference between $5,300,000, and the aggregate amount of
deductions that have been disallowed under the second sentence of Section 15 of
this Agreement prior to such date.

     Any payment due pursuant to this Section 7(b) shall be made, in the manner
provided in Section 9(a) hereof, 90 days after the filing of the tax return for
the taxable year in which such tax deduction or credit is utilized or absorbed
(or, in the case of a payment to VRI, would have been utilized or absorbed).
BPA's determinations pursuant to this Section 7(b) shall be presumptively
correct and shall be binding on the parties hereto.  At BPA's request, VRI or
the applicable Subsidiary shall promptly notify BPA of any amounts due by any
party pursuant to this Section 7(b).  At BPA's request, the calculation of any
such amounts shall be verified by a nationally recognized accounting firm
selected by BPA, whose fees and expenses shall be shared equally by BPA and VRI.

(c)  If a Member at any time acquires the assets and properties of another
     Member pursuant to a transaction to which section 381 of the Code applies
     or otherwise, the acquiring Member shall, from and after the date of such
     acquisition, be responsible for all of the undertakings and obligations of
     such other Member hereunder and shall, from and after such date, be
     entitled to receive any and all payments that

                                       41
<PAGE>

     such other Member would be entitled to receive hereunder. Provided such
     other Member ceases to exist solely as a result of such transaction, such
     event shall not, except as expressly provided herein, in any way result in
     any acceleration of the time at which any payments hereunder are due to or
     from such other Member, and, except as expressly provided herein to the
     contrary, all such payments shall be made to or by the acquiring Member at
     the same time or times that such payments would be payable to or by such
     other Member had such other Member continued to exist as a Member
     hereunder.

8.  Adjustments.

(a)  If any adjustment is made with respect to a Taxable Year during which VRI
     or any of its Subsidiaries is a Member of the BPA Group to any item of
     income, gain, loss, deduction, expense or credit of VRI or any Subsidiary
     of VRI by reason of the filing of an amended Consolidated Return (or an
     amended state and local consolidated, combined or unitary return), a claim
     for refund with respect to such Taxable Year or an audit with respect to
     such Taxable Year by the Service (or the applicable state and local taxing
     authority), the amounts, if any, due to or from VRI under this Agreement
     shall be redetermined by taking into account any such adjustment and
     applying the procedures set forth in this Agreement.  BPA shall have sole
     and absolute discretion to determine whether and in what amount an
     adjustment applies to VRI or any of its Subsidiaries.  If, as a result of
     such redetermination, any amounts due to or from VRI under this Agreement
     differ from the amounts previously paid, then except as herein provided,
     payment of such difference together with any interest, penalty or addition
     to tax allocated to VRI shall be made to VRI or by VRI in the manner
     provided in Section 9(a)

                                       42
<PAGE>

     as follows: (i) in the case of an adjustment resulting in a credit or
     refund of tax, within 10 calendar days of the date on which such refund or
     notice of such credit is received by BPA with respect to such adjustment,
     or (ii) in the case of an adjustment resulting in a payment of additional
     tax, within 10 calendar days of the date on which such additional tax is
     paid by BPA. Any interest, penalty or addition to tax will be allocated as
     BPA, in its discretion, deems just and proper in view of all applicable
     circumstances (to the extent practicable, however, such allocations shall
     reflect the amount of interest and penalty that the VRI Group would have
     paid on a stand alone basis). Neither acceptance of a Pro Forma VRI Return
     nor failure by BPA to file consistently with such Pro Forma VRI Return
     shall relieve VRI of liability for an adjustment under this Section 8(a).

