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

                                   FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER: 1-14569

                      PLAINS ALL AMERICAN PIPELINE, L.P.

            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            DELAWARE                                           76-0582150
(STATE OR OTHER JURISDICTION OF                             (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)

                          333 CLAY STREET, SUITE 2900
                             HOUSTON, TEXAS 77002
                   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                  (ZIP CODE)

                                (713) 646-4100
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 TITLE OF EACH CLASS                NAME OF EACH EXCHANGE ON WHICH REGISTERED
- -----------------------            ------------------------------------------
    COMMON UNITS                           NEW YORK STOCK EXCHANGE

       SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  NONE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

The aggregate value of the Common Units held by non-affiliates of the registrant
(treating all executive officers and directors of the registrant and holders of
10% or more of the Common Units outstanding, for this purpose, as if they may be
affiliates of the registrant) was approximately $640,433,291 on March 15, 2002,
based on $25.61 per unit, the closing price of the Common Units as reported on
the New York Stock Exchange on such date.

At March 15, 2002, there were outstanding 31,915,939 Common Units, 1,307,190
Class B Common Units and 10,029,619 Subordinated Units.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

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              PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
                          2001 FORM 10-K ANNUAL REPORT
                               TABLE OF CONTENTS

                                                                          PAGE
                                                                          ----
                                     Part I
                                                                     
Items 1 and 2.   Business and Properties................................    1
Item 3.          Legal Proceedings......................................   25
Item 4.          Submission of Matters to a Vote of Security Holders....   26

                                PART II

Item 5.          Market for the Registrant's Common Units and Related
                  Unitholder Matters....................................   27
Item 6.          Selected Financial and Operating Data..................   29
Item 7.          Management's Discussion and Analysis of Financial
                  Condition and Results of Operations...................   32
Item 7a.         Quantitative and Qualitative Disclosures About
                  Market Risks..........................................   47
Item 8.          Financial Statements and Supplementary Data............   49
Item 9.          Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure...................   49

                                PART III

Item 10.         Directors and Executive Officers of Our General
                  Partner...............................................   50
Item 11.         Executive Compensation.................................   53
Item 12.         Security Ownership of Certain Beneficial Owners
                  and Management........................................   56
Item 13.         Certain Relationships and Related Transactions.........   58

                                PART IV

Item 14.         Exhibits, Financial Statement Schedules and Reports
                  on Form 8-K...........................................   65

                           FORWARD-LOOKING STATEMENTS

  All statements, other than statements of historical fact, included in this
report are forward-looking statements, including, but not limited to, statements
identified by the words "anticipate," "believe," "estimate," "expect,"
"plan," "intend" and "forecast" and similar expressions and statements
regarding our business strategy, plans and objectives of our management for
future operations. These statements reflect our current views and those of our
general partner with respect to future events, based on what we believe are
reasonable assumptions. Certain factors could cause actual results to differ
materially from results anticipated in the forward-looking statements.  The
factors include, but are not limited to:

 .  abrupt or severe production declines or production interruptions in outer
   continental shelf production located offshore California and transported on
   the All American Pipeline;
 .  the availability of adequate supplies of and demand for crude oil in the
   areas in which we operate;
 .  the effects of competition;
 .  the success of our risk management activities;
 .  the availability (or lack thereof) of acquisition or combination
   opportunities;
 .  successful integration and future performance of acquired assets;
 .  our ability to receive credit on satisfactory terms;
 .  shortages or cost increases of power supplies, materials or labor;
 .  the impact of current and future laws and governmental regulations;
 .  environmental liabilities that are not covered by an indemnity or insurance;
 .  fluctuations in the debt and equity markets; and
 .  general economic, market or business conditions.

Other factors described herein, or factors that are unknown or unpredictable,
could also have a material adverse effect on future results. See Item 7.
"Management's Discussion and Analysis--Risk Factors Related to Our Business".
Except as required by applicable securities laws, we do not intend to update
these forward-looking statements and information.

                                       i

                                    PART I

ITEMS 1 AND 2.  BUSINESS AND PROPERTIES

GENERAL

  We are a publicly traded Delaware limited partnership (the "partnership")
engaged in interstate and intrastate marketing, transportation and terminalling
of crude oil and marketing of liquefied petroleum gas ("LPG"). We were formed in
September 1998 to acquire and operate the midstream crude oil business and
assets of Plains Resources Inc. and its wholly owned subsidiaries ("Plains
Resources") as a separate, publicly traded master limited partnership. We
completed our initial public offering in November 1998. Immediately after our
initial public offering, Plains Resources owned 100% of our general partner
interest and an overall effective ownership in the partnership of 57% (including
the 2% general partner interest and common and subordinated units owned by it).

  In May 2001, senior management and a group of financial investors entered into
a transaction with Plains Resources to acquire control of the general partner
interest and a majority of the outstanding subordinated units. The transaction
closed in June 2001 and, for purposes of this report, is referred to as the
"General Partner Transition". As a result of this transaction, Plains Resources'
ownership in the general partner interest was reduced from 100% to 44%.
Additionally, as a result of this transaction and various equity offerings
conducted since the initial public offering, Plains Resources' overall effective
ownership has been reduced to approximately 29%. In addition, certain senior
officers of the general partner that previously were also officers of Plains
Resources terminated their affiliation with Plains Resources and now devote 100%
of their efforts to the management of the partnership.

  The general partner interest is now held by Plains AAP, L.P., a Delaware
limited partnership. Plains All American GP LLC, a Delaware limited liability
company, is Plains AAP, L.P.'s general partner. Our operations and activities
are managed by, and our officers and personnel are employed by, Plains All
American GP LLC. Unless the context otherwise requires, we use the term "general
partner" to refer to both Plains AAP, L.P. and Plains All American GP LLC. We
use the phrase "former general partner" to refer to the subsidiary of Plains
Resources that formerly held the general partner interest.

  Our operations are concentrated in Texas, Oklahoma, California and Louisiana
and in the Canadian provinces of Alberta, Saskatchewan and Manitoba, and can be
categorized into two primary business activities:

 .  Crude Oil Pipeline Transportation. We own and operate over 3,000 miles of
   gathering and mainline crude oil pipelines located throughout the United
   States and Canada. Our activities from pipeline operations generally consist
   of transporting crude oil for a fee.

 .  Terminalling and Storage Activities and Gathering and Marketing Activities.
   In connection with our terminalling and storage activities, we own and
   operate approximately 11.5 million barrels of above-ground crude oil
   terminalling and storage facilities, including the state-of-the-art, 3.1
   million barrel crude oil terminalling and storage facility at Cushing,
   Oklahoma (the "Cushing Terminal"). Cushing is the largest crude oil trading
   hub in the United States and the designated delivery point for New York
   Mercantile Exchange, or NYMEX, crude oil futures contracts (the "Cushing
   Interchange"). Our terminalling and storage operations generate revenue
   through a combination of storage and throughput charges to third parties. We
   also utilize our storage tanks to counter-cyclically balance our gathering
   and marketing operations and to execute different hedging strategies to lock
   in profits and reduce the negative impact of crude oil market volatility. See
   "--Crude Oil Volatility; Counter-Cyclical Balance; Risk Management".

  Our gathering and marketing operations include:

 .  the purchase of crude oil at the wellhead and the bulk purchase of crude oil
   at pipeline and terminal facilities;

 .  the transportation of crude oil on trucks, barges or pipelines, including our
   own;

 .  the subsequent resale or exchange of crude oil at various points along the
   crude oil distribution chain; and

 .  The purchase of LPG from producers, refiners and other marketers, and sale of
   LPG to end users and retailers.

                                       1

BUSINESS STRATEGY

  Our business strategy is to capitalize on the regional crude oil supply and
demand imbalances that exist in the United States and Canada by combining the
strategic location and unique capabilities of our transportation and
terminalling assets with our extensive marketing and distribution expertise to
generate sustainable earnings and cash flow.

  We intend to execute our business strategy by:

 .  increasing and optimizing throughput on our various pipeline and gathering
   assets and realizing cost efficiencies through operational improvements and
   potential strategic alliances;

 .  utilizing and expanding our Cushing Terminal and our other assets to service
   the needs of refiners and to profit from merchant activities that take
   advantage of crude oil pricing and quality differentials;

 .  pursuing strategic and accretive acquisitions of crude oil transportation
   assets and businesses, including pipelines, gathering systems, terminalling
   and storage facilities, gathering and marketing entities and other assets
   that complement our existing asset base and distribution capabilities; and

 .  optimizing and expanding our Canadian operations to take advantage of
   anticipated increases in the volume and qualities of crude oil produced in,
   and exported from, Canada.

FINANCIAL STRATEGY

  We believe that a major factor in our continued success will be our ability to
maintain a low cost of capital and access to capital markets. Since our
inception in 1998, we have consistently communicated to the financial community
our intention to maintain a strong credit profile that we believe is consistent
with our goal of achieving and maintaining an investment grade credit rating. We
have targeted a general credit profile with the following attributes:

 .  an average long-term debt-to-total capitalization ratio of approximately 60%
   or less;

 .  an average long-term debt-to-EBITDA ratio of approximately 3.5x or less; and

 .  an average EBITDA-to-interest coverage ratio of approximately 3.3x or better.

  As of December 31, 2001, we were within our targeted credit profile. In order
for us to maintain our target credit profile and achieve growth through
acquisitions, our strategy is to fund acquisitions using approximately equal
proportions of equity and debt. Because it is likely that acquisitions will
initially be financed using indebtedness and it is difficult to predict the
actual timing of accessing the market to raise equity, we may be temporarily,
from time to time, outside the parameters of our target credit profile until
such time as the equity is raised.

COMPETITIVE STRENGTHS

  We believe we are well positioned to successfully execute our business
strategy due to the following competitive strengths:

 .  Our pipeline assets are strategically located and have additional capacity.
   Our primary crude oil pipeline transportation and gathering assets are
   located in prolific oil producing regions and are connected, directly or
   indirectly, with our terminalling and storage assets that service major North
   American refinery and distribution markets, where we have strong business
   relationships. These assets are strategically positioned to maximize the
   value of our crude oil by transporting it to major trading locations and
   premium markets. Our pipeline networks possess additional capacity to respond
   to increased demand.

 .  Our Cushing Terminal is strategically located, operationally flexible and
   readily expandable. Our Cushing Terminal interconnects with the Cushing
   Interchange's major inbound and outbound pipelines, providing access to both
   foreign and domestic crude oil. The Cushing Terminal is the most modern
   terminalling and storage facility at the Cushing Interchange, incorporating
   (1) operational enhancements designed to safely and efficiently terminal,
   store, blend and segregate large volumes and multiple varieties of crude oil
   and (2) extensive environmental safeguards.

 .  Our business activities are counter-cyclically balanced. We believe that our
   terminalling and storage activities and our gathering and marketing
   activities are counter-cyclical. We believe that this balance of activities,
   combined with the long-term nature of our pipeline transportation contracts,
   has a stabilizing effect on our cash flow from operations.

 .  We possess specialized crude oil market knowledge. We believe our business
   relationships with participants in all phases of the crude oil distribution
   chain, from crude oil producers to refiners, as well as our own industry
   expertise, provide us with a comprehensive understanding of the North
   American crude oil markets.

 .  We have the financial flexibility to pursue expansion and acquisition
   opportunities. We believe we have significant resources to finance strategic
   expansion and acquisition opportunities, including our ability to issue
   additional partnership units and to borrow under our bank credit facility.

                                       2

 .  We have an experienced management team whose interests are aligned with those
   of all of our stakeholders. Our executive management team has an average of
   more than 20 years of industry experience, with an average of over 15 years
   with us or our predecessors and affiliates, during which time there was
   significant growth in our operations and profitability. As part of the
   General Partner Transition, members of our senior management team acquired a
   4% interest in our general partner. In addition, through restricted unit
   grants and options, members of our senior management team have significant
   contingent equity incentives that will vest only if we achieve specified
   performance objectives.

PARTNERSHIP STRUCTURE AND MANAGEMENT

  Our operations are conducted through, and our operating assets are owned by,
our subsidiaries. Our domestic operating limited partnerships are Plains
Marketing, L.P. and All American Pipeline, L.P. Our operations and activities
are managed by, and our officers and personnel are employed by, our general
partner. Our general partner does not receive a management fee or any other
compensation in connection with its management of our business, but it is
reimbursed for all direct and indirect expenses incurred on our behalf,
including employee compensation costs. Our Canadian operating limited
partnership is Plains Marketing Canada, L.P. Canadian personnel are employed by
its general partner, PMC (Nova Scotia) Company.

  Our general partner has responsibility for conducting our business and
managing our operations, and owns all of the incentive distribution rights.
These rights provide that our general partner receives an increasing percentage
of cash distributions (in addition to its 2% general partner interest) as
distributions reach and exceed certain threshold levels. See Item 5. "Market for
the Registrant's Common Units and Related Unitholder Matters".

                                       3

  The chart below depicts the current organization and ownership of Plains All
American Pipeline, the operating partnerships and the subsidiaries.

                       [organization chart appears here]

                                       4

ACQUISITIONS AND DISPOSITIONS

 Coast/Lantern Acquisition

   In March 2002, we completed the acquisition of substantially all of the
domestic crude oil pipeline, gathering, and marketing assets of Coast Energy
Group and Lantern Petroleum, divisions of Cornerstone Propane Partners, L.P. for
approximately $8.2 million in cash plus transactions costs. The principal assets
acquired, which are located in West Texas, include several gathering lines,
crude oil contracts and a small truck and trailer fleet.

 Butte Acquisition

  In February 2002, we acquired an approximate 22% equity interest in Butte Pipe
Line Company from Murphy Ventures, a wholly owned subsidiary of Murphy Oil
Corporation. The total cost of the acquisition, including various transaction
and related expenses, was approximately $8.0 million. Butte Pipe Line Company
owns the 373-mile Butte Pipeline System, principally a mainline transmission
system, that runs from Baker, Montana to Guernsey, Wyoming. At the time of
acquisition, the Butte Pipeline System transported approximately 60,000 barrels
per day of crude oil. The remaining 78% interest in the Butte Pipe Line Company
is owned by Equilon Pipeline Company LLC.

 Wapella Acquisition

  In December 2001, we completed the acquisition of the Wapella Pipeline System
from private investors for approximately $12.0 million including transaction
costs. In 2001, the Wapella Pipeline System delivered approximately 11,000
barrels per day of crude oil to the Enbridge Pipeline at Cromer, Manitoba. The
system is located in southeastern Saskatchewan and southwestern Manitoba. The
acquisition also includes approximately 21,500 barrels of crude oil storage
capacity located along the system as well as a truck terminal.

 CANPET Energy Group, Inc.

  In July 2001, we purchased substantially all of the assets of CANPET Energy
Group Inc., a Calgary-based Canadian crude oil and liquefied petroleum gas
marketing company, for approximately $42.0 million plus $25.0 million for
additional inventory owned by CANPET at the closing of the transaction.
Approximately $24.0 million of the purchase price, plus $25.0 million for the
additional inventory, was paid in cash at closing, and the remainder, which is
subject to various performance standards, will be paid in common units in April
2004 if the performance standards are met. The principal assets acquired include
a crude oil handling facility, a 130,000-barrel tank facility, LPG facilities,
existing business relationships and working capital of approximately $8.6
million.

 Murphy Oil Company Ltd. Midstream Operations

  In May 2001, we completed the acquisition of substantially all of the Canadian
crude oil pipeline, gathering, storage and terminalling assets of Murphy Oil
Company Ltd. for approximately $161.0 million in cash including financing and
transaction costs. The purchase price included $6.5 million for excess inventory
in the systems.  The principal assets acquired include approximately 450 miles
of crude oil and condensate mainlines (including dual lines on which condensate
is shipped for blending purposes and blended crude is shipped in the opposite
direction) and associated gathering and lateral lines, approximately 1.1 million
barrels of crude oil storage and terminalling capacity located primarily in
Kerrobert, Saskatchewan, approximately 254,000 barrels of pipeline linefill and
tank inventories, an inactive 108-mile mainline system and 121 trailers used
primarily for crude oil transportation. We have reactivated the 108-mile
mainline system and began shipping volumes in May of 2001.

 Scurlock Acquisition

  In May 1999, we completed the acquisition of Scurlock Permian LLC and certain
other pipeline assets from Marathon Ashland Petroleum LLC. Including working
capital adjustments and closing and financing costs, the cash purchase price was
approximately $141.7 million. Financing for the acquisition was provided through
$117.0 million of borrowings and the sale of 1.3 million Class B Common Units to
our former general partner for total cash consideration of $25.0 million.

  Scurlock, previously a wholly owned subsidiary of Marathon Ashland Petroleum,
was engaged in crude oil transportation, gathering and marketing. The assets
acquired included approximately 2,300 miles of active pipelines, numerous
storage terminals and a fleet of trucks. The largest asset is an approximately
920-mile pipeline and gathering system located in the Spraberry Trend in West
Texas that extends into Andrews, Glasscock, Martin, Midland, Regan and Upton
Counties, Texas. The assets we acquired also included approximately one million
barrels of crude oil linefill.

                                       5

 West Texas Gathering System Acquisition

  In July 1999, we completed the acquisition of the West Texas Gathering System
from Chevron Pipe Line Company for approximately $36.0 million, including
transaction costs. Financing for the amounts paid at closing was provided by a
draw under a previous credit facility. The assets acquired include approximately
420 miles of crude oil transmission mainlines, approximately 295 miles of
associated gathering and lateral lines, and approximately 2.9 million barrels of
tankage located along the system.

 All American Pipeline Linefill Sale and Asset Disposition

  In March 2000, we sold to a unit of El Paso Corporation ("El Paso") for $129.0
million the segment of the All American Pipeline that extends from Emidio,
California to McCamey, Texas. Except for minor third-party volumes, one of our
subsidiaries, Plains Marketing, L.P., was the sole shipper on this segment of
the pipeline since its predecessor acquired the line from the Goodyear Tire &
Rubber Company in July 1998. We realized net proceeds of approximately $124.0
million after the associated transaction costs and estimated costs to remove
equipment. We used the proceeds from the sale to reduce outstanding debt. We
recognized a gain of approximately $20.1 million in connection with the sale.

  We had suspended shipments of crude oil on this segment of the pipeline in
November 1999. At that time, we owned approximately 5.2 million barrels of crude
oil in the segment of the pipeline. We sold this crude oil from November 1999 to
February 2000 for net proceeds of approximately $100.0 million, which were used
for working capital purposes. We recognized gains of approximately $28.1 million
and $16.5 million in 2000 and 1999, respectively, in connection with the sale of
the linefill.

PIPELINE OPERATIONS

  We describe below our principal pipeline assets. All of our pipeline systems
are operated from one of two central control rooms with computer systems
designed to continuously monitor real-time operational data including
measurement of crude oil quantities injected in and delivered through the
pipelines, product flow rates and pressure and temperature variations. This
monitoring and measurement technology allows us to efficiently batch differing
crude oil types with varying characteristics through the pipeline systems. The
systems are designed to enhance leak detection capabilities, to sound automatic
alarms in the event of operational conditions outside of pre-established
parameters and to provide for remote-controlled shut-down of pump stations on
the pipeline systems. Pump stations, storage facilities and meter measurement
points along the pipeline systems are linked by telephone, satellite or radio
communication systems for remote monitoring and control, which reduces our
requirement for full time site personnel at most of these locations.

  We perform scheduled maintenance on all of our pipeline systems and make
repairs and replacements when necessary or appropriate. We attempt to control
corrosion of the mainlines through the use of corrosion inhibiting chemicals
injected into the crude stream, external coatings and cathodic protection
systems. Maintenance facilities containing equipment for pipe repairs, spare
parts and trained response personnel are strategically located along the
pipelines and in concentrated operating areas. We believe that all of our
pipelines have been constructed and are maintained in all material respects in
accordance with applicable federal, state and local laws and regulations,
standards prescribed by the American Petroleum Institute and accepted industry
practice. See "--Regulation".

 U. S. Pipeline Assets

  All American Pipeline. The segment of the All American Pipeline that we
retained following the sale of the line to El Paso is a common carrier crude oil
pipeline system that transports crude oil produced from Outer Continental Shelf
("OCS") fields offshore California to locations in California. See "--All
American Pipeline Linefill Sale and Asset Disposition". This segment is subject
to tariff rates regulated by the Federal Energy Regulatory Commission ("FERC")
(see "--Regulation-- Transportation Regulation"). As a common carrier, the All
American Pipeline offers transportation services to any shipper of crude oil,
provided that the crude oil tendered for transportation satisfies the conditions
and specifications contained in the applicable tariff.

  We own and operate the segment of the system that extends approximately 10
miles from ExxonMobil's onshore facilities at Las Flores on the California coast
to Plains Resources' onshore facilities at Gaviota, California (24-inch diameter
pipe) and continues from Gaviota approximately 130 miles to our station in
Emidio, California (30-inch pipe). Between Gaviota and our Emidio Station, the
All American Pipeline interconnects with our San Joaquin Valley ("SJV")
Gathering System as well as various third-party intrastate pipelines, including
the Unocap Pipeline System, the Equilon Pipeline System and the Pacific
Pipeline.

   The All American Pipeline currently transports OCS crude oil received at the
onshore facilities of the Santa Ynez field at Las Flores, California and the
onshore facilities of the Point Arguello field located at Gaviota, California.
ExxonMobil,

                                       6

which owns all of the Santa Ynez production, and Plains Resources, Texaco and
Sun Operating L.P., which together own approximately one-half of the Point
Arguello production, have entered into transportation agreements committing to
transport all of their production from these fields on the All American
Pipeline. These agreements, which expire in August 2007, provide for a minimum
tariff with annual escalations based on specific composite indices. The
producers from the Point Arguello field who do not have contracts with us
currently have no other efficient means of transporting their production and,
therefore, ship their volumes on the All American Pipeline at the posted
tariffs. Volumes attributable to Plains Resources are purchased and sold to a
third party under our marketing agreement with Plains Resources before such
volumes enter the All American Pipeline. See Item 13. "Certain Relationships and
Related Transactions--Transactions with Related Parties." The third party pays
the same tariff as required in the transportation agreements. At December 31,
2001, the tariffs averaged $1.54 per barrel for deliveries to connecting
pipelines in California. The tariff was increased by approximately 11% effective
January 9, 2002. The agreements do not require these owners to transport a
minimum volume. For the year ended December 31, 2001, approximately $27.5
million, or 19.3% of our gross margin was attributable to the Santa Ynez field
and approximately $9.5 million, or 6.7%, was attributable to the Point Arguello
field. Transportation of volumes commenced from the Point Arguello field on the
All American Pipeline in 1991 and from the Santa Ynez field in 1994.

  The table below sets forth the historical volumes received from both of these
fields for the last five years.

                                              YEAR ENDED DECEMBER 31,
                                         --------------------------------
                                         2001   2000    1999   1998  1997
                                         ----   ----    ----   ----  ----
                                             (BARRELS IN THOUSANDS)

Average daily volumes received from
  Point Arguello (at Gaviota)             18      18     20     26    30
  Santa Ynez (at Las Flores)              51      56     59     68    85
                                          --      --     --     --   ---
Total                                     69      74     79     94   115
                                          ==      ==     ==     ==   ===

  A wholly owned subsidiary of Plains Resources is the operator of record for
the Point Arguello Unit. All of the volumes attributable to Plains Resources'
interests are committed for transportation on the All American Pipeline and are
subject to our marketing agreement with Plains Resources. We expect that there
will continue to be natural production declines from each of these fields as the
underlying reservoirs are depleted. See Item 13. "Certain Relationships and
Related Transactions--Transactions with Related Parties--General".

  A significant portion of the Partnership's gross margin is derived from
pipeline transportation margins associated with these two fields. The relative
contribution to our gross margin from these fields has decreased from
approximately 46% in the second half of 1998 to 26% in 2001, as the
partnership has grown and diversified through acquisitions and organic
expansions and as a result of declines in volumes produced and transported from
these fields, offset somewhat by an increase in pipeline tariffs. Over the last
several years, transportation volumes received from the Santa Ynez and Point
Arguello fields have declined from 92,000 and 60,000 average daily barrels,
respectively, in 1995 to 51,000 and 18,000 average daily barrels, respectively,
for the year ended December 31, 2001. Although the rate of decline has decreased
over the last three years, we expect that there will continue to be natural
production declines from each of these fields as the underlying reservoirs are
depleted. A 5,000 barrel per day decline in volumes shipped from these fields
would result in a decrease in annual pipeline tariff revenues of approximately
$2.8 million.

  SJV Gathering System. The SJV Gathering System is a proprietary pipeline
system that runs through the heart of the San Joaquin Valley. As a proprietary
pipeline, the SJV Gathering System is not subject to common carrier regulations.
The SJV Gathering System was constructed in 1987 with a design capacity of
approximately 140,000 barrels per day. The system consists of a 16-inch pipeline
that originates at the Belridge station and extends 45 miles south to a
connection with the All American Pipeline at the Pentland station.

  The San Joaquin Valley is one of the most prolific oil producing regions in
the continental United States, producing approximately 552,000 barrels per day
of crude oil during the first nine months of 2001, which accounted for
approximately 77% of total California production (excluding OCS) and 11% of the
total production in the lower 48 states.

                                       7

  The following table reflects the historical production for the San Joaquin
Valley as well as total California production (excluding OCS volumes) as
reported by the California Division of Oil and Gas for the past five years.

                                           YEAR ENDED DECEMBER 31,
                                      --------------------------------
                                      2001(1) 2000  1999  1998    1997
                                      ------- ----  ----  ----    ----
                                            (BARRELS IN THOUSANDS)
   Average daily volumes
    San Joaquin Valley production (2)    552   570   562    592    584
   Total California production
    (excluding OCS volumes)              716   741   734    781    781
   ---------------
   (1)  Reflects information through September 2001.
   (2)  Consists of production from California Division of Oil and Gas District
        IV.

  The SJV Gathering System is connected to several fields, including the South
Belridge, Elk Hills and Midway Sunset fields, three of the seven largest
producing fields in the lower 48 states. We lease a pipeline that
provides us access to the Lost Hills field. The SJV Gathering System also
includes approximately 630,000 barrels of tank capacity, which can be used to
facilitate movements along the system as well as to support our other
activities.

  The table below sets forth the historical volumes received into the SJV
Gathering System for the past five years.

                                        YEAR ENDED DECEMBER 31,
                                        -----------------------
                                      2001  2000  1999  1998  1997
                                      ----  ----  ----  ----  ----
                                          (BARRELS IN THOUSANDS)
        Total average daily volumes     61    60    84    85    91

  West Texas Gathering System. The West Texas Gathering System is a common
carrier crude oil pipeline system located in the heart of the Permian Basin
producing area. The West Texas Gathering System has lease gathering facilities
in Crane, Ector, Upton, Ward and Winkler counties. The West Texas Gathering
System was originally built by Gulf Oil Corporation in the late 1920's, expanded
during the late 1950's and updated during the mid 1990's. The West Texas
Gathering System provides us with considerable flexibility, as major segments
are bi-directional and allow us to move crude oil between three of the major
trading locations in West Texas. The West Texas Gathering System has the
capability to transport approximately 190,000 barrels per day.

  Total system volumes were approximately 82,000 barrels per day in 2001. System
volumes include lease volumes, volumes from connecting carriers and volumes from
truck injection stations. Lease volumes gathered into the system averaged
approximately 39,000 barrels per day in 2001. Chevron USA has agreed to
transport its equity crude oil production from fields connected to the West
Texas Gathering System on the system through July 2011 (currently representing
approximately 22,000 barrels per day, or 56% of total system gathering volumes
and 27% of the total system volumes). Other large producers connected to the
gathering system include Burlington Resources, Devon Energy, Anadarko, Oxy,
Bass, and TotalFinaElf. Volumes from connecting carriers, including ExxonMobil
and Phillips, average approximately 30,000 barrels per day. At the time of the
acquisition, truck injection stations were limited and provided less than 1,000
barrels per day. We have since installed 16 truck injection stations on the West
Texas Gathering System. Truck injection stations provided an average of 13,000
barrels per day in 2001. Our trucks are used to pick up crude oil produced in
the areas adjacent to the West Texas Gathering System and deliver these volumes
into the pipeline. These additional injection stations have allowed us to reduce
the distance of our truck hauls in this area, increase the utilization of our
pipeline assets and reduce our operating costs. The West Texas Gathering System
also includes approximately 2.5 million barrels of tank capacity located along
the pipeline system.

  Sabine Pass Pipeline System. The Sabine Pass Pipeline System, acquired in the
Scurlock acquisition, is a common carrier crude oil pipeline system. The primary
purpose of the Sabine Pass Pipeline System is to gather crude oil from onshore
facilities of offshore production near Johnson's Bayou, Louisiana, and deliver
it to tankage and barge loading facilities in Sabine Pass, Texas. The Sabine
Pass Pipeline System consists of approximately 34 miles of pipe ranging from 4
to 10 inches

                                       8

in diameter and has a throughput capacity of approximately 26,000
barrels of Louisiana light sweet crude oil per day. In 2001, the system
transported approximately 20,000 barrels of crude oil per day. The Sabine Pass
Pipeline System also includes 245,000 barrels of tank capacity located along the
pipeline.

  Ferriday Pipeline System. The Ferriday Pipeline System, acquired in the
Scurlock acquisition, is a common carrier crude oil pipeline system located in
eastern Louisiana and western Mississippi. The Ferriday Pipeline System consists
of approximately 570 miles of pipe ranging from 2 inches to 12 inches in
diameter. In 2001, the Ferriday Pipeline System delivered approximately 11,500
barrels per day of crude oil (including truck volumes rerouted from a third-
party pipeline undergoing modifications) to third-party pipelines that supplied
refiners in the Midwest. The Ferriday Pipeline System also includes
approximately 332,000 barrels of tank capacity located along the pipeline.

  In November 1999, we completed the construction of an 8-inch pipeline
underneath the Mississippi River that connects our Ferriday Pipeline System in
western Mississippi with the portion of the system located in eastern Louisiana.
This connection provides us with bi-directional capability to access additional
markets and enhances our ability to service our pipeline customers and take
advantage of additional high margin merchant activities.

  Dollarhide Pipeline System. The Dollarhide Pipeline System, acquired from
Unocal Pipeline Company in October 2001, is a common carrier pipeline system
that is located in West Texas. In 2001, the Dollarhide Pipeline System delivered
approximately 5,000 barrels of crude oil per day into the West Texas Gathering
System. The system also includes approximately 215,000 barrels of crude oil
storage capacity along the system and in Midland.

  Spraberry Pipeline System. The Spraberry Pipeline System, acquired in the
Scurlock acquisition, is a proprietary pipeline system that gathers crude oil
from the Spraberry Trend of West Texas and transports it to Midland, Texas,
where it interconnects with the West Texas Gathering System and other pipelines.
The Spraberry Pipeline System consists of approximately 920 miles of pipe of
varying diameter, and has a throughput capacity of approximately 50,000 barrels
of crude oil per day. The Spraberry Trend is one of the largest producing areas
in West Texas, and we are one of the largest gatherers in the Spraberry Trend.
The Spraberry Pipeline System gathered approximately 38,000 barrels per day of
crude oil in 2001. The Spraberry Pipeline System also includes approximately
173,000 barrels of tank capacity located along the pipeline. The margins that we
generate using the system are included in our Marketing, Gathering, Terminalling
and Storage segment.

  East Texas Pipeline System. The East Texas Pipeline System, acquired in the
Scurlock acquisition, is a proprietary crude oil pipeline system. In 2001, it
gathered approximately 21,000 barrels per day of crude oil in East Texas and
transported approximately 23,000 barrels per day of crude oil to Crown Central's
refinery in Longview, Texas. The deliveries to Crown Central are subject to a
throughput and deficiency agreement, which extends through 2004. The East Texas
Pipeline System also includes approximately 221,000 barrels of tank capacity
located along the pipeline. The margins that we generate from the gathered
barrels on the system are included in our Marketing, Gathering, Terminalling and
Storage segment.

  Illinois Basin Pipeline System. The Illinois Basin Pipeline System, acquired
with the Scurlock acquisition, consists of common carrier pipeline and gathering
systems and truck injection facilities in southern Illinois. The Illinois Basin
Pipeline System consists of approximately 80 miles of pipe of varying diameter.
In 2001, the system delivered approximately 4,100 barrels per day of crude oil
to third-party pipelines that supplied refiners in the Midwest. Approximately
3,300 barrels per day of the supply on this system are from fields operated by
Plains Resources.

 Canadian Pipeline Assets

  Manito Pipeline System. The Manito Pipeline System, acquired in the Murphy
acquisition, is a National Energy Board ("NEB") regulated system located in
Saskatchewan, Canada. The Manito Pipeline System is a 101-mile crude oil
pipeline and a parallel 101-mile condensate pipeline that connects the North
Saskatchewan Pipeline System and multiple gathering lines to the Enbridge system
at Kerrobert. The Manito Pipeline System volumes were approximately 66,000
barrels per day of crude oil in 2001.

  Milk River Pipeline System. The Milk River Pipeline System, acquired in the
Murphy acquisition, is an NEB-regulated system located in Alberta, Canada. The
Milk River Pipeline System consists of three parallel 11-mile crude oil
pipelines that connect the Bow River Pipeline in Alberta to the Centex Pipeline
at the United States border. The Milk River Pipeline System transported
approximately 91,000 barrels per day of crude oil in 2001.

  North Saskatchewan Pipeline System. The North Saskatchewan Pipeline System,
acquired in the Murphy acquisition, is an NEB-regulated system located in
Saskatchewan, Canada. The North Saskatchewan Pipeline System is a 34-mile crude
oil pipeline and a parallel 34-mile condensate pipeline that connects to the
Manito Pipeline at Dulwich. In 2001, the North Saskatchewan Pipeline System
delivered approximately 6,500 barrels per day of crude oil into the Manito
pipeline. Our ownership interest in the North Saskatchewan Pipeline System is
approximately 36%.

                                       9

  Cactus Lake/Bodo Pipeline System. The Cactus Lake/Bodo Pipeline System,
acquired in the Murphy acquisition, is an NEB-regulated system located in
Alberta and Saskatchewan, Canada. The Cactus Lake/Bodo Pipeline System is a 55-
mile crude oil pipeline and a parallel 55-mile condensate pipeline that connects
to our storage and terminalling facility at Kerrobert. In 2001, the Cactus
Lake/Bodo Pipeline System transported approximately 33,000 barrels per day of
crude oil. Our ownership interest in the Cactus Lake/Bodo Pipeline System varies
from a low of 13.125% to a high of 76.25%, depending upon the particular segment
of the system.

  Wascana Pipeline System. The Wascana Pipeline System, acquired in the Murphy
acquisition, is a common carrier system located in Saskatchewan, Canada. The
Wascana Pipeline System is a 108-mile crude oil pipeline that connects to the
Equilon Pipeline at Raymond, Montana. In 2001, the Wascana Pipeline System
transported approximately 13,000 barrels per day of crude oil.

  Wapella Pipeline System. The Wapella Pipeline System is an NEB-regulated
system located in southeastern Saskatchewan and southwestern Manitoba. In 2001,
the Wapella Pipeline System delivered approximately 11,000 barrels per day of
crude oil to the Enbridge Pipeline at Cromer, Manitoba. The system also includes
approximately 21,500 barrels of crude oil storage capacity.

TERMINALLING, STORAGE, MARKETING AND GATHERING OPERATIONS

 Terminalling and Storage Activities

  We own approximately 11.5 million barrels of terminalling and storage assets,
including tankage associated with our pipeline and gathering systems. Our
storage and terminalling operations increase the margins in our business of
purchasing and selling crude oil and also generate revenue through a combination
of storage and throughput fees from third parties. Storage fees are generated
when we lease tank capacity to third parties. Terminalling fees, also referred
to as throughput fees, are generated when we receive crude oil from one
connecting pipeline and redeliver crude oil to another connecting carrier in
volumes that allow the refinery to receive its crude oil on a ratable basis
throughout a delivery period. Both terminalling and storage fees are generally
earned from:

 .  refiners and gatherers that segregate or custom blend crudes for refining
   feedstocks;

 .  pipeline operators, refiners or traders that need segregated tankage for
   foreign cargoes;

 .  traders who make or take delivery under NYMEX contracts; and

 .  producers and resellers that seek to increase their marketing alternatives.

  The tankage that is used to support our arbitrage activities positions us to
capture margins in a contango market (when the oil prices for future deliveries
are higher than current prices) or as the market switches from contango to
backwardation (when the oil prices for future deliveries are lower than current
prices). See "--Crude Oil Volatility; Counter-Cyclical Balance; Risk
Management".

  Our most significant terminalling and storage asset is our Cushing Terminal.
The terminal was constructed in 1993, and expanded by approximately 55% in 1999,
to capitalize on the crude oil supply and demand imbalance in the Midwest. The
imbalance was caused by the continued decline of regional production supplies,
increasing imports and an inadequate pipeline and terminal infrastructure. The
Cushing Terminal is also used to support and enhance the margins associated with
our merchant activities relating to our lease gathering and bulk trading
activities. See "--Gathering and Marketing Activities--Bulk Purchases".

  The Cushing Terminal currently has total storage capacity of approximately 3.1
million barrels. We have recently announced the 1.1 million barrel Phase II and
the 1.1 million barrel Phase III expansions of our Cushing Terminal facility. We
expect the Phase II expansion will be completed in mid-2002 and the Phase III
expansion will be completed in late 2002 or early 2003. Giving effect to these
expansions, the capacity of the Cushing Terminal will increase approximately 71%
to a total of approximately 5.3 million barrels. Upon completion of the Phase II
and Phase III expansion projects, the Cushing Terminal will consist of fourteen
100,000 barrel tanks, four 150,000 barrel tanks and twelve 270,000 barrel tanks,
which are used to store and terminal crude oil. The Cushing Terminal also
includes a pipeline manifold and pumping system that has an estimated daily
throughput capacity of approximately 800,000 barrels per day. The pipeline
manifold and pumping system is designed to support more than ten million barrels
of tank capacity. The Cushing Terminal is connected to the major pipelines and
other terminals in the Cushing Interchange through pipelines that range in size
from 10 inches to 24 inches in diameter.

  The Cushing Terminal is a state-of-the-art facility designed to serve the
needs of refiners in the Midwest. Since its original construction in 1993, we
have experienced an increase in the volumes as well as the varieties of foreign
and domestic crude oil transported through the Cushing Interchange. Anticipating
these increases, we incorporated certain attributes into the design of the
Cushing Terminal including:

                                       10

 .  multiple, smaller tanks to facilitate simultaneous handling of multiple crude
   varieties in accordance with normal pipeline batch sizes;

 .  dual header systems connecting most tanks to the main manifold system to
   facilitate efficient switching between crude grades with minimal
   contamination;

 .  bottom drawn sumps that enable each tank to be efficiently drained down to
   minimal remaining volumes to minimize crude contamination and maintain crude
   integrity during changes of service;

 .  mixer(s) on each tank to facilitate blending crude grades to refinery
   specifications; and

 .  a manifold and pump system that allows for receipts and deliveries with
   connecting carriers at their maximum operating capacity.

  As a result of incorporating these attributes into the design of the Cushing
Terminal, we believe we are favorably positioned to serve the needs of Midwest
refiners and to handle the increase in varieties of crude transported through
the Cushing Interchange.

  The Cushing Terminal also incorporates numerous environmental and operational
safeguards. We believe that our terminal is the only one at the Cushing
Interchange in which each tank has a secondary liner (the equivalent of double
bottoms), leak detection devices, secondary seals and above-ground pipelines.
Each tank is cathodically protected. Like the pipeline systems we operate, the
Cushing Terminal is operated by a computer system designed to monitor real time
operational data. In addition, each tank is equipped with an audible and visual
high level alarm system to prevent overflows; a double seal floating roof
designed to minimize air emissions and prevent the possible accumulation of
potentially flammable gases between fluid levels and the roof of the tank; and a
foam dispersal system that, in the event of a fire, is fed by a fully-automated
fire water distribution network.

  The Cushing Interchange is the largest wet barrel trading hub in the U.S. and
the delivery point for crude oil futures contracts traded on the NYMEX. The
Cushing Terminal has been designated by the NYMEX as an approved delivery
location for crude oil delivered under the NYMEX crude oil futures contract. As
the NYMEX delivery point and a cash market hub, the Cushing Interchange serves
as a primary source of refinery feedstock for the Midwest refiners and plays an
integral role in establishing and maintaining markets for many varieties of
foreign and domestic crude oil.

  The following table sets forth throughput volumes for our terminalling and
storage operations, and quantity of tankage leased to third parties from 1997
through 2001.

                                                                 YEAR ENDED DECEMBER 31,
                                          ----------------------------------------------------------------
                                             2001          2000          1999         1998         1997
                                          ----------    ----------    ----------   ---------     ---------
                                                                 (BARRELS IN THOUSANDS)
                                                                                 
      Throughput volumes
       (average daily volumes)
        Cushing Terminal                        94            59            72            69         69
        Ingleside Terminal                       5             8            11            11          8
                                             -----         -----         -----         -----        ---
        Total                                   99            67            83            80         77
                                             =====         =====         =====         =====        ===

      Storage leased to third parties
       (average monthly volumes)
        Cushing Terminal                     2,136         1,437         1,743           890        414
        Ingleside Terminal                     220           220           232           260        254
                                             -----         -----         -----         -----        ---
         Total                               2,356         1,657         1,975         1,150        668
                                             =====         =====         =====         =====        ===

 Gathering and Marketing Activities

  Crude Oil. The majority of our gathering and marketing activities are in
Texas, Louisiana and California and the provinces of Alberta, Saskatchewan and
Manitoba. These activities include:

 .  purchasing crude oil from producers at the wellhead and in bulk from
   aggregators at major pipeline interconnects and trading locations;

 .  transporting this crude oil on our own assets or, when necessary or cost
   effective, assets owned and operated by third parties;

 .  exchanging this crude oil for another grade of crude oil or at a different
   geographic location, as appropriate, in order to maximize margins or meet
   contract delivery requirements; and

 .  marketing crude oil to refiners or other resellers.

                                       11

  We purchase crude oil from many independent producers and believe that we have
established broad-based relationships with crude oil producers in our areas of
operations. For the year ended December 31, 2001, we purchased approximately
375,000 barrels per day of crude oil directly at the wellhead. Gathering and
marketing activities are characterized by large volumes of transactions with
lower margins relative to pipeline and terminalling and storage operations.

  In the period immediately following the disclosure of our unauthorized trading
losses in 1999, a significant number of our suppliers and trading partners
reduced or eliminated the open credit previously extended to us. Consequently,
the amount of letters of credit we needed to support the level of our crude oil
purchases then in effect increased significantly. In addition, the cost of
letters of credit increased under our credit facility, and some of our purchase
contracts were terminated. For the year 2001, we believe that the effects of the
loss on our cost of credit and operations were minimal and the requirement for
us to issue letters of credit has reduced to levels lower than existed before
the unauthorized trading loss. See "--Unauthorized Trading Losses."

  The following table shows the average daily volume of our lease gathering and
bulk purchases from 1997 through 2001.

                                                          YEAR ENDED DECEMBER 31,
                                 --------------------------------------------------------------------------
                                    2001 (2)         2000        1999 (1)           1998           1997
                                 --------------------------------------------------------------------------
                                                          (BARRELS IN THOUSANDS)
                                                                                
    Lease Gathering                   375             262            265              88             71
    Bulk Purchases                     54              28            138              98             49
                                  ----------      ----------     ----------      ----------      ---------
     Total                            429             290            403             186            120
                                  ==========      ==========     ==========      ==========      =========

- ---------------

(1)  Includes average daily volumes from Scurlock Permian since May 1, 1999,
     extrapolated for the entire year.

(2)  Includes average daily volumes from the Murphy acquisition and the CANPET
     acquisition since April 1 and July 1, respectively, extrapolated for the
     entire year.

  Crude Oil Purchases. We purchase crude oil from producers under contracts that
range in term from a thirty-day evergreen to three years. In a typical
producer's operation, crude oil flows from the wellhead to a separator where the
petroleum gases are removed. After separation, the crude oil is treated to
remove water, sand and other contaminants and is then moved into the producer's
on-site storage tanks. When the tank is full, the producer contacts our field
personnel to purchase and transport the crude oil to market. We use our truck
fleet, gathering pipelines, third-party pipelines and barges to transport the
crude oil to market. We own or lease approximately 300 trucks used for gathering
crude oil.

  We have a marketing agreement with Plains Resources under which we are the
exclusive marketer/purchaser for all of Plains Resources' equity crude oil
production. The marketing agreement provides that we will purchase for resale at
market prices all of Plains Resources' equity crude oil production for which we
charge a fee of $0.20 per barrel. This fee is subject to adjustment every three
years based upon then-existing market conditions. The marketing agreement will
terminate upon a "change of control" of Plains Resources or our general partner.
In November 2001, the marketing agreement automatically extended for an
additional three-year period. See Item 13. "Certain Relationships and Related
Transactions--Transactions with Related Parties."

  Bulk Purchases. In addition to purchasing crude oil at the wellhead from
producers, we purchase crude oil in bulk at major pipeline terminal points. This
production is transported from the wellhead to the pipeline by major oil
companies, large independent producers or other gathering and marketing
companies. We purchase crude oil in bulk when we believe additional
opportunities exist to realize margins further downstream in the crude oil
distribution chain. The opportunities to earn additional margins vary over time
with changing market conditions. Accordingly, the volumes and margins associated
with our bulk purchases will fluctuate from period to period.

  Crude Oil Sales. The marketing of crude oil is complex and requires detailed
current knowledge of crude oil sources and end markets and a familiarity with a
number of factors including grades of crude oil, individual refinery demand for
specific grades of crude oil, area market price structures for the different
grades of crude oil, location of customers, availability of transportation
facilities and timing and costs (including storage) involved in delivering crude
oil to the appropriate customer. We sell our crude oil to major integrated oil
companies, independent refiners and other resellers in various types of sale and
exchange transactions, at market prices for terms ranging generally  from one
month to three years.

                                       12

  We establish a margin for crude oil we purchase by selling crude oil for
physical delivery to third party users, such as independent refiners or major
oil companies, or by entering into a future delivery obligation with respect to
futures contracts on the NYMEX. Through these transactions, we establish on a
monthly basis a position that is substantially balanced between crude oil
purchases and sales and future delivery obligations. From time to time, we enter
into fixed price delivery contracts, floating price collar arrangements,
financial swaps and crude oil futures and options contracts as hedging devices.
Except for pre-defined inventory positions as discussed under "--Crude Oil
Volatility; Counter-Cyclical Balance; Risk Management" below, our policy is
generally (i) to purchase only crude oil for which we have a market, (ii) to
structure our sales contracts so that crude oil price fluctuations do not
materially affect the gross margin we receive and (iii) not to acquire and hold
crude  oil, futures contracts or other derivative products for the purpose of
speculating on crude oil price changes that might expose us to indeterminable
losses. See "--Crude Oil Volatility; Counter-Cyclical Balance; and Risk
Management". In November 1999, we discovered that this policy was violated, and
we incurred $174.0 million in unauthorized trading losses, including estimated
associated costs and legal expenses. In 2000, we recognized an additional $7.0
million charge for litigation related to the unauthorized trading losses. See
"--Unauthorized Trading Losses".

  Crude Oil Exchanges. We pursue exchange opportunities to enhance margins
throughout the gathering and marketing process. When opportunities arise to
increase our margin or to acquire a grade of crude oil that more nearly matches
our physical delivery requirement or the preferences of our refinery customers,
we exchange physical crude oil with third parties. These exchanges are effected
through contracts called exchange or buy-sell agreements. Through an exchange
agreement, we agree to buy crude oil that differs in terms of geographic
location, grade of crude oil or physical delivery schedule from crude oil we
have available for sale. Generally, we enter into exchanges to acquire crude oil
at locations that are closer to our end markets, thereby reducing transportation
costs and increasing our margin. We also exchange our crude oil to be physically
delivered at an earlier or later date, if the exchange is expected to result in
a higher margin net of storage costs, and enter into exchanges based on the
grade of crude oil, which includes such factors as sulfur content and specific
gravity, in order to meet the quality specifications of our physical delivery
contracts.

  Producer Services. Crude oil purchasers who buy from producers compete on the
basis of competitive prices and highly responsive services. Through our team of
crude oil purchasing representatives, we maintain our ongoing relationships with
producers in the United States and Canada. We believe that our ability to offer
high-quality field and administrative services to producers is a key factor in
our ability to maintain volumes of purchased crude oil and to obtain new
volumes. High-quality field services include efficient gathering capabilities,
availability of trucks, willingness to construct gathering pipelines where
economically justified, timely pickup of crude oil from tank batteries at the
lease or production point, accurate measurement of crude oil volumes received,
avoidance of spills and effective management of pipeline deliveries. Accounting
and other administrative services include securing division orders (statements
from interest owners affirming the division of ownership in crude oil purchased
by us), providing statements of the crude oil purchased each month, disbursing
production proceeds to interest owners and calculation and payment of ad valorem
and production taxes on behalf of interest owners. In order to compete
effectively, we must maintain records of title and division order interests in
an accurate and timely manner for purposes of making prompt and correct payment
of crude oil production proceeds, together with the correct payment of all
severance and production taxes associated with such proceeds.

  Liquefied Petroleum Gas. We also gather and market LPG throughout the United
States and Canada, concentrated primarily in Washington, California, Kansas,
Michigan, Texas, Montana, Nebraska and the Canadian provinces of Alberta and
Ontario. These activities include:

 .  purchasing LPG (propane and butane) from producers at gas plants and in bulk
   at major pipeline terminal points and storage locations;

 .  transporting the LPG via common carrier pipelines, railcars and trucks to our
   own terminals and our customers' facilities for subsequent resale to retail
   and wholesale customers; and

 .  exchanging product to other locations to maximize margins and/or to meet
   contract delivery requirements.

  We purchase LPG from many producers and believe that we have established long-
term, broad based relationships with LPG producers in our areas of operation. We
purchase LPG directly from gas plants, major pipeline interconnects and storage
locations. Gathering and marketing activities for LPG typically consist of
smaller transactions in terms of volume, but generate higher margins per barrel
relative to crude oil transactions.

  LPG Purchases. We purchase LPG from producers, refiners, and other LPG
marketing companies under contracts that range from immediate delivery to one
year in term. In a typical producer's or refiner's operation, LPG that is
produced at the gas plant or refinery is fractionated into propane and butanes
and then purchased by us for movement via tank truck, railcar or pipeline.

                                       13

  In addition to purchasing LPG at the gas plant or refinery from producers, we
also purchase LPG in bulk at major pipeline terminal points and storage
facilities from major oil companies, large independent producers or other LPG
marketing companies. We purchase LPG in bulk when we believe additional
opportunities exist to realize margins further downstream in our LPG
distribution chain. The opportunities to earn additional margins vary over time
with changing market conditions. Accordingly, the margins associated with our
bulk purchases will fluctuate from period to period. Our bulk purchasing
activities are concentrated in Kansas, Texas, Alberta and Ontario.

  LPG Sales. The marketing of LPG is complex and requires detailed current
knowledge of LPG sources and end markets and a familiarity with a number of
factors including the various modes and availability of transportation, area
market prices and timing and costs of delivering LPG to customers.

  We sell LPG primarily to end users and retailers, and limited volumes to other
marketers. Propane is sold to the small independent retailers who then transport
the product via bobtail truck to the residential consumer for home heating and
to some light industrial users such as forklift operators. Butane is used by
refiners for gasoline blending and as a diluent for the movement of conventional
heavy oil production. Butane demand for use as heavy oil diluent has increased
as supplies of Canadian condensate have declined.

  We establish a margin for LPG that we purchase by taking the propane component
and transporting it in large volume, via various transportation modes, to our
controlled terminals where we deliver the propane to our retailer customers for
subsequent delivery to their individual heating customers. We also create margin
by selling propane for future physical delivery to third party users, such as
retailers and industrial users. Through these transactions, we seek to maintain
a position that is substantially balanced between propane purchases and sales
and future delivery obligations. From time to time, we enter into floating price
collar arrangements, financial swaps and crude oil and LPG-related futures
contracts as hedging devices. Our policy is generally to purchase only LPG for
which we have a market, and to structure our sales contracts so that LPG
fluctuations do not materially affect the gross margin we receive. Margin is
created on the butane purchased by delivering large volumes during the short
refinery blending season through the use of our extensive leased railcar fleet
and the use of third party storage facilities. We also create margin on butane
by capturing the difference in price between condensate and butane when butane
is used to replace condensate as a diluent for the movement of heavy oil
production.

  LPG Exchanges. We pursue exchange opportunities to enhance margins throughout
the gathering and marketing process. When opportunities arise to increase our
margin or to acquire a volume of LPG that more nearly matches our physical
delivery requirement or the preferences of our customers, we exchange physical
LPG with third parties. These exchanges are affected through contracts called
exchange or buy-sell agreements. Through an exchange agreement, we agree to buy
LPG that differs in terms of geographic location, type of LPG or physical
delivery schedule from LPG we have available for sale. Generally, we enter into
exchanges to acquire LPG at locations that are closer to our end markets in
order to meet the delivery specifications of our physical delivery contracts.

  Credit. Our merchant activities involve the purchase of crude oil for resale
and require significant extensions of credit by our suppliers of crude oil. In
order to assure our ability to perform our obligations under crude oil purchase
agreements, various credit arrangements are negotiated with our crude oil
suppliers. Such arrangements include open lines of credit directly with us and
standby letters of credit issued under our letter of credit facility. At
December 31, 2001, we had letters of credit outstanding aggregating
approximately $30.1 million. Generally, letters of credit are issued for a
period of up to 70 days. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."

  When we market crude oil, we must determine the amount, if any, of the line of
credit to be extended to any given customer. If we determine that a customer
should receive a credit line, we must then decide on the amount of credit that
should be extended. Since our typical sales transactions can involve tens of
thousands of barrels of crude oil, the risk of nonpayment and nonperformance by
customers is a major consideration in our business. We believe our sales are
made to creditworthy entities or entities with adequate credit support.

  We also have credit risk with respect to our sales of LPG; however, because
our sales are typically in relatively small amounts to individual customers, we
do not believe that we have material concentration of credit risk. Typically, we
enter into annual contracts to sell LPG on a forward basis, as well as sell LPG
on a current basis to local distributors and retailers. In certain cases our
customers prepay for their purchases, in amounts ranging from 10% to 100% of
their contracted amounts. Generally, sales of LPG are settled within seven days
of the sale.

 Crude Oil Volatility; Counter-Cyclical Balance; Risk Management

  Crude oil prices have historically been very volatile and cyclical, with NYMEX
benchmark prices ranging from as high as $40.00 per barrel to as low as $10.00
per barrel over the last 12 years.  Gross margin from terminalling and storage
activities is dependent on the throughput volume of crude oil stored, capacity
leased to third parties, capacity that we use, and the level of other fees
generated at our terminalling and storage facilities. Gross margin from our
gathering and marketing

                                       14

activities is dependent on our ability to sell crude oil at a price in excess of
our aggregate cost. These operations are not directly affected by the absolute
level of crude oil prices, but are affected by overall levels of supply and
demand for crude oil and relative fluctuations in market-related indices.

  During periods when the demand for crude oil is weak on a relative basis (as
was the case in the first quarter of 1999 and the last nine months of 2001), the
market for crude oil is often in contango, meaning that the price of crude oil
for future deliveries is higher than current prices. A contango market has a
generally negative impact on marketing margins, but is favorable to the storage
business, because storage owners at major trading locations (such as the Cushing
Interchange) can simultaneously purchase production at current prices for
storage and sell at higher prices for future delivery.

  When there is a higher demand than supply of crude oil in the near term (as
was the case in the last nine months of 1999, 2000 and the first quarter of
2001), the market is backwardated, meaning that the price of crude oil for
future deliveries is lower than current prices. A backwardated market has a
positive impact on marketing margins because crude oil gatherers can capture a
premium for prompt deliveries.   In this environment, there is little incentive
to store crude oil as current prices are above future delivery prices.

