Document:

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                                                                   EXHIBIT 10.34

                           VALUE ASSURANCE AGREEMENT

     This Value Assurance Agreement is made as of August 17, 2001, by and among
Plains Resources Inc., a Delaware corporation ("Rodeo"), and First Union
Investors, Inc., a North Carolina corporation ("First Union").

                                   RECITALS:

     WHEREAS, Kafu Holdings, LLC ("Holdings LLC") and Rodeo are parties to that
certain Unit Transfer and Contribution Agreement dated as of May 8, 2001 (the
"Transfer Agreement") whereby, among other things, PAAI LLC, a wholly owned,
indirect subsidiary of Rodeo has agreed to sell to Holdings LLC and Holdings LLC
has agreed to purchase from PAAI LLC, 1,985,865 subordinated units of limited
partner interests (the "Subordinated Units") of Plains All American Pipeline,
L.P. (the "Company").

     WHEREAS, Holdings LLC has assigned all its rights and interests under the
Transfer Agreement to KAFU Holdings, LP.

     WHEREAS, KAFU Holdings, LP has assigned its rights and interests with
respect to 328,668 of the Subordinated Units to First Union.

     WHEREAS, it is the intent of the parties that during the term of this
Agreement the Unit Holders shall receive quarterly distributions per
Subordinated Unit in an amount equal to at least the Minimum Distribution (as
hereinafter defined).

     WHEREAS, Rodeo has agreed to pay to the Unit Holders (as hereinafter
defined), on the terms and conditions hereinafter set forth as an adjustment to
the purchase price of the Subordinated Units, such amounts per Subordinated Unit
as are necessary to assure that the Minimum Distributions are realized.

     WHEREAS, as a condition precedent to the consummation of the transactions
contemplated by the Transfer Agreement, Rodeo is required to execute and deliver
this Agreement.

     NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of all of which are hereby
acknowledged, the parties hereby agree as follows:

                                   AGREEMENT

     Section 1.  Certain Definitions.  As used herein the following terms shall
have the following meanings:

     "Actual Distributions" means, for any Quarter, the amount of Available Cash
distributed by the Company per Subordinated Unit pursuant to Article VI of the
Partnership Agreement.

     "Agreement" means this Value Assurance Agreement, as it may be amended from
time to time in accordance with its terms.
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     "Available Cash" has the meaning given such term in the Partnership
Agreement.

     "Common Unit" has the meaning given such term in the Partnership Agreement.

     "Minimum Distribution" means $0.4625 per Subordinated Unit per Quarter,
subject to proportional adjustment in the event of any distribution, combination
or subdivision (whether effected by a distribution payable in Units or
otherwise) of Units or other Partnership Securities in accordance with Section
5.10 of the Partnership Agreement.

     "Partnership Agreement" means the Second Amended and Restated Agreement of
Limited Partnership of the Company dated as of November 23, 1998, as amended,
modified, supplemented or restated from time to time.

     "Partnership Securities" has the meaning given such term in the Partnership
Agreement.

     "Quarter" has the meaning given such term in the Partnership Agreement.

     "Shortfall Payment" means an amount equal to the product of (A) the Minimum
Distribution less the Actual Distribution, times (B) the number of Subordinated
Units held of record by a particular Unit Holder.

     "Subordinated Units" has the meaning given such term in the Recitals
hereof.

     "Transfer Agreement" has the meaning given such term in the Recitals
hereof.

     "Unit" has the meaning given such term in the Partnership Agreement.

     "Unit Holders" means initially First Union as owner of the Subordinated
Units and shall include any subsequent permitted transferee in accordance with
Section 6 hereof that is the record holder of Subordinated Units.

     Section 2.  Assurance of Minimum Distributions.  In the event the Actual
Distribution is less than the Minimum Distribution, Rodeo shall pay to each Unit
Holder their respective Shortfall Payment within 50 days after the end of such
Quarter; provided, however, that no Unit Holder shall be entitled to any
Shortfall Payment if the aggregate amount of Actual Distributions and Shortfall
Payments made to date for that fiscal year (the "Aggregate Payment Amount") is
greater than $1.85 (an "Excess Payment"); provided, further, that if any payment
of any Shortfall Payment would result in an Excess Payment, such Shortfall
Payment shall be reduced so that the Aggregate Payment Amount through and
including the date of such Shortfall Payment equals $1.85 (the "Guaranteed
Amount").  If Rodeo shall fail to timely make any Shortfall Payment as
contemplated by this Section 2, Rodeo agrees to pay interest in respect of any
delinquent amount under this Agreement at the rate per annum that Citibank, N.A.
or any successor entity thereto, announces from time to time as its prime
lending rate.  All Shortfall Payments, and other payments hereunder, shall be
made in immediately available funds to the account of each of the Unit Holders,
or their respective successors and permitted assignees, as appropriate without
offset, deduction or counterclaim of any kind (except as provided for in Section
3 below).  A Unitholder shall not be entitled to receive any Shortfall
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Payment with respect to any Subordinated Unit that has been converted into a
Common Unit other than with respect to any distributions of Available Cash
declared but not paid prior to such Conversion.