(b)  Refund of Tax Sharing Payment.  In the event that the Pro Forma VRI Return
     (or the corresponding calculation with respect to the VRI Group State and
     Local Tax Liability) for any Taxable Year or for any Taxable Year under the
     Prior Agreement reflects a net operating loss, net capital loss, excess tax
     credit or other tax attribute, such attributes (other than Designated
     Credits or Refundable Designated Credits that have reduced the VRI Group
     Consolidated Tax Liability, including a reduction below zero, pursuant to
     Section 4(h)(i), 4(h)(iv)(A) or 4(h)(iv)(B) and Refundable Designated
     Credits  that may be carried forward pursuant to Section 4(h)(v) of this
     Agreement or the corresponding provisions of the Prior Agreement), may be
     carried back or carried forward, as the case may be, and utilized in
     calculating the VRI Group Consolidated Tax Liability (or the VRI Group
     State and Local Tax Liability) for prior or subsequent Taxable Years,
     including carrybacks to and carryforwards from Taxable Years under

                                       43
<PAGE>

     the Prior Agreement, in the same manner as such attributes would have been
     carried back or carried forward and deducted if the Pro Forma VRI Returns
     had been actual returns or, in the case of state and local tax, under
     applicable state or local provisions, as such provisions would have been
     applied to a consolidated, combined or unitary return filed with respect to
     the VRI Group (or one or more Members thereof), but after taking into
     account any limitation on the use of such attributes imposed pursuant to
     the Code or the Income Tax Regulations (or with respect to state and local
     tax, applicable state or local provisions). In such case, the VRI Group
     Consolidated Tax Liability (or the VRI Group State and Local Tax Liability)
     shall be recomputed for the Taxable Year or Years to which such attributes
     are carried and for any subsequent Taxable Years to take into account such
     attributes, and payments made pursuant to Sections 5 and 6 of this
     Agreement, or, if applicable, Sections 5 and 6 of the Prior Agreement,
     shall be appropriately adjusted. In the case of any carryback of attributes
     pursuant to this Section 8(b), any payment between BPA and VRI required by
     such adjustment shall be paid within 45 days after Completion (or the
     corresponding date with respect to the relevant consolidated, combined or
     unitary state or local tax return) for the year in which such attribute
     arises.

(c)  Except as provided in Sections 8(a) or 8(b) of this Agreement, VRI may not
     amend a Pro Forma VRI Tax Return for a prior Taxable Year or otherwise
     cause a redetermination of the VRI Group Consolidated Tax Liability for a
     prior Taxable Year.  Nothing in this Section 8 shall be construed to
     entitle VRI or any Subsidiary of VRI to receive a double benefit or
     compensation with respect to any attribute, taking into account benefits
     received under the Prior Agreement.

                                       44
<PAGE>

9.  Remittances by and to VRI.

(a)  Until such time as BPA notifies VRI in writing to the contrary, any and all
     payments that VRI agrees to make hereunder shall be made and remitted by
     VRI directly to BPA.  BPA shall be responsible for making all payments
     required to be made hereunder to VRI.

(b)  Any payment required to be made hereunder by VRI or BPA that is not made on
     or before the date on which such payment is due under the terms of this
     Agreement shall bear interest at the rate specified from time to time
     pursuant to section 6621(a)(2) of the Code, and the party to whom such
     payment is due shall be entitled to receive interest computed at such rate
     upon the late payment of any such amount which is required at any time to
     be paid hereunder.

(c)  On or before March 15 of each Taxable Year, BPA shall prepare a written
     schedule based on the projected amounts of section 29 credits that the VRI
     Group expect to generate in such year, that sets forth the amount of such
     credits that BPA anticipates that it will use in such year.  From time to
     time during the Taxable Year, BPA may amend the schedule to increase or
     decrease its estimated usage.  Notwithstanding Section 9(b), no interest or
     penalties will be due from VRI with respect to any VRI estimated tax
     payment made pursuant to Section 5(a) or Section 5(b) to the extent the
     underpayment of VRl's estimated tax is directly attributable to VRl's good
     faith reliance on such written estimate for the Taxable Year to which the
     VRI estimated payment relates.

10.  Carryback and Carryforwards.

                                       45
<PAGE>

(a)  If part or all of an unused consolidated net operating loss or tax credit
     of VRI or one of its Subsidiaries arises in a year in which VRI or such
     Subsidiary is not a Member of the BPA Group and is carried back to a year
     in which VRI or such Subsidiary is a Member of the BPA Group, any refund or
     reduction in tax liability arising from the carryback will be retained by
     or allocated to BPA.  BPA shall have no obligation to pay to VRI or its
     Subsidiaries the amount of any refund or credit of federal income tax that
     BPA may receive as a result of such carryback  (nor will such occurrence
     affect the amount of compensation, if any, to which VRI or any of its
     Subsidiaries is entitled pursuant to Section 7(b) of this Agreement).