  The periods in between a backwardated market and a contango market are
referred to as transition periods.  Depending on the overall duration of these
transition periods, how we have allocated our assets to particular strategies
and  the time length of our crude oil purchase and sale contracts and  storage
lease agreements, these transition periods may have either an adverse or
beneficial affect on our aggregate gross margin. A prolonged transition from a
backwardated market to a contango market (essentially a market that is neither
in pronounced backwardation or contango) represents the most difficult
environment for our gathering, marketing, storage and terminalling activities.
When the market is in contango, we will use our tankage to improve our gathering
margins by storing crude we have purchased for delivery in future months that
are selling at a higher price. In a backwardated market, we use and lease less
storage capacity but increased marketing margins provide an offset to this
reduced cash flow.  We believe that the combination of our terminalling and
storage activities and gathering and marketing activities provides a counter-
cyclical balance that has a stabilizing effect on our operations and cash flow.
References to counter-cyclical balance elsewhere in this report are referring to
this relationship between our terminalling and storage activities and our
gathering and marketing activities in transitioning crude oil markets.

  As use of the financial markets for crude oil has increased by producers,
refiners, utilities, other users of energy and trading entities, risk management
strategies, including those involving price hedges using NYMEX futures contracts
and derivatives, have become increasingly important in creating and maintaining
margins. Such hedging techniques require significant resources dedicated to
managing these positions. Our risk management policies and procedures are
designed to monitor both NYMEX and over-the-counter positions and physical
volumes, grades, locations and delivery schedules to ensure that our hedging
activities are implemented in accordance with such policies. We have a risk
management function that has direct responsibility and authority for our risk
policies and our trading controls and procedures and certain other aspects of
corporate risk management.

  Our policy is to purchase only crude oil for which we have a market, and to
structure our sales contracts so that crude oil price fluctuations do not
materially affect the gross margin we receive. Except for inventory transactions
not to exceed 500,000 barrels, we do not acquire and hold crude oil futures
contracts or other derivative products for the purpose of speculating on crude
oil price changes that might expose us to indeterminable losses.

  As a result of production and delivery variances associated with our lease
purchase activities, from time to time we experience net unbalanced positions.
In connection with managing these positions and maintaining a constant presence
in the marketplace, both necessary for our core business, we engage in this
controlled trading program for up to 500,000 barrels.  This activity is
monitored independently by our risk management function and must take place
within predefined limits and authorizations.  In order to hedge margins
involving our physical assets and manage risks associated with our crude oil
purchase and sale obligations we use derivative instruments, including futures
and over-the-counter instruments.  In analyzing our risk management activities,
we draw a distinction between enterprise-level risks and trading-related risks.
Enterprise-level risks are those that underlie our core businesses and may be
managed based on whether there is value in doing so.   Conversely, trading-
related risks (the risks involved in trading in the hopes of generating an
increased return) are not inherent in the core business; rather, the risks arise
as a result of engaging in the trading activity.  We have a Risk Management
Committee that approves all new risk management strategies through a formal
process.  With the partial exception of the limited program not to exceed
500,000 barrels, our approved strategies are intended to mitigate enterprise-
level risks that are inherent in our core businesses of gathering and marketing
and storage.

  Although the intent of our risk-management strategies is to hedge our margin,
not all of our derivatives qualify for hedge accounting.  In such instances,
changes in the fair values of these derivatives will receive mark-to-market
treatment in current earnings, and result in greater potential for earnings
volatility than in the past.  This accounting treatment is discussed further
under Notes 2 and 9 of "Notes to Consolidated Financial Statements".

                                       15

GEOGRAPHIC DATA

  Prior to 2001, all of our revenues were derived from, and our assets located
in, the United States. During 2001, we expanded into Canada. See "--Acquisitions
and Dispositions."  Set forth below is a table of 2001 revenues and long-lived
assets attributable to these geographic areas (in thousands):

      REVENUES
        United States                      $6,149,788
        Canada                             $  718,427

      LONG-LIVED ASSETS
        United States                      $  567,551
        Canada                             $  188,207

OPERATING ACTIVITIES

  For information with respect to our pipeline activities and terminalling and
storage and gathering and marketing activities, see "--Pipeline Operations", "--
Terminalling, Storage, Marketing and Gathering Operations" and Note 16 in the
Notes to Consolidated Financial Statements appearing elsewhere in this report.

CUSTOMERS

  Customers accounting for more than 10% of sales for the periods indicated are
as follows:

                                                          PERCENTAGE
                                                    YEAR ENDED DECEMBER 31,
                                                  ----------------------------
                                                  2001       2000         1999
                                                  ----       ----         ----

        Marathon Ashland Petroleum                 11%        12%          -
        Sempra Energy Trading Corporation           -          -          22%
        Koch Oil Company                            -          -          19%

  All of the customers above pertain to our marketing, gathering, terminalling
and storage segment. We believe that the loss of the customer included above for
2001 would have only a short-term impact on our operating results. There can be
no assurance, however, that we would be able to identify and access a
replacement market at comparable margins.

COMPETITION

  Competition among pipelines is based primarily on transportation charges,
access to producing areas and demand for the crude oil by end users. We believe
that high capital requirements, environmental considerations and the difficulty
in acquiring rights of way and related permits make it unlikely that competing
pipeline systems comparable in size and scope to our pipeline systems will be
built in the foreseeable future. However, to the extent there are already third-
party owned pipelines with excess capacity in the vicinity of our operations, we
will be exposed to significant competition based on the incremental cost of
moving an incremental barrel of crude oil.

  We face intense competition in our terminalling and storage activities and
gathering and marketing activities. Our competitors include other crude oil
pipelines, the major integrated oil companies, their marketing affiliates and
independent gatherers, brokers and marketers of widely varying sizes, financial
resources and experience. Some of these competitors have capital resources many
times greater than ours and control substantially greater supplies of crude oil.

REGULATION

  Our operations are subject to extensive regulations. Many federal, state,
 provincial and local departments and agencies are authorized by statute to
 issue and have issued laws and regulations binding on the oil pipeline industry
 and its individual participants. The failure to comply with such rules and
 regulations can result in substantial penalties. The regulatory burden on the
 oil pipeline industry increases our cost of doing business and, consequently,
 affects our profitability. However, we do not believe that we are affected in a
 significantly different manner by these laws and regulations than are our
 competitors. Due to the myriad of complex federal, state, provincial and local
 regulations that may affect us, directly or indirectly, you should not rely on
 the following discussion of certain laws and regulations as an exhaustive
 review of all regulatory considerations affecting our operations.

                                       16

 Pipeline Regulation

  Our petroleum pipelines in the United States are subject to regulation by the
U.S. Department of Transportation ("DOT") with respect to the design,
installation, testing, construction, operation, replacement, and management of
pipeline facilities. In addition, we must permit access to and copying of
records, and must make certain reports available and provide information as
required by the Secretary of Transportation. Comparable regulation exists in
some states in which we conduct intrastate common carrier or private pipeline
operations.

  Pipeline safety issues are currently receiving significant attention in
various political and administrative arenas at both the state and federal
levels. For example, recent federal rule changes require pipeline operators to:
(i) develop and maintain a written qualification program for individuals
performing covered tasks on pipeline facilities, and (ii) establish pipeline
integrity management programs. In particular, during 2000, the DOT adopted new
regulations requiring operators of interstate pipelines to develop and follow an
integrity management program that provides for continual assessment of the
integrity of all pipeline segments that could affect so-called "high consequence
areas", including high population areas, drinking water areas and ecological
resource areas that are unusually sensitive to environmental damage from a
pipeline release, and commercially navigable waterways. Segments of our
pipelines are located in high consequence areas. Under this new rule, we are
required to evaluate pipeline conditions by means of periodic internal
inspection, pressure testing, or other equally effective assessment means and to
correct identified anomalies. If, as a result of our evaluation process, we
determine that there is a need to provide further protection to high consequence
areas, then we will be required to implement additional prevention and
mitigation risk control measures for our pipelines, including enhanced damage
prevention programs, corrosion control program improvements, leak detection
system enhancements, installation of emergency flow restricting devices, and
emergency preparedness improvements. Under this new rule, we will also be
required to evaluate and, as necessary, improve our management and analysis
processes for integrating available integrity-related data relating to our
pipeline segments and to remediate potential problems found as a result of the
required assessment and evaluation process. Based on currently available
information, our preliminary estimate of the costs to implement this program
over the next five years ranges between $5 million and $10 million. Although we
believe that our pipeline operations are in substantial compliance with
applicable Pipeline Safety Act requirements, these developments renew the
prospect of incurring significant expenses if additional safety requirements are
imposed that exceed our current pipeline control system capabilities.

  States are largely preempted by federal law from regulating pipeline safety
but may assume responsibility for enforcing federal intrastate pipeline
regulations and inspection of intrastate pipelines. In practice, states vary
considerably in their authority and capacity to address pipeline safety. We do
not anticipate any significant problems in complying with applicable state laws
and regulations in those states in which we operate.

 Transportation Regulation

  General Interstate Regulation. Our interstate common carrier pipeline
operations are subject to rate regulation by the Federal Energy Regulatory
Commission ("FERC") under the Interstate Commerce Act. The Interstate Commerce
Act requires that tariff rates for petroleum pipelines, which includes crude
oil, as well as refined product and petrochemical pipelines, be just and
reasonable and non-discriminatory.

  State Regulation. Our intrastate pipeline transportation activities are
subject to various state laws and regulations, as well as orders of regulatory
bodies.

  Canadian Regulation. The Partnership's Canadian pipeline assets are subject to
regulation by the National Energy Board and by provincial agencies in
Saskatchewan and Alberta. With respect to a pipeline over which it has
jurisdiction, each of these agencies has the power, upon application by a third
party, to determine the rates we are allowed to charge for transportation on
such pipeline. In such circumstances, if the relevant regulatory agency
determines that the applicable terms and conditions of service are not just and
reasonable, the agency can amend the offending provisions of an existing
transportation contract.

  Energy Policy Act of 1992 and Subsequent Developments. In October 1992,
Congress passed the Energy Policy Act of 1992 (the "Act"), which among other
things, required the FERC to issue rules establishing a simplified and generally
applicable ratemaking methodology for petroleum pipelines and to streamline
procedures in petroleum pipeline proceedings. The FERC responded to this mandate
by issuing several orders, including Order No. 561. Beginning January 1, 1995,
Order No. 561 enables petroleum pipelines to change their rates within
prescribed ceiling levels that are tied to an inflation index. Rate increases
made pursuant to the indexing methodology are subject to protest, but such
protests must show that the portion of the rate increase resulting from
application of the index is substantially in excess of the pipeline's increase
in costs. If the indexing methodology results in a reduced ceiling level that is
lower than a pipeline's filed rate, Order No. 561 requires the pipeline to
reduce its rate to comply with the lower ceiling. A pipeline must, as a general
rule, utilize the indexing

                                       17

methodology to change its rates. The FERC, however, retained cost-of-service
ratemaking, market-based rates, and settlement as alternatives to the indexing
approach, which alternatives may be used in certain specified circumstances.

  The Act deemed petroleum pipeline rates in effect for the 365-day period
ending on the date of enactment of the Act or that were in effect on the 365th
day preceding enactment and had not been subject to complaint, protest or
investigation during the 365-day period to be just and reasonable under the
Interstate Commerce Act. Generally, complaints against such "grandfathered"
rates may only be pursued if the complainant can show that a substantial change
has occurred since enactment in either the economic circumstances or the nature
of the services which were a basis for the rate or that a provision of the
tariff is unduly discriminatory or preferential.

  In a proceeding involving Lakehead Pipe Line Company, Limited Partnership
(Opinion No. 397), FERC concluded that there should not be a corporate income
tax allowance built into a petroleum pipeline's rates to reflect income
attributable to noncorporate partners since noncorporate partners, unlike
corporate partners, do not pay a corporate income tax. On January 13, 1999, the
FERC issued Opinion No. 435 in a proceeding involving SFPP, L.P., which, among
other things, affirmed Opinion No. 397's determination that there should not be
a corporate income tax allowance built into a petroleum pipeline's rates to
reflect income attributable to noncorporate partners. On rehearing, the FERC
affirmed its position; however, additional rehearing requests on other matters
remain pending. Petitions for review of Opinion No. 435 and subsequent FERC
opinions in the case are before the D.C. Circuit Court of Appeals, but are being
held in abeyance pending FERC action on the remaining rehearing requests. Once
the rehearing process is completed, the FERC's position on the income tax
allowance and on other rate issues could be subject to judicial review.

  Our Pipelines. The FERC generally has not investigated rates on its own
initiative when those rates have not been the subject of a protest or complaint
by a shipper. Substantially all of our gross margins on transportation are
produced by rates that are either grandfathered or set by agreement of the
parties. Rates for OCS crude are set by transportation agreements with shippers
that do not expire until 2007 and provide for a minimum tariff with annual
escalation. The FERC has twice approved the agreed OCS rates, although
application of the indexing method would have required their reduction. When
these OCS agreements expire in 2007, they will be subject to renegotiation or to
any of the other methods for establishing rates under Order No. 561. As a
result, we believe that the rates now in effect can be sustained, although no
assurance can be given that the rates currently charged would ultimately be
upheld if challenged. In addition, we do not believe that an adverse
determination on the tax allowance issue in the SFPP, L.P. proceeding would have
a detrimental impact upon our current rates.

 Trucking Regulation

  We operate a fleet of trucks to transport crude oil and oilfield materials as
a private, contract and common carrier. We are licensed to perform both
intrastate and interstate motor carrier services. As a motor carrier, we are
subject to certain safety regulations issued by the Department of
Transportation. The trucking regulations cover, among other things, driver
operations, maintaining log books, truck manifest preparations, the placement of
safety placards on the trucks and trailer vehicles, drug and alcohol testing,
safety of operation and equipment, and many other aspects of truck operations.
We are also subject to the Occupational Safety and Health Act, as amended
("OSHA"), with respect to our trucking operations.

  The Partnership's trucking assets in Canada are subject to regulation by
provincial agencies in the provinces in which they are operated. These
regulatory agencies do not set freight rates, but do establish and administer
rules and regulations relating to other matters including equipment and driver
licensing, equipment inspection, hazardous materials and safety.

ENVIRONMENTAL REGULATION

 General

  Numerous federal, state and local laws and regulations governing the discharge
of materials into the environment or otherwise relating to the protection of the
environment affect our operations and costs. In particular, our activities in
connection with storage and transportation of crude oil and other liquid
hydrocarbons and our use of facilities for treating, processing or otherwise
handling hydrocarbons and wastes are subject to stringent environmental laws and
regulations. As with the industry generally, compliance with existing and
anticipated laws and regulations increases our overall cost of business,
including our capital costs to construct, maintain and upgrade equipment and
facilities. Although these regulations affect our capital expenditures and
earnings, we believe that they do not affect our competitive position because
our competitors that comply with such laws and regulations are similarly
affected. Environmental laws and regulations have historically been subject to
change, and we are unable to predict the ongoing cost to us of complying with
these laws and regulations or the future impact of such laws and regulations on
our operations. Violation of these environmental laws and regulations and any
associated permits can result in the imposition of significant administrative,
civil and criminal penalties, injunctions and construction bans or delays. A
discharge of hydrocarbons or hazardous substances into the environment could, to
the extent such event is not insured, subject us to substantial expense,
including both the cost to comply with

                                       18

applicable laws and regulations and claims made by neighboring landowners and
other third parties for personal injury and property damage.

 Water

  The Oil Pollution Act, as amended ("OPA"), was enacted in 1990 and amends
provisions of the Federal Water Pollution Control Act of 1972, as amended
("FWPCA"), and other statutes as they pertain to prevention and response to oil
spills. The OPA subjects owners of facilities to strict, joint and potentially
unlimited liability for containment and removal costs, natural resource damages,
and certain other consequences of an oil spill, where such spill is into
navigable waters, along shorelines or in the exclusive economic zone of the U.S.
The OPA establishes a liability for onshore facilities of $350.0 million;
however, a party cannot take advantage of this liability limit if the spill is
caused by gross negligence or willful misconduct or resulted from a violation of
a federal safety, construction, or operating regulation. If a party fails to
report a spill or cooperate in the cleanup, the liability limits likewise do not
apply. In the event of an oil spill into navigable waters, substantial
liabilities could be imposed upon us. States in which we operate have also
enacted similar laws. Regulations have been or are currently being developed
under OPA and state laws that may also impose additional regulatory burdens on
our operations. We believe that we are in substantial compliance with applicable
OPA requirements.

  The FWPCA imposes restrictions and strict controls regarding the discharge of
pollutants into navigable waters. Permits must be obtained to discharge
pollutants into state and federal waters. The FWPCA imposes substantial
potential liability for the costs of removal, remediation and damages. We
believe that compliance with existing permits and compliance with foreseeable
new permit requirements will not have a material adverse effect on our financial
condition or results of operations.

  Some states maintain groundwater protection programs that require permits for
discharges or operations that may impact groundwater conditions. We believe that
we are in substantial compliance with these state requirements.

 Air Emissions

  Our operations are subject to the Federal Clean Air Act, as amended, and
comparable state and local statutes. We believe that our operations are in
substantial compliance with these statutes in all states in which we operate.

  Amendments to the Federal Clean Air Act enacted in late 1990 (the "1990
Federal Clean Air Act Amendments") as well as recent or soon to be adopted
changes to state implementation plans for controlling air emissions in regional
non-attainment areas require or will require most industrial operations in the
U.S. to incur capital expenditures in order to meet air emission control
standards developed by the U.S. Environmental Protection Agency (the "EPA") and
state environmental agencies. In addition, the 1990 Federal Clean Air Act
Amendments include a new operating permit for major sources ("Title V permits"),
which applies to some of our facilities. We will be required to incur certain
capital expenditures in the next several years for air pollution control
equipment in connection with obtaining or maintaining permits and approvals
addressing air emission related issues. Although we can give no assurances, we
believe implementation of the 1990 Federal Clean Air Act Amendments will not
have a material adverse effect on our financial condition or results of
operations.

 Solid Waste

  We generate wastes, including hazardous wastes, that are subject to the
requirements of the federal Resource Conservation and Recovery Act ("RCRA"), and
comparable state statutes. The EPA is considering the adoption of stricter
disposal standards for non-hazardous wastes, including oil and gas wastes. We
are not currently required to comply with a substantial portion of the RCRA
requirements because our operations generate minimal quantities of hazardous
wastes. However, it is possible that additional wastes, which could include
wastes currently generated as non-hazardous wastes during operations, will in
the future be designated as "hazardous wastes". Hazardous wastes are subject to
more rigorous and costly disposal requirements than are non-hazardous wastes.
Such changes in the regulations could result in additional capital expenditures
or operating expenses for us as well as the industry in general.

 Hazardous Substances

  The Comprehensive Environmental Response, Compensation and Liability Act, as
amended ("CERCLA"), also known as "Superfund", and comparable state laws impose
liability, without regard to fault or the legality of the original act, on
certain classes of persons that contributed to the release of a "hazardous
substance" into the environment. These persons include the owner or operator of
the site or sites where the release occurred and companies that disposed of, or
arranged for the disposal of, the hazardous substances found at the site. Under
CERCLA, such persons may be subject to joint and several liability for the costs
of cleaning up the hazardous substances that have been released into the
environment, for damages to natural resources, and for the costs of certain
health studies. CERCLA also authorizes the EPA and, in some instances, third
parties to act in response to threats to the public health or the environment
and to seek to recover from the responsible classes

                                       19

of persons the costs they incur. It is not uncommon for neighboring landowners
and other third parties to file claims for personal injury and property damage
allegedly caused by hazardous substances or other pollutants released into the
environment. In the course of our ordinary operations, we may generate waste
that falls within CERCLA's definition of a "hazardous substance". We may be
jointly and severally liable under CERCLA for all or part of the costs required
to clean up sites at which such hazardous substances have been disposed of or
released into the environment.

  We currently own or lease, and have in the past owned or leased, properties
where hydrocarbons are being or have been handled. Although we have utilized
operating and disposal practices that were standard in the industry at the time,
hydrocarbons or other wastes may have been disposed of or released on or under
the properties owned or leased by us or on or under other locations where these
wastes have been taken for disposal. In addition, many of these properties have
been operated by third parties whose treatment and disposal or release of
hydrocarbons or other wastes was not under our control. These properties and
wastes disposed thereon may be subject to CERCLA, RCRA and analogous state laws.
Under such laws, we could be required to remove or remediate previously disposed
wastes (including wastes disposed of or released by prior owners or operators),
to clean up contaminated property (including contaminated groundwater) or to
perform remedial plugging operations to prevent future contamination. We are
currently involved in remediation activities at a number of sites, which involve
potentially significant expense. See "--Environmental Remediation".

 OSHA

  We are subject to the requirements of OSHA, and comparable state statutes that
regulate the protection of the health and safety of workers. In addition, the
OSHA hazard communication standard requires that certain information be
maintained about hazardous materials used or produced in operations and that
this information be provided to employees, state and local government
authorities and citizens. We believe that our operations are in substantial
compliance with OSHA requirements, including general industry standards, record
keeping requirements and monitoring of occupational exposure to regulated
substances.

 Endangered Species Act

  The Endangered Species Act, as amended ("ESA"), restricts activities that may
affect endangered species or their habitats. While certain of our facilities are
in areas that may be designated as habitat for endangered species, we believe
that we are in substantial compliance with the ESA. However, the discovery of
previously unidentified endangered species could cause us to incur additional
costs or operation restrictions or bans in the affected area.

 Hazardous Materials Transportation Requirements

  The DOT regulations affecting pipeline safety require pipeline operators to
implement measures designed to reduce the environmental impact of oil discharge
from onshore oil pipelines. These regulations require operators to maintain
comprehensive spill response plans, including extensive spill response training
for pipeline personnel. In addition, DOT regulations contain detailed
specifications for pipeline operation and maintenance. We believe our operations
are in substantial compliance with such regulations. See "--Pipeline
Regulation".

ENVIRONMENTAL REMEDIATION

  In connection with our acquisition of Scurlock Permian, we identified a number
of areas of potential environmental exposure. Under the terms of our acquisition
agreement, Marathon Ashland is fully indemnifying us for areas of environmental
exposure which were identified at the time of the acquisition, including any and
all liabilities associated with two superfund sites at which it is alleged
Scurlock Permian deposited waste oils as well as any potential liability for
hydrocarbon soil and water contamination at a number of Scurlock Permian
facilities. For environmental liabilities which were not identified at the time
of the acquisition but which occurred prior to the closing, we have agreed to
pay the costs relating to matters that are under $25,000. Our liabilities
relating to matters discovered prior to May 2003 and that exceed $25,000, is
currently limited to an aggregate of $0.5 million, with Marathon Ashland
indemnifying us for any excess amounts. Marathon Ashland's indemnification
obligations for identified sites extend indefinitely while its obligations for
non-identified sites extend to matters discovered within four years of the date
of acquisition (May 12, 1999) of Scurlock Permian. While we do not believe that
our liability, if any, for environmental contamination associated with our
Scurlock Permian assets will be material, there can be no assurance in that
regard. In any event, should we be found liable, we believe that our
indemnification from Marathon Ashland should prevent such liability from having
a material adverse effect on our financial condition, results of operations or
cash flows.

  In connection with our acquisition of the West Texas Gathering System, we
agreed to be responsible for pre-acquisition environmental liabilities up to an
aggregate amount of $1.0 million, while Chevron Pipe Line Company agreed to
remain solely responsible for liabilities which are discovered prior to July
2002 which exceed this $1.0 million threshold. During our pre-acquisition
investigation, we identified a number of sites along our West Texas Gathering
System on which there are

                                       20

hydrocarbon contaminated soils. While the total cost of remediation of these
sites has not yet been determined, we believe our indemnification arrangement
with Chevron Pipe Line Company should prevent such costs from having a material
adverse effect on our financial condition, results of operations or cash flows.

  From 1994 to 1997 (prior to our acquisition in 1999), our Venice, Louisiana
terminal experienced several releases of crude oil and jet fuel into the soil.
The Louisiana Department of Environmental Quality has been notified of the
releases. Marathon Ashland has performed some soil remediation related to the
releases and retained liability for these conditions. The extent of the
contamination at the sites is uncertain and there is a potential for groundwater
contamination. We do not expect expenditures related to this terminal to be
material, although we can provide no assurances in that regard.

  During 1997, the All American Pipeline experienced a leak in a segment of its
pipeline in California which resulted in an estimated 12,000 barrels of crude
oil being released into the soil. Immediate action was taken to repair the
pipeline leak, contain the spill and to recover the released crude oil. We have
expended approximately $400,000 to date in connection with this spill and do not
expect any additional expenditures to be material, although we can provide no
assurances in that regard.

  Prior to being acquired by our predecessor in 1996, the Ingleside Terminal
experienced releases of refined petroleum products into the soil and groundwater
underlying the site due to activities on the property. We are undertaking a
voluntary state-administered remediation of the contamination on the property to
determine the extent of the contamination. We have spent approximately $140,000
to date in investigating the contamination at this site. We do not anticipate
the total additional costs related to this site to exceed $250,000, although no
assurance can be given that the actual cost could not exceed such estimate.

  We may experience future releases of crude oil into the environment from our
pipeline and storage operations, or discover releases that were previously
unidentified. While we maintain an extensive inspection program designed to
prevent and, as applicable, to detect and address such releases promptly,
damages and liabilities incurred due to any future environmental releases from
our assets may substantially affect our business.

OPERATIONAL HAZARDS AND INSURANCE

  A pipeline, terminal or other facilities may experience damage as a result of
an accident or natural disaster. These hazards can cause personal injury and
loss of life, severe damage to and destruction of property and equipment,
pollution or environmental damage and suspension of operations. We maintain
insurance of various types that we consider to be adequate to cover our
operations and properties. The insurance covers all of our assets in amounts
considered reasonable. The insurance policies are subject to deductibles that we
consider reasonable and not excessive. Our insurance does not cover every
potential risk associated with operating pipelines, terminals and other
facilities, including the potential loss of significant revenues. Consistent
with insurance coverage generally available to the industry, our insurance
policies provide limited coverage for losses or liabilities relating to
pollution, with broader coverage for sudden and accidental occurrences. The
events of September 11 and their overall effect on the insurance industry may
have a general adverse impact on availability and cost of coverage. We currently
maintain insurance for acts of terrorism on the majority of our assets and
operations. Many of our current policies expire on June 1, 2002. Due to the
events of September 11, 2001, we believe that many insurers will exclude acts of
terrorism from future insurance policies or make the cost for this coverage
prohibitive.

  Since the terrorist attacks, the United States Government has issued warnings
that energy assets (including our nation's pipeline infrastructure) may be a
future target of terrorist organizations. These developments expose our
operations and assets to increased risks. Any future terrorist attacks on our
facilities, those of our customers and, in some cases, those of our competitors,
could have a material adverse effect on our business.

  The occurrence of a significant event not fully insured or indemnified
against, or the failure of a party to meet its indemnification obligations,
could materially and adversely affect our operations and financial condition. We
believe that we are adequately insured for public liability and property damage
to others with respect to our operations. With respect to all of our coverage,
no assurance can be given that we will be able to maintain adequate insurance in
the future at rates we consider reasonable.

TITLE TO PROPERTIES

  Substantially all of our pipelines are constructed on rights-of-way granted by
the apparent record owners of such property and in some instances the rights-of-
way are revocable at the election of the grantor. In many instances, lands over
which rights-of-way have been obtained are subject to prior liens that have not
been subordinated to the right-of-way grants. In some cases, not all of the
apparent record owners have joined in the right-of-way grants, but in
substantially all such cases, signatures of the owners of majority interests
have been obtained. We have obtained permits from public authorities to cross
over or under, or to lay facilities in or along water courses, county roads,
municipal streets and state highways, and in some instances, the permits are
revocable at the election of the grantor. We have also obtained permits from
railroad companies to cross over or under lands or rights-of-way, many of which
are also revocable at

                                       21

the grantor's election. In some cases, property for pipeline purposes was
purchased in fee. All of the pump stations are located on property owned in fee
or property under long-term leases. In certain states and under certain
circumstances, we have the right of eminent domain to acquire rights-of-way and
lands necessary for our common carrier pipelines.

  Some of the leases, easements, rights-of-way, permits and licenses transferred
to us, upon our formation in 1998 and in connection with acquisitions we have
made since that time, required the consent of the grantor to transfer such
rights, which in certain instances is a governmental entity. We believe that we
have obtained the third-party consents, permits and authorizations as are
sufficient for the transfer to us of the assets necessary for us to operate our
business in all material respects as described in this report. With respect to
any consents, permits or authorizations that have not yet been obtained, we
believe that the consents, permits or authorizations will be obtained within a
reasonable period, or that the failure to obtain the consents, permits or
authorizations will have no material adverse effect on the operation of our
business.

  We believe that we have satisfactory title to all of our assets. Although
title to such properties are subject to encumbrances in certain cases, such as
customary interests generally retained in connection with acquisition of real
property, liens related to environmental liabilities associated with historical
operations, liens for current taxes and other burdens and minor easements,
restrictions and other encumbrances to which the underlying properties were
subject at the time of acquisition by our predecessor or us, we believe that
none of such burdens will materially detract from the value of such properties
or from our interest therein or will materially interfere with their use in the
operation of our business.

EMPLOYEES

  To carry out our operations, our general partner or its affiliates employed
approximately 1,000 employees at December 31, 2001. None of the employees of our
general partner were represented by labor unions, and our general partner
considers its employee relations to be good.

SUMMARY OF TAX CONSIDERATIONS

  The tax consequences of ownership of common units depends in part on the
owner's individual tax circumstances. However, the following is a brief summary
of material tax consequences of owning and disposing of common units.

 Partnership Status; Cash Distributions

  We are classified for federal income tax purposes as a partnership based upon
our meeting certain requirements imposed by the Internal Revenue Code (the
"Code") which we must meet each year. The owners of common units are considered
partners in the partnership so long as they do not loan their common units to
others to cover short sales or otherwise dispose of those units. Accordingly, we
pay no federal income taxes, and a common unitholder is required to report on
the unitholder's federal income tax return the unitholder's share of our income,
gains, losses and deductions. In general, cash distributions to a common
unitholder are taxable only if, and to the extent that, they exceed the tax
basis in the common units held.

PARTNERSHIP ALLOCATIONS

  In general, our income and loss is allocated to the general partner and the
unitholders for each taxable year in accordance with their respective percentage
interests in the partnership (including, with respect to the general partner,
its incentive distribution right), as determined annually and prorated on a
monthly basis and subsequently apportioned among the general partner and the
unitholders of record as of the opening of the first business day of the month
to which they relate, even though unitholders may dispose of their units during
the month in question. A unitholder is required to take into account, in
determining federal income tax liability, the unitholder's share of income
generated by us for each taxable year of the partnership ending within or with
the unitholder's taxable year, even if cash distributions are not made to the
unitholder. As a consequence, a unitholder's share of our taxable income (and
possibly the income tax payable by the unitholder with respect to such income)
may exceed the cash actually distributed to the unitholder by us. At any time
distributions are made on the common units in excess of distributions on the
subordinated units, or incentive distributions are made to the general partner,
gross income will be allocated to the recipient to the extent of those
distributions.

 Basis of Common Units

  A unitholder's initial tax basis for a common unit is generally the amount
paid for the common unit. A unitholder's basis is generally increased by the
unitholder's share of our income and decreased by the unitholder's share of our
losses and distributions.

                                       22

 Limitations on Deductibility of Partnership Losses

  In the case of taxpayers subject to the passive loss rules (generally,
individuals and closely held corporations), any partnership losses are only
available to offset future income generated by us and cannot be used to offset
income from other activities, including passive activities or investments. Any
losses unused by virtue of the passive loss rules may be fully deducted if the
unitholder disposes of all of the unitholder's common units in a taxable
transaction with an unrelated party.

 Section 754 Election

  We have made the election provided for by Section 754 of the Code, which will
generally result in a unitholder being allocated income and deductions
calculated by reference to the portion of the unitholder's purchase price
attributable to each asset of the partnership.

 Disposition of Common Units

  A unitholder who sells common units will recognize gain or loss equal to the
difference between the amount realized and the adjusted tax basis of those
common units. A unitholder may not be able to trace basis to particular common
units for this purpose. Thus, distributions of cash from us to a unitholder in
excess of the income allocated to the unitholder will, in effect, become taxable
income if the unitholder sells the common units at a price greater than the
unitholder's adjusted tax basis even if the price is less than the unitholder's
original cost. A portion of the amount realized (whether or not representing
gain) will be ordinary income.

 Foreign, State, Local and Other Tax Considerations

  In addition to federal income taxes, unitholders will likely be subject to
other taxes, such as foreign, state and local income taxes, unincorporated
business taxes, and estate, inheritance or intangible taxes that are imposed by
the various jurisdictions in which a unitholder resides or in which we do
business or own property. We own property and conduct business in five provinces
in Canada as well as in most states in the United States. All but four of those
states and all of the provinces currently impose a personal income tax that
would generally require a unitholder to file a return and pay taxes in that
state or province, as well as in Canada. Of the states in which we primarily do
business, only Texas does not have a personal income tax. In certain states, tax
losses may not produce a tax benefit in the year incurred (if, for example, we
have no income from sources within that state) and also may not be available to
offset income in subsequent taxable years. Some states may require us, or we may
elect, to withhold a percentage of income from amounts to be distributed to a
unitholder. Withholding, the amount of which may be more or less than a
particular unitholder's income tax liability owed to the state, may not relieve
the nonresident unitholder from the obligation to file an income tax return.
Amounts withheld may be treated as if distributed to unitholders for purposes of
determining the amounts distributed by us.

  It is the responsibility of each prospective unitholder to investigate the
legal and tax consequences, under the laws of Canada and those states and
localities, of the unitholder's investment in us. Further, it is the
responsibility of each unitholder to file all U.S. federal, Canadian, state and
local tax returns that may be required of the unitholder.

 Ownership of Common Units by Tax-Exempt Organizations and Certain Other
 Investors

  An investment in common units by tax-exempt organizations (including IRAs and
other retirement plans), regulated investment companies (mutual funds) and
foreign persons raises issues unique to such persons. Virtually all of our
income allocated to a unitholder that is a tax-exempt organization is unrelated
business taxable income and, thus, is taxable to such a unitholder. Furthermore,
no significant amount of our gross income is qualifying income for purposes of
determining whether a unitholder will qualify as a regulated investment company,
and a unitholder who is a nonresident alien, foreign corporation or other
foreign person is regarded as being engaged in a trade or business in the United
States as a result of ownership of a common unit and, thus, is required to file
federal income tax returns and to pay tax on the unitholder's share of our
taxable income. Finally, distributions to foreign unitholders are subject to
federal income tax withholding.

 Tax Shelter Registration

  The Code generally requires that "tax shelters" be registered with the
Secretary of the Treasury. We are registered as a tax shelter with the Secretary
of the Treasury. Our tax shelter registration number is 99061000009. Issuance of
the registration number does not indicate that an investment in the partnership
or the claimed tax benefits has been reviewed, examined or approved by the IRS.

                                       23

Unauthorized Trading Losses

 Background

  In November 1999, we discovered that a former employee had engaged in
unauthorized trading activity, resulting in losses of approximately $174.0
million, which includes estimated associated costs and legal expenses. A full
investigation into the unauthorized trading activities by outside legal counsel
and independent accountants and consultants determined that the vast majority of
the losses occurred from March through November 1999, and the impact warranted a
restatement of previously reported financial information for 1999 and 1998.
Approximately $7.1 million of the unauthorized trading losses was recognized in
1998 and the remainder in 1999. In 2000, we recognized an additional $7.0
million charge for litigation related to the unauthorized trading losses.

  Normally, as we purchase crude oil, we establish a margin by selling crude oil
for physical delivery to third parties, or by entering into future delivery
obligations with respect to futures contracts. The employee in question violated
our policy of maintaining a substantially balanced position between purchases
and sales (or future delivery obligations) by negotiating one side of a
transaction without negotiating the other, leaving the position "open". The
trader concealed his activities by hiding open trading positions, by rolling
open positions forward using off-market, inter-month transactions, and by
providing to counter-parties forged documents that purported to authorize such
transactions. An "inter-month" transaction is one in which the receipt and
delivery of crude oil are scheduled in different months. An "off-market"
transaction is one in which the price is higher or lower than the prices
available in the market on the day of the transaction. By matching one side of
an inter-month transaction with an open position, and using off-market pricing
to match the pricing of the open position, the trader could present
documentation showing both a purchase and a sale, creating the impression of
compliance with our policy. The offsetting side of the inter-month transaction
became a new, hidden open position.

 Investigation; Enhancement of Procedures

  Upon discovery of the violation and related losses, we engaged an outside law
firm to lead the investigation of the unauthorized trading activities. The law
firm retained specialists from an independent accounting firm to assist in the
investigation. In parallel effort with the investigation mentioned above, the
role of the accounting firm specialists was expanded to include reviewing and
making recommendations for enhancement of our systems, policies and procedures.
As a result, we have developed and adopted a new written policy document and
manual of procedures designed to enhance our processes and procedures and
improve our ability to detect any activity that might occur at an early stage.
See "Terminalling, Storage, Marketing and Gathering Operations--Crude Oil
Volatility; Counter-Cyclical Balance; Risk Management."

  To specifically address the methods used by the trader to conceal the
unauthorized trading, in January 2000, we sent a notice to each of our material
counter-parties that no person at Plains All American Pipeline, L.P. was
authorized to enter into off-market transactions. In addition, we have taken the
following actions:

 .  We have communicated our hedging and trading strategies and risk tolerance to
   our traders by more clearly and specifically defining approved strategies and
   risk limits in our written procedures.

 .  The new procedures require (i) more comprehensive and frequent reporting that
   will allow our officers to evaluate risk positions in greater detail, and
   (ii) enhanced procedures to check compliance with these reporting
   requirements and to confirm that trading activity was conducted within
   guidelines.

 .  The procedures provide a system to educate each employee who is involved,
   directly or indirectly, in our crude oil transaction activities with respect
   to policies and procedures, and impose an obligation to notify the Risk
   Manager directly of any questionable transactions or failure of others to
   adhere to the policies, practices and procedures.

 .  Finally, following notification to each of our material counter-parties that
   off-market trading is against our policy and that any written evidence to the
   contrary is unauthorized and false, the Risk Manager and our other
   representatives have also communicated our policies and enhanced procedures
   to our counter-parties to advise them of the information we will routinely
   require from them to assure timely recording and confirmation of trades.

  We can give no assurance that the above steps will serve to detect and prevent
all violations of our trading policy; we believe, however, that such steps
substantially reduce the possibility of a recurrence of unauthorized trading
activities, and that any unauthorized trading that does occur would be detected
before any material loss could develop.

 Effects of the Loss

  The unauthorized trading and associated losses resulted in a default of
certain covenants under our then-existing credit facilities and significant
short-term cash and letter of credit requirements.

                                       24

  In December 1999, we executed amended credit facilities and obtained default
waivers from all of our lenders. We paid approximately $13.7 million to our
lenders in connection with the amended credit facilities. In connection with the
amendments, our former general partner loaned us approximately $114.0 million.

  On May 8, 2000, we entered into new bank credit agreements to refinance our
existing bank debt and repay the $114.0 million owed to our former general
partner. The new bank credit agreements also provided us with additional
flexibility for working capital, capital expenditures and other general
corporate purposes. At closing, we had $256.0 million outstanding under a senior
secured revolving credit facility. We also had at closing letters of credit of
approximately $173.8 million and borrowings of approximately $20.3 million
outstanding under a separate senior secured letter of credit and borrowing
facility. We have since refinanced the bank credit facilities we entered into on
May 8, 2000. See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources".

  In the period immediately following the disclosure of the unauthorized trading
losses, a significant number of our suppliers and trading partners reduced or
eliminated the open credit previously extended to us. Consequently, the amount
of letters of credit we needed to support the level of our crude oil purchases
then in effect increased significantly. In addition, the cost of letters of
credit increased under our credit facility. Some of our purchase contracts were
terminated. For the year 2001, we believe that the effects of the loss on our
cost of credit and operations were minimal and the requirement for us to issue
letters of credit has reduced to levels lower than existed before the
unauthorized trading loss.

  After the public announcement of the trading losses, class action lawsuits
were filed against us and Plains Resources. Derivative lawsuits have also been
filed in the United States District Court for the Southern District of Texas and
the Delaware Chancery Court, Newcastle County. All of the cases have been
settled or are in the process of being settled. See Item 3. "Legal Proceedings".

ITEM 3.  LEGAL PROCEEDINGS

  Texas Securities Litigation. On November 29, 1999, a class action lawsuit was
filed in the United States District Court for the Southern District of Texas
entitled Di Giacomo v. Plains All American Pipeline, L.P., et al. The suit
alleged that Plains All American and certain of our former general partner's
officers and directors violated federal securities laws, primarily in connection
with unauthorized trading by a former employee. An additional nineteen cases
were filed in the Southern District of Texas, some of which named our former
general partner and Plains Resources as additional defendants. All of the
federal securities claims were consolidated into two actions. The first
consolidated action is that filed by purchasers of Plains Resources' common
stock and options, and is captioned Koplovitz v. Plains Resources Inc., et al.
The second consolidated action is that filed by purchasers of our common units,
and is captioned Di Giacomo v. Plains All American Pipeline, L.P., et al.
Plaintiffs alleged that the defendants were liable for securities fraud
violations under Rule 10b-5 and Section 20(a) of the Securities Exchange Act of
1934 and for making false registration statements under Sections 11 and 15 of
the Securities Act of 1933.

  We and Plains Resources reached an agreement with representatives for the
plaintiffs for the settlement of all of the class actions, and in January 2001,
we deposited approximately $30.0 million under the terms of the settlement
agreement. The total cost of the settlement to us and Plains Resources,
including interest and expenses and after insurance reimbursements, was $14.9
million. Of that amount, $1.0 million was allocated to Plains Resources by
agreement between special independent committees of the board of directors of
our former general partner and the board of directors of Plains Resources. All
such amounts were reflected in our financial statements at December 31, 2000.
The settlement was approved by the court on December 19, 2001. The order became
final on January 18, 2002. The settlement agreement does not affect the Texas
Derivative Litigation and Delaware Derivative Litigation described below.

  Delaware Derivative Litigation. On December 3, 1999, two derivative lawsuits
were filed in the Delaware Chancery Court, New Castle County, entitled Susser v.
Plains All American Inc., et al and Senderowitz v. Plains All American Inc., et
al. These suits, and three others which were filed in Delaware subsequently,
named our former general partner, its directors and certain of its officers as
defendants, and allege that the defendants breached the fiduciary duties that
they owed to Plains All American Pipeline, L.P. and its unitholders by failing
to monitor properly the activities of its employees. The court consolidated all
of the cases under the caption In Re Plains All American Inc. Shareholders
Litigation, and has designated the complaint filed in Susser v. Plains All
American Inc. as the complaint in the consolidated action.

  The plaintiffs in the Delaware derivative litigation seek, among other things,
to cause the defendants to account for all losses and damages allegedly
sustained by Plains All American from the unauthorized trading losses; to
establish and maintain effective internal controls ensuring that our affiliates
and persons responsible for our affairs do not engage in wrongful practices
detrimental to Plains All American; and to pay for the plaintiffs' costs and
expenses in the litigation, including reasonable attorneys' fees, accountants'
fees and experts' fees.

                                       25

  We have reached an agreement in principle with the plaintiffs to settle the
Delaware litigation for approximately $1.1 million. On March 6, 2002, the
Delaware court approved the settlement.

  Texas Derivative Litigation. On July 11, 2000, a derivative lawsuit was filed
in the United States District Court of the Southern District of Texas entitled
Fernandes v. Plains All American Inc., et al, naming our former general partner,
its directors and certain of its officers as defendants. This lawsuit contains
the same claims and seeks the same relief as the Delaware derivative litigation,
described above. We have reached an agreement in principle with the plaintiffs,
subject to approval by the District Court, to settle the Texas litigation for
approximately $112,500.

  Other. We, in the ordinary course of business, are a claimant and/or a
defendant in various other legal proceedings. We do not believe that the outcome
of these other legal proceedings, individually and in the aggregate, will have a
materially adverse effect on our financial condition, results of operations or
cash flows.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

  No matters were submitted to a vote of the security holders, through
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.

                                       26

                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON UNITS AND RELATED UNITHOLDER MATTERS

    The common units, excluding the Class B common units, are listed and traded
on the New York Stock Exchange under the symbol "PAA". On March 15, 2002, the
market price for the common units was $25.61 per unit and there were
approximately 17,300 recordholders and beneficial owners (held in street
name).

    The following table sets forth high and low sales prices for the common
units as reported on the New York Stock Exchange Composite Tape, and the cash
distributions paid per common unit for the periods indicated:

                             COMMON UNIT PRICE RANGE           CASH
                               HIGH           LOW         DISTRIBUTIONS
                             --------       --------      -------------
          2000
            1st Quarter      $  16.56       $  13.00        $  0.4500
            2nd Quarter         18.63          15.25           0.4625
            3rd Quarter         19.75          18.00           0.4625
            4th Quarter         20.06          18.00           0.4625

          2001
            1st Quarter      $  23.59       $  19.50        $  0.4750
            2nd Quarter         27.86          22.26           0.5000
            3rd Quarter         29.50          23.47           0.5125
            4th Quarter         27.46          24.76           0.5125

    The Class B common units are pari passu with common units with respect to
quarterly distributions, and are convertible into common units upon approval of
a majority of the common unitholders. The Class B unitholders may request that
we call a meeting of common unitholders to consider approval of the conversion
of Class B units into common units. If the approval of a conversion by the
common unitholders is not obtained within 120 days of a request, each Class B
unitholder will be entitled to receive distributions, on a per unit basis, equal
to 110% of the amount of distributions paid on a common unit, with such
distribution right increasing to 115% if such approval is not secured within 90
days after the end of the 120-day period. Except for the vote to approve the
conversion, the Class B units have the same voting rights as the common units.
As of March 15, 2002, there was one Class B unitholder. We have also issued and
outstanding 10,029,619 subordinated units, for which there is no established
public trading market.

 Cash Distribution Policy

    We distribute on a quarterly basis all of our available cash. Available cash
generally means, for any of our fiscal quarters, all cash on hand at the end of
the quarter less the amount of cash reserves that is necessary or appropriate in
the reasonable discretion of our general partner to:

       .  provide for the proper conduct of our business;
       .  comply with applicable law, any of our debt instruments or other
          agreements; or
       .  provide funds for distributions to unitholders and our general partner
          for any one or more of the next four quarters.

    Minimum quarterly distributions are $0.45 for each full fiscal quarter.
Distributions of available cash to the holders of subordinated units are subject
to the prior rights of the holders of common units to receive the minimum
quarterly distributions for each quarter during the subordination period, and to
receive any arrearages in the distribution of minimum quarterly distributions on
the common units for prior quarters during the subordination period. The
subordination period will end if certain financial tests contained in the
partnership agreement are met for three consecutive four-quarter periods (the
"testing period"), but no sooner than December 31, 2003. During the first
quarter after the end of the subordination period, all of the subordinated units
will convert into Common Units. Early conversion of a portion of the
subordinated units may occur if the testing period is satisfied before
December 31, 2003. We have determined that the first four-quarter period of the
testing period was satisfied as of September 30, 2001. Although we cannot give
assurance in that regard, if we continue to meet the requirements, 25% of the
subordinated units will convert into common units in the fourth quarter of 2003
and the remainder will convert in the first quarter of 2004. Our ability to meet
these requirements is subject to a number of economic and operational
contingencies. See "Management's Discussion and Analysis--Risk Factors Related
to our Business" and "--Forward Looking Statements".

    In addition to distributions on its 2% general partner interest, our general
partner is entitled to receive incentive distributions if the amount we
distribute with respect to any quarter exceeds levels specified in our
partnership agreement.

                                       27

Under the quarterly incentive distribution provisions, generally our general
partner is entitled to 15% of amounts we distribute in excess of $0.450 per
unit, 25% of the amounts we distribute in excess of $0.495 per unit and 50% of
amounts we distribute in excess of $0.675 per unit.

    Under the terms of our bank credit agreement and letter of credit and
borrowing facility, we are prohibited from declaring or paying any distribution
to unitholders if a default or event of default (as defined in such agreements)
exists. See Item 7. "Management's Discussion and Analysis --Liquidity and
Capital Resources".

                                       28

ITEM 6.  SELECTED FINANCIAL AND OPERATING DATA

    On November 23, 1998, we completed our initial public offering and the
transactions whereby we became the successor to the business of our predecessor
(the midstream subsidiaries of Plains Resources). The historical financial
information below for Plains All American Pipeline was derived from our audited
consolidated financial statements as of December 31, 2001, 2000, 1999 and 1998,
and for the years ended December 31, 2001, 2000 and 1999 and for the period from
November 23, 1998, through December 31, 1998. The financial information below
for our predecessor was derived from the audited combined financial statements
of our predecessor, as of December 31, 1997, and for the period from January 1,
1998, through November 22, 1998, and for the year ended December 31, 1997,
including the notes thereto. The operating data for all periods is derived from
our records as well as those of our predecessor. Commencing April 1, 2001, July
1, 2001, and October 1, 2001, respectively, the results of operations of the
Murphy, CANPET and Wapella acquisitions are included in our results of
operations. Commencing May 1, 1999, the results of operations of the Scurlock
Permian businesses are included in our results of operations. Commencing July
30, 1998, the results of operations of the All American Pipeline and the SJV
Gathering System are included in the results of operations of our predecessor
and Plains All American Pipeline. The selected financial data should be read in
conjunction with the consolidated financial statements, including the notes
thereto, included elsewhere in this report, and Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations".

                                                                                                               PREDECESSOR
                                                                                                          -------------------------
                                                                                       NOVEMBER 23 TO    JANUARY 1 TO   YEAR ENDED
                                                YEAR ENDED DECEMBER 31,                 DECEMBER 31,     NOVEMBER 22,   DECEMBER 31,
                                       ---------------------------------------------   --------------    -----------    -----------
                                           2001            2000             1999            1998             1998           1997
                                       ------------     -----------     ------------   --------------    -----------    -----------
                                                                   (in thousands except per unit data)
                                                                                                     
STATEMENT OF OPERATIONS DATA:
Revenues                               $  6,868,215     $ 6,641,187     $ 10,910,423   $      398,918    $ 3,118,353    $ 2,815,278
Cost of sales and operations              6,720,970       6,506,504       10,800,109          391,419      3,087,372      2,802,798
Unauthorized trading losses
  and related expenses (1)                        -           6,963          166,440            2,400          4,700              -
Inventory valuation adjustment                4,984               -                -                -              -              -
                                       ------------     -----------     ------------   --------------    -----------    -----------
Gross margin                                142,261         127,720          (56,126)           5,099         26,281         12,480
                                       ------------     -----------     ------------   --------------    -----------    -----------
General and administrative
 expenses  (2)                               46,586          40,821           23,211              771          4,526          3,529
Depreciation and amortization                24,307          24,523           17,344            1,192          4,179          1,165
Restructuring expense                             -               -            1,410                -              -              -
                                       ------------     -----------     ------------   --------------    -----------    -----------
Total expenses                               70,893          65,344           41,965            1,963          8,705          4,694
                                       ------------     -----------     ------------   --------------    -----------    -----------
Operating income (loss)                      71,368          62,376          (98,091)           3,136         17,576          7,786
Interest expense                            (29,082)        (28,691)         (21,139)          (1,371)       (11,260)        (4,516)
Gain on sale of assets (3)                      984          48,188           16,457                -              -              -
Interest and other income (4)                   401          10,776              958               12            572            138
                                       ------------     -----------     ------------   --------------    -----------    -----------
Income (loss) before provision
 (benefit) in lieu of income
 taxes, extraordinary item and
 cumulative effect of accounting
 change                                      43,671          92,649         (101,815)           1,777          6,888          3,408
Provision (benefit) in lieu of
 income taxes                                     -               -                -                -          2,631          1,268
                                       ------------     -----------     ------------   --------------    -----------    -----------
Income (loss) before extraordinary
 item and cumulative effect of
 accounting change                     $     43,671     $    92,649     $   (101,815)  $        1,777    $     4,257    $     2,140
                                       ============     ===========     ============   ==============    ===========    ===========
Basic and diluted net income
 (loss) per limited partner unit
 before extraordinary item and
 cumulative effect of accounting
  change (5)                           $       1.12     $      2.64     $      (3.16)  $         0.06    $      0.25    $      0.12
                                       ============     ===========     ============   ==============    ===========    ===========
Weighted average number of
 limited partner  units outstanding          37,528          34,386           31,633           30,089         17,004         17,004
                                       ============     ===========     ============   ==============    ===========    ===========
                                                                                                 (table continued on following page)

                                       29

                                                                                                               PREDECESSOR
                                                                                                          -------------------------
                                                                                       NOVEMBER 23 TO    JANUARY 1 TO   YEAR ENDED
                                                YEAR ENDED DECEMBER 31,                 DECEMBER 31,     NOVEMBER 22,   DECEMBER 31,
                                       ---------------------------------------------   --------------    -----------    -----------
                                           2001            2000             1999            1998             1998           1997
                                       ------------     -----------     ------------   --------------    -----------    -----------
                                                                   (in thousands except per unit data)
                                                                                                     
BALANCE SHEET DATA:
 (AT END OF PERIOD):
 Working capital (6)                   $     52,922     $    47,111      $    101,539   $       2,231            N/A    $     2,017
 Total assets                             1,261,251         885,801         1,223,037         607,186            N/A        149,619
 Related party debt - Long-term                   -               -           114,000               -            N/A         28,531
 Total debt (7)                             456,159         321,300           368,819         184,750            N/A         18,000
 Partners' capital                          402,797         213,999           192,973         270,543            N/A              -
 Combined equity                                  -               -                 -               -            N/A          5,975

OTHER DATA:
 Adjusted EBITDA (8)                   $    109,595     $   103,048      $     89,074   $       6,740    $    27,027    $     9,089
 Maintenance capital
  expenditures (9)                            3,401           1,785             1,741             200          1,508            678
 Net cash provided by (used in)
  operating activities (10)                 (29,953)        (33,511)          (71,245)          7,218         21,384        (12,869)
 Net cash provided by (used in)
  investing activities                     (249,491)        211,001          (186,093)         (3,089)      (399,611)        (1,854)
 Net cash provided by (used in)
  financing activities                      279,529        (227,832)          305,603           1,374        386,154         14,321

OPERATING DATA:
 Volumes (barrels per day)(11):
  All American
   Tariff (12)                               69,300          73,800           102,700         110,200        113,700            N/A
   Margin (13)                               60,600          60,000            54,100          50,900         49,100            N/A
  Canada                                    223,300             N/A               N/A             N/A            N/A            N/A
  Other                                     124,200         106,500            61,400               -              -            N/A
                                       ------------     -----------     -------------  --------------    -----------    -----------
   Total pipeline                           477,400         240,300           218,200         161,100        162,800            N/A
                                       ============     ===========     =============  ==============    ===========    ===========
  Lease gathering (14)                      375,300         262,600           264,700         126,200         87,100         71,400
  Bulk purchases (15)                        54,200          27,700           138,200         133,600         94,700         48,500
                                       ------------     -----------     -------------  --------------    -----------    -----------
   Total                                    429,500         290,300           402,900         259,800        181,800        119,900
                                       ============     ===========     =============  ==============    ===========    ===========
  Terminal throughput (16)                   99,000          67,000            83,300          61,900         81,400         76,700
                                       ============     ===========     =============  ==============    ===========    ===========

- ------------
(1)  In November 1999, we discovered that a former employee had engaged in
     unauthorized trading activity, resulting in losses of approximately $174.0
     million, including estimated associated costs and legal expenses of which
     $166.4 million and $7.1 million was recognized in 1999 and 1998,
     respectively. In 2000, we recognized an additional $7.0 million charge for
     litigation related to the unauthorized trading losses. See Items 1 and 2.
     "Business and Properties -- Unauthorized Trading Losses".
(2)  General and administrative expenses for 2001 and 2000 include a $1.0
     million charge and a $5.0 million charge, respectively, to reserve
     potentially uncollectible accounts receivable. Operating expenses for 2001
     also include a similar charge of $2.0 million. See Item 7. "Management's
     Discussion and Analysis of Financial Condition and Results of Operations--
     Results of Operations".
(3)  In March 2000, we completed the sale of 5.2 million barrels of crude oil
     linefill from the All American Pipeline. We recognized gains of $28.1
     million and $16.5 million in 2000 and 1999, respectively, in connection
     with that sale. We also sold a segment of the All American Pipeline to El
     Paso and recognized a gain of $20.1 million in the first quarter of 2000.
     See Items 1 and 2. "Business and Properties--Acquisitions and Dispositions
     -- All American Pipeline Linefill Sale and Asset Disposition".
(4)  For the year ended December 31, 2000, this amount includes $9.7 million of
     previously deferred gains from terminated interest rate swaps recognized as
     a result of debt extinguishment.
(5)  Basic and diluted net income (loss) per unit is computed by dividing the
     limited partners' interest in net income by the number of outstanding
     common and subordinated units. For periods prior to November 23, 1998, the
     number of units are equal to the common and subordinated units received by
     our former general partner in exchange for the assets contributed to the
     Partnership.
(6)  At December 31, 1999, working capital includes $37.9 million of pipeline
     linefill and $103.6 million for the segment of the All American Pipeline
     that were both sold in the first quarter of 2000. See Items 1 and 2.
     "Business and Properties--Acquisitions and Dispositions--All American
     Pipeline Linefill Sale and Asset Disposition".
(7)  Total debt in 1999 excludes related party debt. Total debt at December 31,
     2001, includes an aggregate $100 million of short-term debt outstanding
     under our $200 million senior secured letter of credit and borrowing
     facility attributable to contango inventory purchases, which was
     repaid in January 2002 with proceeds from the sale of the inventory. We
     continuously use this facility for short-term borrowings of contango
     inventory purchases.
(8)  EBITDA means earnings before interest expense, income taxes, depreciation
     and amortization. Adjusted EBITDA also excludes unauthorized trading
     losses, noncash compensation ($5.7 million, $3.1 million and $1.0 million
     in 2001, 2000 and 1999, respectively), restructuring expense, gains on the
     sales of assets,

                                       30

     allowance for accounts receivable ($3.0 million in 2001 and $5.0 million in
     2000), noncash inventory valuation adjustment, the impact on earnings of
     noncash SFAS 133 items, gain on early termination of interest rate swaps,
     and extraordinary loss from extinguishment of debt. Adjusted EBITDA is not
     a measurement presented in accordance with GAAP and is not intended to be
     used in lieu of GAAP presentations of results of operations and cash
     provided by operating activities. EBITDA is commonly used by debt holders
     and financial statement users as a measurement to determine the ability of
     an entity to meet its interest obligations.
(9)  Maintenance capital expenditures are capital expenditures made to replace
     partially or fully depreciated assets to maintain the existing operating
     capacity of existing assets or extend their useful lives. Capital
     expenditures made to expand our existing capacity, whether through
     construction or acquisition, are not considered maintenance capital
     expenditures. Repair and maintenance expenditures associated with existing
     assets that do not extend the useful life or expand operating capacity are
     charged to expense as incurred.
(10) See Item 7. "Management's Discussion and Analysis--Liquidity and Capital
     Resources--Cash Flows" and "--Operating Activities" for a discussion of
     negative amounts in 2001, 2000 and 1999.
(11) Includes average daily volumes from acquisition effective dates,
     extrapolated for the full year in which the acquisitions were consummated.
(12) Represents crude oil deliveries on the All American Pipeline.
(13) Represents crude oil deliveries on the SJV Gathering System.
(14) Represents barrels of crude oil purchased at the wellhead, including
     volumes which were purchased under the Marketing Agreement.
(15) Represents barrels of crude oil purchased at collection points, terminals
     and pipelines.
(16) Represents total crude oil barrels delivered from the Cushing Terminal and
     the Ingleside Terminal.