     Section 3.  True-Up.  In the event that the Aggregate Payment Amount for
any fiscal year is greater than the Guaranteed Amount, each Unit Holder shall
reimburse Rodeo in an amount equal to the product of (x) the lesser of (A) the
aggregate amount of Shortfall Payments per Subordinated Unit made during that
year and (B) the difference between the Aggregate Payment Amount and the
Guaranteed Amount in respect of such fiscal year (such lesser amount, the "True-
Up Amount") and (y) the number of Subordinated Units held of record by that Unit
Holder.  Such reimbursement shall be made in cash within 50 days after the end
of the fiscal year.  If any Unit Holder shall fail to timely make any
reimbursement contemplated by this Section 3, such Unit Holder shall pay
interest in respect of any delinquent amount at the rate per annum that
Citibank, N.A. or any successor entity thereto, announces from time to time as
its prime lending rate, and if not paid prior to the date on which any
subsequent Shortfall Payment is to be made, the True-Up Amount shall be set off
against such Shortfall Payment.  In the event a Unit Holder has transferred
Subordinated Units during such fiscal year, transferor and transferee shall each
be responsible for proportional payment of the True-Up Amount based upon the
Shortfall Payments made to each of them.

     Section 4.  Absolute Obligation.  Rodeo hereby agrees that this Agreement
constitutes an irrevocable and unconditional obligation to pay and perform all
obligations due hereunder on demand.  Rodeo agrees to make payment and to
perform strictly in accordance with terms hereof regardless of any law,
regulation or equitable principle now or hereafter in effect which would modify
or restrict either the obligations of Rodeo or the rights of the Unit Holders
with respect to this Agreement, and Rodeo waives defenses to the payment or
performance by Rodeo hereunder. Rodeo and the Unit Holders, with respect to
Section 3 hereof, each hereby agree to the prompt, complete, and full payment of
all expenses and fees (including, without limitation, reasonable attorneys'
fees) incurred in the enforcement of this Agreement.

     Section 5.  Representations and Warranties.  Rodeo hereby represents and
warrants to the Unit Holders as of the date hereof as follows:

     Section 5.1.  Organization and Good Standing. Rodeo is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Rodeo has the power and authority to conduct its business as it is presently
being conducted and to own or use its properties and assets.

     Section 5.2.  Power, Authority and Enforceability.  Rodeo has all requisite
power and authority to execute, deliver and perform this Agreement.  This
Agreement has been duly and validly authorized and executed by persons with
authority to bind Rodeo and constitutes the legal, valid and binding obligation
of the Rodeo, enforceable against Rodeo in accordance with its terms.

     Section 5.3.  No Conflicts; Consents. The execution, delivery and
performance by Rodeo of this Agreement does not and will not conflict with,
contravene, violate or result in a breach of or default under any laws
applicable to Rodeo or any order, decree or judgment of any court or
governmental authority binding on Rodeo or any agreement or instrument to which
Rodeo is a party or by which it or any of its assets are bound, and will not
result in or require the creation or
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imposition of any lien, charge or encumbrance upon any assets of Rodeo. No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or other regulatory body or third party is required
for the due execution, delivery and performance by Rodeo of this Agreement.

     Section 5.4.  Legal Proceedings.  There is no action, suit or proceeding
pending or, to the knowledge of Rodeo, threatened against or otherwise affecting
Rodeo before any court, arbitrator or governmental department, commission,
board, bureau, agency or instrumentality that would reasonably be expected to
materially and adversely affect Rodeo's financial condition, properties or
operations or ability to perform its obligations hereunder.

     Section 5.5.  Solvency.  Rodeo is solvent and able to pay its debts as they
become due.  Rodeo's capital is adequate for the businesses in which it is
engaged and intends to be engaged.  Rodeo has not incurred, nor does Rodeo
intend to incur or believe that it will incur, debts which will be beyond its
ability to pay as such debts mature.

     Section 6.  Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assignees.
Rodeo shall not be allowed to assign or otherwise transfer this Agreement and
its rights or obligations hereunder except by operation of law.  A Unit Holder
may assign, grant a participation in, or otherwise transfer any of its rights or
interests hereunder without the consent of the other parties (i) to any third
party in connection with the transfer of Subordinated Units that is permitted
by, and in accordance with, the Transfer Agreement, whereupon such transferee
shall then be a "Unit Holder" for all purposes under this Agreement, and (ii) to
any lender to secure indebtedness of the Unit Holder, or in the event of a
default in any indebtedness of the Unit Holder.