11.  Allocation of BPA Group Consolidated Tax Liability For Purposes of
     Determining Earnings and Profits.

(a)  The BPA Group Consolidated Tax Liability for each Taxable Year of the BPA
     Group shall, for purposes of determining the earnings and profits of each
     Member, be allocated among the Members in accordance with the method
     prescribed in section 1.1552-1(a)(2) of the Income Tax Regulations.  In
     addition, VRI shall keep such records as are required to permit BPA to
     adjust the bases of the stock of VRI and its Subsidiaries pursuant to
     section 1.1502-32 of the Consolidated Return Regulations.  Notwithstanding
     the foregoing, BPA may, in its sole and absolute discretion, change the
     method set forth above, to the extent that it is permitted to do so by
     applicable law.

12.  BPA Control of Conduct of Audits, Litigation; Expenses.

(a)  In any audit, conference or other proceeding with the Service or the
     relevant state or local authorities, or in any judicial proceedings
     concerning the determination of the BPA Group Consolidated Tax Liability or
     the state or local income tax liability of any

                                       46
<PAGE>

     consolidated, combined or unitary group including BPA or any of its
     Subsidiaries (other than VRI or a Subsidiary of VRI) and VRI (or any of the
     Subsidiaries of VRI), BPA shall have the exclusive right to contest,
     compromise or settle any adjustment or deficiency proposed, asserted or
     assessed as a result of such proceeding and to extend or refuse to extend
     the applicable time period for making assessments or adjustments. VRI and
     each Subsidiary of VRI hereby appoints BPA as its agent for the purpose of
     conducting such contest or proposing and concluding any such compromise and
     settlement. BPA shall have control over the proceedings, but shall confer
     with VRI regarding any proposed adjustment bearing on any material
     liability of VRI pursuant to this Agreement. VRI shall support any audit or
     other examination or judicial or administrative proceeding with respect to
     any Taxable Year, at its own expense, in any reasonable way requested by
     BPA. Nothing herein shall limit BPA's discretion to determine whether and
     in what amount an item arising from VRI or any VRI Subsidiary shall be
     conceded or otherwise compromised and whether and in what amount an item
     results in an adjustment to VRI described in Section 8(a).

(b)  Expenses.  VRI shall reimburse BPA for all third party expenses (including,
     without limitation, legal and accounting fees) incurred by BPA in the
     course of proceedings described in this Section 12 to the extent such
     expenses are allocable, in BPA's sole and absolute discretion, to VRI Group
     items.

13.  Indemnification For Certain Income Taxes.

(a)  BPA shall indemnify VRI on an after-tax basis (taking into account, when
     realized, any tax detriment or tax benefit to VRI (or any VRI Subsidiary)
     of (x) a payment hereunder or (y) the liability to the Service or state,
     local or foreign taxing

                                       47
<PAGE>

     authority giving rise to such a payment), with respect to and in the
     amount of:

     (i)  Any liability for federal income tax incurred by VRI or any Subsidiary
          of VRI for any Taxable Year with respect to which VRI or such
          Subsidiary is included in the BPA Group's Consolidated Return;
          provided that VRI shall have made payments to BPA as provided in this
          Agreement in complete satisfaction of the VRI Group Consolidated Tax
          Liability for such Taxable Year;

     (ii) Any liability for state or local income tax incurred by VRI or any
          Subsidiary of VRI with respect to any jurisdiction for any Taxable
          Year with respect to which VRI or any such Subsidiary of VRI
          participates in the filing of a consolidated, combined or unitary
          return with BPA or any Subsidiary of BPA (other than VRI or any
          Subsidiary of VRI); provided and to the extent that VRI shall have
          made payments to BPA as provided in this Agreement in complete
          satisfaction of the VRI Group State and Local Tax Liability for such
          Taxable Year;