                                       31

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

    The following discussion of our financial condition and results of our
operations should be read in conjunction with our historical consolidated
financial statements and accompanying notes. For more detailed information
regarding the basis of presentation for the following financial information, see
the notes to the historical consolidated financial statements.

OVERVIEW

    We were formed in September of 1998 to acquire and operate the midstream
crude oil business and assets of Plains Resources Inc. and its wholly owned
subsidiaries. On November 23, 1998, we completed our initial public offering and
the transactions whereby we became the successor to the business of our
predecessor. We are a master limited partnership and conduct our operations
through our wholly owned operating limited partnerships Plains Marketing, L.P.,
All American Pipeline, L.P. and Plains Marketing Canada, L.P.

    In May 2001, management and a group of financial investors entered into a
transaction with Plains Resources to acquire control of our general partner and
a majority of the outstanding subordinated units. The transaction closed in June
2001. As a result of this transaction, Plains Resources' ownership in the
general partner was reduced from 100% to 44% and, combined with two equity
offerings conducted in 2001, Plains Resources' overall effective ownership in
the Partnership (which includes its ownership in common and subordinated units)
was reduced from 55% to approximately 29%. See Item 12. "Security Ownership of
Certain Beneficial Owners and Management". In addition, certain officers of the
general partner who previously were also officers of Plains Resources terminated
their affiliation with Plains Resources and as a result now devote 100% of their
efforts to the management of the Partnership. In connection with the General
Partner Transition, certain equity interests previously granted to management
and outside directors vested, resulting in a charge to the Partnership's income
of approximately $6.1 million, of which Plains Resources funded approximately
94%.

    We are engaged in interstate and intrastate transportation, marketing and
terminalling and storage of crude oil and marketing of liquefied petroleum gas.

    Pipeline Operations. Our activities from pipeline operations generally
consist of transporting third-party volumes of crude oil for a fee, third party
leases of pipeline capacity, barrel exchanges and buy/sell arrangements. We also
utilize our pipelines in our merchant activities conducted under our gathering
and marketing business. Utilization of our pipelines in our gathering and
marketing business provides us with a competitive advantage over third party
gatherers that do not have similarly located pipelines, because generally it
costs less to transport crude oil on pipelines than alternative methods of
transportation. Tariffs and other fees on our pipeline systems vary by receipt
point and delivery point. The gross margin generated by our tariff and other
fee-related activities depends on the volumes transported on the pipeline and
the level of the tariff and other fees charged, as well as the fixed and
variable costs of operating the pipeline. Gross margin from our pipeline
capacity leases, barrel exchanges and buy/sell arrangements generally reflect a
negotiated amount.

    Terminalling and Storage Activities and Gathering and Marketing Activities.
Terminals are facilities where crude oil is transferred to or from storage or a
transportation system, such as a pipeline, to another transportation system,
such as trucks or another pipeline. The operation of these facilities is called
"terminalling". Gross margin from terminalling and storage activities is
dependent on the throughput volumes, the volume of crude oil stored and the
level of fees generated from our terminalling and storage services. Gross margin
from our gathering and marketing activities is dependent on our ability to sell
crude oil at a price in excess of our aggregate cost. These operations are
margin businesses, and are not directly affected by the absolute level of crude
oil prices, but are affected by overall levels of supply and demand for crude
oil and fluctuations in market-related indices.

    During periods when the demand for crude oil is weak on a relative basis (as
was the case in the first quarter of 1999 and the last nine months of 2001), the
market for crude oil is often in contango, meaning that the price of crude oil
for future deliveries is higher than current prices. A contango market has a
generally negative impact on marketing margins, but is favorable to the storage
business, because storage owners at major trading locations (such as the Cushing
Interchange) can simultaneously purchase production at current prices for
storage and sell at higher prices for future delivery. When there is a higher
demand than supply of crude oil in the near term, the market is backward,
meaning that the price of crude oil for future deliveries is lower than current
prices. A backward market has a positive impact on marketing margins because
crude oil gatherers can capture a premium for prompt deliveries. In this
environment, there is little incentive to store crude oil, as current prices are
above future delivery prices. We believe that the combination of our
terminalling and storage activities and gathering and marketing activities
provides a counter-cyclical balance that has a stabilizing effect on our
operations and cash flow.

    We establish a margin by selling crude oil for physical delivery to third
party users, such as independent refiners or major oil companies, or by entering
into a future delivery obligation with respect to futures contracts on the
NYMEX.

                                       32

Through these transactions, we establish on a monthly basis a position that is
substantially balanced between crude oil purchases and sales and future delivery
obligations. We purchase crude oil on both a fixed and floating price basis. As
fixed price barrels are purchased, we enter into sales arrangements with
refiners, trade partners or on the NYMEX, which establishes a margin and
protects it against future price fluctuations. When floating price barrels are
purchased, we match those contracts with similar type sales agreements with our
customers, or likewise establish a hedge position using the NYMEX futures
market. From time to time, we enter into arrangements that expose us to basis
risk. Basis risk occurs when crude oil is purchased based on a crude oil
specification and location that differs from the countervailing sales
arrangement. In order to lock in profits involving our physical assets and to
manage risks associated with our crude purchase obligations, we use derivative
instruments. Except for pre-defined inventory positions as discussed below, our
policy is to purchase only crude oil for which we have a market, and to
structure our sales contracts so that crude oil price fluctuations do not
materially affect the gross margin we receive. See Items 1 and 2., "Business and
Properties--Crude Oil Volatility; Counter-Cyclical Balance; Risk
Management". In November 1999, we discovered that this policy was violated. See
Items 1 and 2. "Business and Properties--Unauthorized Trading Losses" and
"Unauthorized Trading Losses" below. Except for inventory transactions not to
exceed 500,000 barrels, we do not acquire and hold crude oil futures contracts
or other derivative products for the purpose of speculating on crude oil price
changes that might expose us to indeterminable losses.

2001 ACQUISITIONS

    We completed a number of acquisitions in 2001 that impacted the results of
operations discussed in this section. We continue to have an active acquisition
program and have completed two acquisitions in 2002 as of March 15. See Items 1
and 2. "Business and Properties--Acquisitions and Dispositions".

 Wapella Pipeline System

    In December 2001, we consummated the acquisition of the Wapella Pipeline
System from private investors for approximately $12.0 million, including
transaction costs. The system is located in southeastern Saskatchewan and
southwestern Manitoba. In 2001, the Wapella Pipeline System delivered
approximately 11,000 barrels per day of crude oil to the Enbridge Pipeline at
Cromer, Manitoba. The acquisition also includes approximately 21,500 barrels of
crude oil storage capacity located along the system as well as a truck terminal.

    The Wapella acquisition was accounted for using the purchase method of
accounting and the purchase price was allocated in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 141. The purchase price allocation
is as follows (in thousands):

      Crude oil pipeline, gathering and
        terminal assets                           $  10,251
      Other property and equipment                    1,720
                                                  ---------
      Total                                       $  11,971
                                                  =========

 CANPET Energy Group Inc.

    In July 2001, we acquired the assets of CANPET Energy Group Inc. ("CANPET"),
a Calgary-based Canadian crude oil and liquefied petroleum gas marketing
company, for approximately $42.0 million plus excess inventory at the closing
date of approximately $25.0 million. Approximately $24.0 million of the purchase
price plus $25 million for the additional inventory was paid in cash at closing,
and the remainder, which is subject to certain performance standards, will be
paid in common units in April 2004, if such standards are met. At the time of
the acquisition, CANPET's activities consisted of gathering approximately 75,000
barrels per day of crude oil and marketing an average of approximately 26,000
barrels per day of natural gas liquids. Assets acquired include a crude oil
handling facility, a 130,000-barrel tank facility, LPG facilities, existing
business relationships and working capital of approximately $8.6 million.

                                       33

    The CANPET acquisition was accounted for using the purchase method of
accounting and the purchase price was allocated in accordance with SFAS 141. The
purchase price allocation (including transaction costs) is as follows (in
thousands):

       Inventory                                         $29,708
       Goodwill                                            8,818
       Intangible assets (contracts)                         980
       Other assets, including debt issue costs            1,661
       Pipeline linefill                                   4,332
       Crude oil gathering and terminal
        assets                                             4,243
       Other property and equipment                          502
                                                         -------
       Total                                             $50,244
                                                         =======

 Murphy Oil Company Ltd. Midstream Operations

    In May 2001, we acquired substantially all of the Canadian crude oil
pipeline, gathering, storage and terminalling assets of Murphy Oil Company Ltd.
for approximately $161.0 million in cash, including financing and transaction
costs. Initial financing for the acquisition was provided through borrowings
under our bank credit facilities. The purchase included $6.5 million for excess
inventory in the pipeline systems. The principal assets acquired include
approximately 450 miles of crude oil and condensate mainlines (including dual
lines on which condensate is shipped for blending purposes and blended crude is
shipped in the opposite direction) and associated gathering and lateral lines,
approximately 1.1 million barrels of crude oil storage and terminalling capacity
located primarily in Kerrobert, Saskatchewan, approximately 254,000 barrels of
pipeline linefill and tank inventories, an inactive 108-mile mainline system and
121 trailers used primarily for crude oil transportation. We have reactivated
the 108-mile mainline system and began shipping volumes through that system in
May of 2001.

    Murphy agreed to continue to transport production from fields previously
delivering crude oil to these pipeline systems, under a long-term contract. At
the time of acquisition, these volumes averaged approximately 11,000 barrels per
day. Total volumes transported on the pipeline system in 2001 were approximately
223,000 barrels per day of light, medium and heavy crudes, as well as
condensate.

    The Murphy acquisition has been accounted for using the purchase method of
accounting and the purchase price was allocated in accordance with APB 16. The
purchase price allocation, as adjusted pursuant to the provisions of the
purchase and sale agreement upon resolution of an outstanding pipeline tariff
dispute, is as follows (in thousands):

       Crude oil pipeline, gathering and terminal
        assets                                           $145,106
       Pipeline linefill                                    7,602
       Net working capital items                            1,953
       Other property and equipment                           487
       Other assets, including debt issue costs               360
                                                         --------
       Total                                             $155,508
                                                         ========

UNAUTHORIZED TRADING LOSSES

  In November 1999, we discovered that a former employee had engaged in
unauthorized trading activity, resulting in losses of approximately $174.0
million, which includes estimated associated costs and legal expenses.
Approximately $7.1 million of the unauthorized trading losses was recognized in
1998 and the remainder in 1999. In 2000, we recognized an additional $7.0
million charge for litigation related to the unauthorized trading losses. See
Items 1 and 2. "Business and Properties--Unauthorized Trading Losses" for a
discussion of the unauthorized trading loss, its financial effects and the steps
taken to prevent future violations of our trading policies. See also Item 3.
"Legal Proceedings".

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that affect the reported amounts of assets and liabilities, as
well as the disclosure of contingent assets and liabilities, at the date of the
financial statements.  Such estimates and assumptions also affect the reported
amounts of revenues and expenses during the reporting period.  Although we
believe these estimates are reasonable, actual results could differ from these
estimates.  The critical accounting policies that we have identified are
discussed below.

                                       34

 Depreciation and Amortization

   We calculate our depreciation and amortization based on estimated useful
lives and salvage values of our assets.  When assets are put into service, we
make estimates with respect to useful lives that we believe  are reasonable.
However, subsequent events could cause us to change our estimates, thus
impacting the future calculation of depreciation and amortization.  In
conjunction with the recent adoption of SFAS 141, we are required to determine
the portion of goodwill or intangibles, relating to acquisitions after June 30,
2001, which have finite lives as opposed to indefinite lives.  Intangibles with
indefinite lives are not amortized but instead are periodically assessed for
impairment.  The impairment testing entails estimating future net cash flows
relating to the asset,  based on management's estimate of market conditions
including pricing, demand, competition, operating costs and other factors.
Intangibles with finite lives are amortized over the estimated useful life
determined by management. Determining the amount of intangibles associated with
an acquisition that relates to such items as relationships, contracts, and
industry expertise involves professional judgment and is ultimately based on
acquisition models and management's assessment of the value of the assets
acquired.

 Allowance for Doubtful Accounts Receivable

   We routinely review our receivable balances to identify past due amounts and
analyze the reasons such amounts have not been collected.  In many instances,
such uncollected amounts involve billing delays and discrepancies or disputes as
to the appropriate price, volumes or quality of crude oil delivered, received or
exchanged.  We also attempt to monitor changes in the creditworthiness of our
customers as a result of developments related to each customer, the industry as
a whole and the general economy.  Based on these analyses, we have established
an allowance for doubtful accounts receivable and consider the reserve adequate.

 Revenue and Expense Accruals

   We routinely make accruals for both revenues and expenses due to the timing
of compiling billing information, receiving third party information and
reconciling our records with those of third parties. The delayed information
includes, among other things, actual volumes of crude oil purchased, transported
or sold, claims for employee medical insurance, and invoices for purchases and
other operating expenses. In situations where we are required to make mark to
market estimates pursuant to SFAS 133, the estimates of gains or losses at a
particular period end do not reflect the end results of particular transactions,
and will most likely not reflect the actual gain or loss at the conclusion of a
transaction. We make accruals to reflect estimates for these items based on our
internal records and information from third parties. We believe our estimates
for these items are reasonable, but there is no assurance that actual amounts
will not vary significantly from estimated amounts.

 Liability and Contingency Accruals

   We accrue reserves for contingent liabilities including, but not limited to,
environmental remediation and potential legal claims.  Accruals are made when
our assessment indicates that it is probable that a liability has occurred and
the amount of liability can be reasonably estimated.  Our estimates are based on
all known facts at the time and our assessment of the ultimate outcome.  These
estimates can be increased or decreased as additional information is obtained or
resolution is achieved.

RESULTS OF OPERATIONS

 Analysis of Three Years Ended December 31, 2001

    Commencing April 1, July 1, and October 1, 2001, respectively, the results
of operations of the Murphy, CANPET and Wapella acquisitions are included in our
results of operations. The results of operations for the year ended December 31,
1999, include the results of the Scurlock acquisition effective May 1, 1999, and
the West Texas Gathering System acquisition effective July 1, 1999.

    For 2001, we reported net income of $44.2 million on total revenue of $6.9
billion compared to net income for 2000 of $77.5 million on total revenue of
$6.6 billion and a net loss for 1999 of $103.4 million on total revenue of $10.9
billion. Such results include the impacts of unusual, non-recurring or
extraordinary items as follows:

 2001
       .  a $6.1 million charge associated with the vesting of phantom
          partnership units primarily as a result of the General Partner
          Transition in June 2001. See Item 13. "Certain Relationships and
          Related Transactions--Transactions with Related Parties--Transactions
          Grant Agreements." The vesting had no effect on the number of units
          outstanding, as the units were satisfied out of units owned by Plains

                                       35

          Resources. Approximately $5.7 million of the charge (included in
          general and administrative expenses) was noncash. This portion of the
          charge had no impact on equity as it was offset by a deemed capital
          contribution by our former general partner;
       .  a $5.0 million noncash writedown of operating crude oil inventory in
          the fourth quarter of 2001 to reflect prices at December 31, 2001.
          During 2001, the price of crude oil traded on the NYMEX averaged
          $25.98 per barrel. At December 31, 2001, the NYMEX crude oil price was
          approximately 24% lower, or $19.84 per barrel. The Partnership uses
          the average cost method for recording inventory and the noncash
          writedown reflects the impact of a lower of cost or market valuation;
       .  a $3.0 million reserve for potentially uncollectible accounts
          receivable; and
       .  a $1.0 million gain on the sale of excess communications equipment.

 2000
       .  a $28.1 million gain on the sale of crude oil linefill;
       .  a $20.1 million gain on the sale of the segment of the All American
          Pipeline that extends from Emidio, California, to McCamey, Texas;
       .  $9.7 million of previously deferred gains on interest rate swap
          terminations recognized due to the early extinguishment of debt;
       .  an extraordinary loss of $15.1 million related to the early
          extinguishment of debt;
       .  a $7.0 million charge for litigation related to the unauthorized
          trading losses;
       .  a $5.0 million reserve for potentially uncollectible accounts
          receivable;
       .  amortization of $4.6 million of debt issue costs associated with
          facilities put in place during the fourth quarter of 1999 subsequent
          to the unauthorized trading loss; and
       .  $3.1 million of noncash compensation expense, attributable to the
          vesting of rights to receive phantom partnership units granted by an
          affiliate of Plains Resources. See Item 13. "Certain Relationships and
          Related Transactions--Transactions with Related Parties--Transaction
          Grant Agreements."

 1999
       .  $166.4 million of unauthorized trading losses;
       .  a $16.5 million gain on the sale of crude oil linefill that was sold
          in 1999;
       .  restructuring expense of $1.4 million;
       .  an extraordinary loss of $1.5 million related to the early
          extinguishment of debt; and
       .  $1.0 million of noncash compensation expense attributable to the
          vesting of phantom partnership units as described for 2000 and 2001
          above.

    Excluding the items listed above, we would have reported net income of $57.3
million, $54.4 million and $50.6 million for the years ended December 31, 2001,
2000 and 1999, respectively.

                                       36

  The following table sets forth financial and operating information for the
periods presented and includes the impact of the items discussed above (in
thousands):

                                                                        YEAR ENDED DECEMBER 31,
                                                     -------------------------------------------------------
                                                         2001                  2000                 1999
                                                     ----------            ----------            -----------
                                                                                              
OPERATING RESULTS:
 Revenues                                            $6,868,215            $6,641,187            $10,910,423
                                                     ==========            ==========            ===========
 Gross margin
  Pipeline                                           $   71,322            $   51,787            $    58,001
  Terminalling and storage
   and gathering and marketing                           75,923                82,896                 52,313
  Unauthorized trading losses                                 -                (6,963)              (166,440)
  Inventory valuation adjustment                         (4,984)                    -                      -
                                                     ----------            ----------            -----------
   Total                                                142,261               127,720                (56,126)
 General and administrative expense                     (46,586)              (40,821)               (23,211)
                                                     ----------            ----------            -----------
 Gross profit                                        $   95,675            $   86,899            $   (79,337)
                                                     ==========            ==========            ===========
 Extraordinary item and cumulative
  effect of accounting change                        $      508            $  (15,147)           $    (1,545)
                                                     ==========            ==========            ===========
 Net income (loss)                                   $   44,179            $   77,502            $  (103,360)
                                                     ==========            ==========            ===========
AVERAGE DAILY VOLUMES (BARRELS PER DAY)(1):
 Pipeline Activities:
  All American
   Tariff and fee activities                                 69                    74                    103
   Margin activities                                         61                    60                     54
  Canada                                                    223                     -                      -
  Other                                                     124                   107                     61
                                                     ----------            ----------            -----------
  Total                                                     477                   241                    218
                                                     ==========            ==========            ===========
 Lease gathering                                            375                   262                    265
 Bulk purchases                                              54                    28                    138
                                                     ----------            ----------            -----------
  Total                                                     429                   290                    403
                                                     ==========            ==========            ===========
 Terminal throughput                                         99                    67                     83
                                                     ==========            ==========            ===========
 Storage leased to third parties,
   monthly average volumes                                2,356                 1,657                  1,975
                                                     ==========            ==========            ===========

(1) Includes average daily volumes from acquisition effective dates,
    extrapolated for the full year in which acquisitions were consummated.

    Revenues. Total revenues were $6.9 billion, $6.6 billion and $10.9 billion
for 2001, 2000 and 1999, respectively. The small increase in 2001 as compared to
2000 was primarily due to the impact of our Canadian acquisitions offset by
lower oil prices. The decrease in 2000 as compared to 1999 was primarily
attributable to lower bulk purchases and exchange volumes associated with our
gathering and marketing activities, partially offset by higher crude oil prices.
We significantly reduced the volume of our bulk purchases after our unauthorized
trading losses in 1999, because these transactions typically have lower margins,
and sellers of the crude oil were requesting letters of credit, which increased
our costs on these transactions.

    Cost of Sales and Operations. Cost of sales and operations was $6.7 billion,
$6.5 billion and $10.8 billion in 2001, 2000 and 1999, respectively. Year-to-
year changes were primarily due to the reasons discussed above for revenues.

    Inventory Valuation Adjustment. We recorded a noncash charge of $5.0 million
related to inventory valuation for the year ended December 31, 2001. We utilize
an average cost method of valuing our operating inventory. This charge was
required due to the drop in crude oil prices during 2001.

    Unauthorized Trading Losses. We recognized losses of approximately $7.0
million and $166.4 million in 2000 and 1999, respectively, as a result of
unauthorized trading by a former employee. See "--Unauthorized Trading Losses".

    General and Administrative. General and administrative expenses were $46.6
million for the year ended December 31, 2001, an increase of approximately 14%,
or $5.8 million as compared to $40.8 million in 2000. G&A expenses were $23.2
million in 1999. The overall increase from 2000 to 2001 is primarily due to (1)
a $4.7 million increase associated with the Canadian acquisitions, (2) a $2.6
million increase in noncash compensation expense, (3) a $.8 million increase in
personnel related expenses, primarily associated with increased insurance costs
and additional personnel costs associated with the General Partner Transition
and (4) a $4 million decrease to G&A resulting from a reduction year over year
in charges to reserve for potentially uncollectible receivables. The overall
increase from 1999 to 2000 is primarily attributable to (1) a $5.7 million
increase associated with the Scurlock acquisition in mid-1999, (2) a $5.0
million charge to expense associated with

                                       37

potentially uncollectible accounts receivable, (3) approximately $4.6 million of
consulting and accounting charges related to the unauthorized trading loss
investigation, system modifications and enhancements and implementation of SFAS
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133")
and (4) a $2.1 million increase in noncash compensation expense.

    During 2001, 2000 and 1999, we incurred charges of $6.1 million, $3.1
million and $1.0 million, respectively, related to incentive compensation paid
to certain officers and key employees of Plains Resources and its affiliates.
The incentive compensation charges were noncash except for approximately
$400,000 in 2001. In 1998 and 2000, Plains Resources granted certain officers
and key employees the right to earn ownership in our common units owned by it.
These rights provided for a three-year vesting period, subject to distributions
being paid on the common and subordinated units. As a result of the change
control of the general partner interest, all remaining units vested. See Item
13. "Certain Relationships and Related Transactions--Transactions with Related
Parties--Transaction Grant Agreements."

    Depreciation and Amortization. Depreciation and amortization expense was
$24.3 million in 2001, $24.5 million in 2000 and $17.3 million in 1999.
Excluding the nonrecurring items discussed below, depreciation and amortization
expense increased approximately $4.9 million in 2001 as compared to 2000
primarily as a result of our Canadian acquisitions. Approximately $5.1 million
of the increase in 2000 as compared to 1999 is primarily related to nonrecurring
amortization of debt issue costs associated with credit facilities put in place
during the fourth quarter of 1999, subsequent to the unauthorized trading
losses. The remaining increase is attributable to the Scurlock and West Texas
Gathering System acquisitions, which were effective May 1, 1999, and July 1,
1999, respectively, as well as our 1999 and 2000 capital additions.

    Restructuring Expense. We incurred a $1.4 million restructuring charge in
1999, primarily associated with severance-related expenses of 24 employees who
were terminated. As of December 31, 1999, all severance costs were paid and the
terminated employees were not employed by us.

    Interest Expense. Interest expense was $29.1 million in 2001, $28.7 million
in 2000 and $21.1 million in 1999. The decrease in 2001 interest expense is
attributable to lower interest rates, as our average debt balance in 2001 was
slightly higher than in 2000. The increase in 2000 over 1999 is primarily due to
higher interest rates as well as slightly higher average debt balances. During
2001, we capitalized approximately $0.2 million of interest related to capital
projects in the construction phase.

    Gain on Sale of Assets. In March 2000, we sold to a unit of El Paso for
$129.0 million the segment of the All American Pipeline that extends from
Emidio, California to McCamey, Texas. Except for minor third-party volumes, one
of our subsidiaries, Plains Marketing, L.P., had been the sole shipper on this
segment of the pipeline since its predecessor acquired the line from the
Goodyear Tire & Rubber Company in July 1998. We realized net proceeds of
approximately $124.0 million after the associated transaction costs and
estimated costs to remove equipment. We used the proceeds from the sale to
reduce outstanding debt. We recognized a gain of approximately $20.1 million in
connection with the sale.

    We had suspended shipments of crude oil on this segment of the pipeline in
November 1999. At that time, we owned approximately 5.2 million barrels of crude
oil in the segment of the pipeline. We sold this crude oil from November 1999 to
February 2000 for net proceeds of approximately $100.0 million, which were used
for working capital purposes. We recognized gains of approximately $28.1 million
and $16.5 million in 2000 and 1999, respectively, in connection with the sale of
the linefill.

    Early Extinguishment of Debt. During 2000, we recognized extraordinary
losses, consisting primarily of unamortized debt issue costs, totaling $15.1
million related to the permanent reduction of the All American Pipeline, L.P.
term loan facility and the refinancing of our credit facilities. In addition,
interest and other income for the year ended December 31, 2000, includes $9.7
million of previously deferred gains from terminated interest rate swaps as a
result of debt extinguishment. The extraordinary item of $1.5 million in 1999
relates to the write-off of certain debt issue costs and penalties associated
with the prepayment of debt.

 Segment Results

    Pipeline Operations. Gross margin from pipeline operations was $71.3 million
for the year ended December 31, 2001, an increase of approximately 38% compared
to $51.8 million for 2000 and $58.0 million for 1999. The increase in 2001
compared to 2000 is primarily attributable to the impact of the Murphy
acquisition. Excluding the Murphy acquisition, gross margin from pipeline
operations would have increased approximately 8%, due to slightly higher volumes
and tariffs, while maintaining operating expenses at a fairly constant level.
Gross margin from pipeline operations was negatively impacted on a comparative
basis in 2000 compared to 1999 due to the sale of the California to West Texas
portion of the All American Pipeline, decreased tariff volumes from California
OCS production and slightly higher fuel and power charges in 2000. These
decreases in 2000 were partially offset by increased margins from the Scurlock
and West Texas gathering system acquisitions in mid-1999.

                                       38

    The margin between revenue and direct cost of crude purchased from our
pipeline margin activities was $14.8 million for the year ended December 31,
2001, compared to $21.1 million and $35.6 million for 2000 and 1999,
respectively. Pipeline tariff and fee revenues were approximately $52.9 million
for the year ended December 31, 2001, compared to approximately $47.0 million
for 2000 and approximately $46.4 million for 1999. Pipeline operations and
maintenance expenses were approximately $19.0 million, $16.3 million and $24.0
million for the years ended December 31, 2001, 2000 and 1999, respectively.

    Average daily pipeline volumes totaled 477,000 barrels per day, 241,000
barrels per day and 218,000 barrels per day in 2001, 2000 and 1999,
respectively. Approximately 223,000 barrels per day in 2001 are attributable to
the Murphy acquisition. Average daily volumes from the Murphy acquisition are
included from the effective date of the acquisition, April 1, 2001, extrapolated
for the full year. Volumes on the All American Pipeline decreased from an
average of 134,000 barrels per day in 2000 to 110,000 barrels per day in 2001
due to the reasons discussed above. All American's tariffs volumes attributable
to California OCS production were approximately 69,000 barrels per day in 2001
compared to 74,000 barrels per day in 2000. Volumes from the Santa Ynez and
Point Arguello fields, both offshore California, have steadily declined from
1995 through 2001. A 5,000 barrel per day decline in volumes shipped from these
fields would result in a decrease in annual pipeline tariff revenues of
approximately $2.8 million, based on the 2001 average tariff rate. Effective
January 1, 2002, the average tariff increased an average of approximately 11% on
the All American Pipeline. Tariff volumes shipped on the Scurlock and West Texas
gathering systems averaged 124,000 barrels per day and 107,000 barrels per day
in 2001 and 2000, respectively. The 1999 period includes average daily volumes
for Scurlock effective May 1, 1999, and West Texas gathering system average
daily volumes effective July 1, 1999, in each case extrapolated for the full
year.

    Gathering and Marketing Activities and Terminalling and Storage Activities.
Gross margin from gathering and marketing and terminalling and storage
activities was approximately $75.9 million for the year ended December 31, 2001,
(excluding the $5.0 inventory valuation charge) reflecting a 8% decrease over
the $82.9 million reported for 2000 and a 45% increase over the $52.3 million
reported for 1999. Gross margin for 2000 and 1999 exclude the unauthorized
trading losses. The decrease in margin in 2001 is primarily attributable to a
relatively weak environment for gathering and marketing due to market
conditions. The market conditions during 2000 were favorable for gathering and
marketing margins. The increase in gross margin from 1999 to 2000 is primarily
due to a full year of results from the Scurlock acquisition and increased per
barrel margins due to the strong crude oil market in 2000. Gross revenues from
gathering, marketing, terminalling and storage activities were approximately
$6.5 billion, $6.1 billion and $10.1 billion for the years ended December 31,
2001, 2000 and 1999, respectively.

    Lease gathering volumes averaged 375,000 barrels per day in 2001, 262,000
barrels per day in 2000 and 265,000 barrels per day in 1999. Bulk purchase
volumes averaged 54,000 barrels per day, 28,000 barrels per day and 138,000
barrels per day in 2001, 2000 and 1999, respectively. The increases in 2001 are
primarily due to the average daily volumes attributable to our Canadian
acquisitions from their effective dates, extrapolated for the full year. The
decreases in 2000 compared to 1999 are due primarily to a significant amount of
low margin barrels that were phased out after the discovery of the trading
losses, partially offset by increased volumes attributable to the Scurlock
acquisition, which was effective May 1, 1999.

    In the period immediately following the disclosure of the unauthorized
trading losses, a significant number of our suppliers and trading partners
reduced or eliminated the open credit previously extended to us. Consequently,
the amount of letters of credit we needed to support the level of our crude oil
purchases then in effect increased significantly. In addition, the cost to us of
obtaining letters of credit increased under our credit facility. In many
instances we arranged for letters of credit to secure our obligations to
purchase crude oil from our customers, which increased our letter of credit
costs and decreased our unit margins. In other instances, primarily involving
lower margin wellhead and bulk purchases, our purchase contracts were
terminated. We estimate that adjusted EBITDA and net income was adversely
affected by approximately $6.0 million in 2000 as a result of the increase in
letter of credit costs and reduced volumes. Currently, our letter of credit
requirement levels are lower than those levels existing prior to the
unauthorized trading losses. Our senior implied credit ratings from Standard and
Poor's and Moody's prior to the unauthorized trading loss were BB and Ba3,
respectively. As of March 1, 2002, our ratings from these respective agencies
were BB+ and Ba2.

    Terminal throughput, which includes both our Cushing and Ingleside
terminals, was 99,000, 67,000 and 83,000 barrels per day for the years ended
December 31, 2001, 2000 and 1999, respectively. Storage leased to third parties
averaged 2.4 million, 1.8 million and 2.0 million barrels per month for the same
periods.

LIQUIDITY AND CAPITAL RESOURCES

 Cushing Terminal Expansion

    We have recently announced the 1.1 million barrel Phase II and the 1.1
million barrel Phase III expansions of our Cushing Terminal facility. We expect
the Phase II expansion will be completed in mid-2002 and the Phase III expansion
will

                                       39

be completed in late 2002 or early 2003. The two expansion projects are expected
to cost, in the aggregate, approximately $22 million and will expand the total
capacity of the facility by 71% to approximately 5.3 million barrels. We expect
to fund the cost of the expansions from cash generated by operations, working
capital and our revolving credit facility.

 General

    Cash generated from operations and our credit facilities are our primary
sources of liquidity. At December 31, 2001, we had working capital of
approximately $52.9 million and approximately $425 million of availability under
our revolving credit facility.

    We believe that we have sufficient liquid assets, cash from operations and
borrowing capacity under our credit agreements to meet our financial
commitments, debt service obligations, contingencies and anticipated capital
expenditures. However, we are subject to business and operational risks that
could adversely effect our cash flow. A material decrease in our cash flows
would likely produce a corollary adverse effect on our borrowing capacity. See
"--Risk Factors".

 Cash Flows
                                           YEAR ENDED DECEMBER 31,
                                      -------------------------------
                                        2001         2000       1999
                                      -------      -------    -------
                                                (IN MILLIONS)

      Cash provided by (used in):
       Operating activities           $ (30.0)     $ (33.5)   $ (71.2)
       Investing activities            (249.5)       211.0     (186.1)
       Financing activities             279.5       (227.8)     305.6

    Operating Activities. Net cash used in operating activities in 2001 is
primarily attributable to inventory purchased and stored in our facilities, for
sale and delivery at a later date. Excluding these inventory purchases, cash
provided by operating activities was approximately $88.0 million in 2001. Except
for minor amounts, the inventory has been hedged against future price risk by
using NYMEX transactions and fixed price sales contracts. Net cash used in
operating activities in 2000 and 1999 resulted primarily from the unauthorized
trading losses. The losses were partially offset by increased margins due to the
Scurlock and West Texas Gathering System acquisitions.

    Investing Activities. Net cash used in investing activities in 2001 included
$229 million for the acquisitions described above and $21.1 million primarily
for other expansion and acquisition projects. Net cash provided by investing
activities for 2000 included approximately $224.0 million of proceeds from the
sale of the All American Pipeline and pipeline linefill offset by approximately
$12.6 million of capital expenditures. Capital expenditures for 2000 included
approximately $10.8 million for expansion capital and $1.8 million for
maintenance capital. Net cash used in investing activities for 1999 included
approximately $176.9 million for acquisitions, primarily for the Scurlock and
West Texas gathering system acquisitions, $11.1 million for expansion capital
and $1.7 million for maintenance capital.

    Financing activities. Cash provided by financing activities in 2001
consisted primarily of (1) $134.3 million in short-term and long-term debt, (2)
$227.5 million for equity issued, (3) the payment of $75.9 million in
distributions to unitholders and (4) the payment of $6.4 million in financing
costs.

    Cash used in financing activities in 2000 consisted primarily of (1) net
payments of $47.5 million of short-term and long-term debt, (2) the repayment of
subordinated debt of $114.0 million to our former general partner and (3)
distributions to unitholders of $59.6 million. Proceeds used to reduce the bank
debt primarily came from the asset sales discussed above. Proceeds to repay the
$114.0 million of subordinated debt to our former general partner came from our
revolving credit  facility, which was refinanced in May 2000. Cash provided by
financing activities in 1999 was generated from net issuances of (1) $76.5
million in common and Class B units, (2) $184.1 million of short-term and long-
term debt and (3) $114.0 million of subordinated debt to our former general
partner. Financing activities for 1999 includes $51.7 million in distributions
to unitholders.

 Capital Expenditures

    We have made and will continue to make capital expenditures for acquisitions
and expansion and maintenance capital. Historically, we have financed these
expenditures primarily with cash generated by operations, bank borrowings and
the sale of additional common units. We estimate aggregate capital expenditures
for 2002 (excluding acquisitions) to be approximately $29.6 million, of which
approximately $17.6 million is attributable to the expansion of our Cushing
Terminal noted above and approximately $5.0 million is attributable to
maintenance capital expenditures. We believe that we will have sufficient cash
from working capital, cash flow from operating activities and availability under
our revolving credit facility

                                       40

under our bank credit agreement to fund these expenditures. In addition, the
Partnership has spent approximately $16.2 million for acquisitions as of March
15, 2002 (including $2.5 million paid in the form of a deposit as of December
31, 2001).

 Universal Shelf

    We have filed with the Securities and Exchange Commission a universal shelf
registration statement that, subject to effectiveness at the time of use, allows
us to issue from time to time up to $700 million of debt or equity securities.
In October 2001, we sold approximately $130 million of common units under the
shelf. Accordingly, as of March 15, 2002, we have the ability to issue
approximately $570 million additional debt or equity securities under this
registration statement.

 Commitments

    The following table reflects our long-term non-cancelable contractual
obligations as of December 31, 2001 (in millions):

  CONTRACTUAL OBLIGATIONS                 2002       2003        2004        2005        2006       THEREAFTER      TOTAL
- ----------------------------------      -------     ------      -------     ------      -------     ----------    ---------
                                                                                             
Long-term debt (including
 current maturities)                    $   3.0     $  9.0      $  10.0     $ 64.7      $  78.0     $    190.0    $   354.7

Operating leases                            6.8        6.2          6.3        6.2          4.5            5.6         35.6

Total contractual cash obligations      $   9.8     $ 15.2      $  16.3     $ 70.9      $  82.5     $    195.6    $   390.3

    Operating leases are primarily for office rent and trucks. Other than the
amounts reflected above for these operating leases we have no cash commitments
that are not reflected on the consolidated balance sheet. As is common within
the industry, we have entered into various operational commitments and
agreements related to pipeline operations and to the marketing, transportation,
terminalling and storage of crude oil. It is management's belief that such
commitments will be met without a material adverse effect on our financial
position, results of operations or cash flows.

    We will distribute 100% of our available cash within 45 days after the end
of each quarter to unitholders of record, and to our general partner. Available
cash is generally defined as all cash and cash equivalents on hand at the end of
the quarter less reserves established for future requirements. Minimum quarterly
distributions are $0.45 for each full fiscal quarter. Distributions of available
cash to the holders of subordinated units are subject to the prior rights of the
holders of common units to receive the minimum quarterly distributions for each
quarter during the subordination period, and to receive any arrearages in the
distribution of minimum quarterly distributions on the common units for prior
quarters during the subordination period. There were no arrearages on common
units at December 31, 2001. On February 14, 2002, we paid a cash distribution of
$0.5125 per unit on all outstanding units. The total distribution paid was
approximately $23.2 million, with approximately $17.0 million paid to our common
unitholders, $5.1 million paid to our subordinated unitholders and $1.0 million
paid to the general partner for its general partner and incentive distribution
interests.

    Our general partner is entitled to incentive distributions if the amount we
distribute with respect to any quarter exceeds levels specified in our
partnership agreement. Under the quarterly incentive distribution provisions,
our general partner is entitled to 15% of amounts we distribute in excess of
$0.450 per common unit, 25% of amounts we distribute in excess of $0.495 per
common unit and 50% of amounts we distribute in excess of $0.675 per common
unit.

    In connection with our crude oil marketing activities, we provide certain
purchasers and transporters with irrevocable standby letters of credit to secure
our obligation for the purchase of crude oil. Our liabilities with respect to
these purchase obligations are recorded in accounts payable on our balance sheet
in the month the crude oil is purchased. Generally, these letters of credit are
issued for up to seventy-day periods and are terminated upon completion of each
transaction. At December 31, 2001, we had outstanding letters of credit of
approximately $31.0 million. Such letters of credit are secured by our crude oil
inventory and accounts receivable.

 Credit Agreements

    In September 2001 we amended and expanded our credit facilities to include a
six-year, $200 million term B loan. In connection with this amendment, we
reduced the revolving portion of the facilities by $50 million. Our credit
facilities currently consist of:

       .  a $780.0 million senior secured revolving credit and term loan
          facility, which is secured by substantially all of our assets. The
          facility consists of (i) a $450.0 million domestic revolving facility
          (reflecting the $50 million reduction in such facility in connection
          with the September amendment), with a $10.0 million letter of credit
          sublimit, (ii) a $30.0 million Canadian revolving facility (with a
          $5.0 million letter of credit sublimit), (iii) a $100.0 million term
          loan and (iv) a $200.0 million term B loan. The facility matures, (i)
          as to the aggregate $480.0 million domestic and Canadian revolver
          portions, in April 2005, (ii) as to the $100.0 million term portion,
          in May 2006, and, (iii) as to the

                                       41

          $200.0 million term B loan portion, September 2007. On the revolver
          portions, no principal is scheduled for payment prior to maturity. The
          $100.0 million term loan portion of this facility has four scheduled
          annual payments of principal, commencing May 4, 2002, in the
          respective amounts of 1%, 7%, 8% and 8% of the original term principal
          amount, with the remaining principal balance scheduled for payment on
          the stated maturity date of May 5, 2006. If any part of the term
          portion is prepaid prior to its first anniversary, a 1% premium will
          be due on that portion. The $200.0 million term B loan has 1% payable
          yearly commencing on September 21, 2002, with the remaining principal
          balance scheduled for payment on the stated maturity date of September
          26, 2007. The term B loan may be prepaid without penalty. The
          revolving credit and term loan facility bears interest at our option
          at either the base rate, as defined, plus an applicable margin, or
          LIBOR plus an applicable margin, and further, the Canadian revolver
          may effectively bear interest based upon bankers' acceptance rates. We
          incur a commitment fee on the unused portion of the revolver portion
          of this credit facility.

       .  a $200.0 million senior secured letter of credit and borrowing
          facility, the purpose of which is to provide standby letters of credit
          to support the purchase and exchange of crude oil and other specified
          petroleum products for resale and borrowings to finance crude oil
          inventory and other specified petroleum products that have been hedged
          against future price risk. The letter of credit facility is secured by
          substantially all of our assets and has a sublimit for cash borrowings
          of $100.0 million to purchase crude oil and other petroleum products
          that have been hedged against future price risk and to fund margin
          requirements under NYMEX contracts used to facilitate our hedging
          activities. The letter of credit facility expires in April, 2004.
          Aggregate availability under the letter of credit facility for direct
          borrowings and letters of credit is limited to a borrowing base that
          is determined monthly based on certain of our current assets and
          current liabilities, primarily inventory and accounts receivable and
          accounts payable related to the purchase and sale of crude oil and
          other specified petroleum products. We incur a commitment fee on the
          unused portion of this facility.

    Our credit facilities prohibit distributions on, or purchases or redemptions
of, units if any default or event of default is continuing. In addition, the
agreements contain various covenants limiting our ability to, among other
things:

       .  incur indebtedness;
       .  grant liens;
       .  sell assets;
       .  make investments;
       .  engage in transactions with affiliates;
       .  enter into certain contracts; and
       .  enter into a merger or consolidation.

    Our credit facilities treat a change of control as an event of default and
also require us to maintain:

       .  a current ratio (as defined) of 1.0 to 1.0;
       .  a debt coverage ratio which is not greater than 4.00 to 1.0;
       .  an interest coverage ratio which is not less than 2.75 to 1.0; and
       .  a debt to capital ratio of not greater than 0.70 to 1.0 prior to
          December 31, 2002, and 0.65 to 1.0 thereafter.

    A default under our credit facilities would permit the lenders to accelerate
the maturity of the outstanding debt and to foreclose on the assets securing the
credit facilities. As long as we are in compliance with our commercial credit
agreements, they do not restrict our ability to make distributions of "available
cash" as defined in our partnership agreement. We are currently in compliance
with the covenants contained in our credit agreements.

    The credit facilities provide that the Partnership may issue up to $400.0
million of senior unsecured debt that has a maturity date extending beyond the
maturity date of the credit facilities. If senior unsecured debt is issued, the
aggregate amount available under the $450.0 million U.S. revolving credit
facility will be reduced by an amount equal to (A) 40% of the face amount of the
senior unsecured debt if the aggregate amount of new debt issued is less than
$350.0 million, or (B) 50% of the face amount of the senior unsecured debt if
the aggregate amount of new debt issued is equal to or greater than $350.0
million; provided, however, in both cases, the amount of the revolver reduction
is decreased by $50.0 million.

    In January 2002, we amended our credit facility to provide the Partnership
with greater structuring flexibility to finance larger acquisitions by amending
the limitation and restrictions on asset sales, including the removal of a
provision that required lender approval before making any acquisition greater
than $50.0 million.

                                       42

 Contingencies

    Following our announcement in November 1999 of our losses resulting from
unauthorized trading by a former employee, numerous class action lawsuits were
filed against us, certain of our former general partner's officers and directors
and in some of these cases, our former general partner and Plains Resources Inc.
alleging violations of the federal securities laws. In addition, derivative
lawsuits were filed in the Delaware Chancery Court against our former general
partner, its directors and certain of its officers alleging the defendants
breached the fiduciary duties owed to us and our unitholders by failing to
monitor properly the activities of our traders. We have settled or reached
agreement in principle to settle all of these suits. See Item 3. "--Legal
Proceedings".

    We may experience future releases of crude oil into the environment from our
pipeline and storage operations, or discover releases that were previously
unidentified. Although we maintain an extensive inspection program designed to
prevent and, as applicable, to detect and address such releases promptly,
damages and liabilities incurred due to any future environmental releases from
our assets may substantially affect our business.

    The events of September 11 and their overall effect on the insurance
industry may have a general adverse impact on availability and cost of coverage.
We currently maintain insurance for acts of terrorism on the majority of our
assets and operations. Many of our current policies expire on June 1, 2002. Due
to the events of September 11, 2001, we believe that many insurers will exclude
acts of terrorism from future insurance policies or make the cost for this
coverage prohibitive.

    Since the September 11 terrorist attacks, the United States Government has
issued warnings that energy assets (including our nation's pipeline
infrastructure) may be a future target of terrorist organizations. These
developments expose our operations and assets to increased risks. Any future
terrorist attacks on our facilities, those of our customers and, in some cases,
those of our competitors, could have a material adverse effect on our business.

OUTLOOK

    As is common with most merchant activities, our ability to generate a profit
on our margin activities is not tied to the absolute level of crude oil prices
but is generated by the difference between the price paid and other costs
incurred in the purchase of crude oil versus the price at which we sell crude
oil. The gross margin generated by tariff and other fee activities depends on
the volumes transported on the pipeline and the level of the tariff or fee
charged, as well as the fixed and variable costs of operating the pipeline.
These operations are affected by overall levels of supply and demand for crude
oil.

    Our operations have been impacted by higher fuel and power costs relating to
our pipeline and trucking operations. The increased costs will be largely offset
by an 11% increase in the tariff rate on the All American Pipeline effective
January 1, 2002. Also, the crude oil market moved from a backwardated to a flat
and contango market during March of 2001 and remained that way during most of
the remainder of 2001. A flat to contango crude oil market generally means lower
gross margin from our gathering and marketing activities. With countercyclical
balance provided by our storage and terminalling assets, a contango market
creates other arbitrage opportunities and an increase in the usage of our
tankage in Cushing and in the field. During 2001, this countercyclical balance
served to offset a portion of the weaker gathering and marketing margins. A
continued prolonged flat crude oil market will continue to adversely affect our
margins from gathering and marketing, while generally providing fewer arbitrage
opportunities than exist in a contango market.

    A significant portion of our gross margin is derived from pipeline
transportation margins associated with the Santa Ynez and Point Arguello fields
located offshore California. While the rate of decline has reduced over the last
three years, we expect that there will continue to be natural production
declines from each of these fields as the underlying reservoirs are depleted. In
addition, any production disruption from these fields due to production
problems, transportation problems or other reasons could have a material adverse
effect on our business.

RELATED PARTY TRANSACTIONS

    We have a long-term agreement with Plains Resources pursuant to which we
purchase for resale at market prices all of Plains Resources equity crude oil
production for a fee of $0.20 per barrel. In November 2001, the agreement
automatically extended for three years. The fee is subject to adjustment every
three years based on then-existing market conditions.  For the year ended
December 31, 2001, we paid approximately $223 million for Plains Resources'
production and recognized gross margin of approximately $1.8 million. For a
description of this and other related party transactions, see Item 13.
"Certain Relationships and Related Transactions".

                                       43

RECENT ACCOUNTING PRONOUNCEMENTS

    In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
141 "Business Combinations" and SFAS. 142 "Goodwill and Other Intangible Assets"
SFAS 141 requires all business combinations initiated after June 30, 2001 (see
Note 4), to be accounted for under the purchase method. For all business
combinations for which the date of acquisition is after June 30, 2001, this
Standard also establishes specific criteria for the recognition of intangible
assets separately from goodwill. We have adopted SFAS 142 effective January 1,
2002. SFAS 142 changes the accounting for goodwill and other intangible assets
after an acquisition. The most significant changes made by SFAS 142 are:  1)
goodwill and intangible assets with indefinite lives will no longer be
amortized; 2) goodwill and intangible assets with indefinite lives must be
tested for impairment at least annually; and 3) the amortization period for
intangible assets with finite lives will no longer be limited to forty years. In
conjunction with the adoption of SFAS 142, amortization on the unamortized
portion of the goodwill arising from previous acquisitions will cease in 2002.
The adoption of SFAS 142 will not have a material effect on either our financial
position, results of operations, or cash flows.

    In June 2001, the FASB also issued SFAS 143, "Asset Retirement Obligations".
SFAS 143 establishes accounting requirements for retirement obligations
associated with tangible long-lived assets, including (1) the time of the
liability recognition, (2) initial measurement of the liability, (3) allocation
of asset retirement cost to expense, (4) subsequent measurement of the liability
and (5) financial statement disclosures. SFAS 143 requires that an asset
retirement cost should be capitalized as part of the cost of the related long-
lived asset and subsequently allocated to expense using a systematic and
rational method. We will adopt the statement effective January 1, 2003, as
required. The transition adjustment resulting from the adoption of SFAS 143 will
be reported as a cumulative effect of a change in accounting principle. At this
time, we cannot reasonably estimate the effect of the adoption of this statement
on either our financial position, results of operations, or cash flows.

    In August 2001, the FASB approved SFAS 144, "Accounting for Impairment or
Disposal of Long-Lived Assets". SFAS 144 establishes a single accounting model
for long-lived assets to be disposed of by sale and provides additional
implementation guidance for assets to be held and used and assets to be disposed
of other than by sale. Upon adoption of  this Statement effective January 1,
2002, there was no effect on either our financial position, results of
operations or cash flows.

    In June 1998, the FASB issued SFAS 133, which was subsequently amended (i)
in June 1999 by SFAS 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133", which
deferred the effective date of SFAS 133 to fiscal years beginning after June 15,
2000; and (ii) in June 2000 by SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedge Activities", which amended certain provisions,
inclusive of the definition of the normal purchase and sale exclusion. We have
determined that our physical purchase and sale agreements qualify for the normal
purchase and sale exclusion.

    SFAS 133 requires that all derivative instruments be recorded on the balance
sheet as either assets or liabilities measured at their fair value. Changes in
the fair value of derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if so, the type of hedge transaction. For fair
value hedge transactions in which we are hedging changes in the fair value of an
asset, liability, or firm commitment, changes in the fair value of the
derivative instrument will generally be offset in the income statement by
changes in the fair value of the hedged item. For cash flow hedge transactions,
in which we are hedging the variability of cash flows related to a variable-rate
asset, liability, or a forecasted transaction, changes in the fair value of the
derivative instrument will be reported in other comprehensive income, a
component of partners' capital. The gains and losses on the derivative
instrument that are reported in other comprehensive income will be reclassified
as earnings in the periods in which earnings are affected by the variability of
the cash flows of the hedged item. The ineffective portion of all hedges will be
recognized in earnings in the current period. Hedge effectiveness is measured at
least quarterly based on the relative cumulative changes in fair value between
the derivative contract and the hedged item over time.

    We adopted SFAS 133, as amended, effective January 1, 2001. Our
implementation procedures identified all instruments in place at the adoption
date that are subject to the requirements of SFAS 133. Upon adoption, we
recorded a cumulative effect charge of $8.3 million in accumulated other
comprehensive income to recognize at fair value all derivative instruments that
are designated as cash flow hedging instruments and a cumulative effect gain of
$0.5 million to earnings. Correspondingly, an asset of $2.8 million and a
liability of $10.6 million were established. Hedge losses/gains included in
accumulated other comprehensive income are transferred to earnings as the
forecasted transactions actually occur. Implementation issues continue to be
addressed by the FASB and any change to existing guidance might impact our
implementation. Adoption of this standard will most likely increase volatility
in earnings and partners' capital through comprehensive income.