     Section 7.  Termination. This Agreement shall terminate with respect to any
Subordinated Unit at the conversion of such Subordinated Unit into a Common
Unit.  This Agreement shall terminate upon the first to occur of the following:
(i) the date on which all of the Subordinated Units shall have converted into
Common Units or (ii) June 8, 2006.  A termination of this Agreement shall have
no effect on nor diminish, alter, nor affect (i) any rights or obligations of
the parties hereto which accrued or arose on or before the date of such
termination and (ii) any right or cause of action and related remedies arising
out of a party's breach of this Agreement.

     Section 8.  General.

     Section 8.1.  Choice of Law.  This Agreement will be governed by and
construed in accordance with the laws of the State of Texas other than the
conflict of laws rules thereof.  The parties agree to submit all disputes
arising under or relating to this Agreement to the exclusive jurisdiction of the
state courts and/or United States federal courts located in Harris County in the
State of Texas and consent to the jurisdiction of such courts.

     Section 8.2.  Entire Agreement and Amendments. This Agreements constitute
the entire agreement between the parties and supersedes all agreements,
representations, warranties, statements, promises and understandings, whether
oral or written, with respect to the subject matter
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hereof. This Agreement may not be amended, supplemented or otherwise modified
except by a written agreement executed by all parties hereto.

     Section 8.3.  Severability.  If any provision of this Agreement is held to
be unenforceable or invalid by a court of competent jurisdiction, such
unenforceability or invalidity shall not render this Agreement unenforceable or
invalid as a whole.  Rather, such provision shall be stricken from the Agreement
and the remaining provisions shall be fully enforceable.

     Section 8.5.  Notices.  All notices under this Agreement shall be in
writing and shall be deemed to have been received (a) when personally delivered
or sent by telecopy, (b) one day following delivery by overnight delivery
courier, with all delivery charges pre-paid, or (c) on the third business day
following the date on which it was sent by United States mail, postage prepaid,
to a party at the address or fax number, as the case may be, of such party as
set forth on the signature page of this Agreement or such other address as a
party may specify in writing.

     Section 8.6.  Headings.  The headings used herein are for purposes of
convenience only and shall not be used in construing the provisions hereof.

     Section 8.7.  Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     Section 8.8.  Treatment of Payments.  Any Shortfall Payment made hereunder
shall be treated for all purposes as an adjustment to the purchase price paid by
the Unit Holder for the Subordinated Units to PAAI LLC.

                                 [SIGNATURE PAGE FOLLOWS]
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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                              PLAINS RESOURCES INC.

                              By:    /s/ Timothy T. Stephens
                                    --------------------------------------
                              Name:      Timothy T. Stephens
                                    --------------------------------------
                              Title:  Executive Vice President and General
                                      Counsel
                                    --------------------------------------

                              Address:   500 Dallas Street, Suite 700
                                         Houston, Texas  77002
                              Facsimile: (713) 654-1523

                              FIRST UNION INVESTORS, INC.

                              By:    /s/  Jay Young
                                    --------------------------------------
                              Name:       Jay Young
                                    --------------------------------------
                              Title:      Vice President
                                    --------------------------------------

                              Address:   301 South College Street
                                         Charlotte, NC 28288-0630
                              Facsimile: (704) 383-0353<PAGE>

                                                                   EXHIBIT 10.35

                             Plains Resources, Inc.

June 7, 2001

John T. Raymond
1025 South Shepherd, #301
Houston, Texas 77019

     Re:  Terms of Employment with the Company

Dear John,

I am pleased to offer you the position of Executive Vice President and Chief
Operating Officer of Plains Resources, Inc (the "Company").  This offer letter
shall outline the terms of your employment with the Company.

Subject to earlier termination by either you or the Company, you will be
employed by the Company for a term of five years which began on May 17, 2001
(the "Effective Date").  The term of your employment will automatically be
extended one year and again for successive one-year periods on each anniversary
thereof, if you and the Company have agreed to new compensation terms at least
ninety days prior to the end of the initial five-year period and any additional
one-year extensions (the initial five-year term and any additional years are
hereinafter referred to as the "Term").  Your annual salary shall be $300,000,
and you shall be eligible for an annual target bonus of $300,000, subject to
attainment of goals set forth by the Company's Board of Directors (the "Board").