     (iii)  Any liability for federal, state or local income tax incurred by VRI
            or any Subsidiary of VRI, to the extent attributable to any Member
            of the BPA Group (other than VRI or any of its Subsidiaries) and for
            which VRI or such Subsidiary is liable as a result of being included
            in a Consolidated Return of the BPA Group or as a result of
            participating in the filing of a consolidated, combined or unitary
            state or local income tax return with BPA or any Subsidiary of BPA
            (other than VRI or any VRI Subsidiary); and

                                       48
<PAGE>

     (iv) Interest, penalties and additions to tax, and costs and expenses in
          connection with any liabilities described in Sections 13(a)(i), (ii)
          and (iii) above, except as otherwise provided in this Agreement.

(b)  BPA shall pay to VRI amounts due under Sections 13(a)(i), (ii) and (iii)
     and Section 13(a)(iv) (to the extent such amounts are related to amounts
     under Sections 13(a)(i), (ii) and (iii)) no later than 7 days after the
     date of a Final Determination with respect thereto; provided, however, that
     no such indemnification shall be made to the extent that VRI has failed to
     make a payment to BPA under the provisions of this Agreement as of the date
     the payment under this Section 13 becomes due.

(c)  If any adjustment giving rise to a tax liability described in Section
     13(a)(iv) of the Prior Agreement hereof as to which ARCO has previously
     provided indemnification results in any tax deduction or tax credit for
     federal, state, local or foreign income tax purposes to VRI or any of its
     Subsidiaries for any taxable year that was not taken into account in
     calculating the original indemnification payment, VRI shall pay to BPA an
     amount equal to the sum of (x) the amount of such credit and (y) the amount
     of such deduction, multiplied by the maximum composite federal, state,
     local and foreign income tax rate to which VRI or the relevant Subsidiary
     is subject for the taxable year in which or with respect to which such
     benefit is realized; provided, however, that such composite rate shall be
     calculated by taking into account only those federal, state, local and
     foreign income taxes with respect to which such deduction is allowed.
     Payments made under this Section 13(c) shall be made upon the later to
     occur of (x) 120 days after there has been a Final Determination under
     applicable law of the adjustment

                                       49
<PAGE>

     giving rise to such payment and (y) 90 days after the filing of the tax
     return for the taxable year in which such tax deduction or credit is
     utilized or absorbed, or such tax liability is due, as the case may be.

14.  Partnership Interests.

     In connection with any partnership interest for which VRI or a VRI
Subsidiary is the Tax Matters Partner, VRI shall to the maximum extent feasible
make elections, use accounting methods, and report positions with respect to
such partnership interest that are consistent with positions reported on the BPA
Group's Consolidated Return and report positions on the Pro Forma VRI Return
that are consistent with those reported for such partnership interest on the BPA
Group's Consolidated Return.  VRI shall confer with BPA in advance regarding any
such item that may be or could be inconsistent with items on the BPA Group's
Consolidated Return.

15.  Limitations on Certain Pro Forma VRI Return Deductions.

     Notwithstanding any provision in this Agreement to the contrary, the Pro
Forma VRI Return shall not include any deductions with respect to any amounts
for which ARCO established a reserve account on its books in 1993 to the extent
such amounts are not also reflected as of the date of payment in any reserve
account established on VRl's books.  Notwithstanding any provision in this
Agreement to the contrary, in light of the fact that the book expense of certain
amounts to be paid to participants or beneficiaries by VRI pursuant to the terms
of its nonqualified deferred compensation plans has been taken into account on
ARCO's books and will not (under generally accepted accounting principles) be
taken into account on VRl's books, the deductions on the Pro Forma VRI Return in
the Taxable Year commencing on January

                                       50
<PAGE>

1, 2005 and in each Taxable Year thereafter shall be reduced by $530,000 per
Taxable Year until the aggregate amount of deductions that have been disallowed
pursuant to this sentence equals $5,300,000.