                                       44

RISK FACTORS RELATED TO OUR BUSINESS

 Our profitability is dependent upon an adequate supply of crude oil from fields
 located offshore and onshore California. Production from these offshore fields
 has experienced substantial production declines since 1995.

    A significant portion of our gross margin is derived from pipeline
transportation margins associated with the Santa Ynez and Point Arguello fields
located offshore California. Although the rate of decline from these fields has
decreased over the last three years, we expect that there will continue to be
natural production declines from each of these fields as the underlying
reservoirs are depleted. A 5,000 barrel per day decline in volumes shipped from
these fields would result in a decrease in annual pipeline tariff revenues of
approximately $2.8 million. See "Outlook". In addition, any production
disruption from these fields due to production problems, transportation problems
or other reasons could have a material adverse effect on our business.

 Cash distributions are not guaranteed and may fluctuate with our performance
 and the establishment of financial reserves.

    Because distributions on the common units are dependent on the amount of
cash we generate, distributions may fluctuate based on our performance. We
cannot guarantee that we will be able to pay the minimum quarterly distributions
of $0.45 per common unit in each quarter. The actual amount of cash that is
available to be distributed each quarter will depend upon numerous factors, some
of which are beyond our control and the control of our general partner. Cash
distributions are dependent primarily on cash flow, including cash flow from
financial reserves and working capital borrowings, and not solely on
profitability, which is affected by non-cash items. Therefore, cash
distributions might be made during periods when we record losses and might not
be made during periods when we record profits.

 Potential future acquisitions and expansions, if any, may affect our business
 by substantially increasing the level of our indebtedness and contingent
 liabilities and increasing our risks of being unable to effectively integrate
 these new operations.

    From time to time, we evaluate and acquire assets and businesses that we
believe complement our existing assets and businesses. Acquisitions may require
substantial capital or the incurrence of substantial indebtedness. If we
consummate any future acquisitions, our capitalization and results of operations
may change significantly and you will not have the opportunity to evaluate the
economic, financial and other relevant information that we will consider in
determining the application of these funds and other resources.

 In 1999, we suffered a large loss from unauthorized crude oil trading by a
 former employee. A loss of this kind could occur again in the future in spite
 of our efforts to prevent it.

    Generally, it is our policy that as we purchase crude oil, we establish a
margin by selling crude oil for physical delivery to third-party users, such as
independent refiners or major oil companies, or by entering into a future
delivery obligation under futures contracts on the NYMEX. Through these
transactions, we seek to maintain a position that is substantially balanced
between purchases, on the one hand, and sales or future delivery obligations, on
the other hand. Except for pre-defined inventory positions described in Items 1
and 2. "Business and Properties--Terminalling, Storage, Gathering and Marketing
Operations--Crude Oil Volatility; Counter-Cyclical Balance; Risk Management",
our policy is not to acquire and hold crude oil, futures contracts or derivative
products for the purpose of speculating on price changes. We discovered in
November 1999 that this policy was violated by one of our former employees,
which resulted in losses of approximately $174.0 million, including estimated
associated costs and legal expenses. In 2000, we recognized an additional $7.0
million charge for litigation related to the unauthorized trading losses. We
have taken steps within our organization to enhance our processes and procedures
to prevent future unauthorized trading. We cannot assure you, however, that
these steps will detect and prevent all violations of our trading policies and
procedures, particularly if deception or other intentional misconduct is
involved. See Items 1 and 2. "Business and Properties--Unauthorized Trading
Loss".

 We have substantial leverage that may limit our ability to borrow additional
 funds, make distributions to unitholders, comply with the terms of our
 indebtedness or capitalize on business opportunities.

    Our leverage is significant in relation to our partners' capital. As of
December 31, 2001, our total outstanding long-term debt was approximately $352
million. Our payment of principal and interest on the debt will reduce the cash
available for distribution on the units. We will be prohibited from making cash
distributions during an event of default under any of our indebtedness. Various
limitations in our credit facilities may reduce our ability to incur additional
debt, to engage in some transactions and to capitalize on business
opportunities. Any subsequent refinancing of our current indebtedness or any new
indebtedness could have similar or greater restrictions. See "--Liquidity and
Capital Resources".

                                       45

 The success of our business strategy to increase and optimize throughput on our
 pipeline and gathering assets is dependent upon our securing additional
 supplies of crude oil.

    Our operating results are dependent upon securing additional supplies of
crude oil from increased production by oil companies and aggressive lease
gathering efforts. The ability of producers to increase production is dependent
on the prevailing market price of oil, the exploration and production budgets of
the major and independent oil companies, the depletion rate of existing
reservoirs, the success of new wells drilled, environmental concerns, regulatory
initiatives and other matters beyond our control. There can be no assurance that
production of crude oil will rise to sufficient levels to cause an increase in
the throughput on our pipeline and gathering assets.

 Our operations are dependent upon demand for crude oil by refiners in the
 Midwest and on the Gulf Coast. Any decrease in this demand could adversely
 affect our business.

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

 We face intense competition in our terminalling and storage activities and
 gathering and marketing activities.

    Our competitors include other crude oil pipelines, the major integrated oil
companies, their marketing affiliates and independent gatherers, brokers and
marketers of widely varying sizes, financial resources and experience. Some of
these competitors have capital resources many times greater than ours and
control substantially greater supplies of crude oil. See Items 1 and 2.
"Business and Properties--Competition".

 The profitability of our gathering and marketing activities depends primarily
 on the volumes of crude oil we purchase and gather.

    To maintain the volumes of crude oil we purchase, we must continue to
contract for new supplies of crude oil to offset volumes lost because of natural
declines in crude oil production from depleting wells or volumes lost to
competitors. Replacement of lost volumes of crude oil is particularly difficult
in an environment where production is low and competition to gather available
production is intense. Generally, because producers experience inconveniences in
switching crude oil purchasers, such as delays in receipt of proceeds while
awaiting the preparation of new division orders, producers typically do not
change purchasers on the basis of minor variations in price. Thus, we may
experience difficulty acquiring crude oil at the wellhead in areas where there
are existing relationships between producers and other gatherers and purchasers
of crude oil.

 We are exposed to the credit risk of our customers in the ordinary course of
 our gathering and marketing activities.

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

 Our operations are subject to federal and state environmental and safety laws
 and regulations relating to environmental protection and operational safety.

    Our pipeline, gathering, storage and terminalling facilities operations are
subject to the risk of incurring substantial environmental and safety related
costs and liabilities. These costs and liabilities could arise under
increasingly strict environmental and safety laws, including regulations and
enforcement policies, or claims for damages to property or persons resulting
from our operations. If we were not able to recover such resulting costs through
insurance or increased tariffs and revenues, cash distributions to unitholders
could be adversely affected.

    The transportation and storage of crude oil results in a risk that crude oil
and other hydrocarbons may be suddenly or gradually released into the
environment, potentially causing substantial expenditures for a response action,
significant government penalties, liability for natural resources damages to
government agencies, personal injury or property damage to private parties and
significant business interruption. See Items 1 and 2. "Business and Properties--
Regulation".

 Our pipeline systems are dependent upon their interconnections with other crude
 oil pipelines to reach end markets.

    Reduced throughput on these interconnecting pipelines as a result of
testing, line repair, reduced operating pressures or other causes could result
in reduced throughput on our pipeline systems that would adversely affect our
profitability.

                                       46

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

    We are exposed to various market risks, including volatility in crude oil
commodity prices and interest rates. To manage such exposure, we monitor our
inventory levels, current economic conditions and our expectations of future
commodity prices and interest rates when making decisions with respect to risk
management. Except for inventory transactions that generally do not exceed
approximately 500,000 barrels, we do not enter into derivative transactions for
speculative trading purposes. See Items 1 and 2. "Business and Properties--Crude
Volatility; Counter-Cyclical Balance; Risk Management". Substantially all of our
derivative contracts are exchanged or traded on the NYMEX or entered into  with
major financial institutions and the risk of credit loss is considered remote.

    Commodity Price Risk. The fair value of outstanding derivative instruments
and the change in fair value that would be expected from a 10 percent price
decrease are shown in the table below (in millions):

                                                                        YEAR OF MATURITY
                                    -------------------------------------------------------------------------------
                                                  2002                                       2003
                                    ------------------------------------     --------------------------------------
                                                            EFFECT OF                                  EFFECT OF
                                        FAIR                10% PRICE              FAIR                10% PRICE
                                        VALUE               DECREASE              VALUE                DECREASE
                                    ------------        ----------------     ----------------       ---------------
                                                                                        
Crude oil :
 Futures contracts                      $(1.8)                $(0.7)                $0.7                  $(4.2)
 Swaps and options contracts                -                     -                    -                      -

    The fair values of the futures contracts are based on quoted market prices
obtained from the NYMEX. The fair value of the swaps and option contracts are
estimated based on quoted prices from independent reporting services compared to
the contract price of the swap, which comparison approximates the gain or loss
that would have been realized if the contracts had been closed out at year end.
All hedge positions offset physical positions exposed to the cash market; none
of these offsetting physical positions are included in the above table. Price-
risk sensitivities were calculated by assuming an across-the-board 10 percent
decrease in price regardless of term or historical relationships between the
contractual price of the instruments and the underlying commodity price. In the
event of an actual 10 percent change in prompt month crude prices, the fair
value of our derivative portfolio would typically change less than that shown in
the table due to lower volatility in out-month prices.

    At December 31, 2001, our hedging activities included crude oil futures
contracts maturing through 2003, covering approximately 2.4 million barrels of
product. Because such contracts are designated as hedges and correlate to price
movements of crude oil, any gains or losses resulting from market changes will
be largely offset by losses or gains on our hedged inventory or anticipated
purchases of crude oil. Such contracts resulted in an increase in revenues of
$1.8 million in 2001 and a reduction in revenues of $15.1 million in 2000 and of
$17.8 million in 1999. The offsetting gains from the physical positions are not
included in such amounts. The unrealized loss with respect to such instruments,
interest rate hedges and foreign exchange hedges, at December 31, 2001, was $4.7
million.

    Interest Rate Risk. Our debt instruments are sensitive to market
fluctuations in interest rates. The table below presents principal payments and
the related weighted average interest rates by expected maturity dates for debt
outstanding at December 31, 2001. Our variable rate debt bears interest at LIBOR
or prime plus the applicable margin. The average interest rates presented below
are based upon rates in effect at December 31, 2001. The carrying value of
variable rate bank debt approximates fair value because interest rates are
variable and based on prevailing market rates (dollars in millions).

                                                               EXPECTED YEAR OF MATURITY
                                        --------------------------------------------------------------------------------    FAIR
                                         2002        2003      2004         2005        2006       THEREAFTER     TOTAL     VALUE
                                        ------      -----     ------       ------      ------       ---------    -------    -------
                                                                                                    
Liabilities:
 Short-term debt (and current
  maturities of long-term debt) -
   variable rate                        $104.5      $   -     $    -       $    -      $    -       $      -     $ 104.5    $ 104.5
  Average interest rate                    3.7%         -          -            -           -              -         3.7%
 Long-term debt - variable rate         $    -      $ 9.0     $ 10.0       $ 64.7      $ 78.0       $  190.0     $ 351.7    $ 351.7
  Average interest rate                      -        4.4%       4.4%         4.4%        4.4%           4.5%        4.4%

    At December 31, 2001, the carrying value of short-term and long-term debt of
$104.5 million and $351.7 million, respectively, approximated fair value.

                                       47

  Interest rate swaps and collars are used to hedge underlying interest payment
obligations. These instruments hedge interest rates on specific debt issuances
and qualify for hedge accounting. The interest rate differential is reflected as
an adjustment to interest expense over the life of the instruments. At December
31, 2001, we had interest rate swap and collar arrangements for an aggregate
notional principal amount of $275.0 million, for which we would pay
approximately $5.3 million if such arrangements were terminated as of such date.

  The table shown below summarizes the fair value of our interest rate swaps and
collars by the year of maturity (in thousands):

                                              Year of Maturity
                                    ------------------------------------------
                                       2002       2003      2004       Total
                                    --------    --------   -------    --------
                                                          
          Interest rate swaps       $     --    $  (810)   $   (689)   $ (1,499)
          Interest rate collars       (3,777)        --          --      (3,777)
                                    --------    --------   --------    --------

             Total                  $ (3,777)   $  (810)   $   (689)   $ (5,276)
                                    ========    ========   ========    ========

    The adjustment to interest expense resulting from interest rate swaps for
the years ended December 31, 2001, 2000 and 1999, was a $2.4 million loss, a
$0.1 million gain and a $0.1 million loss, respectively. These instruments are
based on LIBOR rates. The collar provides for a floor of 6.1% and a ceiling of
8.0% with an expiration date of August 2002 for $125.0 million notional
principal amount. The fixed rate interest rate swaps provide for a rate of 4.3%
for $50.0 million notional principal amount expiring March 2004, and an average
rate of 3.6% for $100.0 million notional principal amount expiring September
2003.

    Foreign Currency Risk. Our cash flow stream relating to our Canadian
operations is based on the U.S. dollar equivalent of such amounts measured in
Canadian dollars. Assets and liabilities of our Canadian subsidiaries are
translated to U.S. dollars using the applicable exchange rate as of the end of a
reporting period. Revenues, expenses and cash flow are translated using the
average exchange rate during the reporting period.

    Since substantially all of our Canadian business is conducted in Canadian
dollars, we use certain financial instruments to minimize the risks of changes
in the exchange rate. These instruments include forward exchange contracts,
forward extra option contracts and cross currency swaps. Additionally, at
December 31, 2001, $25.4 million ($40.5 million Canadian) of our long-term debt
was denominated in Canadian dollars. All of the financial instruments utilized
are placed with large creditworthy financial institutions that participate in
our credit facilities and meet the criteria under SFAS 133 for hedge accounting
treatment.

    At December 31, 2001, we had forward exchange contracts and forward extra
option contracts that allow us to exchange $3.0 million Canadian for at least
$1.9 million U.S. (based on a Canadian-U.S. dollar exchange rate of 1.55)
quarterly during 2002 and 2003. If these contracts were terminated on December
31, 2001, we would receive $0.5 million U.S. At December 31, 2001, we also had a
cross currency swap contract for an aggregate notional principal amount of $25.0
million, effectively converting this amount of our $100.0 million senior secured
term loan (25% of the total) from U.S. dollars to $38.7 million of Canadian
dollar debt (based on a Canadian U.S. dollar exchange rate of 1.55). The terms
mirror the term loan, matching the amortization schedule and final maturity in
May 2006. If this swap contract was terminated on December 31, 2001, we would
receive $0.5 million U.S. dollars.

    The table shown below summarizes the fair value of our foreign currency
hedges by year of maturity (in thousands):

                                                                      YEAR OF MATURITY
                                                   -------------------------------------------------------
                                                     2002            2003          2006 (1)        TOTAL
                                                   --------       --------        --------        --------
                                                                                        
        Forward exchange contracts                  $   123        $   100        $      -        $    223
        Forward extra options                           145            146               -             291
        Cross currency swaps                              -              -             497             497
                                                   --------       --------        --------        --------
           Total                                   $    268       $    246        $    497        $  1,011
                                                   ========       ========        ========        ========

           _________________
           (1) At December 31, 2001, we did not have any foreign currency hedges
               expiring in 2004 or 2005.

                                       48

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The information required here is included in the report as set forth in
the "Index to Financial Statements" on page F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

  None.

                                       49

                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF OUR GENERAL PARTNER

PARTNERSHIP MANAGEMENT

  As is the case with many publicly traded partnerships, we do not have
officers, directors or employees. Our operations and activities are managed by
the general partner of our general partner, Plains All American GP LLC. Our
operational personnel are employees of Plains All American GP LLC. References to
our general partner, unless the context otherwise requires, includes Plains All
American GP LLC. References to our officers, directors and employees are
references to the officers, directors and employees of Plains All American GP
LLC.

  Our general partner manages our operations and activities. Unitholders do not
directly or indirectly participate in our management or operation. Our general
partner owes a fiduciary duty to the unitholders, as limited by our partnership
agreement. As a general partner, our general partner is liable for all of our
debts (to the extent not paid from our assets), except for indebtedness or other
obligations that are made specifically non-recourse to it. Whenever possible,
our general partner intends to incur indebtedness or other obligations on a non-
recourse basis.

  Two members of the board of directors of our general partner serve on a
conflicts committee, which reviews specific matters that the board believes may
involve conflicts of interest between our general partner and Plains All
American Pipeline. The conflicts committee determines if the resolution of a
conflict of interest is fair and reasonable to us. The members of the conflicts
committee are not officers or employees of our general partner or directors,
officers or employees of its affiliates. Any matters approved by the conflicts
committee will be conclusively deemed to be fair and reasonable to us, approved
by all of our partners, and not a breach by our general partner of any duties
owed to us or our unitholders. The members of the conflicts committee also serve
with another director on an audit committee, which reviews our external
financial reporting, recommends engagement of our independent auditors and
reviews the adequacy of our internal accounting controls.

DIRECTORS AND EXECUTIVE OFFICERS

  The following table sets forth certain information with respect to the
executive officers and members of the Board of Directors of our general partner.
Directors were elected in June 2001 for an initial three-year term, and will be
elected annually thereafter. Certain owners of our general partner have the
right to designate a member of our board. Such designees are indicated in the
footnote to the table.

NAME                           AGE          POSITION WITH OUR GENERAL PARTNER
- ----                           ---          ---------------------------------
                                    
EXECUTIVE OFFICERS AND
 DIRECTORS:
Greg L. Armstrong              43         Chairman of the Board, Chief Executive Officer and Director
Harry N. Pefanis               44         President, Chief Operating Officer and Director
Phillip D. Kramer              46         Executive Vice President and Chief Financial Officer
George R. Coiner               51         Senior Vice President
Mark F. Shires                 44         Vice President - Operations
Jim Hester                     42         Vice President - Acquisitions
Tim Moore                      44         Vice President, General Counsel and Secretary
Alfred A. Lindseth             32         Vice President - Administration
Everardo Goyanes               57         Director and Member of Audit* and Conflicts Committees
Gary R. Petersen(1)            55         Director and Member of Compensation Committee*
John T. Raymond(1)             31         Director and Member of Finance Committee
Robert V. Sinnott(1)           52         Director and Member of Compensation and Finance Committees
Arthur L. Smith                49         Director and Member of Audit, Conflicts* and Compensation
                                          Committees
J. Taft Symonds(1)             62         Director and member of Audit and Finance* Committees

- ---------------
 *   Indicates chairman of committee
(1)  Pursuant to the Amended and Restated Limited Liability Company Agreement of
     Plains All American GP LLC, certain of the owners of our general partner
     have the right to designate a member of our board of directors. Mr.
     Petersen has been designated by E-Holdings III, L.P., an affiliate of EnCap
     Investments LLC, of which he is a Managing Director. Mr. Raymond has been
     designated by Sable Investments, L.P., in which Mr. Raymond indirectly owns
     a limited partner interest. Sable Investments, L.P. is controlled by James
     M. Flores, the Chief Executive Officer of Plains Resources. Mr.

                                       50

     Sinnott has been designated by KAFU Holdings, L.P., which is affiliated
     with Kayne Anderson Investment Management, Inc., of which he is a Vice
     President. Mr. Symonds has been designated by Plains Resources, of which he
     is a director. See Item 12. "Security Ownership of Certain Beneficial
     Owners and Management--Beneficial Ownership of General Partner Interest".

  The following table sets forth certain information with respect to other
members of our management team and officers of  the general partner of our
Canadian operating partnership:

                           POSITION WITH OUR GENERAL PARTNER/
NAME                 AGE   CANADIAN GENERAL PARTNER
- ----                 ---   ----------------------------------
MANAGEMENT TEAM/
OTHER OFFICERS:
A. Patrick Diamond    29   Manager - Special Projects
Lawrence J. Dreyfuss  47   Associate General Counsel and Assistant Secretary;
                           General Counsel and Secretary of PMC (Nova Scotia)
                           Company (the general partner of Plains Marketing
                           Canada, L.P.)

Al Swanson            38   Treasurer

CANADIAN OFFICERS:
W. David Duckett      47   Executive Vice President of PMC (Nova Scotia) Company
Ralph R. Cross        47   Vice President - Business Development of PMC
                            (Nova Scotia) Company
John Kers             54   Vice President - Operations of PMC (Nova Scotia)
                            Company

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

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

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

  George R. Coiner has served as Senior Vice President since our formation. In
addition, he was Vice President of Plains Marketing & Transportation Inc., a
former midstream subsidiary of Plains Resources, from November 1995 until our
formation in 1998. Prior to joining Plains Marketing & Transportation Inc., he
was Senior Vice President, Marketing with Scurlock Permian Corp.

  Mark F. Shires has served as Vice President - Operations since August 1999. He
served as Manager of Operations from April 1999 until he was elected to his
current position. In addition, he was a business consultant from 1996 until
April 1999. He served as a consultant to Plains Marketing & Transportation Inc.
and Plains All American Pipeline from May 1998 until April 1999. He previously
served as President of Plains Terminal & Transfer Corporation, a former
midstream subsidiary of Plains Resources, from 1993 to 1996.

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

                                       51

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

  Alfred A. Lindseth has served as Vice President - Administration since March
2001. He served as Risk Manager from March 2000 until he was elected to his
current position. He previously served PricewaterhouseCoopers LLP in its
Financial Risk Management Practice section as a Consultant from 1997 to 1999 and
as Principal Consultant from 1999 to March 2000. He also served GSC Energy, an
energy risk management brokerage and consulting firm, as Manager of its Oil &
Gas Hedging Program from 1995 to 1996 and as Director of Research and Trading
from 1996 to 1997.

  Everardo Goyanes has served as a director of our general partner or former
general partner since May 1999. Mr. Goyanes has been President and Chief
Executive Officer of Liberty Energy Holdings since May 2000. From 1999 to May
2000 he was a financial consultant specializing in natural resources. From 1989
to 1999, he was Managing Director of the Natural Resources Group of ING Barings
Furman Selz. He was a financial consultant from 1987 to 1989 and was Vice
President - Finance of Forest Oil Corporation from 1983 to 1987. Mr. Goyanes is
also a director of Consort Group Limited.

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

  John T. Raymond has served as a director since June 2001. Mr. Raymond has also
served as Executive Vice President and Chief Operating Officer of Plains
Resources from May 2001 to November 2001 and President and Chief Operating
Officer since November 2001. He was Director of Corporate Development of Kinder
Morgan, Inc. from January 2000 to May 2001. He served as Vice President of
Corporate Development of Ocean Energy, Inc. from April 1998 to January 2000. He
was a Vice President of Howard Weil Labouisse Friedrichs, Inc. from 1992 to
April 1998.

  Robert V. Sinnott has served as a director of our general partner or former
general partner since September 1998. Mr. Sinnott has been a Senior Managing
Director of Kayne Anderson Capital Advisors, L.P. (an investment management
firm) since 1996, and was a Managing Director from 1992 to 1996. He was Vice
President and Senior Securities Officer of the Investment Banking Division of
Citibank from 1986 to 1992. He is also a director of Plains Resources and
Glacier Water Services, Inc. (a vended water company).

  Arthur L. Smith has served as a director of our general partner or former
general partner since February 1999. Mr. Smith is Chairman of John S. Herold,
Inc. (a petroleum research and consulting firm), a position he has held since
1984. For the period from May 1998 to October 1998, he served as Chairman and
Chief Executive Officer of Torch Energy Advisors Incorporated. He is also a
director of Cabot Oil & Gas Corporation and Evergreen Resources, Inc.

  J. Taft Symonds has served as a director since June 2001. He has been Chairman
of the Board of Symonds Trust Co. Ltd. (an investment firm) and Chairman of the
Board of Maurice Pincoffs Company, Inc. (an international marketing firm) since
1978. He is also Chairman of the Board of Tetra Technologies, Inc. (an oilfield
services firm) and a director of Denali, Inc. (a manufacturer of storage tanks
and a product and service provider for handling of industrial fluids). Mr.
Symonds is also a director of Plains Resources Inc.

  A. Patrick Diamond has served as Manager, Special Projects since June 2001. In
addition, he was Manager, Special Projects of Plains Resources from August 1999
to June 2001. Prior to joining Plains Resources, Mr. Diamond served Salomon
Smith Barney Inc. in its Global Energy Investment Banking Group as a Financial
Analyst from July 1994 to June 1997 and as an Associate from July 1997 to May
1999.

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

  Al Swanson has served as Treasurer since May 2001. In addition, he held
several positions at Plains Resources including Treasurer from February 2001 to
May 2001 and Director of Treasury from November 2000 to February 2001. Prior to
joining Plains Resources, he served as Treasurer of Santa Fe Snyder Corporation
from 1999 to October 2000 and in various capacities at Snyder Oil Corporation
including Director Corporate Finance from 1998, Controller - SOCO Offshore, Inc.

                                       52

from 1997, and Accounting Manager from 1992. Mr. Swanson began his career with
Apache Corporation in 1986 serving in internal audit and accounting.

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

  Ralph W. Cross has been Vice President of Business Development of PMC (Nova
Scotia) Company since July 2001. Mr. Cross was previously with CANPET Energy
Group Inc. since 1992, where he served in various capacities, including most
recently as Vice President of Business Development.

  John Kers has been Vice President of Operations for PMC (Nova Scotia) Company
since July 2001. Mr. Kers was previously with Murphy Oil Co. Ltd. since 1980,
where he served in various capacities, including most recently as Manager of
Engineering.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

  Section 16(a) of the Securities and Exchange Act of 1934 requires directors,
officers and persons who beneficially own more than ten percent of a registered
class of our equity securities to file with the SEC and the New York Stock
Exchange initial reports of ownership and reports of changes in ownership of
such equity securities. Such persons are also required to furnish us with copies
of all Section 16(a) forms that they file. Based solely upon a review of the
copies of Forms 3, 4 and 5 furnished to us, or written representations from
certain reporting persons that no Forms 5 were required, we believe that during
2001 our officers and directors complied with all filing requirements with
respect to our equity securities. Plains Resources filed a late Form 3 and
six Forms 4 for transactions in 1998, 1999, 2000 and 2001.

REIMBURSEMENT OF EXPENSES OF OUR GENERAL PARTNER AND ITS AFFILIATES

  Our general partner does not receive any management fee or other compensation
in connection with its management of Plains All American Pipeline. However, our
general partner performs services for us and is reimbursed by us for all
expenses incurred on our behalf, including the costs of employee, officer and
director compensation and benefits, as well as all other expenses necessary or
appropriate to the conduct of our business. The partnership agreement provides
that our general partner will determine the expenses that are allocable to us in
any reasonable manner determined by our general partner in its sole discretion.
See Item 13. "Certain Relationships and Related Transactions".

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

  The following table sets forth certain compensation information for our Chief
Executive Officer and the four most highly compensated executive officers other
than the Chief Executive Officer in 2001 (the "Named Executive Officers").
Messrs. Armstrong, Pefanis and Kramer were compensated by Plains Resources prior
to July 2001. However, we reimburse our general partner and its affiliates (and,
for 1999, 2000 and a portion of 2001, we reimbursed our former general partner
and its affiliates, which included Plains Resources) for expenses incurred on
our behalf, including the costs of officer compensation allocable to us. The
Named Executive Officers have also received certain equity-based awards from our
general partner and from our former general partner and its affiliates, which
awards (other than awards under the Long-Term Incentive Plan) are not subject to
reimbursement by us. See "--Long-Term Incentive Plan" and Item 13. "Certain
Relationships and Related Transactions--Transactions with Affiliates".

                                       53

                                                  ANNUAL COMPENSATION
                                            ------------------------------                    OTHER
NAME AND PRINCIPAL POSITION        YEAR        SALARY             BONUS                    COMPENSATION (2)
- ----------------------------       ----     -----------         ----------                ----------------
                                                                           
Greg L. Armstrong                  2001     $165,000(1)          $450,000                       (1)(3)
 CEO                               2000         (1)                  (1)                        (1)(3)
                                   1999         (1)                  (1)                        (1)(3)

Harry N. Pefanis                   2001     $117,500(1)          $350,000                       (1)(3)
 President and COO                 2000         (1)                  (1)                        (1)(3)
                                   1999         (1)                  (1)                        (1)(3)

Phillip D. Kramer                  2001     $100,000(1)          $100,000                       (1)(3)
 Executive V.P. and CFO            2000         (1)                  (1)                        (1)(3)
                                   1999         (1)                  (1)                        (1)(3)

George Coiner                      2001     $175,000             $394,100                     $10,500(3)
 Senior Vice President             2000      175,000              500,700                      10,500(3)
                                   1999      180,956              295,000                      10,000(3)

Mark F. Shires                     2001     $173,333             $175,000                     $10,500(3)
 Vice President - Operations       2000      155,000              220,000                      10,500(3)
                                   1999      160,792(4)            77,500                           -

- ---------------
(1)  Until July 2001, Messrs. Armstrong, Pefanis and Kramer were employed and
     compensated by Plains Resources, which owned our former general partner. We
     reimbursed Plains Resources for the portion of their compensation allocable
     to us. See Item 13. "Certain Relationships and Related Transactions--
     Transactions with Affiliates".  Salary amounts shown for the year 2001
     reflect compensation paid by our general partner and reimbursed by us for
     the last six months of 2001.
(2)  Executive officers have received equity-based awards from our general
     partner and former general partner and its affiliates. Other than awards
     under the general partner's Long-Term Incentive Plan, we do not fund these
     awards. Other than awards to non-employee directors, no awards have vested
     to date under our Long-Term Incentive Plan. For a description of awards
     granted to date under the Long-Term Incentive Plan as well as awards under
     other equity-based plans, see "--Long-Term Incentive Plan" and Item 13.
     "Certain Relationships and Related Transactions--Transactions with
     Affiliates".
(3)  Prior to the General Partner Transition, Plains Resources matched 100% of
     employees' contribution to its 401(k) Plan (subject to certain limitations
     in the plan), with such matching contribution being made 50% in cash and
     50% in Plains Resources Common Stock (the number of shares for the stock
     match being based on the market value of the Common Stock at the time the
     shares were granted). After the General Partner Transition, our general
     partner matches 100% of employees' contributions to its 401(k) Plan in
     cash, subject to certain limitations in the plan.
(4)  Includes $51,000 for consulting fees we paid to Mr. Shires prior to his
     becoming an employee in April 1999.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

  Prior to the consummation of the General Partner Transition, Messrs. Armstrong
and Pefanis were employed pursuant to employment agreements with Plains
Resources. Both now have employment agreements with our general partner. Mr.
Armstrong is employed as Chairman and Chief Executive Officer. The primary term
of Mr. Armstrong's employment agreement runs for three years from June 30, 2001.
The term will be automatically extended by one year on each anniversary of the
initial date (June 30, 2001) unless Mr. Armstrong receives notice from the
Chairman of the Compensation Committee that the Board of Directors has elected
not to extend the agreement. Mr. Armstrong has agreed, during the term of the
agreement and for five years thereafter, not to disclose (subject to typical
exceptions) any confidential information obtained by him while employed under
the agreement. The agreement provides for a current base salary of $330,000 per
year, subject to annual review. If Mr. Armstrong's employment is terminated
without cause, he will be entitled to receive an amount equal to his annual base
salary plus his highest annual bonus, multiplied by the lesser of (i) the number
of years (including fractional years) remaining on the agreement and (ii) two.
If Mr. Armstrong terminates his employment as a result of a change in control he
will be entitled to receive an amount equal to three times the aggregate of his
annual base salary and bonus. Under Mr. Armstrong's agreement, a "change of
control" is defined to include (i) the acquisition by an entity or group (other
than Plains Resources and its wholly owned subsidiaries) of 50% or more of our
general partner or (ii) the existing owners of our general partner ceasing to
own more than 50% of our general partner. If Mr. Armstrong's employment is
terminated because of his death, a lump sum payment will be paid to his designee
equal to his annual salary plus his highest annual bonus, multiplied by the
lesser of (i) the number of years (including fractional years) remaining on the
agreement and

                                       54

(ii) two. Under the agreement, Mr. Armstrong will be reimbursed for any excise
tax due as a result of compensation (parachute) payments.

  Mr. Pefanis is employed as President and Chief Operating Officer. The primary
term of Mr. Pefanis' employment agreement runs for three years from June 30,
2001. The term will be automatically extended by one year on each anniversary of
the initial date (June 30, 2001) unless Mr. Pefanis receives notice from the
Chairman of the Board of Directors that the Board has elected not to extend the
agreement. Mr. Pefanis has agreed, during the term of the agreement and for one
year thereafter, not to disclose (subject to typical exceptions) any
confidential information obtained by him while employed under the agreement. The
agreement provides for a current base salary of $235,000 per year, subject to
annual review. The provisions in Mr. Pefanis' agreement with respect to
termination, change in control and related payment obligations are substantially
similar to the parallel provisions in Mr. Armstrong's agreement.

LONG-TERM INCENTIVE PLAN

  Our general partner has adopted the Plains All American GP LLC 1998 Long-Term
Incentive Plan for employees and directors of our general partner and its
affiliates who perform services for us. The Long-Term Incentive Plan consists of
two components, a restricted unit plan and a unit option plan. The Long-Term
Incentive Plan currently permits the grant of restricted units and unit options
covering an aggregate of 1,425,000 common units. The plan is administered by the
Compensation Committee of our general partner's board of directors. Our general
partner's board of directors in its discretion may terminate the Long-Term
Incentive Plan at any time with respect to any common units for which a grant
has not yet been made. Our general partner's board of directors also has the
right to alter or amend the Long-Term Incentive Plan or any part of the plan
from time to time, including increasing the number of common units with respect
to which awards may be granted; provided, however, that no change in any
outstanding grant may be made that would materially impair the rights of the
participant without the consent of such participant.

  Restricted Unit Plan. A restricted unit is a "phantom" unit that entitles the
grantee to receive a common unit upon the vesting of the phantom unit. As of
March 15, 2002, aggregate outstanding grants of approximately 679,000 restricted
units have been made to employees of our general partner. Grants made include
165,000 restricted units to executive officers as a group, including 60,000,
30,000 and 30,000 units to Messrs. Pefanis, Coiner and Shires, respectively.
Additional grants of approximately 288,000 restricted units have been approved,
with vesting in 25% increments if and when the quarterly distribution reaches
$0.525, $0.575 and $0.625 ($2.10, $2.30 and $2.50 annualized), and the criteria
for the remaining 25% yet to be determined. These grants include approximately
203,000 restricted units to executive officers, including  70,000, 10,000,
50,000, 37,500 and 20,000 units to Messrs. Armstrong, Pefanis, Kramer, Coiner
and Shires. The Compensation Committee may, in the future, make additional
grants under the plan to employees and directors containing such terms as the
Compensation Committee shall determine. Restricted units granted to employees
during the subordination period, although additional vesting criteria may
sometimes apply, will vest only after, and in the same proportions as, the
conversion of the subordinated units to common units. Grants made to non-
employee directors of our general partner are eligible to vest prior to
termination of the subordination period. In 2000, the three non-employee
directors of our former general partner (Messrs. Goyanes, Sinnott and Smith)
were each granted 5,000 restricted units. These units vested in connection with
the consummation of the General Partner Transition. Additional grants of 5,000
restricted units will be made in 2002 to each non-employee director of our
general partner. These units will vest in 25% increments on each anniversary of
June 8, 2001. See "--Compensation of Directors".

  If a grantee terminates employment or membership on the board for any reason,
the grantee's restricted units will be automatically forfeited unless, and to
the extent, the Compensation Committee provides otherwise. Common units to be
delivered upon the vesting of rights may be common units acquired by our general
partner in the open market or in private transactions, common units already
owned by our general partner, or any combination of the foregoing. Our general
partner will be entitled to reimbursement by us for the cost incurred in
acquiring common units. In addition, we may issue up to 975,000 Common Units to
satisfy delivery obligations under the grants, less any common units issued upon
exercise of unit options under the plan (see below). If we issue new common
units upon vesting of the restricted units, the total number of common units
outstanding will increase. Whether we satisfy vested units with purchases or by
new issuances, the vesting will result in a compensation expense charge to us.
Following the subordination period, the Compensation Committee, in its
discretion, may grant tandem distribution equivalent rights with respect to
restricted units.

  The subordination period (as defined in the partnership agreement) will end if
certain financial tests are met for three consecutive four-quarter periods (the
"testing period"), but no sooner than December 31, 2003. During the first
quarter after the end of the subordination period, all of the subordinated units
will convert into common units. Early conversion of a portion of the
subordinated units may occur if the testing period is satisfied before December
31, 2003. We have determined that the first four-quarter period of the testing
period was satisfied as of September 30, 2001. Although we cannot give assurance
in that regard, if we continue to meet the requirements, 25% of the subordinated
units will convert in the fourth quarter of 2003 and the remainder will convert
in the first quarter of 2004. Our ability to continue to meet the requirements
is

                                       55

subject to a number of economic and operational contingencies. See
"Managements Discussion and Analysis--Risk Factors" and "--Forward Looking
Statements".

  The issuance of the common units pursuant to the restricted unit plan is
primarily intended to serve as a means of incentive compensation for
performance. Therefore, no consideration will be paid to us by the plan
participants upon receipt of the common units.

  Unit Option Plan. The Unit Option Plan currently permits the grant of options
covering common units. No grants have been made under the Unit Option Plan to
date. However, the Compensation Committee may, in the future, make grants under
the plan to employees and directors containing such terms as the committee shall
determine, provided that unit options have an exercise price equal to the fair
market value of the units on the date of grant. Unit options granted during the
subordination period will become exercisable automatically upon, and in the same
proportions as, the conversion of the subordinated units to common units, unless
a later vesting date is provided.

  Upon exercise of a unit option, our general partner will deliver common units
acquired by it in the open market or in private transactions or use common units
already owned by our general partner, or any combination of the foregoing. In
addition, we may issue up to 975,000 common units to satisfy delivery
obligations under the grants, less any common units issued upon vesting of
Restricted Units under the Plan. Our general partner will be entitled to
reimbursement by us for the difference between the cost incurred by our general
partner in acquiring such common units and the proceeds received by our general
partner from an optionee at the time of exercise. Thus, the cost of the unit
options will be borne by us. If we issue new common units upon exercise of the
unit options, the total number of common units outstanding will increase, and
our general partner will remit to us the proceeds received by it from the
optioned upon exercise of the unit option.

OTHER EQUITY GRANTS

  Certain other employees and officers have also received grants of equity not
associated with the Long-Term Incentive Plan described above, and for which we
have no cost or reimbursement obligations. See Item 13. "Certain Relationships
and Related Transactions - Transactions with Affiliates".

COMPENSATION OF DIRECTORS

  Each director of our general partner who is not an employee of our general
partner is paid an annual retainer fee of $20,000, an attendance fee of $2,000
for each board meeting he attends (excluding telephonic meetings), an attendance
fee of $500 for each committee meeting or telephonic board meeting he attends
plus reimbursement for related out-of-pocket expenses. In 2001, Messrs. Goyanes
and Smith each received $10,000 for their service on a special committee of the
Board of Directors of our former general partner. Mr. Armstrong is otherwise
compensated for his services as an employee and therefore receives no separate
compensation for his services as a director. Each committee chairman (other than
the Audit Committee) receives $2,000 annually. The chairman of the Audit
Committee receives $12,000 annually, and the other members of the Audit
Committee receives $4,000 annually.

  In 2000, Messrs. Goyanes, Sinnott and Smith, as directors of our former
general partner, received a grant of 5,000 restricted units each under our Long-
Term Incentive Plan. The restricted units vested in 2001 in connection with the
consummation of the General Partner Transition. Each non-employee director of
our general partner will receive a grant of 5,000 restricted units in 2002. The
units will vest in 25% increments annually on each anniversary of June 8, 2001.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

BENEFICIAL OWNERSHIP OF PARTNERSHIP UNITS

  The following table sets forth the beneficial ownership of units held by
beneficial owners of 5% or more of the units, by directors and Named Executive
Officers of our general partner and by all directors and executive officers as a
group as of March 15, 2002.

                                       56

                                            PERCENTAGE             PERCENTAGE                       PERCENTAGE
                                              OF       CLASS B       OF                                   OF        PERCENTAGE
                              COMMON         COMMON     COMMON      CLASS B     SUBORDINATED        SUBORDINATED         OF
NAME OF BENEFICIAL OWNER       UNITS         UNITS      UNITS        UNITS         UNITS                UNITS       TOTAL UNITS
- ------------------------      ------       --------   ---------   -----------   ------------         ------------   ------------
                                                                                               
Plains Resources Inc. (1)    6,626,008        20.8%   1,307,190        100.0%      4,503,039(2)           44.90%       28.75%
Plains Holdings Inc. (1)     6,626,008        20.8%   1,307,190        100.0%      4,503,039(2)           44.90%       28.75%
Goldman, Sachs & Co.(3)      2,054,391         6.4%           -            -               -                 -          4.70%
Sable Holdings, L.P. (4)             -           -            -            -       1,943,423              19.40%        4.49%
KAFU Holdings, L.P. (5)              -           -            -            -       1,595,322              15.90%        3.69%
E-Holdings III, L.P. (6)             -           -            -            -         874,540               8.70%        2.02%
Greg L. Armstrong               96,106(7)       (8)           -            -          28,593(9)              (8)          (8)
Harry N. Pefanis                73,975(7)       (8)           -            -           4,602(9)              (8)          (8)
George R. Coiner                44,026(7)       (8)           -            -               -                  -           (8)
Phil Kramer                     29,000(7)       (8)           -            -           9,742(9)              (8)          (8)
Mark F. Shires                       -(7)        -            -            -               -                  -            -
Everardo Goyanes                 5,000          (8)           -            -               -                  -           (8)
Gary R. Petersen(6)              3,000          (8)           -            -               -                  -           (8)
John T. Raymond                      -           -            -            -          97,171(10)             (8)          (8)
Robert V. Sinnott (5)           10,000          (8)           -            -               -                  -           (8)
Arthur L. Smith                 10,000          (8)           -            -               -                  -           (8)
J. Taft Symonds                 10,000          (8)           -            -               -                  -           (8)
All directors and
 executive
 officers as a group           282,774(7)         (8)           -            -       143,981(9)            1.40%          (8)
(14 persons)

- ---------------
(1)  Plains Resources Inc. is the sole stockholder of Plains Holdings Inc, our
     former general partner. The record holders of the Class B Common Units is
     Plains Holdings Inc. The record holder of the common units and subordinated
     units is Plains Holdings LLC, a wholly owned subsidiary of Plains Holdings
     Inc. The address of Plains Resources Inc., Plains Holdings Inc. and Plains
     Holdings LLC is 500 Dallas, Suite 700, Houston, Texas 77002.
(2)  Includes subordinated units owned by Plains Resources, to be transferred to
     certain of our employees pursuant to phantom unit grant agreements, subject
     to certain vesting conditions. See Note (9) below.
(3)  The address for Goldman, Sachs & Co. and its parent, the Goldman Sachs
     Group, Inc., is 85 Broad Street, New York, New York 10004. Goldman, Sachs &
     Co., a broker/dealer, and its parent, the Goldman Sachs Group, Inc., are
     deemed to have shared voting power and shared disposition power over
     2,054,391 common units owned by their customers.
(4)  Subordinated Units include 97,171 units contributed to Sable Holdings, L.P.
     by John T. Raymond in exchange for a limited partner interest. Mr. Raymond
     has the right to reacquire such units. Sable Holdings, L.P. is controlled
     by James M. Flores. Mr. Flores is the Chief Executive Officer of Plains
     Resources. The address for Sable Holdings, L.P. is 500 Dallas, Suite 700,
     Houston, Texas 77002.
(5)  KAFU Holdings L.P. is an affiliate of Kayne Anderson Investment Management,
     Inc., of which Robert V. Sinnott is a Vice President. Mr. Sinnott
     disclaims any deemed beneficial ownership of units held by KAFU Holdings,
     L.P. Mr. Sinnott owns a 4.5% limited partner interest in KAFU Holdings,
     L.P. The address for KAFU Holdings, L.P. is 1800 Avenue of the Stars, 2nd
     Floor, Los Angeles, California 90067.
(6)  E-Holdings III, L.P. is an affiliate of EnCap Investments L.L.C. of which
     Gary R. Petersen is a Managing Director. Mr. Petersen disclaims any deemed
     beneficial ownership of units owned by E-Holdings III, L.P.. The address
     for E-Holdings III, L.P. is 1100 Louisiana, Suite 3150, Houston, Texas
     77002.
(7)  Does not include units granted under the Long-Term Incentive Plan, none of
     which will vest within 60 days of the date hereof. See Item 11. "Executive
     Compensation--Long-Term Incentive Plan".
(8)  Less than one percent.
(9)  Includes the following unvested subordinated units, which will vest within
     60 days, deliverable pursuant to phantom unit agreements to:  Mr. Armstrong
     - 8,548; Mr. Pefanis - 4,602; Mr. Kramer - 9,742; and Mr. Moore - 3,873.
     See Item 13. "Certain Relationships and Related Transactions--Transactions
     with Affiliates--Stock Option Replacement".
(10) Units contributed to Sable Holdings, L.P. in exchange for an indirect
     limited partner interest. Mr. Raymond has the right to reacquire such
     units. See Note (4 )above.

BENEFICIAL OWNERSHIP OF GENERAL PARTNER INTEREST

  Plains AAP, L.P. owns all of our 2% general partner interest and all of our
incentive distribution rights. The effective ownership of Plains AAP, L.P.
(after giving effect to proportionate ownership of its 1% general partner,
Plains All American GP LLC) is as follows:  Plains Holdings Inc. - 44%; Sable
Investments, L.P. - 20%; KAFU Holdings, L.P. - 16.418%;

E-Holdings III, L.P. -9%; PAA Management, L.P. - 4%; First Union Investors,
Inc. - 3.382%; Mark E. Strome - 2.134%; Strome Hedgecap Fund, L.P. - 1.066%; and
John T. Raymond - 1% (indirectly held through a limited partner interest in
Sable Investments, L.P.).

  PAA Management, L.P. is owned by certain members of senior management,
including Messrs. Armstrong, Pefanis, Kramer, Coiner and  Shires.

                                       57

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

OUR GENERAL PARTNER

  Our operations and activities are managed by, and our officers and personnel
are employed by, our general partner. Prior to the consummation of the General
Partner Transition, some of the senior executives who managed our business also
managed and operated the business of Plains Resources. The transition of
employment of such executives to our general partner was effected on June 30,
2001. Our general partner does not receive any management fee or other
compensation in connection with its management of our business, but it is
reimbursed for all direct and indirect expenses incurred on our behalf.

  Our general partner owns the 2% general partner interest and all of the
incentive distribution rights. Our general partner is entitled to receive
incentive distributions if the amount we distribute with respect to any quarter
exceeds levels specified in our partnership agreement. Under the quarterly
incentive distribution provisions, generally our general partner is entitled to
15% of amounts we distribute in excess of $0.450 per unit, 25% of the amounts we
distribute in excess of $0.495 per unit and 50% of amounts we distribute in
excess of $0.675 per unit.

TRANSACTIONS WITH RELATED PARTIES

 General

  Before the General Partner Transition, Plains Resources indirectly owned and
controlled our former general partner interest. In 2001, our former general
partner and its affiliates incurred $31.2 million of direct and indirect
expenses on our behalf, which we reimbursed. Of this amount, approximately
$218,000, $655,000 and $127,000 represented allocated salary and bonus (for the
year 2000) reimbursement for the services of Messrs. Armstrong, Pefanis and
Kramer, respectively, as officers of our former general partner. In the year
2000, we reimbursed our former general partner $63.8 million, of which $165,000,
$212,000 and $96,000 represented allocated salary and bonus (for the year 1999)
for Messrs. Armstrong, Pefanis and Kramer. For 1999, the equivalent amounts were
$44.7 million, $142,000, $212,000 and $104,000, respectively.

  Plains Resources currently owns an effective 44% of our general partner
interest. We have  ongoing relationships with Plains Resources. These
relationships include but are not limited to:

 .  a separation agreement entered into in connection with the General Partner
   Transition pursuant to which (i) Plains Resources has indemnified us for (a)
   claims relating to securities laws or regulations in connection with the
   upstream or midstream businesses, based on alleged acts or omissions
   occurring on or prior to June 8, 2001, or (b) claims related to the upstream
   business, whenever arising, and (ii) we have indemnified Plains Resources for
   claims related to the midstream business, whenever arising. Plains Resources
   also has agreed to indemnify and maintain liability insurance for the
   individuals who were, on or before June 8, 2001, directors or officers of
   Plains Resources or our former general partner.

 .  a Pension and Employee Benefits Assumption and Transition Services Agreement
   that provided for the transfer to our general partner of the employees of our
   former general partner and certain headquarter employees of Plains Resources.

 .  an Omnibus Agreement that provides for the resolution of certain conflicts
   arising from the fact that we and Plains Resources conduct related
   businesses;

 .  a Marketing Agreement with Plains Resources that provides for the marketing
   of Plains Resources' equity crude oil production. Under the Marketing
   Agreement, we purchase for resale at market prices all of Plains Resources
   equity production for a fee of $0.20 per barrel. The Marketing Agreement will
   terminate upon a "change of control" of Plains resources or our general
   partner. In November 2001, the Marketing Agreement automatically extended for
   an additional three-year period. The fee is subject to adjustment every three
   years based on then-existing market conditions. For the year ended December
   31, 2001, Plains Resources produced approximately 24,500 barrels per day that
   were subject to the Marketing Agreement. We paid approximately $223 million
   for such production and recognized gross margin of approximately $1.8 million
   under the terms of that agreement. In our opinion, these purchases were made
   at prevailing market prices. In November 2001, the agreement automatically
   extended for an additional three-year period; and

 .  a Letter Agreement with Plains Resources that provides that if the Marketing
   Agreement terminates before our crude oil sales agreement with Tosco Refining
   Co. terminates, we will continue to purchase Plains Resources' equity crude
   oil production from the Arroyo Grande field under the same terms as the
   Marketing Agreement until our Tosco sales agreement terminates.

                                       58

 Transaction Grant Agreements

  In connection with our initial public offering, our former general partner, at
no cost to us, agreed to transfer, subject to vesting, approximately 400,000 of
its affiliates' common units (including distribution equivalent rights
attributable to such units) to certain key officers and employees of our former
general partner and its affiliates. Of this amount, 75,000 common units were
allocated to each of Messrs. Armstrong and Pefanis, 50,000 common units were
allocated to Mr. Coiner and 30,000 were allocated to Mr. Kramer. Under these
grants, the common units vested based on attaining a targeted operating surplus
for a given year. Of the 400,000 units subject to the transaction grant
agreements, 69,444 units vested in 2000 for 1999's operating results and 133,336
units vested in 2001 for 2000's operating results. The remainder (197,200 units)
vested in connection with the consummation of the General Partner Transition.
Distribution equivalent rights were paid in cash at the time of the vesting of
the associated common units. The values of the units and associated distribution
equivalent rights that vested under the Transaction Grant Agreements for all
grantees in 2001, 2000 and 1999 were $5.7 million, $3.1 million and
$1.0 million, respectively. Although we recorded noncash compensation
expenses with respect to these vestings, the compensation expense incurred in
connection with these grants was funded by our former general partner, without
reimbursement by us.

 Long-Term Incentive Plan

  Our general partner has adopted the Plains All American LLC 1998 Long-Term
Incentive Plan for employees and directors of our general partner and its
affiliates who perform services for us. The Long-Term Incentive Plan consists of
two components, a restricted unit plan and a unit option plan. The Long-Term
Incentive Plan currently permits the grant of restricted units and unit options
covering an aggregate of 1,425,000 common units. The plan is administered by the
Compensation Committee of our general partner's board of directors.

  A restricted unit is a "phantom" unit that entitles the grantee to receive a
common unit upon the vesting of the phantom unit. As of March 15, 2002,
aggregate outstanding grants of approximately 679,000 restricted units have been
made to employees of our general partner. Grants made include 165,000 restricted
units to executive officers as a group, including 60,000, 30,000 and 30,000
units to Messrs. Pefanis, Coiner and Shires, respectively. Additional grants of
approximately 288,000 restricted units have been approved, with vesting in 25%
increments when the quarterly distribution reaches $0.525, $0.575 and $0.625
($2.10, $2.30 and $2.50 annualized), and the criteria for the remaining 25% yet
to be determined. These grants include approximately 203,000 restricted units to
executive officers, including  70,000, 10,000, 50,000, 37,500 and 20,000 units
to Messrs. Armstrong, Pefanis, Kramer, Coiner and Shires.

  In 2000, the three non-employee directors of our former general partner
(Messrs. Goyanes, Sinnott and Smith) were each granted 5,000 restricted units.
These units vested in connection with the consummation of the General Partner
Transition. Additional grants of 5,000 restricted units will be made in 2002 to
each non-employee director of our general partner. These units will vest in 25%
increments on each anniversary of June 8, 2001. See "Executive Compensation--
Compensation of Directors".

 Performance Option Plan

  In connection with the General Partner Transition, the owners of the general
partner (other than PAA Management, L.P.) contributed an aggregate of 450,000
subordinated units to the general partner to provide a pool of units available
for the grant of options to management and key employees. In that regard, the
general partner adopted the Plains All American 2001 Performance Option Plan,
pursuant to which options to purchase approximately 332,500 units have been
granted. Of this amount, 75,000, 55,000, 45,000, 42,500 and 20,000 were granted
to Messrs. Armstrong, Pefanis, Kramer, Coiner and Shires, respectively. Such
options vest in 25% increments based upon achieving quarterly distribution
levels on our units of $0.525, $0.575, $0.625 and $0.675 ($2.10, $2.30, $2.50
and $2.70, annualized). The options will vest immediately upon a change in
control (as defined in the grant agreements). The purchase price under the
options is $22 per subordinated unit, declining over time in an amount equal to
80% of each quarterly distribution per unit. The terms of future grants may
differ from the existing grants. Because the subordinated units underlying the
plan were contributed to the general partner, we will have no obligation to
reimburse the general partner for the cost of the units upon exercise of the
options.

 Stock Option Replacement

  In connection with the General Partner Transition, certain members of the
management team that had been employed by Plains Resources were transferred to
the general partner. At that time, such individuals held in-the-money but
unvested stock options in Plains Resources, which were subject to forfeiture
because of the transfer of employment. Plains Resources, through its affiliates,
agreed to substitute a contingent grant of subordinated units with a value equal
to the discounted present value of the spread on the unvested options.
Approximately 51,000 subordinated units are subject to such grants, with 34,511
granted to executive officers, including 8,548, 4,602 and 9,742 to Messrs.
Armstrong, Pefanis and Kramer. The subordinated units vest on the same schedule
as the stock options would have vested. The units granted to Messrs. Armstrong,
Pefanis and

                                      59

Kramer will vest in March and April of 2002. The general partner will administer
the vesting and delivery of the units under the grants. Because the units
necessary to satisfy the delivery requirements under the grants will be provided
by Plains Resources, we will have no obligation to reimburse the general partner
for the cost of such units.

  Tank Car lease and CANPET

    In connection with the CANPET asset acquisition, Plains Marketing Canada,
L.P. assumed CANPET's rights and obligations under a Master Railcar Leasing
Agreement between CANPET and Pivotal Enterprises Corporation ("Pivotal"). The
agreement provides for Plains Marketing Canada, L.P. to lease approximately 57
railcars from Pivotal at a lease price of $1,000 per month, per car. The lease
extends until June of 2008, with an option for Pivotal to extend the term of the
lease for an additional five years. Pivotal is substantially owned by former
employees of CANPET, including W. David Duckett, who is the Executive Vice
President of PMC (Nova Scotia) Company, the general partner of Plains Marketing
Canada, L.P. Mr. Duckett owns a 22% interest in Pivotal. Mr. Duckett, as an
owner of CANPET, will also receive a portion of the proceeds from any contingent
payment of purchase price for the CANPET assets. See Items 1 and 2. "Business
and Properties--Acquisitions and Dispositions--CANPET Energy Group, Inc."