Your compensation shall include options covering 300,000 shares of the Company's
common stock (the "Options"), subject only to shareholder approval of the
Company's new stock option plan (the "Plan").  The grant date of the Options
shall be the date of this letter (June 7, 2001), and the Options shall have a
per share exercise price equal to the fair market value of a share of Company
common stock ("Common Stock") on the date of grant (which for purposes of this
Agreement and the Plan is the closing sales prices of the Shares on the day
prior to the grant date).  One Option shall cover 200,000 shares of Common
Stock, shall vest ratably over three years starting on the first anniversary of
the Effective Date, shall have a five-year term, and shall contain such other
terms and conditions as the Board shall decide.  The second Option shall cover
100,000 shares, 50% of which shall vest when the closing price of the Common
Stock equals or exceeds 150% of the exercise price of the Option for a period of
10 trading days during a period of 20 consecutive trading days, and 100% of
which shall vest when the closing price of the Common Stock equals or exceeds
200% of the exercise price of the Option for a period of 10 trading days during
a period of 20 consecutive trading days.  Both Options generally shall be fully
exercisable upon a "change in control" of the Company (as defined in the Plan),
upon a termination of employment by the Company for any reason other than
"cause" (as defined in the Plan) and upon your death.
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June 7, 2001
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In addition, you will be entitled to receive as soon as practicable after the
Effective Date, a signing bonus of $600,000.  At your election, this payment
shall be made in the form of a direct grant of shares of Common Stock, the
number of which shall be determined by dividing the signing bonus amount by the
fair market value of a share on the Effective Date, rounded down to the nearest
whole share.

If the Company terminates your employment during the Term for any reason other
than cause or if your employment terminates due to your death during the Term,
you will receive a severance payment equal to two times the sum of your base
salary and last earned annual bonus (provided, however, that if such termination
shall take place prior to the end of the first full calendar year of employment
(i.e., prior to December 31, 2002), the bonus amount used for the severance
calculation shall be the target bonus), and the Options shall immediately vest.
In addition, you will be entitled to health benefits for up to two years,
subject to mitigation should you become entitled to health benefits under
another plan.

During the Term and for any period thereafter, you shall not, without the
written consent of the Board or a person authorized by the Board, disclose to
any person, other than an employee of the Company or a person to whom disclosure
is reasonably necessary or appropriate in connection with the performance of
your duties as an executive of the Company, any confidential information
obtained by you while in the employ of the Company with respect to the Company's
business, including but not limited to technology, know-how, processes, maps,
geological and geophysical data, other proprietary information and any
information whatsoever of a confidential nature, the disclosure of which you
know or should know will be damaging to the Company; provided, however, that
confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by you) or any
information which you may be required to disclose by any applicable law, order,
or judicial or administrative proceeding.

During the Term and for a period of one year thereafter, you shall not in North
America, directly or indirectly engage in or become interested financially in as
a principal, employee, partner, shareholder, agent, manager, owner, advisor,
lender, or guarantor of any person engaged in any business substantially
identical to the Business (defined below); provided, however, that you may
invest in stock, bonds or other securities in any such business (without
participating in such business) if:  (i)(A) such stock, bonds or other
securities are listed on any United States securities exchange or are publicly
traded in an over the counter market and (B) its investment does not exceed, in
the case of any capital stock of any one issuer, 5% of the issued and
outstanding capital stock, or in the case of bonds or other securities, 5% of
the aggregate principal amount thereof issued and outstanding, or (ii) such
investment is completely passive and no control or influence over the management
or policies of such business is exercised.  The term "Business" shall mean the
exploration, development and production of crude petroleum and natural gas.

Further, during the Term and for a period of one year thereafter, you shall not
solicit or hire, directly or indirectly, in any manner whatsoever (except in
response to a general solicitation), in the capacity of employee, consultant or
in any other capacity whatsoever, one or more of the employees, directors or
officers or other persons (hereinafter collectively referred to as "Employees")
who at the time of solicitation or hire, or in the 90-day period prior thereto,
are working full-time or part-time for the Company or any of its subsidiaries
and you shall not endeavour, directly or indirectly, in any manner whatsoever,
to encourage any Employee to leave his or her job with the Company or any of its
Subsidiaries and you shall not endeavour, directly
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June 7, 2001
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or indirectly, and in any manner whatsoever, to incite or induce any client of
the Company or any of its Subsidiaries to terminate, in whole or in part, its
business relations with the Company or any of its Subsidiaries.

If you agree with the terms as set forth herein, please sign both copies of this
letter and return one copy to me at the above address.

Sincerely,

/s/ James C. Flores
--------------------------------------
James C. Flores
Chairman and Chief Executive Officer

Agreed to and accepted by on this 11th day of June, 2001:

/s/ John T. Raymond
--------------------------------------
John T. Raymond

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