16.  Administration; Resolution of Disputes.

     The provisions of this Agreement will be administered by BPA.  Except as
otherwise expressly governed by the terms of this Agreement, BPA may use any
reasonable method in making any computations or allocations hereunder, and BPA's
calculations will be conclusive unless a written objection is provided to BPA
within one year of such calculations.  If written objection is timely made by
VRI, the disputed issue (other than disputes described in Section 4(f) of this
Agreement, which disputes shall be governed solely by such provision) shall be
resolved by a nationally recognized accounting firm selected by BPA, whose
determination will be conclusive and binding upon the parties and whose fees and
expenses shall be shared equally by BPA and VRI.  Nothing in this Section 16 is
intended to limit BPA's discretion in making any computations, allocations or
determinations that may be made under this Agreement in BPA's sole and absolute
discretion.

17.  Interpretation.

     This Agreement is intended to provide for the calculation and allocation of
certain federal and state and local income tax liabilities between the BPA Group
(other than VRI and its Subsidiaries) and the VRI Group, and any situation or
circumstance concerning such calculation and allocation that is not specifically
contemplated hereby or provided for herein shall be dealt with in a manner
consistent with the underlying principles of calculation and allocation in this
Agreement.

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<PAGE>

18.  Effect of Agreement.

     This Agreement shall determine the liability of BPA and VRI as to the
matters provided for herein, whether or not such determination is effective for
purposes of the Code or of state or local revenue laws, for financial reporting
purposes or for any other purpose.

19.  Term.

     This Agreement will apply to Taxable Years ending after the Effective Date
and all subsequent Taxable Years, unless BPA and VRI agree in writing to
terminate this Agreement.  Notwithstanding such termination, this Agreement will
continue in effect with respect to any payment or refunds due for all Taxable
Years prior to termination and all subsequent taxable years to the extent
required to comply with Section 7(b) and the provisions of Sections 13, 21 and
32 shall survive the termination of this Agreement.  VRI or any Subsidiary of
VRI that leaves the BPA Group will be bound by this Agreement.  The failure of
one or more parties hereto to qualify for inclusion in the Consolidated Return
filed by BPA will not operate to terminate this Agreement with respect to the
other parties as long as two or more parties hereto continue so to qualify.

20.  Assignment.

     A party's rights and obligations under this Agreement will not be
assignable by any party without the prior written consent of the other parties.
The preceding sentence notwithstanding, VRI shall be permitted to assign its
rights to receive payments from BPA pursuant to Section 4(h) of this Agreement
without BPA's consent.

21.  Confidentiality.

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<PAGE>

     BPA, VRI and the Subsidiaries of VRI agree that any information furnished
among one another pursuant to this Agreement is confidential and, except as and
to the extent required during the course of an audit or litigation, shall not be
disclosed to other persons.

22.  Documentation.

     All material including, but not limited to, returns, supporting schedules,
work papers, correspondence, and other documents relating to the consolidated
federal income tax returns filed for a taxable year subject to this Agreement
will be made available to any party to the Agreement during regular business
hours for a minimum period equal to applicable federal and state record
retention requirements (or the applicable statute of limitations period).

23.  Additional Members.

     The parties hereto specifically recognize that from time to time other
Subsidiaries of VRI may become Members of the BPA Group and hereby agree that
VRI shall cause such corporations to become parties to this Agreement by causing
such Members to execute the master copy of this Agreement, which will be
maintained at BPA's headquarters.  It will not be necessary for all the parties
hereto to re-execute the Agreement, but the new Members may simply execute a
counterpart of the existing Agreement, which will remain in effect as if all
parties had signed contemporaneously.

24.  Tax Law Changes.

     Any alteration, modification, addition, deletion or other change in the
Code or the Income Tax Regulations (or the applicable state and local tax
provisions) will automatically be applicable to this Agreement when changed.

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<PAGE>

25.  Successors and Assigns.

     This Agreement will bind and inure to the benefit of the respective
successors and assigns of the parties hereto; but no assignment will relieve any
party of its obligations hereunder without the written consent of the other
parties.

28.  Counterparts.

     This Agreement may be executed in two or more counterparts, each of which
     shall be deemed to be an original, but all of which together shall
     constitute one and the same instrument.