OTHER

    Goldman, Sachs & Co., which owns approximately 6% of our common units, was
the sole underwriter of our May 2001 offering of units. The total underwriting
commissions paid in connection with this offering were approximately $4.4
million.

                                       60

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) (1) AND (2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

    See "Index to Consolidated Financial Statements" set forth on Page F-1.

(A) (3)  EXHIBITS

  3.1  --  Third Amended and Restated Agreement of Limited Partnership of Plains
           All American Pipeline, L.P. dated as of June 27, 2001 (incorporated
           by reference to Exhibit 3.1 to Form 8-K filed August 27, 2001.

  3.2  --  Second Amended and Restated Agreement of Limited Partnership of
           Plains Marketing, L.P. dated as of June 27, 2001 (incorporated by
           reference to Exhibit 3.2 to Form 8-K filed August 27, 2001.

  3.3  --  Second Amended and Restated Agreement of Limited Partnership of All
           American Pipeline, L.P. dated as of June 27, 2001 (incorporated by
           reference to Exhibit 3.3 Form 8-K filed August 27, 2001.

  3.4  --  Certificate of Limited Partnership of Plains All American Pipeline,
           L.P. (incorporated by reference to Exhibit 3.4 to Registration
           Statement, file No. 333-64107).

  3.5  --  Certificate of Limited Partnership of Plains Marketing, L.P. dated as
           of November 10, 1998 (incorporated by reference to Exhibit 3.5 to
           Annual Report on Form 10-K for the Year Ended December 31, 1998).

  3.6  --  Articles of Conversion of All American Pipeline Company dated as of
           November 10, 1998 (incorporated by reference to Exhibit 3.5 to Annual
           Report on Form 10-K for the Year Ended December 31, 1998).

  3.7  --  Amended and Restated Limited Partnership Agreement of Plains AAP,
           L.P., dated as of June 8, 2001 (incorporated by reference to Exhibit
           3.1 to Form 8-K filed June 11, 2001).

  3.8  --  Amended and Restated Limited Liability Company Agreement of Plains
           All American GP, LLC dated as of June 8, 2001 (incorporated by
           reference to Exhibit 3.2 to Form 8-K filed June 11, 2001).

  4.1  --  Registration Rights Agreement, dated as of June 8, 2001, among Plains
           All American Pipeline, L.P., Sable Holdings, L.P., E-Holdings III,
           L.P., KAFU Holdings, LP, PAA Management, L.P., Mark E. Strome, Strome
           Hedgecap Fund, L.P., John T. Raymond and Plains All American Inc.
           (incorporated by reference to Exhibit 4.1 to Form 8-K filed June 11,
           2001).

 10.01  -- Contribution, Assignment and Amendment Agreement, dated as of
           June 27, 2001, among Plains All American Pipeline, L.P., Plains
           Marketing, L.P., All American Pipeline, L.P., Plains AAP, L.P.,
           Plains All American GP LLC and Plains Marketing GP Inc. (incorporated
           by reference to Exhibit 10.1 to Form 8-K filed June 27, 2001).

 10.02  -- Contribution, Assignment and Amendment Agreement, dated as of
           June 8, 2001, among Plains All American Inc., Plains AAP, L.P. and
           Plains All American GP LLC (incorporated by reference to Exhibit 10.1
           to Form 8-K filed June 11, 2001).

 10.03  -- Separation Agreement, dated as of June 8, 2001 among Plains
           Resources Inc., Plains All American Inc., Plains All American GP LLC,
           Plains AAP, L.P. and Plains All American Pipeline, L.P. (incorporated
           by reference to Exhibit 10.2 to Form 8-K filed June 11, 2001.

 10.04  -- Pension and Employee Benefits Assumption and Transition Agreement,
           dated as of June 8, 2001 among Plains Resources Inc., Plains All
           American Inc. and Plains All American GP LLC (incorporated by
           reference to Exhibit 10.3 to Form 8-K filed June 11, 2001).

**10.05 -- Plains All American GP LLC 1998 Long-Term Incentive Plan
           (incorporated by reference to Exhibit 99.1 to Registration Statement
           on Form S-8, File No. 333-74920).

**10.06 -- Plains All American 2001 Performance Option Plan (incorporated
           by reference to Exhibit 99.2 to Registration Statement on Form S-8,
           File No. 333-74920).

**10.07 -- Phantom MLP Unit Agreement for Greg L. Armstrong (incorporated
           by reference to Exhibit 99.3 to Registration Statement on Form S-8,
           File No. 333-74920).

                                       61

**10.08 -- Phantom MLP Unit Agreement for Phillip D. Kramer (incorporated
           by reference to Exhibit 99.5 to Registration Statement on Form S-8,
           File No. 333-74920).

**10.09 -- Phantom MLP Unit Agreement for Tim Moore (incorporated by reference
           to Exhibit 99.6 to Registration Statement on Form S-8,
           File No. 333-74920).

**10.10 -- Phantom MLP Unit Agreement for Harry N. Pefanis (incorporated
           by reference to Exhibit 99.7 to Registration Statement on Form S-8,
           File No. 333-74920).

**10.11 -- Plains All American Inc., 1998 Management Incentive Plan
           (incorporated by reference to Exhibit 10.05 to Annual Report on Form
           10-K for the Year Ended December 31, 1998).

**10.12 -- Amended and Restated Employment Agreement between Plains All
           American GP LLC and Greg L. Armstrong dated as of June 30, 2001
           (incorporated by reference to Exhibit 10.3 to Quarterly Report on
           Form 10-Q for the Quarter Ended September 30, 2001).

**10.13  -- Amended and Restated Employment Agreement between Plains All
           American GP LLC and Harry N. Pefanis dated as of June 30, 2001
           (incorporated by reference to Exhibit 10.4 to Quarterly Report on
           Form 10-Q for the Quarter Ended September 30, 2001).

 10.14  -- Asset Purchase and Sale Agreement between Murphy Oil Company Ltd.
           and Plains Marketing Canada, L.P. (incorporated by reference to
           Form 8-K filed May 10, 2001.

*10.15  -- Asset Purchase Agreement dated April 9, 2001 between Plains Marketing
           L.P., Plains Marketing Canada, L.P., and CANPET Energy Group Inc. and
           CANPET Energy Group (USA), Inc.

*10.16  -- Master Railcar Leasing Agreement dated as of May 25, 1998 (effective
           June 1, 1998), between Pivotal Enterprises Corporation and CANPET
           Energy Group, Inc.

 10.17  -- Crude Oil Marketing Agreement among Plains Resources Inc., Plains
           Illinois Inc., Stocker Resources, L.P., Calumet Florida, Inc. and
           Plains Marketing, L.P. dated as of November 23, 1998 (incorporated by
           reference to Exhibit 10.07 to Annual Report on Form 10-K for the Year
           Ended December 31, 1998).

 10.18  -- Omnibus Agreement among Plains Resources Inc., Plains All American
           Pipeline, L.P., Plains Marketing, L.P., All American Pipeline, L.P.,
           and Plains All American Inc. dated as of November 23, 1998
           (incorporated by reference to Exhibit 10.08 to Annual Report on
           Form 10-K for the Year Ended December 31, 1998).

 10.19  -- Transportation Agreement dated July 30, 1993, between All American
           Pipeline Company and Exxon Company, U.S.A. (incorporated by reference
           to Exhibit 10.9 to Registration Statement, file No. 333-64107).

 10.20  -- Transportation Agreement dated August 2, 1993, between All American
           Pipeline Company and Texaco Trading and Transportation Inc., Chevron
           U.S.A. and Sun Operating Limited Partnership (incorporated by
           reference to Exhibit 10.10 to Registration Statement, File
           No. 333-64107).

**10.21  -- Form of Transaction Grant Agreement (Payment on Vesting)
           (incorporated by reference to Exhibit 10.12 to Registration
           Statement, file No. 333-64107).

 10.22  -- First Amendment to Contribution, Conveyance and Assumption Agreement
           dated as of December 15, 1998 (incorporated by reference to Exhibit
           10.13 to Annual Report on Form 10-K for the Year Ended December 31,
           1998).

 10.23  -- Agreement for Purchase and Sale of Membership Interest in Scurlock
           Permian LLC between Marathon Ashland LLC and Plains Marketing, L.P.
           dated as of March 17, 1999 (incorporated by reference to Exhibit
           10.16 to Annual Report on Form 10-K for the Year Ended December 31,
           1998).

 10.24  -- Asset Sales Agreement between Chevron Pipe Line Company and Plains
           Marketing, L.P. dated as of April 16, 1999 (incorporated by reference
           to Exhibit 10.17 to Quarterly Report on Form 10-Q for the Quarter
           Ended March 31, 1999).

**10.25 -- Transaction Grant Agreement with Greg L. Armstrong (incorporated by
           reference to Exhibit 10.20 to Registration Statement on Form S-1,
           File no. 333-86907)

**10.26 -- Phantom Unit Grant Agreement for Phillip D. Kramer (incorporated
           by reference to Exhibit 99.1 to Registration Statement on Form S-8,
           File No. 333-54118).

                                       62

  10.27 -- Pipeline Sale and Purchase Agreement dated January 31, 2000, among
           Plains All American Pipeline, L.P., All American Pipeline, L.P., El
           Paso Natural Gas Company and El Paso Pipeline Company (incorporated
           by reference to Exhibit 10.27 to Annual Report on Form 10-K for the
           Year Ended December 31, 1999).

  10.28 -- Amended and Restated Credit Agreement [Letter of Credit and Hedged
           Inventory Facility] dated May 4, 2001, among Plains Marketing, L.P,
           All American Pipeline, L.P., Plains All American Pipeline, L.P., and
           Fleet National Bank and certain other lenders (incorporated by
           reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for
           the Quarter Ended March 31, 2001).

  10.29 -- Amended and Restated Credit Agreement [Revolving Credit Facility]
           dated May 4, 2001, among Plains Marketing, L.P, All American
           Pipeline, L.P., Plains All American Pipeline, L.P., and Fleet
           national Bank and certain other lenders (incorporated by reference to
           Exhibit 10.2 to the Quarterly Report on Form 10-Q for the Quarter
           Ended March 31, 2001).

 10.30  -- First Amendment to Credit Agreement [Revolving Credit Facility]
           dated as of May 25, 2001 among Plains Marketing, L.P, All American
           Pipeline, L.P., Plains All American Pipeline, L.P., and Fleet
           National Bank and certain other lenders (incorporated by reference to
           Exhibit 10.8 to the Quarterly Report on Form 10-Q for the Quarter
           Ended June 30, 2001).

 10.31  -- First Amendment to Credit Agreement [Letter of Credit and Hedged
           Inventory Facility] dated as of May 25, 2001, among Plains Marketing,
           L.P, All American Pipeline, L.P., Plains All American Pipeline, L.P.,
           and Fleet National Bank and certain other lenders (incorporated by
           reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q for
           the Quarter Ended June 30, 2001).

 10.32  -- Second Amendment to Credit Agreement [Letter of Credit and Hedged
           Inventory Facility] dated as of June 26, 2001, among Plains
           Marketing, L.P, All American Pipeline, L.P., Plains All American
           Pipeline, L.P., and Fleet National Bank and certain other lenders
           (incorporated by reference to Exhibit 10.7 to the Quarterly Report on
           Form 10-Q for the Quarter Ended June 30, 2001).

 10.33  -- Second Amendment to Credit Agreement [Revolving Credit Facility]
           dated as of June 26, 2001 among Plains Marketing, L.P, All American
           Pipeline, L.P., Plains All American Pipeline, L.P., and Fleet
           National Bank and certain other lenders (incorporated by reference to
           Exhibit 10.9 to the Quarterly Report on Form 10-Q for the Quarter
           Ended June 30, 2001).

 10.34  -- Third Amendment to Credit Agreement [Letter of Credit and Hedged
           Inventory Facility] dated as of September 26, 2001, among
           Plains Marketing, L.P, All American Pipeline, L.P., Plains All
           American Pipeline, L.P., and Fleet National Bank and certain other
           lenders (incorporated by reference to Exhibit 10.1 to the Quarterly
           Report on Form 10-Q for the Quarter Ended September 30, 2001).

 10.35  -- Third Amendment to Credit Agreement [Revolving Credit Facility]
           dated as of September 26, 2001 among Plains Marketing,
           L.P, All American Pipeline, L.P., Plains All American Pipeline, L.P.,
           and Fleet National Bank and certain other lenders (incorporated by
           reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for
           the Quarter Ended September 30, 2001).

*10.36  -- Fourth Amendment to Credit Agreement [Letter of Credit and Hedged
           Inventory Facility] dated October 29, 2001, among Plains Marketing,
           L.P, All American Pipeline, L.P., Plains All American Pipeline, L.P.,
           and Fleet National Bank and certain other lenders.

*10.37  -- Fourth Amendment to Credit Agreement [Revolving Credit Facility]
           dated October 29, 2001 among Plains Marketing, L.P, All American
           Pipeline, L.P., Plains All American Pipeline, L.P., and Fleet
           National Bank and certain other lenders.

*10.38  -- Fifth Amendment to Credit Agreement [Letter of Credit and Hedged
           Inventory Facility] dated January 31, 2001, among Plains Marketing,
           L.P, All American Pipeline, L.P., Plains All American Pipeline, L.P.,
           and Fleet National Bank and certain other lenders.

*10.39  -- Fifth Amendment to Credit Agreement [Revolving Credit Facility]
           dated as January 31, 2001 among Plains Marketing, L.P, All American
           Pipeline, L.P., Plains All American Pipeline, L.P., and Fleet
           National Bank and certain other lenders.

 *21.1  -- Subsidiaries of the Registrant.

 *23.1  -- Consent of PricewaterhouseCoopers LLP.

- --------
 *  Filed herewith
**  Management contract or compensatory plan or arrangement

                                       63

(B)  REPORTS ON FORM 8-K

     A current report on Form 8-K was filed on October 26, 2001 in connection
with the execution of an underwriting agreement with Salomon Smith Barney Inc.,
in connection with the sale by the Partnership of 4,500,000 common units of the
Partnership.

     A current report on Form 8-K/A was filed on October 25, 2001 amending the
Partnership's Form 8-K dated June 22, 2001 in connection with the pro forma
financial statements for the Partnership.

                                      64

                                  SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                PLAINS ALL AMERICAN PIPELINE, L.P.

                                By:  PLAINS AAP, L.P.,
                                      general partner

                                By:  PLAINS ALL AMERICAN GP LLC,
                                      general partner

Date: March 20, 2002            By:    /s/ Phillip D. Kramer
                                       ---------------------
                                      Phillip D. Kramer, Executive Vice
                                      President and Chief Financial Officer
                                      (Principal Financial and
                                      Accounting Officer)

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Date: March 20, 2002            By:         /s/  Greg L. Armstrong
                                      ----------------------------
                                      Greg L. Armstrong, Chairman of the Board
                                      Chief Executive Officer and Director of
                                      Plains All American GP LLC (Principal
                                      Executive Officer)

Date: March 20, 2002            By:        /s/  Harry N. Pefanis
                                      --------------------------
                                      Harry N. Pefanis, President and Chief
                                      Operating Officer of
                                      Plains All American GP LLC

Date: March 20, 2002            By:        /s/ Phillip D. Kramer
                                      --------------------------
                                      Phillip D. Kramer, Executive Vice
                                      President and Chief Financial Officer
                                      (Principal Financial and Accounting
                                      Officer) of Plains All American GP LLC

Date: March 20, 2002            By:        /s/ Everardo Goyanes
                                      -------------------------
                                      Everardo Goyanes, Director of Plains All
                                      American GP LLC

Date: March 20, 2002            By:        /s/ Gary R. Petersen
                                      -------------------------
                                      Gary R. Petersen, Director of Plains All
                                      American GP LLC

Date: March 20, 2002            By:        /s/ John T. Raymond
                                      ------------------------
                                      John T. Raymond, Director of Plains All
                                      American GP LLC

Date: March 20, 2002            By:        /s/ Robert V. Sinnott
                                      --------------------------
                                      Robert V. Sinnott, Director of Plains All
                                      American GP LLC

Date: March 20, 2002            By:        /s/ Arthur L. Smith
                                      ------------------------
                                      Arthur L. Smith, Director of Plains All
                                      American GP LLC

Date: March 20, 2002            By:        /s/ J. Taft Symonds
                                      ------------------------
                                      J. Taft Symonds, Director of Plains All
                                      American GP LLC

                                      65

                      PLAINS ALL AMERICAN PIPELINE, L.P.
                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                                                          Page
                                                                                                                          ----
                                                                                                                       
  Financial Statements

       Report of Independent Accountants.................................................................................  F-2

       Consolidated Balance Sheets as of December 31, 2001 and 2000......................................................  F-3

       Consolidated Statements of Operations for the years ended
          December 31, 2001, 2000 and 1999...............................................................................  F-4

       Consolidated Statements of Cash Flows for the years ended
          December 31, 2001, 2000 and 1999...............................................................................  F-5

       Consolidated Statements of Changes in Partners' Capital for the years ended
          December 31, 2001, 2000 and 1999...............................................................................  F-6

       Notes to Consolidated Financial Statements........................................................................  F-7

                                      F-1

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of the General Partner and the Unitholders of
Plains All American Pipeline, L.P.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in partners' capital and of
cash flows present fairly, in all material respects, the financial position of
Plains All American Pipeline, L.P. and its subsidiaries (the "Partnership") at
December 31, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Partnership
changed its method of accounting for derivatives and hedging activities
effective January 1, 2001.

PricewaterhouseCoopers LLP

Houston, Texas
March 6, 2002

                                      F-2

 PAGE>

              PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                       (in thousands, except unit data)

                                                                                            December 31,
                                                                                  ----------------------------------
                                                                                        2001              2000
                                                                                  ----------------  ----------------
                                                                                              
                                     ASSETS

CURRENT ASSETS
Cash and cash equivalents                                                         $         3,511   $         3,426
Accounts receivable and other                                                             365,697           347,698
Inventory                                                                                 188,874            46,780
                                                                                  ----------------  ----------------
Total current assets                                                                      558,082           397,904
                                                                                  ----------------  ----------------

PROPERTY AND EQUIPMENT                                                                    653,050           467,619
Less allowance for depreciation and amortization                                          (48,131)          (26,974)
                                                                                  ----------------  ----------------
                                                                                          604,919           440,645
                                                                                  ----------------  ----------------

OTHER ASSETS
Pipeline linefill                                                                          57,367            34,312
Other, net                                                                                 40,883            12,940
                                                                                  ----------------  ----------------
                                                                                  $     1,261,251   $       885,801
                                                                                  ================  ================

                        LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES
Accounts payable and other current liabilities                                    $       386,993   $       328,542
Due to related party                                                                       13,685            20,951
Short-term debt and current portion of long-term debt                                     104,482             1,300
                                                                                  ----------------  ----------------
Total current liabilities                                                                 505,160           350,793

LONG-TERM LIABILITIES
Bank debt                                                                                 351,677           320,000
Other long-term liabilities and deferred credits                                            1,617             1,009
                                                                                  ----------------  ----------------
Total liabilities                                                                         858,454           671,802
                                                                                  ----------------  ----------------

COMMITMENTS AND CONTINGENCIES (Note 14)

PARTNERS' CAPITAL
Common unitholders (31,915,939 and 23,049,239 units outstanding
at December 31, 2001 and 2000, respectively)                                              408,562           217,073
Class B Common unitholders (1,307,190 units outstanding at each date)                      19,534            21,042
Subordinated unitholders (10,029,619 units outstanding at each date)                      (38,891)          (27,316)
General partner                                                                            13,592             3,200
                                                                                  ----------------  ----------------
                                                                                          402,797           213,999
                                                                                  ----------------  ----------------
                                                                                  $     1,261,251   $       885,801
                                                                                  ================  ================

                See notes to consolidated financial statements.

                                      F-3

              PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per unit data)

                                                                            Year Ended December 31,
                                                                ---------------------------------------------------
                                                                     2001             2000              1999
                                                                ---------------  ----------------  ----------------
                                                                                          
REVENUES                                                         $   6,868,215    $    6,641,187    $   10,910,423

COST OF SALES AND OPERATIONS                                         6,720,970         6,506,504        10,800,109

UNAUTHORIZED TRADING LOSSES
  AND RELATED EXPENSES (Note 3)                                              -             6,963           166,440

INVENTORY VALUATION ADJUSTMENT (Note 2)                                  4,984                 -                 -
                                                                ---------------  ----------------  ----------------
Gross Margin                                                           142,261           127,720           (56,126)
                                                                ---------------  ----------------  ----------------

EXPENSES
General and administrative                                              46,586            40,821            23,211
Depreciation and amortization                                           24,307            24,523            17,344
Restructuring expense                                                        -                 -             1,410
                                                                ---------------  ----------------  ----------------
Total expenses                                                          70,893            65,344            41,965
                                                                ---------------  ----------------  ----------------

OPERATING INCOME (LOSS)                                                 71,368            62,376           (98,091)

Interest expense                                                       (29,082)          (28,691)          (21,139)
Gain on sale of assets (Note 5)                                            984            48,188            16,457
Interest and other income (expense)                                        401            10,776               958
                                                                ---------------  ----------------  ----------------

Income (loss) before extraordinary item and
  cumulative effect of accounting change                                43,671            92,649          (101,815)
Extraordinary item (Note 10)                                                 -           (15,147)           (1,545)
Cumulative effect of accounting change (Note 9)                            508                 -                 -
                                                                ---------------  ----------------  ----------------
NET INCOME (LOSS)                                                $      44,179    $       77,502    $     (103,360)
                                                                ===============  ================  ================

NET INCOME (LOSS) - LIMITED PARTNERS                             $      42,239    $       75,754    $     (101,517)
                                                                ===============  ================  ================

NET INCOME (LOSS) - GENERAL PARTNER                              $       1,940    $        1,748    $       (1,843)
                                                                ===============  ================  ================

BASIC AND DILUTED NET INCOME (LOSS)
  PER LIMITED PARTNER UNIT
  Income (loss) before extraordinary item and
    cumulative effect of accounting change                       $        1.12    $         2.64    $        (3.16)
  Extraordinary item                                                         -             (0.44)            (0.05)
  Cumulative effect of accounting change                                  0.01                 -                 -
                                                                ---------------  ----------------  ----------------
  Net income (loss)                                              $        1.13    $         2.20    $        (3.21)
                                                                ===============  ================  ================

WEIGHTED AVERAGE UNITS OUTSTANDING                                      37,528            34,386            31,633
                                                                ===============  ================  ================

                See notes to consolidated financial statements.

                                      F-4

              PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)

                                                                                       Year Ended December 31,
                                                                            ----------------------------------------------
                                                                                  2001            2000           1999
                                                                            ---------------  --------------  -------------
                                                                                                   
CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)                                                            $      44,179    $    77,502    $   (103,360)
Items not affecting cash flows
  from operating activities:
    Depreciation and amortization                                                   24,307         24,523          17,344
    (Gain) loss on sale of assets (Note 5)                                            (984)       (48,188)        (16,457)
    Cumulative effect of accounting change                                            (508)             -               -
    Noncash compensation expense                                                     5,741          3,089           1,013
    Allowance for doubtful accounts                                                  3,000          5,000               -
    Inventory valuation adjustment                                                   4,984              -               -
    Other non cash items                                                              (207)         4,574           1,047
Change in assets and liabilities, net of acquisition:
    Accounts receivable and other                                                  (18,856)       120,497        (224,181)
    Inventory                                                                     (117,878)       (11,954)         34,772
    Accounts payable and other current liabilities                                  46,671       (161,543)        164,783
    Pipeline linefill                                                              (13,736)       (16,679)             (3)
    Other long-term liabilities and deferred credits                                   600         (8,591)         18,873
    Due (to) from related party                                                     (7,266)       (21,741)         34,924
                                                                            ---------------  --------------  -------------

Net cash provided by (used in) operating activities                                (29,953)       (33,511)        (71,245)
                                                                            ---------------  --------------  -------------

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions (Note 4)                                                             (229,162)             -        (176,918)
Additions to property and equipment                                                (21,069)       (12,603)        (12,801)
Disposals of property and equipment and other (Note 5)                                 740        223,604           3,626
                                                                            ---------------  --------------  -------------

Net cash provided by (used in) investing activities                               (249,491)       211,001        (186,093)
                                                                            ---------------  --------------  -------------

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of units (Note 7)                                           227,549              -          76,450
Costs incurred in connection with financing arrangements                            (6,351)        (6,748)        (17,243)
Subordinated notes - general partner                                                     -       (114,000)        114,000
Proceeds from long-term debt                                                     1,837,750      1,433,750         403,721
Proceeds from short-term debt                                                      492,005         51,300         131,119
Principal payments of long-term debt                                            (1,803,073)    (1,423,850)       (268,621)
Principal payments of short-term debt                                             (392,422)      (108,719)        (82,150)
Distributions to unitholders                                                       (75,929)       (59,565)        (51,673)
                                                                            ---------------  --------------  -------------

Net cash provided by (used in) financing activities                                279,529       (227,832)        305,603
                                                                            ---------------  --------------  -------------

Net increase (decrease) in cash and cash equivalents                                    85        (50,342)         48,265
Cash and cash equivalents, beginning of period                                       3,426         53,768           5,503
                                                                            ---------------  --------------  -------------

Cash and cash equivalents, end of period                                     $       3,511    $     3,426     $    53,768
                                                                            ===============  ==============  =============

                See notes to consolidated financial statements.

                                      F-5

              PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
                                (in thousands)

                                                                                                                    Total
                                                                Class B                                General    Partners'
                                         Common Units         Common Units       Subordinated Units    Partner     Capital
                                    ---------------------- ------------------- --------------------- ---------- ------------
                                      Units      Amount      Units     Amount    Units      Amount     Amount      Amount
                                    --------- ------------ --------- --------- --------- ----------- ---------- ------------
                                                                                           
Balance at December 31, 1998          20,059     $253,568        -   $      -    10,030   $  15,995   $    980    $ 270,543

Issuance of Class B Common Units           -            -    1,307     25,000         -           -        252       25,252

Noncash compensation expense               -            -        -          -         -           -      1,013        1,013

Issuance of units to public            2,990       50,654        -          -         -           -        544       51,198

Net loss                                   -      (62,598)       -     (3,218)        -     (35,701)    (1,843)    (103,360)

Distributions                              -      (33,265)       -     (1,234)        -     (15,915)    (1,259)     (51,673)
                                    --------- ------------ --------- --------- --------- ----------- ---------- ------------

Balance at December 31, 1999          23,049      208,359    1,307     20,548    10,030     (35,621)      (313)     192,973

Noncash compensation expense               -            -        -          -         -           -      3,089        3,089

Net income                                 -       50,780        -      2,878         -      22,096      1,748       77,502

Distributions                              -      (42,066)       -     (2,384)        -     (13,791)    (1,324)     (59,565)
                                    --------- ------------ --------- --------- --------- ----------- ---------- ------------

Balance at December 31, 2000          23,049      217,073    1,307     21,042    10,030     (27,316)     3,200      213,999

Issuance of units                      8,867      222,032        -          -         -           -      5,517      227,549

Noncash compensation expense               -            -        -          -         -           -      5,741        5,741

Net income                                 -       29,436        -      1,476         -      11,327      1,940       44,179

Distributions                              -      (51,271)       -     (2,549)        -     (19,558)    (2,551)     (75,929)

Other comprehensive income                 -       (8,708)       -       (435)        -      (3,344)      (255)     (12,742)
                                    --------- ------------ --------- --------- --------- ----------- ---------- ------------

Balance at December 31, 2001          31,916    $ 408,562    1,307   $ 19,534    10,030   $ (38,891)  $ 13,592    $ 402,797
                                    ========= ============ ========= ========= ========= =========== ========== ============

                 See notes to consolidated financial statements.

                                       F-6

              PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Organization and Basis of Presentation

   Organization

     We are a publicly traded Delaware limited partnership engaged in interstate
and intrastate marketing, transportation and terminalling of crude oil and
liquefied petroleum gas (LPG). We were formed in September 1998 to acquire and
operate the midstream crude oil business and assets of Plains Resources Inc. and
its wholly owned affiliates ("Plains Resources") as a separate, publicly traded
master limited partnership.

     We completed our initial public offering (IPO) in November 1998, issuing
13.1 million common units at $20.00 per unit and received net proceeds of $244.7
million. Concurrently with the offering, Plains Resources sold certain assets to
us and contributed other assets in exchange for cash, common and subordinated
units, an aggregate 2% general partner interest, the right to receive incentive
distributions as defined in the partnership agreement and the assumption of
related indebtedness. Immediately after our initial public offering, Plains
Resources owned 100% of our general partner interest and an overall effective
ownership in the Partnership of 57% (including the 2% general partner interest
and common and subordinated units owned by it).

     In May 2001, senior management of our general partner and a group of
financial investors entered into a transaction with Plains Resources to acquire
control of the general partner interest and a majority of the outstanding
subordinated units. The transaction closed in June 2001, and for purposes of
this report is referred to as the "General Partner Transition." As a result of
this transaction, Plains Resources' ownership in the general partner was reduced
from 100% to 44%. Additionally, as a result of this transaction and various
equity offerings conducted since the IPO, Plains Resources' overall effective
ownership has been reduced to approximately 29%.

     The general partner interest is now held by Plains AAP, L.P., a Delaware
limited partnership. Plains All American GP LLC, a Delaware limited liability
company, is Plains AAP, L.P.'s general partner. Our operations and activities
are managed by, and our officers and personnel are employed by, Plains All
American GP LLC. Unless the context otherwise requires, we use the term "general
partner" to refer to both Plains AAP, L.P. and Plains All American GP LLC. We
use the phrase "former general partner" to refer to the subsidiary of Plains
Resources that formerly held the general partner interest.

     We conduct our operations through our wholly owned operating limited
partnerships Plains Marketing, L.P., All American Pipeline, L.P., and Plains
Marketing Canada, L.P. Our operations are concentrated in Texas, Oklahoma,
California, Louisiana and the Canadian provinces of Alberta, Saskatchewan and
Manitoba.

   Basis of Consolidation and Presentation

     The accompanying financial statements and related notes present our
consolidated financial position as of December 31, 2001 and 2000, and the
results of our operations, cash flows and changes in partners' capital for the
years ended December 31, 2001, 2000 and 1999. All significant intercompany
transactions have been eliminated. Certain reclassifications were made to prior
period amounts to conform with the current period presentation.

Note 2 -- Summary of Significant Accounting Policies

   Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Significant estimates we make include (1) estimated useful lives of assets,
which impacts depreciation and amortization, (2) allowance for doubtful accounts
receivable, (3) accruals related to revenues and expenses and (4) liability and
contingency accruals. Although we believe these estimates are reasonable, actual
results could differ from these estimates.

   Revenue Recognition

     Gathering and marketing revenues are accrued at the time title to the
product sold transfers to the purchaser, which occurs upon receipt of the
product by the purchaser. Terminalling and storage revenues are recognized at
the time service is performed. Revenues for the transportation of crude oil are
recognized either at the point of delivery or at the point of receipt pursuant
to regulated and non-regulated tariffs.

                                      F-7

    Cost of Sales and Operations

     Cost of sales and operations consists of the cost of crude oil,
transportation and storage fees, field and pipeline operating expenses and
letter of credit expenses. Field and pipeline operating expenses consist
primarily of fuel and power costs, telecommunications, labor costs for truck
drivers and pipeline field personnel, maintenance, utilities, insurance and
property taxes.

    Cash and Cash Equivalents

     Cash and cash equivalents consist of all demand deposits and funds invested
in highly liquid instruments with original maturities of three months or less
and at times may exceed federally insured limits. We periodically assess the
financial condition of the institutions where these funds are held and believe
that any possible credit risk is minimal.

    Accounts Receivable

     Our accounts receivable are primarily from purchasers and shippers of crude
oil. The majority of our accounts receivable relate to our gathering and
marketing activities that can generally be described as high volume and low
margin activities, in many cases involving complex exchanges of crude oil
volumes. We make a determination of the amount, if any, of the line of credit to
be extended to any given customer and the form and amount of financial
performance assurances we require. Such financial assurances are commonly
provided in the form of standby letters of credit.

     We routinely review our receivable balances to identify past due amounts
and analyze the reasons such amounts have not been collected. In many instances,
such delays involve billing delays and discrepancies or disputes as to the
appropriate price, volumes or quality of crude oil delivered or exchanged. We
also attempt to monitor changes in the creditworthiness of our customers as a
result of developments related to each customer, the industry as a whole and the
general economy. At December 31, 2001, approximately 93% of accounts receivable
were less than 60 days past scheduled invoice date. At December 31, 2001, our
allowance for doubtful accounts receivable totaled $3.0 million for receivables
included in current assets and $5.0 million for receivables classified as
long-term, representing 11% and 33%, respectively, of all balances greater than
60 days past scheduled invoice date. There was no allowance for doubtful
accounts at December 31, 1999. We consider these reserves adequate. Amounts due
from affiliated entities at December 31, 2001, totaled less than $0.6 million
and represented amounts due under current contracts in the ordinary course of
business or billings for reimbursing expenses that were collected subsequent to
year end. None of the accounts receivables are related to any equity investments
in the Partnership.

   Inventory

     Inventory consists of liquefied petroleum gas and crude oil in pipelines,
storage tanks and rail cars which is valued at the lower of cost or market, with
cost determined using an average cost method. In the fourth quarter of 2001, the
Partnership recorded a $5.0 million noncash writedown of operating crude oil
inventory to reflect prices at December 31, 2001. During 2001, the price of
crude oil traded on the NYMEX averaged $25.98 per barrel. At December 31, 2001,
the NYMEX crude oil price was approximately 24% lower, or $19.84 per barrel.

   Property and Equipment and Pipeline Linefill

     Property and equipment is stated at cost and consists of (in thousands):

                                                               December 31,
                                                        ---------------------------
                                                            2001           2000
                                                        ------------    -----------
                                                                  
Crude oil pipelines                                       $ 470,671      $ 359,826
Crude oil pipeline facilities                                87,446         39,358
Crude oil storage and terminal facilities                    62,974         45,989
Trucking equipment, injection stations and other             25,599         19,435
Office property and equipment                                 6,360          3,011
                                                        ------------    -----------

                                                            653,050        467,619
Less accumulated depreciation and amortization              (48,131)       (26,974)
                                                        ------------    -----------

                                                          $ 604,919      $ 440,645
                                                        ============    ===========

                                       F-8

     Depreciation is computed using the straight-line method over estimated
useful lives as follows:

          .   crude oil pipelines - 30 years;
          .   crude oil pipeline facilities - 30 years;
          .   crude oil storage and terminal facilities - 30 to 40 years;
          .   trucking equipment, injection stations and other - 5 to 15 years;
              and
          .   office property and equipment - 5 years

     Acquisitions and improvements are capitalized; maintenance and repairs are
expensed as incurred.

     Pipeline linefill is recorded at cost and consists of liquefied petroleum
gas and crude oil linefill used to pack a pipeline such that when an incremental
barrel enters a pipeline it forces a barrel out at another location as well as
minimum crude oil necessary to operate our storage and terminalling facilities.
At December 31, 2001, we had approximately 2.6 million barrels of crude oil and
6.4 million gallons of liquefied petroleum gas used to maintain our minimum
operating linefill requirements. Proceeds from the sale and repurchase of
pipeline linefill are reflected as cash flows from operating activities in the
accompanying consolidated statements of cash flows.

   Impairment of Long-Lived Assets

     Long-lived assets with recorded values that are not expected to be
recovered through future cash flows are written-down to estimated fair value.
Fair value is generally determined from estimated discounted future net cash
flows.

   Other Assets

     Other assets consist of the following (in thousands):

                                                  December 31,
                                           ---------------------------
                                              2001           2000
                                           ------------   ------------
                                                    
Debt issue costs                              $ 17,293        $ 8,918
Long term receivable, net                       10,000          5,000
Goodwill                                         9,419            601
Intangible assets (contracts)                      980              -
Other                                            7,649            169
                                           ------------   ------------

                                                45,341         14,688
Less accumulated amortization                   (4,458)        (1,748)
                                           ------------   ------------

                                              $ 40,883       $ 12,940
                                           ============   ============

     Costs incurred in connection with the issuance of long-term debt are
capitalized and amortized using the straight-line method over the term of the
related debt. Use of the straight-line method does not differ materially from
the "effective interest" method of amortization. Goodwill is recorded as the
amount of the purchase price in excess of the fair value of certain assets
purchased. In accordance with Statement of Financial Accounting Standards (SFAS)
No. 142, "Goodwill and Other Intangible Assets", which we will adopt in its
entirety January 1, 2002, we will test goodwill and other intangible assets
periodically to determine whether an impairment has occurred. An impairment
occurs when the carrying amount of an asset exceeds the fair value of the
recognized goodwill or intangible asset. If impairment occurs, the loss is
recorded in the period.

    Income and Other Taxes

     No provision for U.S. federal or Canadian income taxes related to our
operations is included in the accompanying consolidated financial statements,
because as a partnership we are not subject to federal, state or provincial
income tax and the tax effect of our activities accrues to the unitholders. Net
earnings for financial statement purposes may differ significantly from taxable
income reportable to unitholders as a result of differences between the tax
bases and financial reporting bases of assets and liabilities and the taxable
income allocation requirements under the partnership agreement. Individual
unitholders will have different investment bases depending upon the timing and
price of acquisition of partnership units. Further, each unitholder's tax
accounting, which is partially dependent upon the unitholder's tax position, may
differ from the accounting followed in the consolidated financial statements.
Accordingly, there could be significant differences between each individual
unitholder's tax bases and the unitholder's share of the net assets reported in
the consolidated financial statements. We do not have access to information
about each individual unitholder's tax attributes, and the aggregate tax bases
cannot be readily determined. Accordingly, we do not believe that in our
circumstances, the aggregate difference would be meaningful information.

                                       F-9

     The Partnership's Canadian operations are conducted through an operating
limited partnership, of which our wholly owned subsidiary PMC (Nova Scotia)
Company is the general partner. For Canadian tax purposes, the general partner
is taxed as a corporation, subject to income taxes and a capital-based tax at
federal and provincial levels. For 2001, the income tax was not material and the
capital-based tax was approximately $0.4 million (U.S.). In addition, interest
payments made by Plains Marketing Canada, L.P. on its intercompany loan from
Plains Marketing, L.P. are subject to a 10% Canadian withholding tax, which for
2001 totaled $0.3 million and is recorded in other expense.

     In addition to federal income taxes, owners of our common units may be
subject to other taxes, such as state and local and Canadian federal and
provincial taxes, unincorporated business taxes, and estate, inheritance or
intangible taxes that may be imposed by the various jurisdictions in which we do
business or own property. A unitholder may be required to file Canadian federal
income tax returns and to pay Canadian federal and provincial income taxes and
to file state income tax returns and to pay taxes in various states.

   Hedging

     We utilize various derivative instruments, for purposes other than trading,
to hedge our exposure to price fluctuations on crude oil and liquefied petroleum
gas in storage and expected purchases, sales and transportation of those
commodities. The derivative instruments consist primarily of futures and option
contracts traded on the New York Mercantile Exchange and over-the-counter
transactions including crude oil swap contracts entered into with financial
institutions. We also utilize interest rate and foreign exchange swaps and
collars to manage the interest rate exposure on our long-term debt and foreign
exchange exposure arising from our Canadian operations.

     Beginning January 1, 2001, we record all derivative instruments on the
balance sheet as either assets or liabilities measured at their fair value under
the provisions of SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities". Generally for our domestic U.S. operations, these derivative
instruments qualify for hedge accounting as they reduce the price risk of the
underlying hedged item and are designated as a hedge at inception. These
derivative hedges result in financial impacts that are inversely correlated to
those of the items being hedged. This correlation, generally in excess of 80% (a
measure of hedge effectiveness), is measured both at the inception of the hedge
and on an ongoing basis. To qualify for hedge accounting treatment, companies
must formally document, designate and assess the effectiveness of these
transactions. If the necessary correlation ceases to exist or if physical
delivery of the hedged item becomes improbable, we would discontinue hedge
accounting and apply mark to market accounting. Gains and losses on the
termination of hedging instruments are deferred and recognized in income as the
impact of the hedged item is recorded.

     SFAS 133 requires that changes in derivative contracts' fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. We have some derivative contracts, primarily related to our LPG activities,
that do not receive hedge treatment, as the correlation is not consistently at
the necessary level between prices for those markets or commodities and the
hedging instrument. As a result, gains and losses on those derivative contracts
impact earnings directly. The intent of entering into these transactions,
however, is to mitigate price exposure arising from those operations.

     Aside from the exceptions noted above, unrealized changes in the market
value of crude oil or LPG hedge contracts are not generally recognized in our
consolidated statement of operations until the underlying hedged transaction
occurs. The financial impacts of these hedge contracts are included in our
consolidated statements of operations as a component of revenues. Such financial
impacts are offset by gains or losses realized in the physical market. Cash
flows from these hedging activities are included in operating activities in the
accompanying consolidated statements of cash flows. Net deferred gains and
losses on futures contracts (including closed futures contracts) entered into to
hedge anticipated crude oil and LPG purchases and sales, are included in current
assets or current liabilities in the accompanying consolidated balance sheets.
Deferred gains or losses from inventory hedges are included as part of the
inventory costs and recognized when the related inventory is sold.

     Amounts paid or received from interest rate swaps and collars are charged
or credited to interest expense and matched with the cash flows and interest
expense of the debt being hedged, resulting in an adjustment to the effective
interest rate.

   Net Income Per Unit

     Basic and diluted net income (loss) per unit is determined by dividing net
income (loss) after deducting the amount allocated to the general partner
interest, (including its incentive distribution in excess of its 2% interest),
by the weighted average number of outstanding common units and subordinated
units. Partnership income (loss) is first allocated according to percentage
ownership in the Partnership and then reallocated between the limited partners
and general partner based on the amount of incentive distributions. Basic and

                                      F-10

diluted net income (loss) per unit for 2001, 2000 and 1999 is as follows (in
thousands, except per unit data):

                                                                    Year Ended December 31,
                                                         --------------------------------------------
                                                             2001            2000           1999
                                                         -------------   -------------  -------------
                                                                               
               Net income (loss)                          $     44,179    $     77,502   $   (103,360)

               Less:
                 General partner incentive distributions        (1,056)           (198)          (224)
                 General partner 2% ownership                     (884)         (1,550)         2,067
                                                         -------------   -------------  -------------

               Net income (loss) attributable to
                 limited partners                         $     42,239    $     75,754   $   (101,517)
                                                         =============   =============  =============

               Weighted average units outstanding               37,528          34,386         31,633
                                                         =============   =============  =============

               Basic and diluted net income (loss)
                 per limited partner unit                     $   1.13        $   2.20      $   (3.21)
                                                         =============   =============  =============

   Foreign Currency Translation

     Our cash flow stream relating to our Canadian operations is based on the
U.S. dollar equivalent of such amounts measured in Canadian dollars. Assets and
liabilities of our Canadian subsidiaries are translated to U. S. dollars using
the applicable exchange rate as of the end of a reporting period. Revenues and
expenses are translated using the average exchange rate during the reporting
period.

   Recent Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
141 "Business Combinations" and SFAS 142 "Goodwill and Other Intangible Assets".
SFAS 141 requires all business combinations initiated after June 30, 2001 (see
Note 4), to be accounted for under the purchase method. For all business
combinations for which the date of acquisition is after June 30, 2001, this
Standard also establishes specific criteria for the recognition of intangible
assets separately from goodwill. We have adopted SFAS 142 effective January 1,
2002. SFAS 142 changes the accounting for goodwill and other intangible assets
after an acquisition. The most significant changes made by SFAS 142 are: 1)
goodwill and intangible assets with indefinite lives will no longer be
amortized; 2) goodwill and intangible assets with indefinite lives must be
tested for impairment at least annually; and 3) the amortization period for
intangible assets with finite lives will no longer be limited to forty years. In
conjunction with the adoption of SFAS 142, amortization on the unamortized
portion of the goodwill arising from previous acquisitions will cease in 2002.
The adoption of SFAS 142 will not have a material effect on either our financial
position, results of operations, or cash flows.

     In June 2001, the FASB also issued SFAS 143, "Asset Retirement
Obligations". SFAS 143 establishes accounting requirements for retirement
obligations associated with tangible long-lived assets, including (1) the time
of the liability recognition, (2) initial measurement of the liability, (3)
allocation of asset retirement cost to expense, (4) subsequent measurement of
the liability and (5) financial statement disclosures. SFAS 143 requires that an
asset retirement cost should be capitalized as part of the cost of the related
long-lived asset and subsequently allocated to expense using a systematic and
rational method. We will adopt the statement effective January 1, 2003, as
required. The transition adjustment resulting from the adoption of SFAS 143 will
be reported as a cumulative effect of a change in accounting principle. At this
time, we cannot reasonably estimate the effect of the adoption of this statement
on either our financial position, results of operations, or cash flows.

     In August 2001, the FASB approved SFAS 144, "Accounting for Impairment
or Disposal of Long-Lived Assets". SFAS 144 establishes a single accounting
model for long-lived assets to be disposed of by sale and provides additional
implementation guidance for assets to be held and used and assets to be disposed
of other than by sale. Upon adoption of this Statement effective January 1,
2002, there was no effect on either our financial position, results of
operations or cash flows.

     In June 1998, the FASB issued SFAS 133, which was subsequently amended (i)
in June 1999 by SFAS 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133", which
deferred the effective date of SFAS 133 to fiscal years beginning after June 15,
2000; and (ii) in June 2000 by SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedge Activities," which amended certain provisions,
inclusive of the definition of the normal purchase and sale exclusion. We have
determined that our physical purchase and sale agreements qualify for the normal
purchase and sale exclusion.

     SFAS 133 requires that all derivative instruments be recorded on the
balance sheet as either assets or liabilities measured at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other

                                      F-11

comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if so, the type of hedge transaction. For fair value
hedge transactions in which we are hedging changes in the fair value of an
asset, liability, or firm commitment, changes in the fair value of the
derivative instrument will generally be offset in the income statement by
changes in the fair value of the hedged item. For cash flow hedge transactions,
in which we are hedging the variability of cash flows related to a variable-rate
asset, liability, or a forecasted transaction, changes in the fair value of the
derivative instrument will be reported in other comprehensive income, a
component of partners' capital. The gains and losses on the derivative
instrument that are reported in other comprehensive income will be reclassified
as earnings in the periods in which earnings are affected by the variability of
the cash flows of the hedged item. The ineffective portion of all hedges will be
recognized in earnings in the current period. Hedge effectiveness is measured at
least quarterly based on the relative cumulative changes in fair value between
the derivative contract and the hedged item over time.

     We adopted SFAS 133, as amended, effective January 1, 2001. Our
implementation procedures identified all instruments in place at the adoption
date that are subject to the requirements of SFAS 133. Upon adoption, we
recorded a cumulative effect charge of $8.3 million in accumulated other
comprehensive income to recognize at fair value all derivative instruments that
are designated as cash flow hedging instruments and a cumulative effect gain of
$0.5 million to earnings. Correspondingly, an asset of $2.8 million and a
liability of $10.6 million were established. Hedge losses/gains included in
accumulated other comprehensive income are transferred to earnings as the
forecasted transactions actually occur. Implementation issues continue to be
addressed by the FASB and any change to existing guidance might impact our
implementation. Adoption of this standard will most likely increase volatility
in earnings and partners' capital through comprehensive income.

Note 3 -- Unauthorized Trading Losses

     In November 1999, we discovered that a former employee had engaged in
unauthorized trading activity, resulting in losses of approximately $162.0
million ($174.0 million, including estimated associated costs and legal
expenses). A full investigation into the unauthorized trading activities by
outside legal counsel and independent accountants and consultants determined
that the vast majority of the losses occurred from March through November 1999.
Approximately $7.1 million of the unauthorized trading losses was recognized in
1998 and the remainder in 1999. In 2000, we recognized an additional $7.0
million charge for litigation related to the unauthorized trading losses (see
Note 14).

Note 4 -- Acquisitions

   Wapella Pipeline System

     In December 2001, we acquired the Wapella Pipeline System from private
investors for approximately $12.0 million, including transaction costs. The
system is located in southeastern Saskatchewan and southwestern Manitoba. In
2001, the Wapella Pipeline System delivered approximately 11,000 barrels per day
of crude oil to the Enbridge Pipeline at Cromer, Manitoba. The acquisition also
includes approximately 21,500 barrels of crude oil storage capacity located
along the system as well as a truck terminal. Initial financing for the
acquisition was provided through borrowings under our bank credit facility.

     The Wapella acquisition has been accounted for using the purchase method of
accounting and the purchase price was allocated in accordance with SFAS 141 (see
Note 2). The purchase price allocation is as follows (in thousands):

               Crude oil pipeline, gathering and terminal assets    $   10,251
               Other property and equipment                              1,720
                                                                  ------------
               Total                                                $   11,971
                                                                  ============

   CANPET Energy Group Inc.

     In July 2001, we acquired the assets of CANPET Energy Group Inc.
("CANPET"), a Calgary-based Canadian crude oil and liquefied petroleum gas
marketing company, for approximately $42.0 million plus excess inventory at the
closing date of approximately $25.0 million. Approximately $24.0 million of the
purchase price plus $25.0 million for the additional inventory was paid in cash
at closing, and the remainder, which is subject to certain performance
standards, will be paid in common units in April 2004, if such standards are
met. At the time of the acquisition, CANPET's activities consisted of gathering
approximately 75,000 barrels per day of crude oil and marketing an average of
approximately 26,000 barrels per day of natural gas liquids or LPG's. The
principal assets acquired include a crude oil handling facility, a 130,000-
barrel tank facility, LPG facilities, existing business relationships and
working capital of approximately $8.6 million. Initial financing for the
acquisition was provided through borrowings under our bank credit facility.

                                      F-12

     The CANPET acquisition has been accounted for using the purchase method of
accounting and the purchase price was allocated in accordance with SFAS 141 (see
Note 2). The purchase price allocation is as follows (in thousands):

                                                               
                    Inventory                                      $ 29,708
                    Goodwill                                          8,818
                    Intangible assets (contracts)                       980
                    Other assets, including debt issue costs          1,661
                    Pipeline linefill                                 4,332
                    Crude oil gathering and terminal assets           4,243
                    Other property and equipment                        502
                                                                  ---------
                    Total                                          $ 50,244
                                                                  =========

   Murphy Oil Company Ltd. Midstream Operations

     In May 2001, we closed the acquisition of substantially all of the Canadian
crude oil pipeline, gathering, storage and terminalling assets of Murphy Oil
Company Ltd. for approximately $161.0 million in cash ("the Murphy
Acquisition"), including financing and transaction costs. Initial financing for
the acquisition was provided through borrowings under our bank credit
facilities. The purchase included $6.5 million for excess inventory in the
pipeline systems. The principal assets acquired include approximately 450 miles
of crude oil and condensate transmission mainlines (including dual lines on
which condensate is shipped for blending purposes and blended crude is shipped
in the opposite direction) and associated gathering and lateral lines,
approximately 1.1 million barrels of crude oil storage and terminalling capacity
located primarily in Kerrobert, Saskatchewan, approximately 254,000 barrels of
pipeline linefill and tank inventories, an inactive 108-mile mainline system and
121 trailers used primarily for crude oil transportation. We have reactivated
the 108-mile mainline system and began shipping volumes in May of 2001.

     Murphy agreed to continue to transport production from fields previously
delivering crude oil to these pipeline systems, under a long-term contract. At
the time of the acquisition, the volume under the contract was approximately
11,000 barrels per day. Total volumes transported on the pipeline system in 2001
were approximately 223,000 barrels per day of light, medium and heavy crudes, as
well as condensate.

     The Murphy Acquisition has been accounted for using the purchase method of
accounting and the purchase price was allocated in accordance with Accounting
Principles Board Opinion No. 16, Business Combinations ("APB 16"). The purchase
price allocation, as adjusted pursuant to the provisions of the purchase and
sale agreement upon resolution of an outstanding pipeline tariff dispute, is as
follows (in thousands):

                 Crude oil pipeline, gathering and terminal assets    $145,106
                 Pipeline linefill                                       7,602
                 Net working capital items                               1,953
                 Other property and equipment                              487
                 Other assets, including debt issue costs                  360
                                                                      --------
                 Total                                                $155,508
                                                                      ========

                                      F-13

   Pro Forma Results for the Murphy and CANPET Acquisitions

     The following unaudited pro forma data is presented to show pro forma
revenues, net income and basic and diluted net income per limited partner unit
for the Partnership as if the Murphy and CANPET acquisitions had occurred on
January 1, 2000 (in thousands):

                                                                             Year Ended December 31,
                                                                         -----------------------------
                                                                            2001 (1)        2000 (1)
                                                                         --------------  -------------
                                                                                   
          Revenues                                                        $   7,043,143   $  7,330,621
                                                                         ==============  =============

          Income before extraordinary item and cumulative
             effective of accounting change                               $      51,905   $     98,821
                                                                         ==============  =============
          Net income                                                      $      52,413   $     83,674
                                                                         ==============  =============
          Basic and diluted income before extraordinary item and
             cumulative effect of accounting change per
             limited partner unit                                         $        1.32   $       2.81
                                                                         ==============  =============
          Basic and diluted net income per limited partner unit           $        1.33   $       2.38
                                                                         ==============  =============

          _________________

          (1)  The pro forma information does not include the results of the
               Wapella acquisition as it would not differ materially from the
               reported results.

   Scurlock Acquisition

     On May 12, 1999, we completed the acquisition of Scurlock Permian LLC and
certain other pipeline assets from Marathon Ashland Petroleum LLC. Including
working capital adjustments and closing and financing costs, the cash purchase
price was approximately $141.7 million.

     Financing for the Scurlock acquisition was provided through:

        .  borrowings of approximately $92.0 million under a previous bank
           facility;
        .  the sale to our former general partner of 1.3 million of our Class B
           common units for a total cash consideration of $25.0 million, or
           $19.125 per unit, the price equal to the market value of our common
           units on May 12, 1999; and
        .  a $25.0 million draw under our revolving credit agreement.

     The assets, liabilities and results of operations of Scurlock are included
in our consolidated financial statements effective May 1, 1999. The Scurlock
acquisition has been accounted for using the purchase method of accounting and
the purchase price was allocated in accordance with APB 16 as follows (in
thousands):

          Crude oil pipeline, gathering and terminal assets    $  125,120
          Other property and equipment                              1,546
          Pipeline linefill                                        16,057
          Other assets (debt issue costs)                           3,100
          Other long-term liabilities (environmental accrual)      (1,000)
          Net working capital items                                (3,090)
                                                              -----------

          Cash paid                                            $  141,733
                                                              ===========

     The purchase accounting entries include a $1.0 million accrual for
estimated environmental remediation costs. Under the agreement for the sale of
Scurlock by Marathon Ashland Petroleum, Marathon Ashland Petroleum has agreed to
indemnify us and hold us harmless for claims, liabilities and losses resulting
from any act or omission attributable to Scurlock's business or properties
occurring prior to the date of the closing of such sale to the extent the
aggregate amount of such losses exceed $1.0 million; provided, however, that
claims for such losses must individually exceed $25,000 and must be asserted by
us against Marathon Ashland Petroleum on or before May 15, 2003.

    West Texas Gathering System Acquisition

     On July 15, 1999, we completed the acquisition of a West Texas crude oil
pipeline and gathering system from Chevron Pipe Line Company for approximately
$36.0 million, including transaction costs. Our total acquisition cost was
approximately $38.9 million including costs to address certain issues identified
in the due diligence process. The principal assets acquired include
approximately 450 miles of crude oil transmission mainlines, approximately 400
miles of associated gathering and lateral lines and approximately 2.9 million
barrels of crude oil storage and terminalling capacity in Crane,

                                      F-14

Ector, Midland, Upton, Ward and Winkler Counties, Texas. Financing for the
amounts paid at closing was provided by a draw under a previous credit facility.

Note 5 -- Asset Disposition

     In December 2001, we sold excess communications equipment remaining from
the sale of the All American Pipeline discussed below and recognized a gain of
$1.0 million.

     In March 2000, we sold to a unit of El Paso Corporation for $129.0 million
the segment of the All American Pipeline that extends from Emidio, California to
McCamey, Texas. Except for minor third-party volumes, one of our subsidiaries,
Plains Marketing, L.P., was the sole shipper on this segment of the pipeline
since the acquisition of the line from Goodyear in July 1998. We realized net
proceeds of approximately $124.0 million after the associated transaction costs
and estimated costs to remove equipment. We used the proceeds from the sale to
reduce outstanding debt. We recognized a gain of approximately $20.1 million in
connection with the sale.

     We had suspended shipments of crude oil on this segment of the pipeline in
November 1999. At that time, we owned approximately 5.2 million barrels of crude
oil in the segment of the pipeline. We sold this crude oil from November 1999 to
February 2000 for net proceeds of approximately $100.0 million, which were used
for working capital purposes. We recognized gains of approximately $28.1 million
and $16.5 million in 2000 and 1999, respectively, in connection with the sale of
the linefill.

Note 6 -- Debt

     Short-term debt and current maturities of long-term debt consist of the
following (in thousands):

                                                                                             December 31,
                                                                                      --------------------------
                                                                                          2001           2000
                                                                                      ------------   -----------
                                                                                               
          $200.0 million senior secured letter of credit and borrowing facility
            bearing interest at a weighted average interest rate of 3.8% at
            December 31, 2001, and 8.4% at December 31, 2000                            $  100,000       $ 1,300
          Other                                                                              1,482             -
                                                                                      ------------   -----------
                                                                                           101,482         1,300
          Current portion of long-term debt                                                  3,000             -
                                                                                      ------------   -----------
            Total short-term debt and current maturities of long-term debt              $  104,482       $ 1,300
                                                                                      ============   ===========

     Long-term debt consists of the following (in thousands):

                                                                                             December 31,
                                                                                      --------------------------
                                                                                          2001          2000
                                                                                      ------------   -----------
                                                                                               
          $450.0 million senior secured domestic revolving credit facility, bearing
            interest at a weighted average interest rate of 4.5% at
            December 31, 2001, and 9.2% at December 31, 2000                            $   27,450     $ 320,000

          $200.0 million senior secured term B loan, bearing interest at a weighted
            average interest rate of 4.5% at December 31, 2001                             200,000             -

          $100.0 million senior secured term loan, bearing interest at a weighted
            average interest rate of 4.4% at December 31, 2001                             100,000             -

          $30.0 million Canadian senior secured revolving credit facility, bearing
            interest at a weighted average interest rate of 4.4% at
            December 31, 2001                                                               27,227             -
                                                                                      ------------   -----------
                                                                                           354,677       320,000
          Less current maturities                                                           (3,000)            -
                                                                                      ------------   -----------
            Total long-term debt                                                        $  351,677     $ 320,000
                                                                                      ============   ===========

                                      F-15

     In September 2001, we amended and expanded our credit facilities to include
a six-year, $200.0 million term B loan. In connection with this amendment, we
reduced the revolving portion of the facilities by $50.0 million. Our credit
facilities currently consist of:

         .   a $780.0 million senior secured revolving credit and term loan
             facility, which is secured by substantially all of our assets. The
             facility consists of (i) a $450.0 million domestic revolving
             facility (reflecting the $50 million reduction in such facility in
             connection with the September amendment), with a $10.0 million
             letter of credit sublimit, (ii) a $30.0 million Canadian revolving
             facility (with a $5.0 million letter of credit sublimit), (iii) a
             $100.0 million term loan and (iv) a $200.0 million term B loan. The
             facility matures, (i) as to the aggregate $480.0 million domestic
             and Canadian revolver portions, in April 2005, (ii) as to the
             $100.0 million term portion, in May 2006, and, (iii) as to the
             $200.0 million term B loan portion, September 2007. On the revolver
             portions, no principal is scheduled for payment prior to maturity.
             The $100.0 million term loan portion of this facility has four
             scheduled annual payments of principal, commencing May 4, 2002, in
             the respective amounts of 1%, 7%, 8% and 8% of the original term
             principal amount, with the remaining principal balance scheduled
             for payment on the stated maturity date of May 5, 2006. If any part
             of the term portion is prepaid prior to its first anniversary, a 1%
             premium will be due on that portion. The $200.0 million term B loan
             has 1% payable yearly commencing on September 21, 2002, with the
             remaining principal balance scheduled for payment on the stated
             maturity date of September 26, 2007. The term B loan may be prepaid
             without penalty. The revolving credit and term loan facility bears
             interest at our option at either the base rate, as defined, plus an
             applicable margin, or LIBOR plus an applicable margin, and further,
             the Canadian revolver may effectively bear interest based upon
             bankers' acceptance rates. We incur a commitment fee on the unused
             portion of the revolver portion of this credit facility.

         .   a $200.0 million senior secured letter of credit and borrowing
             facility, the purpose of which is to provide standby letters of
             credit to support the purchase and exchange of crude oil and other
             specified petroleum products for resale and borrowings to finance
             crude oil inventory and other specified petroleum products that
             have been hedged against future price risk. The letter of credit
             facility is secured by substantially all of our assets and has a
             sublimit for cash borrowings of $100.0 million to purchase crude
             oil and other petroleum products that have been hedged against
             future price risk and to fund margin requirements under NYMEX
             contracts used to facilitate our hedging activities. The letter of
             credit facility expires in April 2004. Aggregate availability under
             the letter of credit facility for direct borrowings and letters of
             credit is limited to a borrowing base that is determined monthly
             based on certain of our current assets and current liabilities,
             primarily inventory and accounts receivable and accounts payable
             related to the purchase and sale of crude oil and other specified
             petroleum products. We incur a commitment fee on the unused portion
             of this facility.

     Our credit facilities prohibit distributions on, or purchases or
redemptions of, units if any default or event of default is continuing. In
addition, the agreements contain various covenants limiting our ability to,
among other things:

         .   incur indebtedness;
         .   grant liens;
         .   sell assets;
         .   make investments;
         .   engage in transactions with affiliates;
         .   enter into certain contracts; and
         .   enter into a merger or consolidation.

     Our credit facilities treat a change of control as an event of default and
also require us to maintain:

         .   a current ratio (as defined) of 1.0 to 1.0;
         .   a debt coverage ratio which is not greater than 4.00 to 1;
         .   an interest coverage ratio which is not less than 2.75 to 1.0; and
         .   a debt to capital ratio of not greater than 0.70 to 1.0 prior to
             December 31, 2002, and 0.65 to 1.0 thereafter.

     A default under our credit facilities would permit the lenders to
accelerate the maturity of the outstanding debt and to foreclose on the assets
securing the credit facilities. As long as we are in compliance with our
commercial credit agreements, they do not restrict our ability to make
distributions of "available cash" as defined in our partnership agreement. We
are currently in compliance with the covenants contained in our credit
agreements.

                                      F-16

     The credit facilities provide that the Partnership may issue up to $400.0
million of senior unsecured debt that has a maturity date extending beyond the
maturity date of the credit facilities. If senior unsecured debt is issued, the
aggregate amount available under the $450.0 million U.S. revolving credit
facility will be reduced by an amount equal to (a) 40% of the face amount of the
senior unsecured debt if the aggregate amount of new debt issued is less than
$350.0 million, or (b) 50% of the face amount of the senior unsecured debt if
the aggregate amount of new debt issued is equal to or greater than $350.0
million; provided, however, in both cases, the amount of the revolver reduction
is decreased by $50.0 million.

     In January 2002, we amended our credit facility to remove a condition
requiring us to obtain lender approval before making any acquisition greater
than $50.0 million to provide the Partnership with greater structuring
flexibility to finance larger acquisitions.

   Maturities

     The aggregate amount of maturities of all long-term indebtedness at
December 31, 2001, for the next five years is: 2002 - $3.0 million, 2003 - $9.0
million, 2004 - $10.0 million, 2005 - $64.7 million, 2006 and thereafter -$268.0
million.

Note 7 - Partners' Capital and Distributions

     Partners' capital consists of (1) 33,223,129 common units, including
1,307,190 Class B common units, representing a 75.3% effective aggregate
ownership interest in the Partnership and its subsidiaries, (after giving affect
to the general partner interest), (2) 10,029,619 Subordinated units representing
a 22.7% effective aggregate ownership interest in the Partnership and its
subsidiaries limited partner interest (after giving affect to the general
partner interest) and (3) a 2% general partner interest.

     In May 2001, we completed a public offering of 3,966,700 common units.
Total net cash proceeds from the offering, including our former general
partner's proportionate contribution, were approximately $100.7 million. In
addition, in October 2001, we completed a public offering of 4,900,000 common
units. Net cash proceeds from the offering, including our general partner's
proportionate contribution, were approximately $126.0 million. The net proceeds
were used to repay borrowings under our revolving credit facility, a portion of
which was used to finance our Canadian acquisitions.

     We will distribute 100% of our available cash within 45 days after the end
of each quarter to unitholders of record and to our general partner. Available
cash is generally defined as all of our cash and cash equivalents on hand at the
end of each quarter less reserves established by our general partner for future
requirements. Distributions of available cash to holders of subordinated units
are subject to the prior rights of holders of common units to receive the
minimum quarterly distribution ("MQD") for each quarter during the subordination
period and to receive any arrearages in the distribution of the MQD on the
common units for the prior quarters during the subordination period. There were
no arrearages on common units at December 31, 2001. The MQD is $0.45 per unit
($1.80 per unit on an annual basis). Common units will not accrue arrearages
with respect to distributions for any quarter after the subordination period and
subordinated units will not accrue any arrearages with respect to distributions
for any quarter.

     The subordination period (as defined in the partnership agreement) will end
if certain financial tests are met for three consecutive four-quarter periods
(the "testing period"), but not sooner than December 31, 2003. During the first
quarter after the end of the subordination period, all of the subordinated units
will convert into common units, and will participate pro rata with all other
common units in future distributions. Early conversion of a portion of the
subordinated units may occur if the testing period is satisfied before December
31, 2003. We have determined that the first four-quarter period of the testing
period was satisfied as of September 30, 2001. Although we cannot give assurance
in that regard, if we continue to meet the requirements, 25% of the subordinated
units will convert in the fourth quarter of 2003 and the remainder will convert
in the first quarter of 2004.

     Our general partner is entitled to receive incentive distributions if the
amount we distribute with respect to any quarter exceeds levels specified in our
partnership agreement. Under the quarterly incentive distribution provisions,
generally the general partner is entitled to 15% of amounts we distribute in
excess of $0.450 per unit, 25% of the amounts we distribute in excess of $0.495
per unit and 50% of amounts we distribute in excess of $0.675 per unit. Cash
distributions for the first, second, third and fourth quarters of 2001 were
$0.4750, $0.5000, $0.5125 and $0.5125, respectively, per unit on our outstanding
common units, Class B units and subordinated units, representing an excess of
$0.025, $0.050, $0.0625 and $0.0625 per unit, respectively, over the MQD. Cash
distributions for the second, third and fourth quarters of 2000 were $0.4625 per
unit on our outstanding common units, Class B units and subordinated units,
representing an excess of $0.0125 per unit over the MQD. Cash distributions for
the second and third quarters of 1999 were $0.4625 and $0.4812 per unit,
respectively, on our outstanding common units, Class B units and subordinated
units, representing an excess of $0.0125 per unit and $0.0312 per unit,
respectively, over the MQD. Distributions were not paid on the subordinated
units for the fourth quarter of 1999.

                                      F-17

     The Class B common units are initially pari passu with common units with
respect to distributions, and are convertible into common units upon approval of
a majority of the common unitholders. The Class B unitholders may request that
we call a meeting of common unitholders to consider approval of the conversion
of Class B units into common units. If the approval of a conversion by the
common unitholders is not obtained within 120 days of a request, each Class B
common unitholder will be entitled to receive distributions, on a per unit
basis, equal to 110% of the amount of distributions paid on a common unit, with
such distribution right increasing to 115% if such approval is not secured
within 90 days after the end of the 120-day period. Except for the vote to
approve the conversion, Class B common units have the same voting rights as the
common units.

Note 8 -- Comprehensive Income

     Comprehensive income includes net income and certain items recorded
directly to Partners' Capital and classified as Other Comprehensive Income
(OCI). Such amounts are allocated in proportion to the limited partners and
general partners interest. Following the adoption of SFAS 133, we recorded a
charge to OCI of $8.3 million related to the change in fair value of certain
derivative financial instruments that qualified for cash flow hedge accounting.
The following table reflects comprehensive income for the year ended
December 31, 2001 (in thousands):

       Total comprehensive income at January 1, 2001              $        -
         Cumulative effect of change in accounting principle          (8,337)
         Reclassification adjustment for settled contracts            (2,526)
         Changes in fair value of outstanding hedging positions        6,123
         Currency translation adjustment                              (8,002)
                                                                 -----------
       Other comprehensive income (loss)                             (12,742)
         Net income                                                   44,179
                                                                 -----------
       Total comprehensive income at December 31, 2001            $   31,437
                                                                 ===========

Note 9 -- Financial Instruments

   Derivatives

     On January 1, 2001, we adopted SFAS 133 "Accounting for Derivative
Instruments and Hedging Activities" as amended by SFAS 137 and SFAS 138. In
accordance with the transition provisions of SFAS 133, we recorded a loss of
$8.3 million in OCI, representing the cumulative effect of an accounting change
to recognize, at fair value, all cash flow derivatives. We also recorded a
noncash gain of $0.5 million in earnings as a cumulative effect adjustment.

     At December 31, 2001, a $4.7 million unrealized loss was recorded to OCI
together with related assets and liabilities of $4.2 million and $8.2 million,
respectively. Earnings included a noncash gain of $0.2 million (excluding the
$0.5 million gain related to the cumulative effect of accounting change upon
adoption of SFAS 133) related to the ineffective portion of our cash flow
hedges, as well as certain derivative contracts that did not qualify as hedges
primarily relating to our LPG activities due to a low correlation between the
futures contract and hedged item. Our hedge-related assets and liabilities are
included in other current assets and other current liabilities in the
consolidated balance sheet.

     As of December 31, 2001, the total amount of deferred net losses on
derivative instruments recorded in OCI are expected to be reclassified to
earnings during 2002 and 2003. The following table sets forth our open crude oil
hedge positions at December 31, 2001. These are futures hedges and have
offsetting physical exposures to the extent they are effective.

                                                  2002                                               2003
                             ------------------------------------------------    ---------------------------------------------
                                1st Qtr      2nd Qtr      3rd Qtr    4th Qtr      1st Qtr     2nd Qtr    3rd Qtr     4th Qtr
                             ------------ ------------ ------------ ---------    --------- ------------ --------- ------------
                                                                                          
     Volume (bbls)
         Short positions       1,228,000             -      200,000         -            -      200,000         -    1,800,000
         Long positions                -     1,053,000            -         -            -            -         -            -
     Average price ($/bbl)   $     20.64   $     22.73   $    19.53  $      -     $      -   $    21.26   $     -   $    21.23

     Interest rate swaps and collars are used to hedge underlying interest
obligations. These instruments hedge interest rates on specific debt issuances
and qualify for hedge accounting. The interest rate differential is reflected as
an adjustment to interest expense over the life of the instruments. At December
31, 2001, we had interest rate swap and collar arrangements for an aggregate
notional principal amount of $275.0 million for which we would pay approximately
$5.3 million if such arrangements were terminated as of such date.

                                      F-18

     The table shown below summarizes the fair value of our interest rate swaps
and collars by year of maturity (in thousands):

                                              Year of Maturity
                                    ------------------------------------------
                                       2002       2003      2004       Total
                                    --------    --------   -------    --------
                                                          
          Interest rate swaps       $     --    $  (810)   $   (689)   $ (1,499)
          Interest rate collars       (3,777)        --          --      (3,777)
                                    --------    --------   --------    --------

             Total                  $ (3,777)   $  (810)   $   (689)   $ (5,276)
                                    ========    ========   ========    ========

     The adjustment to interest expense resulting from interest rate swaps for
the years ended December 31, 2001, 2000 and 1999 was a $2.4 million loss, a $0.1
million gain and a $0.1 million loss, respectively. These instruments are based
on LIBOR rates. The collar provides for a floor of 6.1% and a ceiling of 8.0%
with an expiration date of August 2002 for $125.0 million notional principal
amount. The fixed rate interest rate swaps provide for a rate of 4.3% for $50.0
million notional principal amount expiring March 2004, and a rate of 3.6% for
$100.0 million notional principal amount expiring September 2003.

     We formally document all relationships between hedging instruments and
hedged items, as well as our risk management objectives and strategy for
undertaking the hedge. Hedge effectiveness is measured on a quarterly basis.
This process includes specific identification of the hedging instrument and the
hedge transaction, the nature of the risk being hedged and how the hedging
instrument's effectiveness will be assessed. Both at the inception of the hedge
and on an ongoing basis, we assess whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes in cash flows of
hedged items. No amounts were excluded from the computation of hedge
effectiveness.

     Since substantially all of our Canadian business is conducted in Canadian
dollars (CAD), we use certain financial instruments to minimize the risks of
changes in the exchange rate. These instruments include forward exchange
contracts, forward extra option contracts and cross currency swaps.
Additionally, at December 31, 2001, $25.4 million ($40.5 million CAD) of our
long-term debt was denominated in Canadian dollars. All of the financial
instruments utilized are placed with large creditworthy financial institutions
and meet the criteria under SFAS 133 for hedge accounting treatment.

     At December 31, 2001, we had forward exchange contracts and forward extra
option contracts that allow us to exchange $3.0 million Canadian for at least
$1.9 million U. S. (based on a Canadian-U.S. dollar exchange rate of 1.55)
quarterly during 2002 and 2003. If these contracts were terminated on December
31, 2001, we would receive $0.5 million U.S. At December 31, 2001, we also had a
cross currency swap contract for an aggregate notional principal amount of $25.0
million, effectively converting this amount of our $100.0 million senior secured
term loan (25% of the total) from U.S. dollars to $38.7 million of Canadian
dollar debt (based on a Canadian-U.S. dollar exchange rate of 1.55). The terms
of this contract mirror the term loan, matching the amortization schedule and
final maturity in May 2006. If this swap contract was terminated on
December 31, 2001, we would receive $0.5 million U.S.

     The table shown below summarizes the fair value of our foreign currency
hedges by year of maturity (in thousands):

                                                      Year of Maturity
                                         --------------------------------------
                                          2002       2003    2006(1)    Total
                                         ------     ------   -------    -------
                                                            
          Forward exchange contracts     $  123     $  100    $  --     $   223
          Forward extra options             145        146       --         291
          Cross currency swaps               --         --      497         497
                                         ------     ------    -----     -------

            Total                        $  268     $  246    $ 497     $ 1,011
                                         ======     ======    =====     =======

          ____________

          (1)  At December 31, 2001, we did not have foreign currency hedges
               expiring in 2004 or 2005.

   Fair Value of Financial Instruments

     The carrying values of items comprising current assets and current
liabilities approximate fair value due to the short-term maturities of these
instruments. The carrying value of bank debt approximates fair value as interest
rates are variable, based on prevailing market rates. Crude oil futures
contracts permit settlement by delivery of the crude oil and, therefore, are not

                                      F-19

financial instruments, as defined. The fair value of crude oil swap and option
contracts and interest rate swap and collar agreements are based on current
termination values or quoted market prices of comparable contracts.

     The carrying amounts and fair values of our financial instruments are as
follows (in thousands):

                                                                          December 31,
                                                     ------------------------------------------------------
                                                                2001                        2000
                                                     --------------------------  --------------------------
                                                       Carrying        Fair        Carrying        Fair
                                                        Amount         Value        Amount         Value
                                                     ------------  ------------  ------------  ------------
                                                                                   
          Unrealized gain (loss) on interest rate
            swaps and collars                           $ (5,276)     $ (5,276)          $ -        $ (561)

Note 10 --  Early Extinguishment of Debt

     During 2000, we recognized extraordinary losses, consisting primarily of
unamortized debt issue costs, totaling $15.1 million related to the permanent
reduction of the All American Pipeline, L.P. term loan facility and the
refinancing of our credit facilities. In addition, interest and other income for
the year ended December 31, 2000, included $9.7 million of previously deferred
gains from terminated interest rate swaps as a result of debt extinguishments
(see Note 3). The extraordinary loss of $1.5 million in 1999 relates to the
write-off of certain debt issue costs and penalties associated with the
prepayment of debt.

Note 11 -- Major Customers and Concentration of Credit Risk

     Customers accounting for 10% or more of revenues were as follows for the
periods indicated:

                                                                         Percentage
                                                                  Year Ended December 31,
                                                          ----------------------------------------
                                                             2001          2000           1999
                                                          ------------  ------------   -----------
                                                                              
               Marathon Ashland Petroleum                          11%           12%           -
               Sempra Energy Trading Corporation                    -             -           22%
               Koch Oil Company                                     -             -           19%

     All of the customers above pertain to our marketing, gathering,
terminalling and storage segment. We believe that the loss of the customer
included above for 2001 would have only a short-term impact on our operating
results. There can be no assurance, however, that we would be able to identify
and access a replacement market at comparable margins.

     Financial instruments that potentially subject us to concentrations of
credit risk consist principally of trade receivables. Our accounts receivable
are primarily from purchasers and shippers of crude oil. This industry
concentration has the potential to impact our overall exposure to credit risk,
either positively or negatively, in that the customers may be similarly affected
by changes in economic, industry or other conditions. We review credit exposure
and financial information of our counterparties and generally require letters of
credit for receivables from customers that are not considered credit worthy,
unless the credit risk can otherwise be reduced.

Note 12 -- Related Party Transactions

  Reimbursement of Expense of Our General Partner and Its Affiliates

     We do not directly employ any persons to manage or operate our business.
These functions are provided by employees of our general partner. Our general
partner does not receive a management fee or other compensation in connection
with its management of us. We reimburse our general partner for all direct and
indirect costs of services provided, including the costs of employee, officer
and director compensation and benefits allocable to us, and all other expenses
necessary or appropriate to the conduct of our business, and allocable to us.
Our agreement provides that our general partner will determine the expenses
allocable to us in any reasonable manner determined by our general partner in
its sole discretion. Total costs reimbursed by us to our general partner in 2001
were approximately $31.3 million. Total costs reimbursed by us to our former
general partner and Plains Resources were approximately $31.2 million, $63.8
million and $44.7 million for the years ended December 31, 2001, 2000 and 1999,
respectively. Such costs include, (1) allocated personnel costs (such as
salaries and employee benefits) of the personnel providing such services, (2)
rent on office space allocated to our general partner in Plains Resources'
offices in Houston, Texas, (3) property and casualty insurance premiums and (4)
out-of-pocket expenses related to the provision of such services.

                                      F-20

   Crude Oil Marketing Agreement

     We are the exclusive marketer/purchaser for all of Plains Resources' equity
crude oil production. The marketing agreement with Plains Resources provides
that we will purchase for resale at market prices all of Plains Resources' crude
oil production for which we charge a fee of $0.20 per barrel. This fee is
subject to adjustment every three years based on then-existing market
conditions. For the years ended December 31, 2001, 2000 and 1999, we paid Plains
Resources approximately $223.2 million, $244.9 million and $131.5 million,
respectively, for the purchase of crude oil under the agreement, including the
royalty share of production, and recognized margins of approximately $1.8
million, $1.7 million and $1.5 million from the marketing fee for the same
periods, respectively. In our opinion, these purchases were made at prevailing
market prices. In November 2001, the marketing agreement automatically extended
for an additional three-year period.

   Separation Agreement

     A separation agreement was entered into in connection with the General
Partner Transition pursuant to which (i) Plains Resources has indemnified us for
(a) claims relating to securities laws or regulations in connection with the
upstream or midstream businesses, based on alleged acts or omissions occurring
on or prior to June 8, 2001 or (b) claims related to the upstream business,
whenever arising, and (ii) we have indemnified Plains Resources for claims
related to the midstream business, whenever arising. Plains Resources also has
agreed to indemnify and maintain liability insurance for the individuals who
were, on or before June 8, 2001, directors or officers of Plains Resources or
our former general partner.

   Financing

     In May 2000, we repaid to our former general partner $114.0 million of
subordinated debt. Interest expense related to the notes was $3.3 million and
$0.6 million for the years ended December 31, 2000 and 1999, respectively.

     To finance a portion of the purchase price of the Scurlock acquisition, we
sold to our former general partner 1.3 million Class B common units at $19.125
per unit, the market value of our common units on May 12, 1999 (see Note 4).

     The balance of amounts due to related parties at December 31, 2001 and 2000
was $13.7 million and $21.0 million, respectively, and was related to crude oil
purchased by us but not yet paid as of December 31 of each year.

   Transaction Grant Agreements

     In connection with our initial public offering, our former general partner,
at no cost to us, agreed to transfer, subject to vesting, approximately 400,000
of its affiliates' common units (including distribution equivalent rights
attributable to such units) to certain key officers and employees of our former
general partner and its affiliates. Under these grants, the common units vested
based on attaining a targeted operating surplus for a given year. Of the 400,000
units subject to the transaction grant agreements, 69,444 units vested in 2000
for 1999's operating results and 133,336 units vested in 2001 for 2000's
operating results. The remainder (197,220 units) vested in connection with the
consummation of the General Partner Transition. Distribution equivalent rights
were paid in cash at the time of the vesting of the associated common units. The
values of the units and associated distribution equivalent rights that vested
under the Transaction Grant Agreements for all grantees in 2001, 2000 and 1999
were $5.7 million, $3.1 million and $1.0 million, respectively. Although we
recorded noncash compensation expenses with respect to these vestings, the
compensation expense incurred in connection with these grants was funded by our
former general partner, without reimbursement by us.

   Performance Option Plan

     In connection with the General Partner Transition, all except one of the
owners of the general partner contributed an aggregate of 450,000 subordinated
units to the general partner to provide a pool of units available for the grant
of options to management and key employees. In that regard, the general partner
adopted the Plains All American 2001 Performance Option Plan, pursuant to which
options to purchase approximately 332,500 units have been granted to officers
and key employees of our general partner. Such options vest in 25% increments
based upon achieving quarterly distribution levels on our units of $0.525,
$0.575, $0.625 and $0.675 ($2.10, $2.30, $2.50 and $2.70, annualized). The
options will vest immediately upon a change in control (as defined in the grant
agreements). The purchase price under the options is $22 per subordinated unit,
declining over time in an amount equal to 80% of each quarterly distribution per
unit. The terms of future grants may differ from the existing grants. Because
the subordinated units underlying the plan were contributed to the general
partner, we will have no obligation to reimburse the general partner for the
cost of the units upon exercise of the options, but will have a noncash
compensation charge offset by a deemed capital contribution.

                                      F-21

Stock Option Replacement

     In connection with the General Partner Transition, certain members of the
management team that had been employed by Plains Resources were transferred to
the general partner. At that time, such individuals held in-the-money but
unvested stock options in Plains Resources, which were subject to forfeiture
because of the transfer of employment. Plains Resources, through its affiliates,
agreed to substitute a contingent grant of subordinated units with a value equal
to the discounted present value of the spread on the unvested options, with
distribution equivalent rights from the date of grant. The subordinated units
vest on the same schedule as the stock options would have vested. The general
partner will administer the vesting and delivery of the units under the grants.
Because the units necessary to satisfy the delivery requirements under the
grants will be provided by Plains Resources, we will have no obligation to
reimburse the general partner for the cost of such units.

   Benefit Plan

      A subsidiary of Plains Resources was, until June 8, 2001, our general
partner. On that date, such entity transferred the general partner interest to
Plains AAP, L.P. Effective July 1, 2001, Plains All American GP LLC (Plains
AAP, L.P.'s general partner), now maintains a 401(k) defined contribution plan
whereby it matches 100% of an employee's contribution (subject to certain
limitations in the plan). For the period July 1 through December 31, 2001,
defined contribution plan expense was approximately $1.1 million.

     Prior to July 1, 2001, Plains Resources maintained a 401(k) defined
contribution plan whereby it matched 100% of an employee's contribution (subject
to certain limitations in the plan), with matching contributions being made 50%
in cash and 50% in common stock (the number of shares for the stock match being
based on the market value of the common stock at the time the shares were
granted). For the period January 1 through June 30, 2001, defined contribution
plan expense was $1.0 million. For the years ended December 31, 2000 and 1999,
defined contribution plan expense was approximately $1.0 million and $0.7
million, respectively.

Note 13 -- Long-Term Incentive Plans

     Our general partner has adopted the Plains All American GP LLC 1998
Long-Term Incentive Plan for employees and directors of our general partner and
its affiliates who perform services for us. The Long-Term Incentive Plan
consists of two components, a restricted unit plan and a unit option plan. The
Long-Term Incentive Plan currently permits the grant of restricted units and
unit options covering an aggregate of 1,425,000 common units. The plan is
administered by the Compensation Committee of our general partner's board of
directors. Our general partner's board of directors in its discretion may
terminate the Long-Term Incentive Plan at any time with respect to any common
units for which a grant has not yet been made. Our general partner's board of
directors also has the right to alter or amend the Long-Term Incentive Plan or
any part of the plan from time to time, including increasing the number of
common units with respect to which awards may be granted; provided, however,
that no change in any outstanding grant may be made that would materially impair
the rights of the participant without the consent of such participant.

     Restricted Unit Plan. A restricted unit is a "phantom" unit that entitles
the grantee to receive a common unit upon the vesting of the phantom unit. As of
March 5, 2002, aggregate outstanding grants of approximately 679,000 restricted
units have been made to employees of our general partner. Grants made include
165,000 restricted units to executive officers as a group. Additional grants of
approximately 288,000 restricted units have been approved, with vesting in 25%
increments when the quarterly distribution reaches $0.525, $0.575 and $0.625
($2.10, $2.30 and $2.50 annualized), and the criteria for the remaining 25% is
yet to be determined. These grants include approximately 203,000 restricted
units to executive officers of the general partner. The Compensation Committee
of the general partner may, in the future, make additional grants under the plan
to employees and directors containing such terms as the Compensation Committee
shall determine. Restricted units granted to employees during the subordination
period, although additional vesting criteria may sometimes apply, will vest only
after, and in the same proportions as, the conversion of the subordinated units
to common units. Grants made to non-employee directors of our general partner
are eligible to vest prior to termination of the subordination period. In 2000,
the three non-employee directors of our former general partner were each granted
5,000 restricted units. These units vested in connection with the consummation
of the General Partner Transition.

     If a grantee terminates employment or membership on the board for any
reason, the grantee's restricted units will be automatically forfeited unless,
and to the extent, the Compensation Committee provides otherwise. Common units
to be delivered upon the vesting of rights may be common units acquired by our
general partner in the open market or in private transactions, common units
already owned by our general partner, or any combination of the foregoing. Our
general partner will be entitled to reimbursement by us for the cost incurred in
acquiring common units. In addition, we may issue up to 975,000 common units to
satisfy delivery obligations under the grants, less any common units issued upon
exercise of unit options under the plan (see below). If we issue new common
units upon vesting of the restricted units, the total number of common units
outstanding will increase. Whether we satisfy vested units with purchases or by
new issuances, the vesting will result in a compensation charge to us. Following
the subordination period, the Compensation Committee, in its discretion, may
grant tandem distribution equivalent rights with respect to restricted units.

                                      F-22

     The subordination period (as defined in the partnership agreement) will end
if certain financial tests are met for three consecutive four-quarter periods
(the "testing period"), but no sooner than December 31, 2003 (see Note 7).

     The issuance of the common units pursuant to the restricted unit plan is
primarily intended to serve as a means of incentive compensation for
performance. Therefore, no consideration will be paid to us by the plan
participants upon receipt of the common units.

     Unit Option Plan. The Unit Option Plan currently permits the grant of
options covering common units. No grants have been made under the Unit Option
Plan to date. However, the Compensation Committee may, in the future, make
grants under the plan to employees and directors containing such terms as the
committee shall determine, provided that unit options have an exercise price
equal to the fair market value of the units on the date of grant. Unit options
granted during the subordination period will become exercisable automatically
upon, and in the same proportions as, the conversion of the subordinated units
to common units, unless a later vesting date is provided.

     Upon exercise of a unit option, our general partner will deliver common
units acquired by it in the open market, or in private transactions, or use
common units already owned by our general partner, or any combination of the
foregoing. In addition, we may issue up to 975,000 common units to satisfy
delivery obligations under the grants less any common units issued upon vesting
of restricted units under the plan. Our general partner will be entitled to
reimbursement by us for the difference between the cost incurred by our general
partner in acquiring such common units and the proceeds received by our general
partner from an optionee at the time of exercise. Thus, the cost of the unit
options will be borne by us. If we issue new common units upon exercise of the
unit options, the total number of common units outstanding will increase, and
our general partner will remit to us the proceeds received by it from the
optionee upon exercise of the unit option.

     Certain employees and officers of the general partner have received grants
of equity not associated with the Long-Term Incentive Plan described above, and
for which we have no cost or reimbursement obligations (see Note 12).

Note 14 -- Commitments and Contingencies

     We lease certain real property, equipment and operating facilities under
various operating leases. We also incur costs associated with leased land,
rights-of-way, permits and regulatory fees, the contracts for which generally
extend beyond one year but can be cancelled at any time should they not be
required for operations. Future non-cancellable commitments related to these
items at December 31, 2001, are summarized below (in thousands):

                            2002                $ 6,774
                            2003                  6,245
                            2004                  6,340
                            2005                  6,216
                            2006                  4,458
                            Thereafter            5,595

     Total lease expense incurred for 2001, 2000 and 1999 was $7.4 million, $6.7
million and $8.9 million, respectively. As is common within the industry and in
the ordinary course of business, we have also entered into various operational
commitments and agreements related to pipeline operations and to marketing,
transportation, terminalling and storage of crude oil and liquefied petroleum
gas.

     From 1994 to 1997 (prior to our acquisition in 1999), our Venice, Louisiana
terminal experienced several releases of crude oil and jet fuel into the soil.
The Louisiana Department of Environmental Quality has been notified of the
releases. Marathon Ashland has performed some soil remediation related to the
releases and retained liability for these conditions. The extent of the
contamination at the sites is uncertain and there is a potential for groundwater
contamination. We do not expect expenditures related to this terminal to be
material, although we can provide no assurances in that regard.

     During 1997, the All American Pipeline experienced a leak in a segment of
its pipeline in California that resulted in an estimated 12,000 barrels of crude
oil being released into the soil. Immediate action was taken to repair the
pipeline leak, contain the spill and to recover the released crude oil. We have
expended approximately $0.4 million to date in connection with this spill and do
not expect any additional expenditures to be material to the financial
statements, although we can provide no assurances in that regard.

                                      F-23

     Prior to being acquired by our predecessor in 1996, the Ingleside Terminal
experienced releases of refined petroleum products into the soil and groundwater
underlying the site due to activities on the property. We are undertaking a
voluntary state-administered remediation of the contamination on the property to
determine the extent of the contamination. We have proposed extending the scope
of our study and are awaiting the state's response. We have spent approximately
$0.1 million to date in investigating the contamination at this site. We do not
anticipate the total additional cost related to this site to exceed $0.3
million, although no assurance can be given that the actual cost could not
exceed such estimate.

    Litigation

     Texas Securities Litigation. On November 29, 1999, a class action lawsuit
was filed in the United States District Court for the Southern District of Texas
entitled Di Giacomo v. Plains All American Pipeline, L.P., et al. The suit
alleged that Plains All American and certain of our former general partner's
officers and directors violated federal securities laws, primarily in connection
with unauthorized trading by a former employee. An additional nineteen cases
were filed in the Southern District of Texas, some of which named our former
general partner and Plains Resources as additional defendants. All of the
federal securities claims were consolidated into two actions. The first
consolidated action is that filed by purchasers of Plains Resources' common
stock and options, and is captioned Koplovitz v. Plains Resources Inc., et al.
The second consolidated action is that filed by purchasers of our common units,
and is captioned Di Giacomo v. Plains All American Pipeline, L.P., et al.
Plaintiffs alleged that the defendants were liable for securities fraud
violations under Rule l0b-5 and Section 20(a) of the Securities Exchange Act of
1934 and for making false registration statements under Sections 11 and 15 of
the Securities Act of 1933.

     We and Plains Resources reached an agreement with representatives for the
plaintiffs for the settlement of all of the class actions, and in January 2001,
we deposited approximately $30.0 million under the terms of the settlement
agreement. The total cost of the settlement to us and Plains Resources,
including interest and expenses and after insurance reimbursements, was $14.9
million. Of that amount, $1.0 million was allocated to Plains Resources by
agreement between special independent committees of the board of directors of
our former general partner and the board of directors of Plains Resources. All
such amounts were reflected in our financial statements at December 31, 2000.
The settlement was approved by the court on December 19, 2001. The order became
final on January 18, 2002. The settlement agreement does not affect the Texas
Derivative Litigation and Delaware Derivative Litigation described below.

     Delaware Derivative Litigation. On December 3, 1999, two derivative
lawsuits were filed in the Delaware Chancery Court, New Castle County, entitled
Susser v. Plains All American Inc., et al and Senderowitz v. Plains All American
Inc., et al. These suits, and three others which were filed in Delaware
subsequently, named our former general partner, its directors and certain of its
officers as defendants, and allege that the defendants breached the fiduciary
duties that they owed to Plains All American Pipeline, L.P. and its unitholders
by failing to monitor properly the activities of its employees. The court
consolidated all of the cases under the caption In Re Plains All American Inc.
Shareholders Litigation, and has designated the complaint filed in Susser v.
Plains All American Inc. as the complaint in the consolidated action.

     The plaintiffs in the Delaware derivative litigation seek, among other
things, to cause the defendants to account for all losses and damages allegedly
sustained by Plains All American from the unauthorized trading losses; to
establish and maintain effective internal controls ensuring that our affiliates
and persons responsible for our affairs do not engage in wrongful practices
detrimental to Plains All American; and to pay for the plaintiffs' costs and
expenses in the litigation, including reasonable attorneys' fees, accountants'
fees and experts' fees.

     We have agreed with the plaintiffs to settle the Delaware litigation for
approximately $1.1 million. On March 6, 2002, the Delaware court approved the
settlement.

     Texas Derivative Litigation. On July 11, 2000, a derivative lawsuit was
filed in the United States District Court of the Southern District of Texas
entitled Fernandes v. Plains All American Inc., et al, naming our former general
partner, its directors and certain of its officers as defendants. This lawsuit
contains the same claims and seeks the same relief as the Delaware derivative
litigation, described above. We have reached an agreement in principle with the
plaintiffs, subject to approval by the District Court, to settle the Texas
litigation for approximately $112,500.

     Other. We, in the ordinary course of business, are a claimant and/or a
defendant in various other legal proceedings. We do not believe that the outcome
of these other legal proceedings, individually and in the aggregate, will have a
materially adverse effect on our financial condition, results of operations or
cash flows.

                                      F-24

Note 15 -- Quarterly Financial Data (Unaudited) (in thousands, except per unit
data):

                                                   First         Second         Third        Fourth
                                                  Quarter       Quarter        Quarter       Quarter         Total
                                               ------------- -------------  ------------- -------------  --------------
                                                                                          
     2001
     ----
     Revenues                                   $ 1,520,124   $ 1,586,617    $ 2,191,310   $ 1,570,164     $ 6,868,215
     Gross margin                                    32,730        36,387         39,644        33,500         142,261
     Operating income                                19,071        14,843         22,945        14,509          71,368
     Income before extraordinary item and
       cumulative effect of accounting change        12,507         7,067         15,161         8,936          43,671
     Cumulative effect of accounting change             508             -              -             -             508
     Net income                                      13,015         7,067         15,161         8,936          44,179
     Income per limited partner unit before
       extraordinary item and cumulative
       effect of accounting change (1)                 0.36          0.19           0.38          0.20            1.12
       Cumulative effect of accounting change          0.01             -              -             -            0.01
       After extraordinary item (1)                    0.37          0.19           0.38          0.20            1.13
     Cash distributions per common unit (2)     $     0.475   $     0.500    $     0.513   $     0.513     $     2.000

     2000
     ----
     Revenues                                   $ 2,002,507   $ 1,481,834    $ 1,555,863   $ 1,600,983     $ 6,641,187
     Gross margin                                    36.552        32.774         25.960        32.434         127.720
     Operating income                                17,788        20,164         10,700        13,724          62,376
     Income before extraordinary item and
       cumulative effect of accounting change        64,300        17,063          4,516         6,770          92,649
     Extraordinary item                              (4,145)      (11,002)             -             -         (15,147)
     Net income                                      60,155         6,061          4,516         6,770          77,502
     Income per limited partner unit before
       extraordinary item and cumulative
       effect of accounting change                     1.83          0.49           0.13          0.19            2.64
       Extraordinary item                             (0.12)        (0.32)             -             -           (0.44)
       Net income per limited partner unit             1.71          0.17           0.13          0.19            2.20
     Cash distributions per common unit (2)     $     0.450   $     0.463    $     0.463   $     0.463     $     1.839

_______________

     (1)  The sum of the four quarters does not equal the total year due to
          rounding.

     (2)  Represents cash distributions declared per common unit for the period
          indicated. Distributions are paid in the following calendar quarter.

Note 16 -- Operating Segments

     Our operations consist of two operating segments: (1) Pipeline Operations -
engages in interstate and intrastate crude oil pipeline transportation and
certain related merchant activities; (2) Marketing, Gathering, Terminalling and
Storage Operations - engages in purchases and resales of crude oil and liquified
petroleum gas at various points along the distribution chain and the leasing of
certain terminalling and storage assets. We evaluate segment performance based
on gross margin, gross profit and income (loss) before extraordinary items and
cumulative effect of accounting change.

     The following table summarizes segment revenues, gross margin, gross profit
and income (loss) before extraordinary items and cumulative effect of accounting
change (in thousands):

                                                                            Marketing,
                                                                            Gathering,
                                                                           Terminalling
                                                          Pipeline           & Storage           Total
- -----------------------------------------------------------------------------------------------------------
                                                                                    
 Twelve Months Ended December 31, 2001
 Revenues:
  External Customers                                       $ 339,852        $  6,528,363      $  6,868,215
  Intersegment (a)                                            17,528               2,046            19,574
  Other revenue                                                   53                 348               401
                                                        -------------    ----------------    --------------
      Total revenues of reportable segments                $ 357,433        $  6,530,757      $  6,888,190
                                                        =============    ================    ==============
 Gain on sale of assets                                    $     984        $          -      $        984
 Segment gross margin (b)                                     71,322              70,939           142,261
 Segment gross profit (c)                                     65,110              36,306           101,416
 Income allocated to reportable segments (d)                  39,494               9,918            49,412
 Noncash compensation expense                                    n/a                 n/a             5,741
                                                        -------------    ----------------    --------------
 Income before extraordinary item and
   cumulative effect of accounting change                  $     n/a        $        n/a      $     43,671
                                                        =============    ================    ==============
 Interest expense                                             10,667              18,415            29,082
 Depreciation and amortization                                15,983               8,324            24,307
 Capital expenditures                                         11,035              30,204            41,239
 Total assets                                                472,324             788,927         1,261,251
- ----------------------------------------------------------------------------- -----------------------------
                                                                         Table continued on following page

                                      F-25

                                                                            Marketing,
                                                                            Gathering,
                                                                           Terminalling
                                                          Pipeline           & Storage           Total
- -----------------------------------------------------------------------------------------------------------
                                                                                    
 Twelve Months Ended December 31, 2000
 Revenues:
   External Customers                                      $ 505,712        $  6,135,475      $  6,641,187
   Intersegment (a)                                           68,745                   -            68,745
   Other revenue                                               9,045               1,731            10,776
                                                        -------------    ----------------    --------------
      Total revenues of reportable segments                $ 583,502        $  6,137,206      $  6,720,708
                                                        =============    ================    ==============
 Gain on sale of assets                                    $  48,188        $          -      $     48,188
 Segment gross margin (b)                                     51,787              75,933           127,720
 Segment gross profit (c)                                     49,996              39,992            89,988
 Income allocated to reportable segments (d)                  94,461               1,277            95,738
 Noncash compensation expense                                    n/a                 n/a             3,089
                                                        -------------    ----------------    --------------
 Income before extraordinary item and
   cumulative effect of accounting change                  $     n/a        $        n/a      $     92,649
                                                        =============    ================    ==============
 Interest expense                                              5,738              22,953            28,691
 Depreciation and amortization                                 7,030              17,493            24,523
 Capital expenditures                                          1,544              11,059            12,603
 Total assets                                                324,751             561,050           885,801
- ----------------------------------------------------------------------------- -----------------------------
 Twelve Months Ended December 31, 1999
 Revenues:
   External Customers                                      $ 854,377        $ 10,056,046      $ 10,910,423
   Intersegment (a)                                          131,445                   -           131,445
   Other revenue                                                 195                 763               958
                                                        -------------    ----------------    --------------
      Total revenues of reportable segments                $ 986,017        $ 10,056,809      $ 11,042,826
                                                        =============    ================    ==============
 Segment gross margin (b)                                  $  58,001        $   (114,127)     $    (56,126)
 Segment gross profit (c)                                     55,384            (133,708)          (78,324)
 Income (loss) allocated to reportable segments (d)           46,075            (146,877)         (100,802)
 Noncash compensation expense                                    n/a                 n/a             1,013
                                                        -------------    ----------------    --------------
 Income (loss) before extraordinary item and
   cumulative effect of accounting change                  $     n/a        $        n/a      $   (101,815)
                                                        =============    ================    ==============
 Interest expense                                             13,572               7,567            21,139
 Depreciation and amortization                                10,979               6,365            17,344
 Capital expenditures                                         69,375             119,911           189,286
 Total assets                                                524,438             698,599         1,223,037
- -----------------------------------------------------------------------------------------------------------

     (a)  Intersegment sales were conducted on an arm's length basis.

     (b)  Gross margin is calculated as revenues less cost of sales and
          operations expense. The 2001 gross margin includes the impact of the
          $5.0 million inventory valuation adjustment.

     (c)  Gross profit is calculated as revenues less costs of sales and
          operations expenses and general and administrative expenses, excluding
          noncash compensation expense.

     (d)  Excludes noncash compensation expense, as it is not allocated to the
          reportable segments.

                                             F-26

     Prior to 2001, all of our revenues were derived from, and our assets
located in, the United States. During 2001, we expanded into Canada (see Note
4). Set forth below is a table of 2001 revenues and long lived assets
attributable to these geographic areas (in thousands):

          Revenues
            United States       $ 6,149,788
            Canada              $   718,427

          Long Lived Assets
            United States       $   567,551
            Canada              $   188,207

Note 17 -- Subsequent Events

   Acquisitions

     In March 2002, we completed the acquisition of substantially all of the
domestic crude oil pipeline, gathering, and marketing assets of Coast Energy
Group and Lantern Petroleum, divisions of Cornerstone Propane Partners, L.P. for
approximately $8.2 million in cash plus transaction costs. The principal assets
acquired, which are located in West Texas, include several gathering lines,
crude oil contracts and a small truck and trailer fleet.

     In February 2002, we acquired an approximate 22% equity interest in Butte
Pipe Line Company from Murphy Ventures, a subsidiary of Murphy Oil Corporation.
The total cost of the acquisition, including various transaction and related
expenses, was approximately $8.0 million. Butte Pipe Line Company owns the 373-
mile Butte Pipeline System that runs from Baker, Montana, to Guernsey, Wyoming.
The Butte Pipeline System, principally a mainline system, transported
approximately 60,000 barrels per day of crude oil at the time of acquisition.
The remaining 78% interest in the Butte Pipe Line Company is owned by Equilon
Pipeline Company LLC.

                                      F-27

                                                                   EXHIBIT 10.15

                             PLAINS MARKETING, L.P.

                                    - AND -

                         PLAINS MARKETING CANADA, L.P.

                                    - AND -

                            CANPET ENERGY GROUP INC.

                                    - AND -

                        CANPET ENERGY GROUP (USA), INC.

- --------------------------------------------------------------------------------

                            ASSET PURCHASE AGREEMENT

                                 APRIL 9, 2001

- --------------------------------------------------------------------------------

                               TABLE OF CONTENTS
                                                                          Page

ARTICLE I INTERPRETATION ................................................   2
   1.1  Defined Terms....................................................   2
   1.2  Gender and Number................................................  11
   1.3  Headings Etc.....................................................  11
   1.4  Currency.........................................................  11
   1.5  Severability.....................................................  11
   1.6  Entire Agreement.................................................  12
   1.7  Amendments.......................................................  12
   1.8  Statutory References.............................................  12
   1.9  Waiver...........................................................  12
   1.10 Governing Law....................................................  12
   1.11 Attornment.......................................................  12
   1.12 Inclusion........................................................  12
   1.13 Accounting.......................................................  12
   1.14 Calculation of Time..............................................  13
   1.15 Business Day.....................................................  13
   1.16 Incorporation of Schedules.......................................  13
   1.17 Knowledge........................................................  14
   1.18 Canadian and United States Transactions..........................  14

ARTICLE II PURCHASE AND SALE OF ASSETS...................................  15
   2.1  Purchase and Sale of Assets......................................  15
   2.2  Purchase Price...................................................  15
   2.3  Allocation of Initial Installment................................  15
   2.4  Payment at Closing...............................................  15
   2.5  Closing Date Statement and Adjustment to Initial Installment.....  16
   2.6  Payment of Deferred Installment..................................  17
   2.7  Units............................................................  19
   2.8  Allocation of Deferred Installment...............................  19
   2.9  Alternative Payment of Deferred Installment......................  20
   2.10 Continued Employment of W. David Duckett.........................  20
   2.11 Change of Condition..............................................  20
   2.12 Onus of Proof....................................................  20

ARTICLE III ASSUMED LIABILITIES..........................................  21
   3.1  Assumed Liabilities..............................................  21
   3.2  Excluded Liabilities.............................................  21

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE VENDOR..................  22
   4.1  Organization and Standing........................................  22
   4.2  Authority........................................................  22
   4.3  Governmental and Third Party Consents............................  23
   4.4  No Violation.....................................................  23
   4.5  Restrictions on Transfer.........................................  23
   4.6  No Material Adverse Change.......................................  23
   4.7  Compliance with Laws.............................................  25
   4.8  Authorizations...................................................  25
   4.9  Title to Assets..................................................  25
   4.10 No Options on Assets, Etc........................................  25
   4.11 Condition of Assets..............................................  25

                                       2

   4.12 Condition of Inventory...........................................  25
   4.13 Valuation of Inventory...........................................  26
   4.14 Real Property....................................................  26
   4.15 Financial Statements and Related Matters.........................  26
   4.16 Commodity Contracts..............................................  27
   4.17 Other Contracts..................................................  27
   4.18 No Breach of Contracts...........................................  28
   4.19 Intellectual Property Rights.....................................  28
   4.20 Books and Records................................................  29
   4.21 Taxes............................................................  29
   4.22 Employees........................................................  29
   4.23 Environmental Matters............................................  30
   4.24 Insurance........................................................  31
   4.25 Litigation.......................................................  32
   4.26 Letters of Credit and Other Security Instruments.................  32
   4.27 Agents Fees......................................................  32
   4.28 Equipment........................................................  32
   4.29 Inventory........................................................  32
   4.30 Customers........................................................  32

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................  33
   5.1  Due Formation and Existence of the Purchaser.....................  33
   5.2  Validity of Agreement............................................  33
   5.3  Restrictive Documents............................................  33
   5.4  Agent's Fee......................................................  33
   5.5  Financial Resources..............................................  34
   5.6  Units............................................................  34

ARTICLE VI PRE-CLOSING COVENANTS OF THE PARTIES..........................  34
   6.1  Conduct of Business Prior to Closing.............................  34
   6.2  Actions to Satisfy Closing Conditions............................  36
   6.3  Transfer of the Assets...........................................  37
   6.4  Request for Consents.............................................  37
   6.5  Filings and Authorizations.......................................  37
   6.6  Access to Information and Assets.................................  38
   6.7  Notice of Untrue Representation or Warranty......................  38
   6.8  Exclusive Dealing................................................  38

ARTICLE VII CONDITIONS OF CLOSING........................................  39
   7.1  Conditions for the Benefit of the Purchaser......................  39
   7.2  Non-Performance by the Vendor....................................  41
   7.3  Conditions for the Benefit of the Vendor.........................  41
   7.4  Non-Performance by the Purchaser.................................  42
   7.5  Mutual Conditions Precedent......................................  42

ARTICLE VIII CLOSING, TRANSFER OF POSSESSION, RISK OF LOSS...............  43
   8.1  Date, Time and Place of Closing..................................  43
   8.2  Closing Procedures...............................................  43
   8.3  Goods and Services Tax Election..................................  43
   8.4  Letters of Credit................................................  43

ARTICLE IX SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES.......  44
   9.1  Survival of Representations and Warranties.......................  44
   9.2  Indemnification in Favour of the Purchaser.......................  44

                                       3

   9.3  Indemnification in Favour of the Vendor..........................  45
   9.4  Indemnification Proceedings......................................  45
   9.5  Limitation on Indemnities........................................  46

ARTICLE X EMPLOYMENT MATTERS.............................................  47
  10.1  Employees........................................................  47
  10.2  Benefits.........................................................  48
  10.3  Bonus Plan.......................................................  48

ARTICLE XI NON-COMPETITION AND CONFIDENTIALITY...........................  49
  11.1  Non-Competition and Confidentiality..............................  49
  11.2  Shareholder Non-Competition Agreements...........................  49
  11.3  Non-Use of Trade Marks and Trade Name............................  49
  11.4  Modification.....................................................  50

ARTICLE XII MISCELLANEOUS................................................  50
  12.1  Notices..........................................................  50
  12.2  Goods and Services Tax Numbers...................................  51
  12.3  Publicity........................................................  51
  12.4  Time of the Essence..............................................  51
  12.5  Brokers..........................................................  51
  12.6  Expenses.........................................................  52
  12.7  Enurement........................................................  52
  12.8  Assignment.......................................................  52
  12.9  Non-Merger.......................................................  52
  12.10 Further Assurances...............................................  53
  12.11 No Third Party Beneficiaries.....................................  53

Schedule 1.1(b)             -      Permitted Encumbrances
Schedule 2.3                -      Allocation of Purchase Price
Schedule 2.4(c)             -      Assigned Deposits and Prepaid Expenses
Schedule 4.3                -      Governmental and Third Party Consents and
                                    Restrictions on Transfer
Schedule 4.8                -      Authorizations
Schedule 4.14(a)            -      Owned Properties
Schedule 4.14(b)            -      Leases and Leased Property
Schedule 4.14(c)            -      Rights of Way
Schedule 4.15               -      Financial Statements
Schedule 4.16               -      Commodity Contracts
Schedule 4.17               -      Other Contracts
Schedule 4.19               -      Intellectual Property Rights
Schedule 4.22               -      Employees
Schedule 4.23               -      Environmental Matters
Schedule 4.24               -      Insurance
Schedule 4.25               -      Litigation
Schedule 4.26               -      Letters of Credit etc.
Schedule 4.28               -      Equipment
Schedule 4.29               -      Inventory
Schedule 4.30               -      Customers
Schedule 6.1(b)(ix)         -      Capital Expenditures
Schedule 8.4                -      Form of Letter of Credit
Schedule 10.1               -      Key Employees
Schedule 10.1(a)(1)         -      Level One Key Employee Non-Competition
                                    Agreement
Schedule 10.1(a)(2)         -      Level Two Key Employee Non-Competition
                                    Agreement
Schedule 10.3               -      Bonus Plan
Schedule 11.2               -      Shareholder Non-Competition Agreements

                            ASSET PURCHASE AGREEMENT

     This Agreement made the 9th day of April, 2001.