26.  Headings.

     The headings in this Agreement are inserted for convenience only and shall
     not constitute a part hereof or affect the interpretation of this
     Agreement.

27.  Severability.

     If any provision of this Agreement is held to be unenforceable for any
reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to the maximum extent practicable.  In any
event, all other provisions of this Agreement shall be deemed valid, binding and
enforceable to their full extent.

28.  Entire Agreement.

     This Agreement contains the entire understanding of the parties hereto with
respect to the subject matter contained herein.  No alteration, amendment or
modification of any of the terms of this Agreement shall be valid unless made by
an instrument signed in writing by an authorized officer of BPA and of VRI.

29.  Conflicts Between This Agreement and the Stock Purchase Agreement.

     In the event a conflict arises between the terms of this Agreement and the
terms

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<PAGE>

of the Stock Purchase Agreement during any Taxable Year in which this
Agreement is in effect, the terms of this Agreement shall control.  The parties
hereto intend that this Agreement shall supersede Sections 11.1(a)(v) and
11.1(b) of the Stock Purchase Agreement and shall constitute the parties' final
agreement with respect to such sections.  VRI and its Affiliates further agree
to release ARCO and BPA from any indemnity obligations pursuant to Section
11.1(a)(v) of the Stock Purchase Agreement.  It is intended that this Agreement
shall constitute a writing described in Section 12.3 of the Stock Purchase
Agreement.  If the items of income, deduction, gain, loss, credits and other tax
attributes of the Gulf Assets are included in the Pro Forma VRI Return and the
Pro Forma State Return in accordance with this Agreement and the Prior Agreement
for the periods after the Closing Date (as defined in the Stock Purchase
Agreement) and VRI satisfies its payment obligations with respect thereto
pursuant to this Agreement and the Prior Agreement, then VOI and the VRI Group
shall have no further liability to ARCO and BPA for income and franchise taxes
attributable to the Gulf Assets.  Furthermore, the tax indemnity provisions of
this Agreement and the Prior Agreement shall be applicable with respect to the
payment by VRI of such taxes.

33.  Notices.

     Any payment, notice or communication required or permitted to be given
under this Agreement shall be in writing (including telecopy communication) and
mailed, telecopied or delivered:

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<PAGE>

     If to BPA:

     BP America Inc.
     200 East Randolph Drive
     Chicago, Illinois 60601-7125
     Attention:  Vice President & General Tax Officer

     If to VRI:
     VASTAR Resources, Inc.
     15375 Memorial Drive
     Houston, Texas  77079
     Attention:  General Tax Officer

or to such other address that a party shall furnish in writing to the other
party.  All such notices and communications shall be effective when received.

31.  Governing Law.

     This Agreement will be construed and enforced in accordance with the laws
of the State of Texas, without giving effect to the principles of conflict of
laws.

                                    *  *  *

     IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed and executed by their respective authorized officers as of the date
first set forth above.

                                     BP AMERICA, INC.

                                     BY /s/ James G. Nemeth
                                        ______________________________

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<PAGE>

     VASTAR RESOURCES, INC.

     BY /s/ A. Shawn Noonan
       ___________________________

     F&H PIPELINE COMPANY

     BY  /s/ A. Shawn Noonan
        ______________________________

     GRANT GATHERING COMPANY

     BY  /s/ A. Shawn Noonan
        ______________________________

     WILBURTON HUB, INC.

     BY: /s/ A. Shawn Noonan
        ____________________________

     VASTAR GAS MARKETING, INC.

     BY: /s/ A. Shawn Noonan
         _____________________________

     VASTAR HOLDINGS, INC.

     BY: /s/ A. Shawn Noonan
         _____________________________

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<PAGE>

     VASTAR POWER MARKETING, INC.

     BY: /s/ A. Shawn Noonan
        ______________________________

     VASTAR OFFSHORE, INC.

     BY: /s/ A. Shawn Noonan
        ______________________________

     VASTAR PIPELINE, LLC

     BY: /s/ A. Shawn Noonan
         _____________________________

     VASTAR ENERGY, INC.

     BY: /s/ A. Shawn Noonan
        ______________________________

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