AMONG:

          PLAINS MARKETING CANADA, L.P., a limited partnership formed pursuant
          to the laws of the Province of Alberta ("PMC")

                                    - and -

          PLAINS MARKETING, L.P., a limited partnership formed pursuant to the
          laws of the State of Delaware ("PMLP")

                                    - and -

          CANPET ENERGY GROUP INC., a body corporate, incorporated under the
          laws of the Province of Alberta and having offices at the City of
          Calgary in the Province of Alberta ("Canpet Canada")

                                    - and -

          CANPET ENERGY GROUP (USA), INC., a body corporate, incorporated under
          the laws of the State of Washington ("Canpet USA")

          (PMC and PMLP being collectively referred to as the "Purchaser", and
          Canpet Canada and Canpet USA being collectively referred to as the
          "Vendor")

     WHEREAS Canpet Canada desires to sell to PMC and PMC desires to purchase
from Canpet Canada all of the undertaking, property and assets of Canpet Canada;

     AND WHEREAS Canpet USA desires to sell to PMLP and PMLP desires to purchase
from Canpet USA all of the undertaking, property and assets of Canpet USA;

     AND WHEREAS PAA has agreed, subject to the terms and conditions of this
Agreement, to issue certain partnership units as part of the consideration to be
paid by the Purchaser hereunder;

     NOW THEREFORE in consideration for the premises and the mutual agreements
contained in this Agreement, the receipt and adequacy of which are hereby
acknowledged, the Parties hereto agree as follows:

                                       2

                                   ARTICLE I
                                INTERPRETATION

1.1  DEFINED TERMS

     In this Agreement, including the premises hereto, this Section and each
Schedule, the following terms have the following meanings:

"AFFILIATE" has the meaning ascribed thereto in the Business Corporations Act
(Alberta);

"AGREEMENT" means this asset purchase agreement and all schedules and
instruments in amendment or confirmation of it, "HEREOF", "HERETO" and
"HEREUNDER" and similar expressions mean and refer to this Agreement and not to
any particular Article, Section, Subsection or other subdivision and "ARTICLE",
"SECTION", "SUBSECTION", "PARAGRAPH" or other subdivision followed by a number
means and refers to the specified Article, Section, Subsection, Paragraph or
other subdivision of this Agreement;

"ANCILLARY AGREEMENTS" means all agreements, certificates and other instruments
delivered or given pursuant to this Agreement, including the Closing Agreements;
and "ANCILLARY AGREEMENT" means any one of such agreements, certificates or
other instruments;

"ASSETS" means all of the property, assets and undertaking of the Vendor or to
which the Vendor is entitled of every kind and description and wheresoever
situate, excluding the Excluded Assets.  Without limiting the generality of the
foregoing, "ASSETS" includes:

(a)  the Equipment;

(b)  all Inventory of the Vendor as of the Time of Closing;

(c)  all supplies and all other tangible property of the Vendor, as of the Time
     of Closing;

(d)  all real property and improvements thereon owned by the Vendor as at the
     Time of Closing, including the Owned Properties;

(e)  all Buildings and Fixtures;

(f)  the full benefit of all contracts, commitments or orders to which the
     Vendor is entitled including, without limitation, (i) the Contracts; (ii)
     any other service contracts which may be assignable or otherwise assumed;
     and (iii) all benefits under all other agreements, licenses, contracts and
     instruments that are assignable; and related documentation of the Vendor
     relating to the Business;

(g)  the Intellectual Properties;

(h)  the exclusive right to the Purchaser to represent itself as carrying on the
     Business in continuation of and in succession to the Vendor and the right
     to use any words indicating that the Business is so carried on including,
     without limiting the generality of the foregoing, the use of the name
     "CANPET ENERGY GROUP", "CANPET ENERGY GROUP (USA)", and all similar name or
     names under which the Vendor presently carries on its

                                       3

     business; all Authorizations relating to the use, operation or enjoyment of
     the Business and the Assets;

(i)  the Books and Records;

(j)  the Wellpoint Shares;

(k)  all telephone numbers, fax numbers, post office boxes, email addresses and
     websites of the Vendor used in connection with the Business;

(l)  all claims against third parties relating to the Business or the Assets,
     including rights under manufacturers', repairer's and vendor's warranties
     and guarantees; and

(m)  all other tangible and intangible personal property of the Vendor;

"ASSUMED LIABILITIES" has the meaning ascribed thereto in Section 3.1;

"AUTHORIZATION" means, with respect to any Person, any authorization, order,
permit, approval, grant, licence, consent, right, franchise, privilege,
certificate, judgment, writ, injunction, award, determination, direction, decree
or by-law, rule or regulation of any Governmental Entity having jurisdiction
over such Person, whether or not having the force of Law;

"BOOKS AND RECORDS" means all technical, financial, accounting and business
records, data, reports, files, lists, drawings, plans, logs, briefs, customer
and supplier lists, personnel records, deeds, certificates, contracts, surveys,
title opinions or any other documentation and information in any form whatsoever
(including written, printed, electronic or computer printout form) in respect of
the Business and Intellectual Properties;

"BUILDINGS AND FIXTURES" means all buildings, structures, erections,
improvements, appurtenances and fixtures (including fixed machinery and fixed
equipment) situated on the Owned Properties or the Leased Properties, or all of
them as the context requires;

"BUSINESS" means the entire existing business carried on by the Vendor, as of
the Closing Date, including the purchasing and marketing of crude oil, LPG's and
natural gas liquids;

"BUSINESS DAY" means any day of the year, other than a Saturday, Sunday or any
day on which Canadian chartered banks in Calgary, Alberta or United States banks
in New York, New York are not open for business;

"CANADIAN ASSETS" has the meaning ascribed thereto in Section 1.18;

"CLAIM" means any claim of any nature whatsoever, including any demand,
liability, obligation, debt, cause of action, suit, proceeding, judgment, award,
assessment and reassessment;

"CLOSING" means the completion of the transaction of purchase and sale
contemplated in this Agreement;

                                       4

"CLOSING AGREEMENTS" means, collectively, the Key Employee Non-Competition
Agreements and the Contract Assignments;

"CLOSING DATE" means that date on which the transaction contemplated hereby is
completed, as contemplated by Section 8.1;

"CLOSING DATE STATEMENT" has the meaning ascribed thereto in Subsection 2.5(a);

"COMPETITION ACT" means the Competition Act (Canada), as amended;

"COMPETITION ACT APPROVAL" means that:

(a)  the Commissioner of Competition (the "COMMISSIONER") appointed under the
     Competition Act has issued an advance ruling certificate pursuant to
     Section 102 of the Competition Act in respect of the transactions
     contemplated by this Agreement; or

(b)  the Competition Act Notification has been given and either:

     (i)  the applicable waiting period under Section 123 of the Competition Act
          has expired without the Commissioner having advised the parties that
          he intends to apply to the Competition Tribunal for an order under
          Section 92 or Section 100 of the Competition Act in respect of the
          transactions contemplated by this Agreement; or

     (ii) the Commissioner has advised Purchaser that the Commissioner does not
          intend at that time to apply to the Competition Tribunal for an order
          under Section 92 of the Competition Act in respect of the transactions
          contemplated by this Agreement;

"COMPETITION ACT NOTIFICATION" means an application for an advance ruling
certificate and a short form notification in respect of the transactions
contemplated by this Agreement pursuant to Sections 102 and 114 of the
Competition Act;

"CONFIDENTIAL INFORMATION" means all information which is of a confidential or
secret nature and which may be related in any way to the Business or to the
Future Business, and without limitation includes information relating to the
Purchaser's operations, crude oil or LPG streams, crude oil or LPG blends,
blending practices, methods of doing business, marketing strategies, prices,
pricing structures, research and development, trade secrets, computer programs,
algorithms, processes, methodologies, finances, customer lists, client contacts,
business discussions and other information of a confidential or secret nature
(whether or not any such information related to the business of Canpet Canada or
Canpet USA prior to the date hereof); but "CONFIDENTIAL INFORMATION" does not
include information that is within the public domain on the date Duckett became
aware of it (whether before or after the date of this Agreement), or which
thereafter enters the public domain through no fault of Duckett (but only after
it becomes part of the public domain);

"CONSENTS" means the consents of contracting parties required for the assignment
of any Contract or Lease, and "CONSENT" means any one of such Consents;

                                       5

"CONTRACT ASSIGNMENTS" means all written assignment and novation agreements
required pursuant to the terms of all Contracts in order for the valid and
binding assignment of such Contracts to the Purchaser, as contemplated by this
Agreement, including all required Consents in connection therewith;

"CONTRACTS" means all of the contracts, including all agreements relating to the
purchase, sale, exchange, transportation or storage of crude oil, LPG's,
condensate, natural gas liquids, and blends of the foregoing, Intellectual
Property agreements, leases of real and personal property, including the Leases,
licenses, undertakings, engagements or commitments of the Vendor, including
those which are listed in Schedule 4.16 or Schedule 4.17 hereto, and all
contracts related to or with customers listed in Schedule 4.30, and "CONTRACT"
means any one of such Contracts;

"DEFERRED PAYMENT DATE" means April 30, 2004;

"DEFERRED INSTALLMENT" means the portion of the Purchase Price payable on the
Deferred Payment Date, as determined in accordance with Subsection 2.6(a);

"DEPOSITS" means monetary deposits made prior to the Effective Time in respect
of agreements or arrangements with third parties in connection with the Business
and the Assets, to the extent the same are transferred and assigned to the
Purchaser at Closing, but "Deposits" shall not include Nymex margin deposits;

"DISABILITY" shall be deemed to have occurred when two medical doctors, acting
independently of all parties to this Agreement, deliver to such parties
certificates stating that Duckett is disabled and by reason thereof cannot
reasonably be expected to be able to substantially perform his duties
contemplated by this Agreement for a period of at least six (6) months;

"DISCHARGE", in respect of a Substance, includes any emission, discharge,
release, deposit, issuance, spray, injection, abandonment, escape, spill, leak,
seepage, disposal, exhaust, or any similar term as defined in any Environmental
Laws, of such Substance;

"DUCKETT" means W. David Duckett;

"EARN-OUT PERIOD" means the period from March 1, 2001 through December 31, 2003;

"EBITDA" means the earnings relating to the Future Business during the Earn-Out
Period (determined in accordance with GAAP), net of bonuses, but before
deductions for (i) interest (except interest on borrowings used for inventory in
tanks, or in pipelines in excess of operating requirements, provided that such
borrowings shall be deemed to be reduced by any cash proceeds received for
advance payments for crude oil or LPG's to be delivered in a future period, if
such advance payments are not actually used to reduce inventory borrowings);
(ii) any income taxes; and (iii) depreciation and amortization.  EBITDA shall
include earnings attributable to capital projects that expand or enhance the
existing Assets; provided that the Parties hereto shall mutually agree upon a
cost of capital to be charged against the earnings of the Future Business;
however, EBITDA shall not include earnings, losses or expenses attributable to
asset or entity acquisitions made by the Purchaser or any of its Affiliates in
Canada, including earnings, losses or expenses attributable to pipeline
acquisitions in Saskatchewan and/or Alberta, unless, and only to the extent
that, such earnings, losses or expenses are

                                       6

incremental to the acquired assets and are generated primarily by the
accomplishments of the Key Employees and employees directly overseen by the Key
Employees;

"EFFECTIVE TIME" means 12:01 a.m. (Calgary time) on March 1, 2001;

"ENCUMBRANCES" means liens, charges, mortgages, pledges, security interests,
claims, defects of title, restrictions, leases and any other rights of third
parties relating to property, including rights of set-off, voting trusts and
other encumbrances of any kind;

"ENVIRONMENT" includes the ambient air, all layers of atmosphere, surface water,
underground water, any land or underground space even if submerged in water or
covered by a structure, all organic and inorganic matters, all living organisms
and the interacting natural systems that include components of air, land, water,
organic and inorganic matters and living organisms;

"ENVIRONMENTAL LAWS" includes all federal, provincial, municipal or local
statutes, regulations, by-laws, guidelines, policies or rules, and orders of any
Governmental Entity, and principles of common law, relating to the Environment;

"ENVIRONMENTAL LIABILITIES AND COSTS" means all Losses and Claims relating to
the Environment, whether known or unknown, past, present or future, including
those imposed by, under or pursuant to Environmental Laws, all Losses and Claims
related to Remedial Actions and all reasonable fees, disbursements and expenses
of counsel, experts, personnel and consultants, where such Losses and Claims
relating to the Environment are based on, arise out of or are otherwise in
respect of:

(a)  the ownership or operation of the Business, Assets or Leased Properties;

(b)  the conditions on, under, above, about or migrating or having migrated from
     any real property, assets, equipment or facilities currently or previously
     owned, leased or operated by the Vendor;

(c)  expenditures necessary to cause the operations of any of the Business or
     Assets either related to the Business or owned, leased or operated by the
     Vendor to comply in all material respects with any and all requirements
     under Environmental Laws, including expenditures in connection with
     obtaining required Environmental Permits, other than renewals in the
     ordinary course; and

(d)  liability for personal injury or property damage, including damages
     assessed for the maintenance of a public or private nuisance.

"ENVIRONMENTAL PERMITS" means all permits, certificates, approvals,
registrations and licences issued or issuable by any Governmental Entity
pursuant to any Environmental Law;

"EQUIPMENT" means all of the machinery, computer equipment, tools, furniture,
vehicles, and other tangible property used or held for use in connection with
the Business;

"EVENT OF DEFAULT" shall have occurred upon: (a) Duckett having committed or
engaged in any of the following:  fraud, embezzlement, theft, disclosure of
Confidential Information having a material adverse effect on the Purchaser,
dishonesty during the course of employment, acting in a manner

                                       7

contrary to the interests of the Purchaser with knowledge that such actions will
cause material harm to or would reasonably be expected to cause material harm to
the Purchaser, willful disobedience of a lawful and reasonable order of the
Board of Directors of PMC (Nova Scotia) Company (being the only entity entitled
to give such orders), or conduct proven to have constituted moral turpitude; or
(b) a material failure of Duckett to devote a substantial majority of his time,
attention and ability, during normal business hours (and after such hours, as
reasonably required from time to time in order to properly fulfill the duties of
his position, not to be greater than the time commitment of Duckett to the
Business for the three (3) years prior to Closing), to the Future Business;
provided that "EVENT OF DEFAULT" shall not occur upon the death or Disability of
Duckett;

"EXCLUDED ASSETS" means (i) all working capital as of the Time of Closing
(determined in accordance with GAAP), except Inventory; (ii) the Shares; and
(iii) life insurance policies on the lives of the shareholders of the Vendor,
and prepaid premiums in respect thereof,

"EXCLUDED LIABILITIES" has the meaning ascribed thereto in Section 3.2;

"FINAL STATEMENT" has the meaning ascribed thereto in Subsection 2.5(b).

"FUTURE BUSINESS" means the portion of the business to be carried on subsequent
to Closing by the Purchaser, which is related to or arises out of the Business
and which directly utilizes the Assets;

"GAAP" means generally accepted accounting principles so described and
promulgated by the Canadian Institute of Chartered Accountants and applied on a
going concern basis, which is consistent with the past practice of the Vendor;

"GOVERNMENTAL ENTITY" means (i) any multinational, federal, provincial, state,
municipal, local or other governmental or public department, court, commission,
board, bureau, agency or instrumentality, domestic or foreign; (ii) any
subdivision, agent, commission, board or authority of any of the foregoing; or
(iii) any quasi-governmental or private body exercising any regulatory,
expropriation or taxing authority under or for the account of any of the
foregoing;

"HOLDBACK AMOUNT" has the meaning ascribed thereto in Subsection 2.4(a)(i);

"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that act or any
successor law;

"HSR ACT NOTIFICATION" means an application pursuant to the HSR Act by Purchaser
and Vendor to the Federal Trade Commission of the United States of America
requesting approval of the transactions contemplated by this Agreement;

"HSR APPROVAL" means that the HSR Act Notification has been given and any
applicable waiting period under the HSR Act relative to the Reviewable
Transactions shall have expired or been terminated;

"INDEMNIFIED PARTY" has the meaning ascribed thereto in Subsection 9.4(a);

"INDEMNIFYING PARTY" has the meaning ascribed thereto in Subsection 9.4(a);

                                       8

"INDEPENDENT ACCOUNTANTS" means the Calgary, Alberta office of Ernst & Young
LLP, or such other national firm of accountants, which is independent of the
Parties, as may be agreed to by the Parties;

"INITIAL INSTALLMENT" has the meaning ascribed thereto in Subsection 2.4(a);

"INTELLECTUAL PROPERTIES" means any and all Trade Marks, Patent Rights, Know-
How, copyrights, applications, designs, inventions, computer programs, software
and associated source code and other intellectual property related to the
Business;

"INTERIM COSTS" means all costs and expenses of every kind and nature relating
to the Assets during the period of time from the Effective Time to the Closing
Date, determined in accordance with GAAP, including maintenance, capital and
operating costs, cost of sales, and property taxes but specifically excluding
bonuses in excess of those amounts determined and accrued under the bonus plan
outlined in Schedule 10.3 to this Agreement, commissions or compensation in
excess of rates in effect as at January 1, 2001, interest charges (after April
30, 2001), depreciation, amortization and non-cash charges and any taxes imposed
by or under the Income Tax Act (Canada) or any provincial income tax
legislation;

"INTERIM PERIOD" means the period of time between the close of business on the
date hereof and the Time of Closing;

"INTERIM REVENUES" means all benefits, revenue and income of every kind arising
from the ownership or operation or disposition of, or otherwise relating to, the
Assets during the period of time from the Effective Time to the Closing Date,
determined in accordance with GAAP;

"INVENTORY" means all inventories of feedstocks, crude oil, natural gas liquids
and all other items held as inventory as of the Closing Date;

"INVENTORY VALUE" means the cumulative value of the Inventory, calculated in the
Vendor's usual and historical manner, consistent with GAAP;

"INVESTMENT CANADA ACT" means the Investment Canada Act (Canada), as amended;

"INVESTMENT CANADA APPROVAL" means the notice sent by the Minister (as defined
in the Investment Canada Act), in respect of reviewable transactions, pursuant
to Section 21 of the Investment Canada Act that the Minister is satisfied that
the transaction contemplated hereby is likely to be of net benefit to Canada;

"INVESTMENT CANADA NOTIFICATION" means the notification of the Purchaser
pursuant to the Investment Canada Act to be given in connection with reviewable
transactions;

"KEY EMPLOYEES" has the meaning ascribed thereto in Subsection 10.1(a);

"KEY EMPLOYEE NON-COMPETITION AGREEMENTS" has the meaning ascribed thereto in
Section 10.1(a);

"KNOW-HOW" means technical know-how, data, information, formulae and processes
including research and development know-how relating to the Business;

                                       9

"LAWS" means all statutes, codes, ordinances, decrees, rules, regulations,
municipal by-laws, judicial or arbitral or administrative or ministerial or
departmental or regulatory judgments, orders, decisions, rulings or awards, or
any provisions of the foregoing, including general principles of common and
civil law and equity, binding on or affecting the Person referred to in the
context in which such word is used; and "LAW" means any one of them;

"LEASED PROPERTIES" means the lands and premises forming the subject matter of
the Leases from which the Vendor carries on the Business at the locations listed
in Schedule 4.14(b);

"LEASES" means the leases and subleases of lands and premises used in the
Business;

"LEVEL ONE KEY EMPLOYEES" has the meaning ascribed thereto in Subsection 10.1;

"LEVEL TWO KEY EMPLOYEES" has the meaning ascribed thereto in Subsection 10.1;

"LIBOR RATE" means the rate per annum (rounded upwards, if necessary, to the
nearest 1/32 of 1%) as determined on the basis of offered rates for deposits in
Canadian dollars, for a period of time comparable to the period of time between
May 1, 2001 and the Closing Date, which appears on Telerate page 3740 (or any
successor page) as of 11:00 a.m. London time on the day that is two (2) Business
Days preceding the Closing Date;

"LOSS" means any loss whatsoever, including expenses, costs, damages, diminution
in value, penalties, fines, charges, claims, demands, liabilities, interest and
any and all legal fees and disbursements;

"LPG'S" means liquified petroleum gas;

"MARKET VALUE" means the average of the high and low prices for a Unit on the
NYSE for the ten (10) consecutive trading days immediately preceding the third
(3rd) Business Day prior to the applicable date of the delivery of Units
hereunder;

"NOTICE" means any claim, citation, directive, order (draft or otherwise),
request for information, statement of claim, litigation, notice of
investigation, investigation, proceeding, judgment, letter or other
communication, written or oral, actual or implied or threatened, from any
Person;

"NYSE" means the New York Stock Exchange;

"OWNED PROPERTIES", when used in respect of the Vendor, means, collectively, all
of the lands and premises which are owned by the Vendor and used in connection
with the Business, all of which are listed and described as such in Schedule
4.14(a), and the Buildings and Fixtures therein and thereon, including all
pipelines, leasehold improvements, storage tanks, blending facilities, meters,
and pumps;

"PAA" means Plains All American Pipeline, L.P.;

"PARTIES" means the Vendor and the Purchaser and any other person who may become
a party to this Agreement; and "PARTY" means any one of them;

"PATENT RIGHTS" means patents, patent applications, patents issuing on such
applications and any extensions, continuations, divisions or re-examinations
thereof related to the Business;

                                      10

"PERMITTED ENCUMBRANCES" means (i) Encumbrances for Taxes, assessments or
governmental charges or levies on property not yet due or delinquent; (ii)
easements, encroachments and other minor imperfections of title which do not
individually or in the aggregate materially detract from the value of, or impair
the use or marketability of any real property; (iii) the Encumbrances listed in
Schedule 1.1(b) to the extent that such Encumbrances relate solely to the
Assumed Liabilities; (iv) undetermined or inchoate liens arising in the ordinary
course of the Business for the Vendor's proportionate share of the costs and
expenses of operation of the Assets, which costs and expenses are not due or
delinquent; (v) mechanics', builders' and materialmen's liens in respect of
services rendered or goods supplied, but only insofar as such liens relate to
goods or services that have been delivered and for which payment is not due; and
(vi) liens granted in the ordinary course of the Business to a public gas,
electric, water or similar utility or Governmental Entities in connection with
the operation of the Assets in respect of which no amount is due;

"PERSON" means an individual, partnership, corporation, trust, unincorporated
association, joint venture or other entity or Governmental Entity, and pronouns
have a similarly extended meaning;

"PRE-CLOSING ENVIRONMENTAL LIABILITIES" means all Environmental Liabilities and
Costs, whether or not disclosed herein or prior to or at Closing, to the extent
the same accrued, arose, or pertained to any time prior to the Effective Time,
whether or not reasonably discoverable at the Closing Date;

"PREPAID EXPENSES" means expenditures of a non-capital nature in connection with
the Business and the Assets prior to the Effective Time, to the extent
transferred and assigned to the Purchaser at Closing, excluding expenditures in
respect of insurance policies that were incurred for a future benefit;

"PRIME" means the floating annual rate of interest established and announced by
Toronto Dominion Bank from time to time as a reference rate for the purpose of
determining rates of interest it will charge on loans denominated in Canadian
dollars;

"PURCHASE PRICE" means the Initial Installment and the Deferred Installment;

"REMEDIAL ACTION" means any action, whether voluntary or compelled, that is
reasonably necessary to (i) clean up, remove, treat or in any other way deal
with Substances in the Environment; (ii) prevent any Discharge of Substances
where such Discharge would violate any Environmental Laws or would endanger or
threaten to endanger public health or welfare or the Environment; or (iii)
perform remedial studies, investigations, restoration and post-remedial studies,
investigations and monitoring on, about or in connection with any of the Owned
Properties, Leased Properties or other Assets;

"RETAINED EMPLOYEES" has the meaning ascribed thereto in Subsection 10.1(b);

"RIGHTS OF WAY" has the meaning ascribed thereto in section 4.14(c);

"RIMBEY FACILITY" means the crude oil truck terminal and cleaning plant located
at 6-22-42-02 W5M, the water disposal well located at 16-21-42-02 W5M and the
associated equipment, pipelines, leases and rights-of-way more completely
described in Schedules 4.8, 4.14(b), 4.14(c) and 4.28;

"SHAREHOLDER NON-COMPETITION AGREEMENTS" has the meaning ascribed thereto in
Section 11.2;

"SHARES" means all of the issued and outstanding shares in the capital of Canpet
USA;

                                      11

"SUBSTANCE" means any material or substance that is deemed to be "HAZARDOUS",
"TOXIC", "DELETERIOUS", "CAUSTIC", "DANGEROUS", a "CONTAMINANT", a "WASTE", a
"SOURCE OF CONTAMINANT" or a "POLLUTANT" under any Environmental Laws;

"TAX" means any tax, duty, excise, fee, impost, assessment, deduction, charge or
withholding tax including federal and provincial sales tax, social services tax,
goods and services tax, land transfer tax, property purchase tax, income taxes,
excise tax, use tax, business tax, capital tax, franchise tax and other
provincial and federal taxes, municipal tax, local tax, foreign tax, and all
liabilities with respect thereto, including any penalty and interest payable
with respect thereto, levied, imposed or assessed from time to time upon or in
respect of income, profits or assets of any nature or kind by any Governmental
Entity;

"TIME OF CLOSING" means 8:30 a.m. (Calgary time) on the Closing Date or such
later time as the completion of the transaction of purchase and sale
contemplated in this Agreement may occur;

"TRADE MARK" means any and all trade mark registrations and applications for
trade mark registrations and brand names related to the Business;

"UNIT" means a limited partnership common unit of PAA;

"US ASSETS" has the meaning ascribed thereto in Section 1.18; and

"WELLPOINT SHARES" means all of the Vendor's shares in the capital of Wellpoint
Systems Inc., being 902,000 shares.

1.2  GENDER AND NUMBER

     Any reference in this Agreement to gender shall include all genders, and
words importing the singular number only shall include the plural and vice
versa.

1.3  HEADINGS ETC.

     The provision of a Table of Contents, the division into Articles, Sections,
Subsections and other subdivisions and the insertion of headings are for
convenience of reference only and shall not affect or be utilized in the
construction or interpretation of this Agreement.

1.4  CURRENCY

     All references in this Agreement to dollars, unless otherwise specifically
indicated, are expressed in Canadian currency.

1.5  SEVERABILITY

     Any Article, Section, Subsection or other subdivision of the Agreement or
any other provision of this Agreement which is, or becomes, illegal, invalid or
unenforceable shall be severed from this Agreement and be ineffective to the
extent of such illegality, invalidity or unenforceability and shall not affect
or impair the remaining provisions hereof, which provisions shall remain in full
force and effect.

                                      12

1.6  ENTIRE AGREEMENT

     This Agreement together with the Ancillary Agreements constitutes the
entire agreement between the Parties relating to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties.  There are no representations,
warranties, conditions or other agreements, express or implied, statutory or
otherwise, between the Parties in connections with the subject matter of this
Agreement, except as specifically set forth herein and therein.  If there is any
conflict between the provisions of the Agreement and the provisions of any
Ancillary Agreement, the provisions of this Agreement shall govern.

1.7  AMENDMENTS

     This Agreement may only be amended, modified or supplemented by a written
agreement signed by all parties to such agreement.

1.8  STATUTORY REFERENCES

     Any reference in this Agreement to a statute includes all regulations made
thereunder, all amendments to such statutes or regulations in force from time to
time, and any statute or regulation that supplements or supersedes such statute
or regulations.

1.9  WAIVER

     No waiver of any of the provisions of this Agreement shall be deemed to
constitute a waiver of any other provision (whether or not similar), nor shall
such waiver constitute a waiver or continuing waiver unless otherwise expressly
provided in writing duly executed by the Party to be bound thereby.

1.10  GOVERNING LAW

     This Agreement shall be governed by and interpreted and enforced in
accordance with the laws of the Province of Alberta and the laws of Canada
applicable therein.

1.11  ATTORNMENT

     The Purchaser and the Vendor each hereby irrevocably attorn and submit to
the non-exclusive jurisdiction of the Court of Queen's Bench of Alberta for the
adjudication of this Agreement and all matters arising herefrom.

1.12  INCLUSION

     Where the word "INCLUDING" or "INCLUDES" is used in this Agreement it means
"INCLUDING" (or includes) "WITHOUT LIMITATION".

1.13  ACCOUNTING

     All accounting terms used in this Agreement and not specifically defined
herein or therein shall be construed in accordance with GAAP.

                                      13

1.14  CALCULATION OF TIME

     Unless otherwise specified, time periods referred to in this Agreement
within or following which any payment is to be made or act is to be done shall
be calculated by excluding the day on which the period commences and including
the day on which the period ends and by extending the period to the next
Business Day following if the last day of the period is not a Business Day.

1.15 BUSINESS DAY

     Whenever any payment to be made or action to be taken under this Agreement
is required to be made or taken on a day other than a Business Day, such payment
shall be made or action taken on the next Business Day following such day.

1.16 INCORPORATION OF SCHEDULES

     The following are the schedules attached to and incorporated in this
Agreement.

     Schedule 1.1(b)      -   Permitted Encumbrances
     Schedule 2.3         -   Allocation of Purchase Price
     Schedule 2.4(c)      -   Assigned Deposits and Prepaid Expenses
     Schedule 4.3         -   Governmental and Third Party Consents and
                               Restrictions on Transfer
     Schedule 4.8         -   Authorizations
     Schedule 4.14(a)     -   Owned Properties
     Schedule 4.14(b)     -   Leases and Leased Property
     Schedule 4.14(c)     -   Rights of Way
     Schedule 4.15        -   Financial Statements
     Schedule 4.16        -   Commodity Contracts
     Schedule 4.17        -   Other Contracts
     Schedule 4.19        -   Intellectual Property Rights
     Schedule 4.22        -   Employees
     Schedule 4.23        -   Environmental Matters
     Schedule 4.24        -   Insurance
     Schedule 4.25        -   Litigation
     Schedule 4.26        -   Letters of Credit etc.
     Schedule 4.28        -   Equipment
     Schedule 4.29        -   Inventory
     Schedule 4.30        -   Customers
     Schedule 6.1(b)(ix)  -   Capital Expenditures
     Schedule 8.4         -   Form of Letter of Credit
     Schedule 10.1        -   Key Employees
     Schedule 10.1(a)(1)  -   Level One Key Employee Non-Competition Agreement
     Schedule 10.1(a)(2)  -   Level Two Key Employee Non-Competition Agreement
     Schedule 10.3        -   Bonus Plan
     Schedule 11.2        -   Shareholder Non-Competition Agreements

                                      14

1.17 KNOWLEDGE

     References in this Agreement to matters which are to the knowledge of the
Vendor shall refer to the knowledge of the officers, directors, senior managers
and plant superintendents of the Vendor.

1.18 CANADIAN AND UNITED STATES TRANSACTIONS

     The parties acknowledge and agree that although throughout this Agreement,
the Assets and the Business, and other related definitions, are referred to
globally, a portion of the Assets and the Business are located and conducted in
Canada, and a portion in the United States.  Those Assets located in Canada or
which pertain to the portion of the Business conducted in Canada (the "CANADIAN
ASSETS") are owned, held and conducted by Canpet Canada and will be sold by
Canpet Canada to PMC, and those Assets located in the United States, or which
pertain to the portion of the Business conducted in the United States (the "US
ASSETS"), are owned, held and conducted by Canpet USA and shall be sold by
Canpet USA to PMLP.  Therefore, the parties agree as follows:

(a)  the Purchase Price shall be allocated among the Canadian Assets and the US
     Assets, as set forth in Schedule 2.3;

(b)  the portion of the Purchase Price allocated to the US Assets shall be paid
     out of the Initial Installment;

(c)  all obligations and entitlements with respect to the Initial Installment
     shall, to the extent allocated to the US Assets, be those of Canpet USA and
     PMLP, and all obligations and entitlements with respect to the Initial
     Installment shall, to the extent allocated to Canadian Assets, be those of
     Canpet Canada and PMC;

(d)  the Deferred Installment shall be allocated entirely to the Canadian
     Assets;

(e)  the representations, warranties, covenants and agreements of the Vendor
     hereunder, and under all agreements delivered by the Vendor pursuant to
     this Agreement, shall be joint and several between Canpet Canada and Canpet
     USA;

(f)  the representations, warranties, covenants and agreements of the Purchaser
     hereunder, and under all agreements delivered by the Purchaser pursuant to
     this Agreement, shall be joint and several between PMC and PMLP; and

(g)  all matters listed in Schedules to this Agreement and other written
     disclosure made by the Vendor to the Purchaser pursuant to the terms of
     this Agreement shall clearly indicate whether the matters so listed or
     disclosed relate to the US Assets or the Canadian Assets.

                                      15

                                  ARTICLE II
                          PURCHASE AND SALE OF ASSETS

2.1  PURCHASE AND SALE OF ASSETS

     Subject to the terms and conditions set forth in this Agreement, the Vendor
agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the
Vendor at the Closing, the entire right, title, estate and interest of the
Vendor in and to the Assets, free and clear of all Encumbrances, except the
Permitted Encumbrances.

2.2  PURCHASE PRICE

     Subject to Subsections 2.4(b) and 2.6(a), the aggregate purchase price (the
"PURCHASE PRICE") payable by the Purchaser to the Vendor for the Assets shall be
$66.2 million, payable, subject to Section 2.6, in two installments.  The
Purchaser shall pay interest on the unadjusted Initial Installment from May 1,
2001 until the Closing Date at the LIBOR Rate plus two percent (2%).  At
Closing, the Initial Installment shall be calculated and paid in accordance with
Section 2.4.  On the Deferred Payment Date, the Deferred Installment shall be
calculated and paid in accordance with Section 2.6.

2.3  ALLOCATION OF INITIAL INSTALLMENT

     The Vendor and the Purchaser agree to allocate the Initial Installment in
accordance with Schedule 2.3 and to execute and file all Tax returns on the
basis of such allocations.  Any increase or decrease to the Initial Installment
pursuant to Subsection 2.4(b)(ii) (as adjusted in the Final Statement) shall be
allocated to goodwill.  Any increase or decrease to the Initial Installment
pursuant to Subsection 2.4(b)(i) (as adjusted in the Final Statement) shall be
allocated to Inventory Value.

2.4  PAYMENT AT CLOSING

(a)  At the Time of Closing, the Purchaser shall pay to the Vendor $39.7
     million, subject to the adjustments contemplated by Subsection 2.4(b) (the
     "INITIAL INSTALLMENT").  The Initial Installment shall be paid and
     satisfied as follows:

     (i)  $1 million in cash shall be retained by the Purchaser pursuant to
          Section 2.5 below (the "HOLDBACK AMOUNT"); and

     (ii) the remainder of the Initial Installment shall be paid in cash, by
          wire transfer.

(b)  The Initial Installment shall:  (i) be increased by the amount by which the
     Inventory Value exceeds $13.0 million, or if Inventory Value is less than
     $13.0 million, the Initial Installment shall be decreased by the
     difference; and (ii) be decreased (if the amount is positive) or increased
     (if the amount is negative) by 65% of the difference determined by
     deducting Interim Costs from Interim Revenues.

(c)  (i) The Vendor shall assign those Deposits and Prepaid Expenses contained
     in Schedule 2.4(c), and with the consent of the Purchaser (which consent
     may be withheld for any reason), the Vendor may assign and transfer to the
     Purchaser certain other Deposits and/or Prepaid Expenses, and to the extent
     they are

                                      16

          assigned and transferred to the Purchaser, the Purchaser shall
          reimburse the Vendor for all such transferred Deposits and Prepaid
          Expenses.

     (ii) The Vendor shall, at Closing, remit to the Purchaser funds advanced to
          the Vendor which are attributable to future deliveries of crude oil,
          LPG's, or natural gas liquids and are related to Contracts assigned
          under this Agreement.

     (iii) The Vendor shall, at Closing, remit to the Purchaser the amount of
           all deferred gains as at the Closing Date in respect of closed
           futures contracts.

     (iv) The Purchaser shall, at Closing, remit to the Vendor the amount of all
          deferred losses of the Vendor as of the Closing Date in respect of
          closed futures contracts.

     (v) Amounts payable under Subclauses 2.4(c)(i) and 2.4(c)(iv) may be offset
         against amounts under Subclauses 2.4(c)(ii) and 2.4(c)(iii).

(d)  For the purposes of Closing, the Initial Installment shall be based on the
     Closing Date Statement.

2.5  CLOSING DATE STATEMENT AND ADJUSTMENT TO INITIAL INSTALLMENT

(a)  No less than two (2) Business Days prior to Closing the Vendor shall
     deliver to the Purchaser a detailed interim accounting statement (utilizing
     estimates where necessary) setting forth, separately, each of the items
     necessary for calculating its estimate of each of the adjustments
     contemplated by Subsections 2.4(b) and 2.4(c), including a detailed
     statement estimating the calculation of Inventory Value (the "CLOSING DATE
     STATEMENT").

(b)  Within one hundred twenty (120) days following the Closing Date (or such
     other date as is mutually agreed to by the Vendor and the Purchaser in
     writing) the Vendor shall prepare and deliver to the Purchaser a final
     accounting statement (the "FINAL STATEMENT") adjusting the Closing Date
     Statement to reflect actual amounts.

(c)  The Final Statement prepared and delivered as aforesaid shall be final and
     binding upon the parties for all purposes hereof, absent manifest error,
     unless the Purchaser notifies the Vendor in writing, within thirty (30)
     days after receipt by the Purchaser of the Final Statement, that it
     disputes the Final Statement.

(d)  In the event that the Purchaser disputes the Final Statement in accordance
     with Subsection 2.5(c), the parties shall work expeditiously and in good
     faith in an attempt to resolve such dispute for a further period of twenty
     (20) Business Days after the date of notification by the Purchaser to the
     Vendor of such dispute, failing which such dispute shall be submitted for
     determination to the Independent Accountants.  The determination of the
     Independent Accountants shall be final and binding upon the Parties and not
     be subject to appeal, absent manifest error.  The Independent Accountants
     shall be deemed to be acting as experts and not as arbitrators.  The costs
     and expenses of the Independent Accountants shall be borne equally by the
     Vendor and

                                      17

     the Purchaser. The Vendor and the Purchaser shall each bear their own costs
     in presenting their cases to the Independent Accountants.

(e)  Within five (5) Business Days after the twenty (20) Business Day period
     referred to in Subsection 2.5(d) or the resolution of any dispute in
     accordance with Subsection 2.5(d), as the case may be, a cash payment shall
     be made as follows:  (i) if the finally determined Initial Installment
     exceeds the Initial Installment as set forth in the Closing Date Statement,
     the Purchaser shall pay the Vendor such excess amount plus the Holdback
     Amount; (ii) if the Initial Installment as set forth in the Closing Date
     Statement exceeds the finally determined Initial Installment by an amount
     that does not exceed $1.0 million, such amount shall be deducted from the
     Holdback Amount and the remaining Holdback Amount, if any, shall be paid by
     the Purchaser to the Vendor; and (iii) if the Initial Installment as set
     forth in the Closing Date Statement exceeds the finally determined Initial
     Installment by more than $1.0 million, then the Purchaser shall keep and
     thereafter own the Holdback Amount and the Vendor shall remit to the
     Purchaser an amount equal to the amount by which such deficit exceeds $1.0
     million.

(f)  All payments made under this Section 2.5 shall be made by wire transfer and
     shall bear interest calculated from the Closing Date to the date of payment
     at the LIBOR Rate plus 2%.

(g)  The determination and payment of any amounts due pursuant to the provisions
     of this Section 2.5 shall not limit or affect any other rights or causes of
     action either the Purchaser or the Vendor may have hereunder with respect
     to the representations, warranties, covenants and indemnities in its favour
     contained herein.

2.6  PAYMENT OF DEFERRED INSTALLMENT

(a)  Subject to the remainder of this Subsection 2.6(a), the Deferred
     Installment shall be $26.5 million, and shall be satisfied on the Deferred
     Payment Date.  The Deferred Installment shall be satisfied by the issuance
     by PAA, or transfer by the Purchaser, to the Vendor of Units having a
     Market Value equal to the Deferred Installment.  The Deferred Installment
     shall be reduced according to the following if any of the following
     circumstances occur:

     (i)  if the average annual EBITDA for the Earn-Out Period is less than
          $13.24 million but greater than $12.3 million, the Deferred
          Installment shall equal (x) 5 times the average annual EBITDA for the
          Earn-out Period (y) minus $39.7 million;

     (ii) if the average annual EBITDA for the Earn-Out Period is less than
          $12.3 million but greater than $10.8 million, the Deferred Installment
          shall equal (x) 4.5 times the average annual EBITDA for the Earn-Out
          Period (y) minus $39.7 million;

     (iii) if the average annual EBITDA for the Earn-Out Period is less than or
           equal to $10.8 million but greater than $10.0 million, the Deferred
           Installment shall equal (x) 4.0 times the average EBITDA for the
           Earn-Out Period (y) minus $39.7 million; or

                                      18

     (iv) if the average annual EBITDA for the Earn-Out Period is less than $10
          million, the Deferred Installment shall equal zero.

(b)  The Purchaser shall also pay to the Vendor, with respect to the Units
     issued or delivered pursuant to Subsection 2.6(a), on the Deferred Payment
     Date a cash payment equal, on a per Unit basis, to the aggregate amount of
     all distributions made by PAA to its unitholders of record between the
     Effective Time and the actual date on which the Units are transferred or
     issued to the Vendor pursuant to Subsection 2.6(a).  Any such payment shall
     be deemed to be an increase to the Purchase Price.

(c)  For the purposes of Subsection 2.6(a) above, the EBITDA for the Earn-Out
     Period will include an annualized amount for the period from March 1, 2001
     through December 31, 2001 (based on a fraction of 12/10), plus the EBITDA
     for the calendar year 2002, plus the EBITDA for the calendar year 2003.
     The average shall be determined by dividing this amount (which includes the
     annualized amount for the period from March 1, 2001 through December 31,
     2001) by three.

(d)  (i) For the purposes of communicating and verifying the calculations
         contemplated in this Section 2.6, the Purchaser shall, within 100 days
         following the end of each of the three calendar years following
         Closing, deliver to the Vendor an income statement which has been
         reviewed in conjunction with PAA's annual audit for each such calendar
         year and the EBITDA for such period. In addition, with the delivery of
         the last income statement provided pursuant to this Subsection
         2.6(d)(i), the Purchaser shall provide the Vendor with a statement
         setting forth the calculations of the average annual EBITDA during the
         Earn-Out Period. Each statement provided pursuant to this Subsection
         2.6(d)(i) shall be final and binding upon the parties for all purposes
         hereof, absent manifest error, unless the Vendor notifies the Purchaser
         in writing, within twenty (20) days of receipt of such statement, that
         it disputes the said statement.

     (ii) In the event that the Vendor disputes any such statement in accordance
          with Subsection 2.6(d)(i), (A) the parties shall work expeditiously
          and in good faith in an attempt to resolve such disputes for a further
          period of twenty (20) Business Days after the date of notification to
          the Purchaser by the Vendor of such dispute, failing which such
          dispute shall be submitted for determination to the Independent
          Accountants; and (B) if such dispute relates to the last income
          statement or the calculation of the average EBITDA during the Earn-Out
          Period, the Deferred Payment Date shall be delayed until the fifth
          (5th) Business Day following the ultimate resolution of such dispute.
          The determination of the Independent Accountants shall be final and
          binding upon the Parties and not be subject to appeal, absent manifest
          error. The Independent Accountants shall be deemed to be acting as
          experts and not as arbitrators. The costs and expenses of the
          Independent Accountants shall be borne equally by the Vendor and the
          Purchaser. The Vendor and the Purchaser shall each bear their own
          costs in presenting their cases to the Independent Accountants.

                                      19

2.7  UNITS

(a)  The Vendor acknowledges that none of the Units will be the subject of a
     registration statement under the Securities Act of 1933, as amended (the
     "US SECURITIES ACT"), nor a prospectus or similar instrument under Canadian
     securities laws, and accordingly the Units will not be tradable (i) in
     Canada, at any time, to a Canadian resident except in accordance with
     applicable Canadian securities laws; or (ii) in the United States, until
     the expiry of the hold periods prescribed by the US Securities Act and/or
     the NYSE.

(b)  All of the Units comprising the Deferred Installment shall not be tradable
     legally or beneficially by the Vendor, except in accordance with the
     following:

     (i)  after the first anniversary of the Deferred Payment Date:  60% may be
          traded; and

     (ii) after the second anniversary of the Deferred Payment Date: 100% may be
          traded.

(c)  All certificates representing the Units shall be marked with a clearly
     readable legend setting forth the requirements of Subsections 2.7(a) and
     (b).

(d)  For the purposes of this Section 2.7, "TRADE" shall include:

     (i)  any transfer, sale or disposition of a security, whether or not for
          valuable consideration;

     (ii) any transfer, pledge or encumbrance of securities for the purpose of
          giving collateral for a debt (unless given in favour of a chartered
          bank or other lending institution, and such chartered bank or lending
          institution has, concurrently with such transfer, pledge or
          encumbrance, acknowledged in writing to the Purchaser that it is
          subject to the transfer restrictions contained in this Agreement); and

     (iii)  any act, advertisement, solicitation, conduct or negotiation
            directly or indirectly in furtherance of any of the foregoing.

(e)  Canpet Canada shall be entitled to distribute the Units or portions thereof
     to its shareholders from time to time, provided that all such transferees
     shall continue to be bound by the terms of this Section 2.7.  The Vendor
     shall retain records of any such transfers so that the Purchaser may
     conduct an annual audit of compliance with the provisions set forth in this
     Section 2.7.

2.8  ALLOCATION OF DEFERRED INSTALLMENT

     The Vendor and the Purchaser agree to allocate the Deferred Installment as
set forth in Schedule 2.3, and to execute and file all tax returns on the basis
of such allocations.

                                      20

2.9  ALTERNATIVE PAYMENT OF DEFERRED INSTALLMENT

(a)  The Purchaser and PAA shall be entitled, at their option, to satisfy their
     obligations with respect to the Deferred Installment by the payment of
     cash, rather than the issuance of Units.

(b)  In the event that PAA undergoes a reorganization, the result of which is
     that a successor with substantially similar net worth has publicly traded
     securities, then subject to Subsection 2.9(a), the Deferred Installment
     shall be paid by the issuance of such publicly traded securities and each
     reference to "Units" in Sections 2.6 and 2.7 shall be deemed to refer to
     such publicly traded securities.

(c)  The Purchaser shall be entitled, at its option, to satisfy its obligations
     with respect to the Deferred Installment by issuing its own limited
     partnership units, which, by their terms, will be immediately exchangeable
     by both the holder or the issuer thereof into Units on a one-for-one basis.
     The number of limited partnership units to be issued by the Purchaser will
     in such event be equal to the number of Units which would otherwise be
     issuable pursuant to the terms of this Agreement.  The Purchaser shall not
     be entitled to issue such limited partnership units unless (i) the terms of
     such units are acceptable to the Vendor, acting reasonably; and (ii) PAA
     has executed a binding agreement, in a form reasonably satisfactory to the
     Vendor, whereby it undertakes to honour the exchange provisions of the
     limited partnership units.

2.10 CONTINUED EMPLOYMENT OF W. DAVID DUCKETT

     Notwithstanding Section 2.6, the amount of the Deferred Installment as
calculated pursuant to Section 2.6 shall be reduced by thirty six and three
tenths percent (36.3%) upon the dismissal of Duckett by reason of the occurrence
of an Event of Default at any time during the Earn-Out Period.

2.11 CHANGE OF CONDITION

     The Purchaser covenants and agrees that throughout the Earn-Out Period, it
will not, without having first received the written approval of Duckett for the
purposes of and referring to this Section 2.11, cause or permit a material
reorganization, divestiture or downsizing of the Business so as to have a
material adverse effect on the ability of the Key Employees to generate EBITDA
during the Earn-Out Period.

2.12 ONUS OF PROOF

     If the Purchaser is in breach of Section 2.11, there shall be a
presumption, subject to proof to the contrary, on the balance of probabilities,
that for the purposes of Section 2.6, the average annual EBITDA for the Earn-Out
Period would have been in excess of $13.24 million in the absence of the breach,
and the onus of proof that such EBITDA would have been less, and if less,
regarding the amount of EBITDA which would have been earned during the remainder
of the Earn-Out Period, shall be on the Purchaser, on the balance of
probabilities.

                                      21

                                  ARTICLE III
                              ASSUMED LIABILITIES

3.1  ASSUMED LIABILITIES

     Subject to Closing, the Purchaser hereby agrees to assume, discharge,
perform and fulfill the following obligations and liabilities with respect to
the Business as and from the Effective Time (collectively, the "ASSUMED
LIABILITIES"):

(a)  all obligations or liabilities under the Contracts and the Leases arising
     in respect of the period after the Time of Closing and not related to any
     default existing prior to or as a consequence of Closing;

(b)  any liability expressly assumed by the Purchaser under Article IX;

(c)  post-Closing Date obligations and liabilities arising under the Closing
     Agreements to which the Purchaser is a party; and

(d)  any other obligations expressly assumed by the Purchaser hereunder.

Whether or not an item is a "Permitted Encumbrance" shall have no effect as to
whether or not such item is an "Assumed Liability".

3.2  EXCLUDED LIABILITIES

     Except for the Assumed Liabilities, the Purchaser shall not assume and
shall have no obligation to discharge, perform or fulfill any other liabilities
or obligations, contingent or otherwise, of the Vendor or the Assets of any kind
whatsoever (collectively, the "EXCLUDED LIABILITIES") including:

(a)  any liabilities incurred or accruing due prior to the Time of Closing under
     the Contracts or Leases;

(b)  any assessment or reassessment for income, corporate, capital, sales,
     excise or other Taxes, duties or imposts of any kind whatsoever of the
     Vendor or relating to the Business or Assets in respect of a period prior
     to the Time of Closing;

(c)  any third party product liability or warranty liability arising at any time
     in respect of products or services of the Business, provided, processed or
     shipped on or prior to the Closing Date, even though a Claim therefor may
     be made or filed after the Time of Closing;

(d)  any liability of the Vendor to the employees of the Vendor other than as
     specifically contemplated by Article X;

(e)  any liability of the Vendor to employees for wrongful dismissal, whether or
     not such employees were offered employment by the Purchaser as contemplated
     by Article X;

                                      22

(f)  except as set forth in Section 9.5, any liability for Pre-Closing
     Environmental Liabilities;

(g)  any liability arising out of any default, breach or penalty by, of or
     against the Vendor under any contract or commitment prior to the Time of
     Closing;

(h)  any liability relating to the execution, delivery and consummation of this
     Agreement by the Vendor and the transactions of the Vendor contemplated
     hereby, including without limitation any and all federal, provincial,
     state, foreign and local income taxes incurred by the Vendor as a result of
     the transactions contemplated by this Agreement, except as may otherwise be
     expressly assumed herein; and

(i)  any liability relating to or arising out of the conduct or operation of the
     Business by the Vendor prior to the Time of Closing (except as otherwise
     expressly assumed herein), including without limitation those arising from
     (i) personal injury (including death) or property damage claims; (ii) any
     third party relationship, representation agreement or joint venture not
     specifically assumed hereunder; (iii) any indebtedness of the Vendor other
     than that expressly assumed hereunder; (iv) other than as set forth in
     Article X, any employment relationship or employee related obligation; or
     (v) obligations or liabilities under any agreement, contract or commitment
     of the Vendor which accrued prior to the Time of Closing, including without
     limitation, the provision of services prior to the Time of Closing under
     any service contract of the Vendor.

                                  ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF THE VENDOR

     The Vendor represents and warrants to the Purchaser, and acknowledges and
confirms that the Purchaser is relying upon such representations and warranties
in connection with the purchase by the Purchaser of the Assets, as follows:

4.1  ORGANIZATION AND STANDING

     Canpet Canada is a corporation duly organized and validly existing and in
good standing under the laws of Alberta.  Canpet USA is a corporation duly
organized and validly existing under the laws of the State of Washington, and is
a wholly-owned subsidiary of Canpet Canada.  The Vendor has full corporate power
to own or lease its properties and to conduct the Business as presently
conducted and is duly authorized, qualified and licensed to do business in the
Province of Alberta and all other jurisdictions in which the Business is
conducted (except South Dakota, Wisconsin, Missouri, and Michigan, all of which
licenses and qualifications shall have been obtained by the Time of Closing).
Canpet Canada is not a non-resident within the meaning of the Income Tax Act
(Canada).

4.2  AUTHORITY

     The Vendor has all requisite corporate power and authority to execute,
enter into and carry out the terms and conditions of this Agreement and all
other agreements and instruments contemplated hereby, and to perform its
obligations hereunder and thereunder.

                                      23

4.3  GOVERNMENTAL AND THIRD PARTY CONSENTS

(a)  Except as set forth on Schedule 4.3, no consent, approval, order or
     authorization of, or registration, qualification, designation, declaration
     or filing with, any Governmental Entity is required on the part of the
     Vendor in connection with the transactions contemplated by this Agreement
     or the Closing Agreements.

(b)  Except as set forth on Schedule 4.3, no consent, approval, waiver or other
     action by any Person is required or necessary for the execution, delivery
     and performance of this Agreement and the consummation of the transactions
     contemplated hereby or thereby other than the requisite approval of the
     Vendor's shareholders.

4.4  NO VIOLATION

(a)  The execution, delivery and performance by the Vendor of this Agreement and
     the consummation of the transactions contemplated thereby:

     (i)  have been duly authorized by all necessary action on the part of the
          Vendor, other than the requisite approval of the Vendor's
          shareholders; and

     (ii) do not (or would not with the giving of notice or the lapse of time)
          result in a violation or a breach of, or a default under or give rise
          to a right of termination, amendment or cancellation or the
          acceleration of any obligation under (i) any constating documents or
          by-laws of the Vendor; (ii) subject to the obtaining of Consents, any
          contracts or instruments to which the Vendor is a party or by which
          the Vendor is bound; or (iii) any Laws applicable to the Vendor or the
          Assets.

(b)  This Agreement and the Closing Agreements constitute legal, valid and
     binding obligations of the Vendor enforceable against the Vendor in
     accordance with their respective terms.

4.5  RESTRICTIONS ON TRANSFER

     The Vendor is not subject to, or a party to, any charter or by-law or other
constating document restriction, Law, Claim, contract or instrument, Encumbrance
or other restriction of any kind or character which would prevent the
consummation of the transactions contemplated by this Agreement or any Closing
Agreement or compliance by the Vendor with the terms, conditions and provisions
hereof or thereof, except for the necessity of obtaining the Consents and the
Authorizations described in Schedule 4.3.

4.6  NO MATERIAL ADVERSE CHANGE

(a)  Since December 31, 2000, there has been no (i) damage, destruction or loss
     of physical property, or (ii) change in the affairs, assets, liabilities,
     business, prospects, operations or condition of the Business or the Assets,
     financial or otherwise, howsoever arising, including without limiting the
     generality of the foregoing, as a result of any legislative or regulatory
     change, revocation of any licence or right to do business that is to be

                                      24

     assigned to the Purchaser, fire, explosion, accident, casualty, labour
     trouble, loss of regular customers, or cancellation or threatened
     cancellation of material supply contracts, customer agreements or
     relationships, or other business relationships, which has materially
     adversely affected or which could reasonably be expected to materially
     adversely affect the Business or the Assets;

(b)  Since December 31, 2000, the Vendor has not:

     (i)  permitted any of the Assets to become subjected to any Encumbrance
          except for Permitted Encumbrances or Encumbrances to be discharged at
          or prior to Closing;

     (ii) sold, transferred or otherwise disposed of any Assets except for (i)
          Assets sold in the ordinary course of business which are minor in
          nature and not essential to the operation of the Business; and (ii)
          the sale of its Inventory in the ordinary course of the Business, for
          which fair value was received;

     (iii) granted any increase in benefits or the rate of wages and salaries
           for executives or other employees employed in connection with the
           Business, other than increases effective January 1, 2001, the
           details of which are contained in Schedule 4.22, and discretionary
           bonuses which were earned prior to the Effective Time, and which are
           not, and do not, affect on-going obligations of the Purchaser to
           executives or other employees. For greater certainty, no such
           discretionary bonuses shall be included in Interim Costs incurred
           after the Effective Time for the purposes of Subsection 2.4(d);

     (iv) cancelled or waived any material claims or rights relating to Assets
          or the Business;

     (v)  made any change in any method of accounting practice applicable to the
          Business; or

     (vi) cancelled or reduced any of its insurance coverage relating to Assets
          or the Business; and

     the Vendor has:

     (vii) maintained adequate levels of Inventory to carry on the Business in
           the ordinary course;

     (viii) used its best efforts to keep available the services of the
            employees and agents of the Business and to maintain its relations
            and goodwill with the suppliers, customers, distributors and any
            others having business relations with the Business;

     (ix) used reasonable efforts consistent with past practice to preserve the
          possession and control of Assets and to preserve the confidentiality
          of any confidential or proprietary information of the Business; and

                                      25

     (x)  continued to make such capital expenditures as are necessary or
          advisable, in the ordinary course of business, to ensure basic
          maintenance of the Assets and the Business and the health and safety
          of its employees and the protection of the Environment.

4.7  COMPLIANCE WITH LAWS

     The Vendor has and is conducting the Business in compliance with all
applicable health and safety, product manufacturing, Environmental and other
Laws of every jurisdiction in which its business is carried on.

4.8  AUTHORIZATIONS

     The Vendor owns, holds, possesses or lawfully uses in the operation of the
Business all Authorizations which are necessary for it to conduct the Business
as presently conducted or for the ownership and use of its Assets.  All such
Authorizations are listed and described in Schedule 4.8 and the Vendor has not
received any notice of any Claim of default, nor to the knowledge of the Vendor
is the Vendor in default or are requirements outstanding with respect to any
such Authorizations, other than as described in Schedule 4.8.

4.9  TITLE TO ASSETS

     The Vendor has good and marketable title to the Assets, except for those
Assets leased by it, free and clear of all Encumbrances except for Permitted
Encumbrances and Encumbrances to be discharged on or prior to the Closing Date.

4.10  NO OPTIONS ON ASSETS, ETC

     Except for the Purchaser under this Agreement, no Person has any written or
oral agreement, option, understanding or commitment, or any right or privilege
capable of becoming such for the purchase from the Vendor of any of the Assets,
other than pursuant to purchase orders and similar agreements accepted or
entered into by the Vendor in the ordinary course of its Business.

4.11  CONDITION OF ASSETS

     All of the Assets which are material to the Business are (i) maintained in
accordance with all applicable Laws and with all Authorizations validly issued
pursuant thereto; (ii) in good operating condition and in a state of good
maintenance and repair; and (iii) adequate and suitable for the purposes for
which they are presently being used.

4.12  CONDITION OF INVENTORY
     All Inventory meets quality specifications of the applicable pipeline
carriers and/or the Vendor's customers, and may be sold by the Purchaser without
discount or allowances.

                                      26

4.13  VALUATION OF INVENTORY

     All appropriate writedowns of the value of Inventory consistent with GAAP
and the Vendor's normal business practice have been made by the Vendor in its
calculation of Inventory Value.

4.14  REAL PROPERTY

(a)  Schedule 4.14(a) sets forth all lands owned in fee by the Vendor, with the
     legal descriptions or recordation information.  The Vendor has, and at
     Closing will have, good and marketable record title in fee to all lands
     listed on Schedule 4.14(a), free and clear of any and all mortgages, liens
     and encumbrances created by any person, other than Permitted Encumbrances.

(b)  Schedule 4.14(b) contains a true, correct and complete list of all of the
     Leases.  Each Lease is in good standing, creates a good and valid leasehold
     estate in the Leased Properties thereby demised and is in full force and
     effect without amendment thereto, except as disclosed in Schedule 4.14(b).
     With respect to each Lease (i) all rents and additional rents due to the
     date hereof have been paid; (ii) neither the lessor nor the lessee is in
     default thereunder; (iii) no waiver, indulgence or postponement of the
     lessee's obligations thereunder has been granted by the lessor; (iv) there
     exists no event of default or event, occurrence, condition or act, (subject
     to the requirement for Consents) which, with the giving of notice or the
     lapse of time, would become a default under such Lease; (v) the Vendor has
     not violated any of the terms or conditions under any such Lease in any
     material respect; and (vi) to the knowledge of the Vendor, all of the
     covenants to be performed by any other party under any such Lease have been
     fully performed.  To the knowledge of the Vendor, the Leased Properties are
     in a state of good maintenance and repair, subject to age, useful life and
     normal wear and tear, and are adequate and suitable for the purposes for
     which they are presently being used.

(c)  Schedule 4.14(c) sets forth all of the Vendor's right-of-way agreements
     (the "RIGHTS OF WAY").  The Vendor has, and at Closing will have, good and
     defensible title to such rights-of-way, subject only to Permitted
     Encumbrances.  The applicable Assets and Equipment are located within such
     rights-of-way.  Such rights-of-way are continuous, there are no gaps in
     such rights-of-way, and there are not outstanding demands to remove or
     relocate Assets or Equipment within such rights-of-way.

4.15  FINANCIAL STATEMENTS AND RELATED MATTERS

(a)  Schedule 4.15 sets forth the financial statements that the Vendor has
     furnished to the Purchaser, which are true, complete and accurate copies of
     the Vendor's audited financial statements as of and for the fiscal periods
     ended December 31, 1998, 1999 and 2000, which statements include, among
     other things, balance sheets of the Vendor as of December 31, 1998, 1999
     and 2000 and the related statements of income and retained earnings and
     cash flow for the years ended December 31, 1998, 1999 and 2000.  No
     material earnings of the Business in 1998, 1999 and 2000 are attributable
     to unhedged positions, in violation of the Vendor's policies.

                                      27

(b)  Each of the balance sheets referred to above was prepared in accordance
     with the Books and Records of the Vendor and presents fairly in accordance
     with GAAP consistently applied the financial position of the Vendor as of
     the date thereof and each statement of income and retained earnings and
     cash flow referred to above was prepared in accordance with the Books and
     Records of the Vendor and presents, as the case may be, fairly in
     accordance with GAAP consistently applied the results of operations of the
     Vendor for the period which it purports to cover.

(c)  The financial and accounting Books and Records of the Vendor have been
     maintained in accordance with applicable legal and accounting requirements
     and good business practices and accurately reflect the basis for the
     financial position and results of operations of the Vendor as set forth in
     the financial statements described in this Section and such Books and
     Records are true, complete and correct in all material aspects and do not
     contain any misrepresentations or omit any information required to make
     such Books and Records not misleading.

(d)  There are no material liabilities either accrued, absolute or contingent,
     including, without limitation, liabilities under any applicable
     Environmental, safety, health or other Laws or common law theory of
     liability, of the Vendor of any kind whatsoever, in respect of which the
     Purchaser may become liable on or after the consummation of the transaction
     contemplated by this Agreement other than the Assumed Liabilities.

4.16  COMMODITY CONTRACTS

     Except as set forth in Schedule 4.16, the Vendor, with respect to the
Business or the Assets, is not a party to nor bound by:

(a)  any agreement to buy or sell crude oil, LPG's, natural gas liquids or any
     other commodity at a fixed price, as a barrel for barrel exchange, any
     agreement which cannot be cancelled with 30 days prior written notice or to
     deliver barrels against an earlier month's obligation;

(b)  any futures contract or option traded on a regulated Exchange, or in the
     over-the-counter market (other than for hedging purposes, consistent with
     historical practices, all of which hedging contracts or options as of March
     26, 2001 are listed in Schedule 4.16, and will be updated by the Vendor as
     of Closing); or

(c)  any swap, over the counter, or derivative contract or agreement.

4.17  OTHER CONTRACTS

     Except as set forth in Schedule 4.14, 4.16, 4.17, 4.19 or 4.22, the Vendor,
with respect to the Business or the Assets, is not a party to nor bound by:

(a)  any employment agreement, bonus, deferred compensation, pension, profit
     sharing, stock option, phantom stock plan, employee stock purchase, health,
     insurance, retirement or other employee benefit plan, any collective
     agreements or any agreement

                                      28

     (oral or written) providing for compensation out of the ordinary course to
     be paid to any employee as a consequence of the sale of any substantial
     portion of the Assets;

(b)  any agreement or commitment relating to capital expenditures in excess of
     $50,000;

(c)  any agreement or commitment limiting the freedom of the Vendor to engage in
     the Business or to compete with any other Person in respect of the
     Business;

(d)  any licensing or other agreement or commitment relating to intellectual
     property used by the Vendor in the conduct of the Business;

(e)  any agreement or commitment not entered into in the ordinary course of
     business;

(f)  any agreement or arrangement with any Person with whom the Vendor (or its
     present or former directors, officers and employees) does not deal at arm's
     length (which agreements or arrangements are specifically identified in
     Schedule 4.17 as "non-arm's length"); or

(g)  any contractual obligation that would restrict the Vendor's, or its
     employee's right to engage in any type of business or compete in any
     geographic area.

4.18 NO BREACH OF CONTRACTS

     Each of the Contracts is in full force and effect, and there exists no
default or event of default or event, occurrence, condition or act (including
the sale of the Assets hereunder) which, with the giving of notice or the lapse
of time would become a default or event of default thereunder, except for the
necessity of obtaining the Consents.  The Vendor has not violated or breached,
in any respect, any of the material terms or conditions of any Contract, and to
the knowledge of the Vendor, all the covenants to be performed by any other
party thereto have been fully performed and the Vendor has not received notice
of termination of any of the Contracts or any notice alleging breach thereof.

4.19 INTELLECTUAL PROPERTY RIGHTS

(a)  All the Patent Rights and Trade Marks are described in Schedule 4.19.

(b)  The Vendor holds those licences that are reasonably necessary for the
     purpose of conducting the Business.  Except as set forth in Schedule 4.19,
     the Vendor has the right to transfer and grant the licences with respect to
     the Intellectual Properties in accordance with this Agreement.

(c)  Except as set forth in Schedule 4.19, the Vendor is not aware of the
     infringement by third parties of the Intellectual Properties.

(d)  The conduct of the Business in the manner heretofore carried on does not
     infringe the intellectual properties of third parties.

(e)  The Vendor is the owner of the Patent Rights and Trade Marks and has the
     exclusive right to use the Intellectual Properties.

                                      29

(f)  The Intellectual Properties have not been conveyed, assigned, licensed or
     encumbered so as to interfere in any way with the transfer and licences to
     the Purchaser and its ability to use any of them as provided for herein.

(g)  All registrations, filings and fees necessary to preserve the rights of the
     Vendor in the Intellectual Properties have been made and are in good
     standing.

(h)  All Intellectual Properties used in whole or in part in the carrying on of
     the Business in the manner heretofore carried on are owned by or validly
     licensed to the Vendor, other than as disclosed in Schedule 4.19.

4.20 BOOKS AND RECORDS

     All Books and Records of the Business have been fully and properly kept in
accordance with GAAP and there are no material inaccuracies or discrepancies of
any kind contained or reflected therein.  None of the Vendor's records, systems,
controls, data or information are recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Vendor.

4.21 TAXES

     There are no arrears nor any default in respect of the payment of any Taxes
payable in respect of the Business or the Assets and all Taxes and other
assessments due and payable in respect of the Business and the Assets have been
paid or accrued, and no Claim for additional Taxes or other assessments has been
made in respect of the Business and is currently outstanding.  The Vendor is not
in arrears or in default in respect of the filing of any required federal,
provincial, municipal or other Tax return in respect of the Business or the
Assets.  The Vendor has deducted and withheld and will deduct and withhold all
amounts required to be deducted or withheld to and including the Closing Date
from all payments made to any employee of the Business in respect of Taxes and
other deductions.  The Vendor has collected and will collect, to and including
the Closing Date, all amounts required to be collected by it from any Person in
respect of Taxes and other deductions and it has paid or will pay all amounts so
withheld or collected to the proper Tax or other receiving authorities as
required by applicable laws.

4.22 EMPLOYEES

(a)  Schedule 4.22 sets forth all of the employees and consultants of the
     Business.  The Vendor has provided, in writing, a complete and accurate
     list of the annual wages and salaries of each such employee and consultant
     as of December 31, 2000 and as at the Closing Date and a complete and
     accurate list of bonuses paid or payable to each employee and consultant
     for the fiscal year ended December 31, 2000.

(b)  Schedule 4.22 identifies and describes each retirement, pension, stock
     purchase, bonus, profit sharing, stock option, deferred compensation,
     insurance, medical, hospital, dental, vision care, drug, sick leave,
     disability, salary continuation, vacation and incentive compensation plan
     or arrangement that is maintained or contributed to by the Vendor

                                      30

     for the benefit of Employees, and a true and complete copy of each will be
     provided to the Purchaser prior to Closing.

(c)  The Vendor is in compliance with all Laws respecting employment and
     employment practices, terms and conditions of employment, pay equity and
     wages and hours and has not and is not engaged in any unfair labour
     practice.

(d)  No unfair labour practice, complaint or grievance against the Vendor is
     pending or, to the knowledge of the Vendor, threatened before any labour
     relations board or similar Governmental Entity.

(e)  There is no labour strike, dispute, slowdown or stoppage actually pending
     or involving or, to the knowledge of the Vendor, threatened against the
     Vendor.

(f)  No union representation question currently exists respecting the employees
     of the Vendor.

(g)  No collective agreement is currently being negotiated by the Vendor with
     respect to the employees of the Business and there are no collective
     agreements in force with respect to the employees of the Business.

4.23 ENVIRONMENTAL MATTERS

(a)  Except as set out in Schedule 4.23, the Business and the Assets are, and
     the Business is being operated, in compliance with Environmental Laws,
     including all Environment Permits.  The Vendor has not received any Notice
     of non-compliance, and to the knowledge of the Vendor, there are no facts
     or circumstances which could give rise to a Notice of non-compliance with
     any Environmental Laws or Environmental Permits.

(b)  The Vendor has obtained all material Environmental Permits which are
     necessary for the operation of the Business.  All such material
     Environmental Permits are listed in Schedule 4.23 and are valid and in full
     force and effect.  There are no proceedings in progress, pending or
     threatened, that may result in the cancellation, revocation, suspension,
     rescission or amendment of any Environmental Permit.  There is no pending
     or threatened order by any environmental regulatory authority requiring
     improvement or other work to be conducted on any of the Owned Properties or
     the Leased Properties.

(c)  Except as disclosed in Schedule 4.23, with respect to the Business and the
     Assets:

     (i) during the nine (9) years preceding the date hereof, the Vendor has not
         been charged with or convicted of an offence for non-compliance with
         any Environmental Laws and has not been fined or otherwise sentenced or
         settled any prosecution short of conviction; and

     (ii) the Vendor has not received any Notice of judgment or commencement of
          proceedings of any nature or experienced any search and seizure and to
          the

                                      31

          knowledge of the Vendor is not under investigation related to any
          breach or alleged breach of Environmental Laws.

(d)  The Vendor has maintained documents and records concerning the Environment
     in the manner and for the time periods required by Environmental Laws.

(e)  Except as disclosed in Schedule 4.23:

     (i)  there is no currently existing environmental condition or circumstance
          that could reasonably be expected to materially interrupt the
          performance of the Business;

     (ii) during the five (5) years preceding the date hereof, the Vendor has
          not received any request for information from any Governmental Entity,
          or written request for information from any other party, with respect
          to the disposal of waste on, at or under any of the Owned Properties
          or Leased Properties, or the existence of a waste disposal site on, at
          or under any of the Owned Properties or Leased Properties;

     (iii) no part of the Owned Properties or Leased Properties, while owned or
           leased by the Vendor, or any Affiliate of the Vendor, has been used
           by anyone for the disposal of wastes or as a dump site, either
           temporarily or permanently;

     (iv) to the Vendor's knowledge, all pollution control equipment operated as
          part of the Business is effective in meeting applicable emissions
          limits and effluent pre-treatment standards;

     (v)  the Assets and related Buildings and Fixtures are not contaminated in
          any way by materials, substances or wastes present in quantities
          which, pursuant to any Environmental Law, require remediation or
          cleanup; and

     (vi) there has not been any migration or removal of any Substances from any
          of the Assets and related Buildings and Fixtures which has or may have
          an adverse offsite impact which would constitute non-compliance with
          any Environmental Law.

4.24 INSURANCE

     The Vendor maintains insurance policies with responsible insurers as are
appropriate to the Business in such amounts and against such risks as are
customarily carried and insured against by prudent owners of comparable
businesses.  All such policies of insurance coverage are in full force and
effect while the Business and the Assets remain the property of the Vendor.  The
Vendor is not in default with respect to any of the provisions contained in any
such insurance policy and has not failed to give any notice or present any claim
under any such insurance policy in due and timely fashion.  Schedule 4.24
includes a list setting forth any and all (i) material Claims, with reasonable
particulars, made under any policies of insurance maintained by or for the
benefit of the Vendor over the past two (2) calendar years prior to the date
hereof; and (ii) customers and suppliers of the Business, including their names
and addresses, who have been added as named insureds on such insurance policies,
or who hold certificates entitling them to notice of cancellation of such
insurance policies.

                                      32

4.25 LITIGATION

     Except as set forth in Schedule 4.25, there is no Claim, at law or in
equity, by any Person, nor any arbitration, administrative or other proceeding
by or before (or to the knowledge of the Vendor any investigation by) any
Governmental Entity pending, or, to the knowledge of the Vendor, threatened or
contemplated against or affecting the Vendor or any of its properties or rights
or any of the Assets, and the Vendor does not know of any valid basis for any
such Claim, arbitration or investigation.  Except as set forth in Schedule 4.25,
the Vendor is not subject to any judgment, order, charge or decree entered in
any lawsuit or proceeding.

4.26 LETTERS OF CREDIT AND OTHER SECURITY INSTRUMENTS

     Except as set forth in Schedule 4.26, the Vendor is not required to provide
any letters of credit, bonds or other financial security arrangements in
connection with any transactions with any suppliers or customers of the Business
or any Governmental Entity.

4.27 AGENTS FEES

     No agent, broker, investment banker, or other person acting on behalf of
the Vendor or under its authority is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly from
the Purchaser in connection with any of the transactions contemplated herein.

4.28 EQUIPMENT

     Schedule 4.28 contains a true and correct list of all material Equipment
used by the Vendor as of the Effective Time and such assets constitute all of
the tangible personal property used in or necessary for the operation of the
Business, all of which is, except as specifically indicated in Schedule 4.28, in
normal operating condition and repair (reasonable wear and tear excepted) and
are not in need of material repair or replacement, except to the extent such
Equipment is currently under repair or the Purchaser has been advised that
replacement is necessary.

4.29 INVENTORY

     Schedule 4.29 contains a detailed description of the Inventory volumes and
Inventory Values as of the Effective Time, including the locations thereof.

4.30 CUSTOMERS

     Schedule 4.30 contains a complete list of all producers who sold crude oil,
LPG's and natural gas liquids to the Vendor in the month of February, 2001, and
the approximate volumes sold in such month by each such producer, and contains a
list of all on-going purchasers of propane, as of February 28, 2001.

                                      33

                                   ARTICLE V
                REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     The Purchaser represents and warrants to the Vendor, and acknowledges and
confirms that the Vendor is relying on such representations and warranties in
connection with the sale by the Vendor of the Assets, as follows:

5.1  DUE FORMATION AND EXISTENCE OF THE PURCHASER

     PMC is a limited partnership formed and existing under the laws of the
Province of Alberta.  PMLP is a limited partnership formed and existing under
the laws of the State of Delaware.

5.2  VALIDITY OF AGREEMENT

(a)  The Purchaser has all necessary power to enter into and perform its
     obligations under this Agreement and the Closing Agreements to which it is
     a party and to perform its obligations hereunder and thereunder.

(b)  The execution, delivery and performance by the Purchaser of this Agreement
     and the Closing Agreements to which it is a party and the consummation of
     the transactions contemplated thereby have been duly authorized by all
     necessary corporate action on the part of the Purchaser and do not (or
     would not with the giving of notice or the lapse of time) result in a
     violation or a breach of, or a default under or give rise to a right of
     termination, amendment or cancellation or the acceleration of any
     obligation under (i) any constating documents or by-laws of the Purchaser;
     (ii) any contracts or instruments to which the Purchaser is a party or by
     which the Purchaser is bound; or (iii) any Laws applicable to the
     Purchaser.

(c)  This Agreement and the Closing Agreements to which the Purchaser is a party
     constitute legal, valid and binding obligations of the Purchaser
     enforceable against it in accordance with their respective terms.

5.3  RESTRICTIVE DOCUMENTS

     The Purchaser is not subject to, or a party to, any charter or by-law
restriction, any Law, any Claim, any contract or instrument, any Encumbrance or
any other restriction of any kind or character which would prevent the
consummation of the transactions contemplated by this Agreement or any Closing
Agreement or compliance by the Purchaser with the terms, conditions and
provisions hereof or thereof.

5.4  AGENT'S FEE

     No agent, broker, investment banker, or other person acting on behalf of
the Purchaser or under its authority is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly from
the Vendor in connection with any of the transactions contemplated herein.

                                      34

5.5  FINANCIAL RESOURCES

     The Purchaser has adequate financial resources available to it in order to
comply with its obligations under Article II hereof.

5.6  UNITS

     The Units to be issued or transferred to Vendor pursuant to the terms of
this Agreement will be duly and validly issued.

                                  ARTICLE VI
                     PRE-CLOSING COVENANTS OF THE PARTIES

6.1  CONDUCT OF BUSINESS PRIOR TO CLOSING

(a)  During the Interim Period, the Vendor shall conduct the Business in the
     ordinary course thereof, subject to the provisions of Subsections 6.1(b)
     and 6.1(c).

(b)  Without limiting the generality of Subsection 6.1(a), during the Interim
     Period the Vendor shall not, without the prior written consent of the
     Purchaser:

     (i)  permit any of the Assets to be subjected to any Encumbrance except for
          Permitted Encumbrances or Encumbrances to be discharged at Closing;

     (ii) sell, transfer or otherwise dispose of any Assets except for (i)
          Assets, sold in the ordinary course of business which are minor in
          nature and not essential to the operation of the Business; (ii) the
          sale of its Inventory in the ordinary course of the Business and (iii)
          for which fair value was received;

     (iii) other than discretionary bonuses which: (w) may be declared and paid
           by the Vendor; (x) which were earned prior to the Effective Time; (y)
           which have retroactive effect to a period prior to the Effective
           Time; and (z) which are not, and do not, affect on-going obligations
           of the Purchaser to executives or other employees; grant any increase
           in benefits, the rate of wages, salaries, or bonuses for executives
           or other employees employed in connection with the Business;

     (iv) make any change in any method of accounting practice applicable to the
          Business;

     (v)  cancel or reduce any of its insurance coverage relating to Assets or
          the Business;

     (vi) enter into any agreement which cannot be canceled with thirty (30)
          days prior written notice of cancellation;

     (vii) enter into any agreement to purchase or sell crude oil, LPG's,
           condensate, natural gas liquids, any blend thereof or any other
           commodity relating to the Business on a fixed price basis;

                                      35

     (viii) enter into any swap, over-the-counter, or derivative contract or
            agreement;

     (ix) except as set forth in Schedule 6.1(b)(ix), and except due to an
          emergency, purchase or enter into any agreement to purchase any
          capital item with a cost in excess of $20,000 per item or an aggregate
          for all capital items in excess of $100,000; or

     (x)  whether or not in writing, to do any of the foregoing.

(c)  Without limiting the generality of Subsection 6.1(a), during the Interim
     Period, the Vendor shall:

     (i)  maintain adequate levels of Inventory to carry on the Business in the
          ordinary course;

     (ii) use its best efforts to keep available the services of the present
          employees and agents of the Business and to maintain its relations and
          goodwill with the suppliers, customers, distributors and any others
          having business relations with the Business;

     (iii) use reasonable efforts consistent with past practice to preserve the
           possession and control of Assets and to preserve the confidentiality
           of any confidential or proprietary information of the Business;

     (iv)  use its best efforts to conduct the Business in such a manner that on
           the Closing Date the representations and warranties of the Vendor
           contained in this Agreement shall be true, correct and complete as if
           such representations and warranties were made on and as of such date;

     (v)   provide the Purchaser with its daily mark-to-market and other
           position tracking reports available in the ordinary course of the
           Vendor's Business;

     (vi)  provide the Purchaser with financial and cash flow projections
           prepared in the ordinary course of the Vendor's Business;

     (vii) provide the Purchaser with copies of all information, notices and
           other correspondence and reports provided to BNP Paribas and any
           other of the Vendor's lenders;

     (viii) subject to Subsection 6.1(b)(ix), until the Closing Date continue to
            make such capital expenditures as are necessary or advisable, in the
            ordinary course of business, to ensure basic maintenance of the
            Assets and the Business and the health and safety of its employees;

     (ix)  immediately upon becoming aware of the existence of:

           (A) any Notice from, proceeding before or order of any Governmental
               Entity requiring it to comply with or take action under any
               Environmental Law,

                                      36

           (B) any Notice from a lender asserting a violation or breach of any
               loan covenant or any other provision of any financing agreement,
               or

           (C) any state of affairs respecting the Owned Properties, Leased
               Properties, Assets or Business which could reasonably be expected
               to give rise to future Environmental Liabilities and Costs, the
               imposition of any fine, or the shutting down of any facility for
               any period of time,

           notify the Purchaser in writing and provide details of any actions
           taken in response; and

      (x)  without limiting the generality of the obligations of the Vendor
           under Subsection 6.1(c)(ix), notify the Purchaser of any occurrences
           of the following nature:

           (A) receipt of any Notice or Claim regarding the Business to the
               effect that it is or may be liable to any Person, including any
               Claim as a result of the Discharge or threatened Discharge of any
               Substance into the Environment in, on, under or adjacent to its
               Owned Properties or Leased Properties or any other property
               relating to the Business;

           (B) receipt of any Notice that it is subject to investigation by any
               Governmental Entity concerning whether any Remedial Action is
               needed to respond to the Discharge or threatened Discharge of any
               Substance into the Environment in, on, under or adjacent to its
               Owned Properties or Leased Properties or any other property
               relating to the Business;

           (C) receipt of any Notice that all or any portion of its Owned
               Properties or Leased Properties is subject to an order or an
               Encumbrance under or pursuant to any Environmental Law;

           (D) receipt of any Notice of the commencement of any judicial or
               administrative proceeding alleging a violation of any
               Environmental Law with respect to its Owned Properties or Leased
               Properties, or by it with respect to its Owned Properties or
               Leased Properties; or

           (E) receipt of any Notice by a third party alleging a breach by the
               Vendor of any Contract.

6.2  ACTIONS TO SATISFY CLOSING CONDITIONS

(a)  Each of the Parties hereby agrees to take all such actions as are within
     its power to control and to use its reasonable best efforts to cause other
     actions to be taken which are not within its power to control, so as to
     ensure compliance with all of the conditions set forth in Article VII.

(b)  The Vendor will, within two (2) days of the date of this Agreement, call a
     meeting of its shareholders for the purpose of obtaining the consent and
     approval of the holders of no

                                      37

     less than two thirds (2/3) of its common shares to the execution and
     delivery of this Agreement, and the completion of the transactions
     contemplated hereby.

6.3  TRANSFER OF THE ASSETS

     Subject to formal registrations of real property transfers, which will be
completed as soon as practicable following Closing, the Vendor shall take all
necessary and reasonable steps and proceedings to permit good title to the
Assets sold hereunder and good and marketable title to the Owned Properties to
be duly and validly transferred and assigned to the Purchaser at the Time of
Closing, free of all Encumbrances other than Permitted Encumbrances.

6.4  REQUEST FOR CONSENTS

(a)  The Vendor shall use its best efforts to obtain, prior to Closing, all
     Consents which are required under the Contracts in order to legally assign
     all such Contracts to the Purchaser.  Without restricting the foregoing, if
     any third parties will not provide the requisite Consent, the Parties shall
     first offer to have the Purchaser's general partner guarantee the
     obligations of the Purchaser under such Contract, and if the third party
     still will not provide the requisite consent without the Vendor agreeing to
     remain liable under the applicable Contract, the Vendor shall agree to
     remain liable.  Such Consents must be upon such terms as are acceptable to
     the Purchaser.  The Purchaser shall cooperate in obtaining such Consents.

(b)  In the event that any such Consents have not been obtained prior to
     Closing, the Purchaser may, at its sole option, proceed with Closing and
     (i) the Purchaser may request, and the Vendor shall deliver an irrevocable
     declaration from the Vendor that all Contracts which have not been
     terminated by the applicable third party and to which Consents have not
     been obtained, will be held in trust for the Purchaser, in which event the
     Vendor shall act as agent for the Purchaser with respect to such Contracts;
     and (ii) for all Contracts to which a Consent has not been received, and
     which the Parties reasonably believe may be terminated or which have been
     terminated as a result of any assignment by the Vendor of a legal or
     beneficial interest therein (other than due to a default by the Purchaser),
     such Contract shall not be assigned to the Purchaser, and any Contract
     providing for the offsetting position shall also not be assigned to the
     Purchaser, and to the extent the Purchaser incurs any net loss, cost or
     expense as a result of the foregoing, then the Vendor shall bear any net
     loss, cost or expense (taking into account all such Contracts, including
     the offsetting Contracts), incurred by the Purchaser as a result.  With
     respect to all Contracts to which (i) above applies, the Vendor shall
     continue to provide and keep outstanding all existing letters of credit,
     bonds or other financial security agreements until Consent is obtained or
     the applicable Contract is terminated in accordance with its terms.

6.5  FILINGS AND AUTHORIZATIONS

     Each of the Vendor and the Purchaser, as promptly as practicable after the
execution hereof, (i) shall make, or cause to be made, all such filings and
submissions under all Laws applicable to it, as may be required for it to
consummate the purchase and sale of the Assets in accordance with the terms

                                      38

of this Agreement, including the Competition Act Notification, the Investment
Canada Notification, and if determined by the Purchaser to be necessary, the HSR
Act Notification, (the filing and review fees for all of which shall be borne by
the Purchaser); (ii) shall use all reasonable efforts to obtain, or cause to be
obtained, all authorizations, approvals, consents and waivers from all Persons
and Governmental Entities necessary or advisable to be obtained by it in order
to consummate such transfer; and (iii) shall use all reasonable efforts to take,
or cause to be taken, all other actions necessary, proper or advisable in order
for it to fulfill its obligations hereunder. The Vendor and the Purchaser shall
coordinate and cooperate with one another in exchanging such information and
supplying such assistance as may be reasonably requested by each in connection
with the foregoing.

6.6  ACCESS TO INFORMATION AND ASSETS

(a)  From the date hereof through the Closing, the Vendor shall, and shall cause
     its representatives to, afford complete access at all reasonable times to
     the properties, the Assets and the Business, and to the officers,
     employees, agents, lawyers, accountants, properties, Books and Records and
     Contracts of the Vendor, for the purpose of inspecting physical and/or
     Environmental condition of any of the Assets, and conducting any other due
     diligence procedures deemed necessary or appropriate by the Purchaser.  At
     the request of the Purchaser, the Vendor shall execute such consents,
     authorizations and directions as may be necessary to permit any inspection
     of any of the Assets, or to enable the Purchaser or its authorized
     representatives to obtain full access to all files and records relating to
     the Business maintained by governmental or other public authorities.  In
     addition, the Vendor shall furnish the Purchaser and its representatives
     all financial, operating and other data and information as may be
     reasonably requested including, but not limited to, financial statements,
     financial records, health and safety records, data relating to operating
     procedures, workers' compensation history, legal, tax, environmental,
     zoning and other legal compliance.

(b)  The exercise of any rights of inspection by or on behalf of the Purchaser
     under this Section 6.6 shall not mitigate or otherwise affect any of the
     representations or warranties of the Vendor made in Article IV hereof.

6.7  NOTICE OF UNTRUE REPRESENTATION OR WARRANTY

     Each of the Parties shall promptly notify the other Party upon any
representation or warranty of such Party contained in this Agreement becoming
untrue or incorrect during the Interim Period, and for the purposes of this
Section each representation and warranty shall be deemed to be given at and as
of all times during the Interim Period.

6.8  EXCLUSIVE DEALING

     During the Interim Period, the Vendor shall not take any action, directly
or indirectly, to encourage, initiate or engage in discussions or negotiations
with, or provide any information to, any Person, other than the Purchaser,
concerning any purchase of the Assets, or any merger, sale of substantial assets
or similar transaction involving the Business.

                                      39

                                  ARTICLE VII
                             CONDITIONS OF CLOSING

7.1  CONDITIONS FOR THE BENEFIT OF THE PURCHASER

     The purchase and sale of the Assets is subject to the following conditions
to be fulfilled or performed at or prior to the Time of Closing, which
conditions are for the exclusive benefit of the Purchaser and may be waived in
whole or in part by the Purchaser in its sole discretion.

(a)  TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE VENDOR.  The representations
     and warranties of the Vendor contained in Subsections 4.6(a) and 4.23(e)(i)
     shall, as a condition precedent to Closing, be true and correct, and all
     other representations and warranties of the Vendor contained in this
     Agreement shall, as a condition to proceeding with Closing, be true and
     correct in all material respects, as of the Closing Date with the same
     force and effect as if such representations and warranties had been made on
     and as of such date, and the Vendor shall have executed and delivered a
     certificate of a senior officer to that effect.  The receipt of such
     certificate and the Closing shall not be a waiver of the representations
     and warranties of the Vendor which are contained in this Agreement.  Upon
     the delivery of such certificate, the representations and warranties of the
     Vendor shall be deemed to have been made on and as of the Closing Date with
     the same force and effect as if made on and as of such date.

(b)  PERFORMANCE OF COVENANTS BY THE VENDOR.  The Vendor shall have executed and
     delivered for the purposes of Closing all of the Contract Assignments.

(c)  KEY EMPLOYEES.  The Key Employees shall have executed and delivered the Key
     Employee Non-Competition Agreements.

(d)  RETAINED EMPLOYEES.  Sufficient Retained Employees shall have accepted the
     offers of employment made by the Purchaser pursuant to Subsection 10.1(b)
     so as to prevent a material interruption to the Business after Closing.

(e)  CONSENTS AND AUTHORIZATIONS.

     (i)  All Consents shall have been obtained with respect to the Closing
          Agreements, including all assignments and novations respecting the
          Contracts, and all other material Consents and Authorizations shall
          have been obtained, on terms acceptable to the Purchaser, in order to
          permit the Closing of the sale of the Assets on the terms and
          conditions set out in this Agreement without adversely affecting, or
          resulting in the violation of a breach of or a default under or any
          termination, cancellation, amendment or acceleration of any obligation
          under, any licence, permit, Lease or Contract in connection with the
          Assets or the Business.

     (ii) The Vendor will have obtained the shareholder consent contemplated by
          Subsection 6.2(b), and shall have confirmed the same in writing to the
          Purchaser, no later than 25 days after the date of this Agreement.

                                      40

     (iii) The Purchaser shall have received the Investment Canada Approval and
           the Competition Act Approval.

     (iv) In the event the parties have determined that an HSR Notification is
          necessary, the Purchaser will have received the requisite HSR
          Approval.

     (v)  Pivotal Enterprises Corporation shall have agreed in writing to amend
          the Master Railcar Leasing Agreement dated May 25, 1998 such that,
          without additional compensation from the lessee, the said lease shall
          be a full service lease, (provided that cleaning costs shall continue
          to be paid by the lessee).

(f)  DELIVERIES.  The Vendor shall have delivered or caused to be delivered to
     the Purchaser the following in form and substance satisfactory to the
     Purchaser, acting reasonably:

     (i)  certified copies of (A) the resolutions of the board of directors or
          any duly authorized committee thereof, of the Vendor approving the
          entering into of this Agreement and the completion of all transactions
          contemplated hereunder; and (B) all other instruments evidencing
          necessary action of the Vendor and of authorizations, if any, with
          respect to such matters;

     (ii) a certificate of status, compliance, good standing or like certificate
          with respect to the Vendor issued by appropriate government officials
          of the jurisdiction of its organization or incorporation and of each
          jurisdiction in which the Vendor carried on the Business;

     (iii) the certificate referred to in Subsection 7.1(a);

     (iv) a certificate pursuant to Subsection 128(1) of the Workers'
          Compensation Act (Alberta) and all similar legislation in the relevant
          provinces stating that the relevant workers' compensation board or
          similar authority has no outstanding claim in respect of the Business
          or the Assets;

     (v)  an election duly executed by the Vendor and the Purchaser as to goods
          and services tax under Subsection 167(1) of the Excise Tax Act
          (Canada);

     (vi) all share certificates representing the Wellpoint Shares, duly
          endorsed for transfer to the Purchaser, and if reasonably required by
          the Purchaser, a resolution of the directors of Wellpoint Systems
          Inc., approving such transfer;

     (vii) Books and Records relevant to the Business; and

     (viii) all necessary deeds, conveyances, bills of sale, assurances,
            transfers, assignments and any other instruments necessary or
            reasonably required effectively to transfer Assets to the Purchaser
            with a good (and in the case of the Owned Properties, marketable)
            title, free and clear of all Encumbrances other than Permitted
            Encumbrances.

                                      41

(g)  PROCEEDINGS.  All material proceedings to be taken in connection with the
     transactions contemplated by this Agreement shall be reasonably
     satisfactory in form and substance to the Purchaser and the Purchaser shall
     have received copies of all such instruments and other evidence as it may
     reasonably request in order to establish the consummation of such
     transactions and the taking of all proceedings in connection therewith.

(h)  REGULATORY APPROVALS.  All regulatory approvals necessary to complete the
     transactions contemplated herein shall have been received, or the waiting
     period applicable to such requirement shall have expired.

(i)  SHAREHOLDER NON-COMPETITION AGREEMENTS.  The Shareholder Non-Competition
     Agreements shall have been executed and delivered as contemplated by
     Section 11.2.

7.2  NON-PERFORMANCE BY THE VENDOR

     If any condition, obligation or covenant of the Vendor to be performed at
or prior to the Time of Closing shall not have been fulfilled or performed by
such time, the Purchaser may terminate this Agreement by notice in writing to
the Vendor, and in such event the Purchaser shall be released from all of its
obligations hereunder.  The Vendor shall only be released from its obligations
hereunder if the condition or conditions for the non-performance of which the
Purchaser has terminated this Agreement are not reasonably capable of being
performed or caused to be performed by the Vendor.  Notwithstanding the
foregoing, the Purchaser shall be entitled to waive compliance with any of such
conditions, obligations or covenants in whole or in part if it sees fit to do so
without prejudice to any of its rights of termination in the event of non-
performance of any other condition, obligation, or covenant in whole or in part.

7.3  CONDITIONS FOR THE BENEFIT OF THE VENDOR

     The purchase and sale of the Assets is subject to the following conditions
to be fulfilled or performed at or prior to the Time of Closing, which
conditions are for the exclusive benefit of the Vendor and may be waived in
whole or in part by the Vendor in its sole discretion:

(a)  TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.  The
     representations and warranties of the Purchaser contained in this Agreement
     shall, as a condition to proceeding with Closing, be true and correct in
     all material respects as of the Closing Date with the same force and effect
     as if such representations and warranties had been made on and as of such
     date, and the Purchaser shall have executed and delivered a certificate of
     a senior officer to that effect.  The receipt of such evidence and the
     Closing shall not be a waiver of the representations and warranties of the
     Purchaser which are contained in this Agreement.  Upon the delivery of such
     certificates, the representations and warranties of the Purchaser in
     Article V shall be deemed to have been made on and as of the Closing Date
     with the same force and effect as if made on and as of such date.

(b)  PERFORMANCE OF COVENANTS BY THE PURCHASER.  The Purchaser shall have
     fulfilled or complied with all covenants herein contained to be performed
     or caused to be performed by it at or prior to the Time of Closing.

                                      42

(c)  DELIVERIES.  The Purchaser shall have delivered or caused to be delivered
     to the Vendor the following in form and substance satisfactory to the
     Vendor, acting reasonably:

     (i)  the certificate referred to in Subsection 7.3(a);

     (ii) signatures on Contract Assignments and Key Employee Non-Competition
          Agreements;

     (iii) an election duly executed by the Vendor and the Purchaser as to goods
           and services tax under Subsection 167(1) of the Excise Tax Act
           (Canada); and

     (iv) formal confirmation of the assumption by the Purchaser of all Assumed
          Liabilities.

(d)  PROCEEDINGS.  All material proceedings to be taken in connection with the
     transactions contemplated by this Agreement shall be reasonably
     satisfactory in form and substance to the Vendor and it shall have received
     copies of all such instruments and other evidence as it may reasonably
     request in order to establish the consummation of such transactions and the
     taking of all proceedings in connection therewith.

(e)  REGULATORY APPROVALS.  All regulatory approvals necessary to complete the
     transactions contemplated herein have been received, or the waiting period
     applicable to such requirement shall have expired.

(f)  SHAREHOLDER CONSENT.  The Vendor will have obtained the shareholder consent
     contemplated by Subsection 6.2(b), and shall have confirmed the same in
     writing to the Purchaser, no later than 25 days after the date of this
     Agreement.

7.4  NON-PERFORMANCE BY THE PURCHASER

(a)  If any condition, obligation or covenant of the Purchaser to be performed
     at or prior to the Time of Closing shall not have been fulfilled or
     performed by such time, the Vendor may terminate this Agreement by notice
     in writing to the Purchaser, and in such event the Vendor shall be released
     from all of its obligations hereunder.  The Purchaser shall only be
     released from its obligations hereunder if the condition or conditions for
     the non-performance of which the Vendor has terminated this Agreement are
     not reasonably capable of being performed or caused to be performed by the
     Purchaser or PAA.

(b)  Notwithstanding the foregoing, the Vendor shall be entitled to waive
     compliance with any of such conditions, obligations or covenants in whole
     or in part if it sees fit to do so without prejudice to any of its rights
     of termination in the event of non-performance of any other condition,
     obligation, or covenant in whole or in part.

7.5  MUTUAL CONDITIONS PRECEDENT

     In the event that:

                                      43

(a)  there is an action or proceeding pending or threatened prior to the Closing
     by any Person (other than a Party hereto or one of its Affiliates) in any
     jurisdiction, to enjoin, restrict or prohibit any of the transactions
     contemplated hereby or the right of the Purchaser to conduct the Business
     after Closing on substantially the same basis as heretofore operated; or

(b)  the condition set out in Subsection 7.1(h) has not been met within ninety
     (90) days of the date of this Agreement;

this Agreement may be terminated by either Party hereto providing the other
Party to this Agreement with written notice of termination, prior to Closing,
and thereafter the Parties shall be released from all obligations hereunder.

                                 ARTICLE VIII
                 CLOSING, TRANSFER OF POSSESSION, RISK OF LOSS

8.1  DATE, TIME AND PLACE OF CLOSING

     The Closing Date shall be the fifth Business Day after receipt of all
approvals contemplated by Subsections 7.1(f) and 7.1(g), or such other date as
may be agreed to by the Vendor and the Purchaser.  The completion of the
transactions contemplated by this Agreement shall take place at the offices of
Bennett Jones LLP, Barristers and Solicitors, Calgary, Alberta on the Closing
Date at the Time of Closing.

8.2  CLOSING PROCEDURES

     Subject to satisfaction or waiver by the relevant Party of the conditions
of Closing set forth herein, at the Time of Closing the Vendor shall deliver
actual possession of the Assets, and upon such delivery the Purchaser shall pay
or satisfy the Initial Installment.

8.3  GOODS AND SERVICES TAX ELECTION

     The Purchaser shall be responsible for and pay all state, provincial and
federal sales and value-added taxes payable in connection with the purchase and
sale of the Assets hereunder, including GST if applicable.  PMC and Canpet
Canada shall execute and file an election under Subsection 167(1) of the Excise
Tax Act (Canada) in respect of the purchase and sale of the Canadian Assets
hereunder.  The elections shall be in the prescribed form, contain the
prescribed information and shall be filed by PMC within the time limits
applicable thereto.

8.4  LETTERS OF CREDIT

     At Closing, the Purchaser shall provide BNP Paribas with a letter of
credit, substantially in the form of Schedule 8.4, issued by Fleet Bank, or
other security acceptable to BNP Paribas, in an amount and for a term equal to
the amount and term of the Vendor's outstanding letters of credit as of the
Closing Date.

                                      44

                                  ARTICLE IX
            SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITIES

9.1  SURVIVAL OF REPRESENTATIONS AND WARRANTIES

(a)  The representations and warranties of the Vendor contained in this
     Agreement shall survive the Closing and, notwithstanding such Closing and
     any investigation made by or on behalf of the Purchaser, shall continue in
     full force and effect for the benefit of the Purchaser for a period of
     three (3) years from the Closing Date, and any Claim in respect thereof
     (except a Claim based on fraud, which may be made at any time) shall be
     made in writing within such time periods in accordance with the provisions
     of Section 9.4.

(b)  The representations and warranties of the Purchaser contained in this
     Agreement shall survive the Closing and, notwithstanding such Closing and
     any investigation made by or on behalf of any of the Vendor, shall continue
     in full force and effect for the benefit of the Vendor for a period of
     three (3) years from the Closing Date, and any Claim in respect thereof
     (except a Claim based on fraud, which may be made at any time) shall be
     made in writing within such time period in accordance with the provisions
     of Section 9.4.

9.2  INDEMNIFICATION IN FAVOUR OF THE PURCHASER

(a)  The Vendor shall indemnify and save each of the Purchaser and its
     directors, officers, employees, agents and representatives harmless of and
     from any Claim or Loss suffered by, imposed upon or asserted against such
     Indemnified Parties as a result of, in respect of, connect with or arising
     out of, under or pursuant to:

     (i)  any failure of the Vendor to perform or fulfill any of its covenants
          under this Agreement;

     (ii) subject to the limitations set forth in Subsection 9.1(a) and Section
          9.5, any breach or inaccuracy of any representation or warranty given
          by the Vendor contained in this Agreement;

     (iii) any and all liabilities of the Business as at the Effective Time,
           including the Excluded Liabilities, which are not expressly assumed
           by the Purchaser including any action in respect of the Assets taken
           by any Governmental Entity pursuant to a Tax reassessment or
           obligation with respect to a failure to comply with applicable Tax
           obligations for a period prior to the Effective Time;

     (iv) any Claim by a third party in respect of the alleged breach of any
          agreement of the Vendor as a result of the transaction contemplated
          hereby;

     (v)  any Claim by any employees or contractors of the Business, including
          for wrongful dismissal;

     (vi) subject to Section 9.5, Pre-Closing Environmental Liabilities; and

                                      45

     (vii) any dealings by or on behalf of the Vendor with any Person other than
           the Purchaser with respect to the sale of the Assets or the Business.

9.3  INDEMNIFICATION IN FAVOUR OF THE VENDOR

     The Purchaser shall indemnify and save the Vendor and its directors,
officers, employees, agents and representatives harmless of and from any Claim
or Loss suffered by, imposed upon or asserted against such Indemnified Parties
as a result of, in respect of, connected with or arising out of, under or
pursuant to:

(a)  any failure by the Purchaser to perform and fulfill any covenant of the
     Purchaser under this Agreement;

(b)  subject to the limitation period set forth in Subsection 9.1(b) hereof, any
     breach or inaccuracy of any representation or warranty given by the
     Purchaser contained in this Agreement; and

(c)  the assumption and satisfaction or discharge by the Purchaser of the
     Assumed Liabilities.

9.4  INDEMNIFICATION PROCEEDINGS

(a)  Any Party seeking indemnification under this Article (the "INDEMNIFIED
     PARTY") shall forthwith notify the Party against whom a Claim for
     indemnification is sought hereunder (the "INDEMNIFYING PARTY") in writing,
     which notice shall specify, in reasonable detail, the nature and estimated
     amount of the Claim.  If a Claim by a third party is made against an
     Indemnified Party, and if the Indemnified Party intends to seek indemnity
     with respect thereto under this Article, the Indemnified Party shall
     promptly (and in any case within thirty (30) days of such claim being made)
     notify the Indemnifying Party of such with reasonable particulars.  The
     Indemnifying Party shall have thirty (30) days after receipt of such notice
     to undertake, conduct and control, through counsel of its own choosing and
     at its own expense, the settlement or defence thereof, and the Indemnified
     Party shall cooperate with it in connection therewith; except that with
     respect to settlements entered into by the Indemnifying Party (i) the
     consent of the Indemnified Party shall be required if the settlement
     provides for equitable relief against the Indemnified Party, which consent
     shall not be unreasonably withheld or delayed; and (ii) the Indemnifying
     Party shall obtain the release of the Indemnified Party.  If the
     Indemnifying Party undertakes, conducts and controls the settlement or
     defence of such Claim (i) the Indemnifying Party shall permit the
     Indemnified Party to participate in such settlement or defence through
     counsel chosen by the Indemnified Party; and (ii) the Indemnifying Party
     shall promptly reimburse the Indemnified Party for the full amount of any
     loss resulting from any Claim and all related expenses incurred by the
     Indemnified Party.  The Indemnified Party shall not pay or settle any Claim
     so long as the Indemnifying Party is reasonably contesting any such Claim
     in good faith and on a timely basis.  Notwithstanding the two immediately
     preceding sentences, the Indemnified Party shall have the right (i) to pay
     or settle any such Claim, without the consent of the Indemnifying Party,
     provided that in such event

                                      46

     it shall waive any right to indemnity therefor by the Indemnifying Party;
     and (ii) to retain its own counsel in respect of such Claim. Legal fees in
     respect of such counsel shall be paid by the Indemnified Party unless the
     Indemnified Party has retained counsel as a result of a reasonable
     apprehension that, with respect to the Claim, its interests are not
     completely aligned with those of the Indemnifying Party.

(b)  With respect to third party Claims, if the Indemnifying Party does not
     notify the Indemnified Party within thirty (30) days after the receipt of
     the Indemnified Party's notice of a Claim of indemnity hereunder that it
     elects to undertake the defence thereof, or if the Indemnifying Party fails
     to reasonably contest such Claim in good faith and on a timely basis, the
     Indemnified Party shall have the right, but not the obligation, to contest,
     settle or compromise the Claim in the exercise of its reasonable judgment
     at the expense of the Indemnifying Party.

(c)  In the event of any Claim by a third party against an Indemnified Party,
     the defence of which is being undertaken and controlled by the Indemnifying
     Party, the Indemnified Party shall use all reasonable efforts to make
     available to the Indemnifying Party those employees whose assistance,
     testimony or presence is necessary to assist the Indemnifying Party in
     evaluating and in defending any such Claims; provided that the Indemnifying
     Party shall be responsible for the expense incurred by the Indemnified
     Party and such employees made available by the Indemnified Party to the
     Indemnifying Party hereunder.

(d)  With respect to third party Claims, the Indemnified Party shall make
     available to the Indemnifying Party or its representatives on a timely
     basis all documents, records and other materials in the possession of the
     Indemnified Party, at the expense of the Indemnifying Party, reasonably
     required by the Indemnifying Party for its use in defending any Claim and
     shall otherwise cooperate on a timely basis with the Indemnifying Party in
     the defence of such Claim.

(e)  With respect to any re-assessment for income, corporate, sales, excise, or
     other Taxes or other liability enforceable by Encumbrance against the
     property of the Indemnified Party, the Indemnifying Party's right to so
     contest shall only apply after such payment of such re-assessment or the
     provision of such security as is necessary to avoid an Encumbrance being
     placed on the property of the Indemnified Party has been made.

(f)  The failure of the Indemnified Party to give notice to the Indemnifying
     Party within thirty (30) days as contemplated by Subsection 9.4(a) shall
     not affect its right to indemnity unless the failure to give such notice
     has materially adversely effected the Indemnifying Party's ability to
     defend the claim.

9.5  LIMITATION ON INDEMNITIES

(a)  The aggregate liability of the Vendor in respect of Claims or Losses
     described in Section 9.2 (whether such liability arises under Section 9.2
     or otherwise) shall be limited to the monetary value of the Purchase Price.

                                      47

(b)  The aggregate liability of the Vendor in respect of Claims or Losses
     described in Subsection 9.2(a)(vi) (whether such liability arises under
     Subsection 9.2(a)(vi) or otherwise), and of which the Vendor did not have
     knowledge at Closing, shall be limited to $4,500,000.

(c)  No amounts of indemnity shall be payable in respect of any and all Claims
     and Losses described in Section 9.2 (whether such liability arises under
     Section 9.2 or otherwise), unless, until and then only to the extent that
     the Indemnified Party has suffered, incurred, sustained or become subject
     to Losses in excess of $50,000.00 in the aggregate.

(d)  No amounts of indemnity shall be payable in respect of those Claims and
     Losses contemplated by Subsection 9.2(a)(vi) (whether such liability arises
     under Subsection 9.2(a)(vi) or otherwise), which are applicable solely to
     that portion of the Owned Properties and Assets which constitute and form
     part of the Rimbey Facility, unless, until and then only to the extent that
     the Indemnified Party has suffered, incurred, sustained or become subject
     to Losses in excess of $600,000 in the aggregate.

(e)  The obligations of the Vendor pursuant to Section 9.2 with respect to Pre-
     Closing Environmental Liabilities shall:  (i) with respect to Environmental
     Liabilities which are restricted to and contained in or upon the Owned
     Properties, Leased Properties, Rights of Way or any of them, pertain only
     to matters of which the Purchaser has given the Vendor written notice
     within two (2) years after Closing; and (ii) with respect to Environmental
     Liabilities which are not contained in or upon the Owned Properties, Leased
     Properties or Rights of Way, pertain only to matters of which the Purchaser
     has given the Vendor written notice within three (3) years after Closing.

(f)  In the event that the Vendor holds Units at a time when an indemnity
     obligation arises hereunder, the Vendor shall be entitled to satisfy such
     indemnity obligation by the transfer to the Purchaser of Units with a value
     equivalent to the indemnity obligation, which for this purpose shall be
     valued at the Market Value at the date of such transfer.

                                   ARTICLE X
                               EMPLOYMENT MATTERS

10.1  EMPLOYEES

(a)  Schedule 10.1 hereto sets out (i) those employees of the Vendor which are
     to be considered "LEVEL ONE KEY EMPLOYEES" and "LEVEL TWO KEY EMPLOYEES"
     (collectively, the "KEY EMPLOYEES"); and (ii) the duration of the non-
     competition provisions which shall be applicable to each Key Employee.  The
     Vendor and the Purchaser shall, immediately after the execution and
     delivery of this Agreement, use their mutual best efforts to obtain the
     written agreement of all such Key Employees to continue to be employed by
     the Purchaser in the conduct of the Future Business subsequent to Closing,
     on terms which are satisfactory to the Purchaser and each of the Key
     Employees.  The obligations of the Purchaser to complete the Closing shall
     be conditional upon the Purchaser having entered into written agreements
     (the "KEY

                                      48

     EMPLOYEE NON-COMPETITION AGREEMENTS") in the form attached as Schedule
     10.1(a)(1) or 10.1(a)(2), as applicable. The salaries and wages of the
     Purchaser's offer of employment to the Key Employees shall be substantially
     the same as the terms of their employment with the Vendor as of the
     Effective Time.

(b)  No later than fifteen (15) days after the date of this Agreement, the
     Purchaser shall notify the Vendor as to the employees of the Business,
     other than the Key Employees, to whom it wishes to offer employment (the
     "RETAINED EMPLOYEES"), and shall notify the Vendor as to the identity of
     such Retained Employees.  The Vendor and the Purchaser shall, immediately
     after the giving of such notice, use their mutual best efforts to cause
     such Retained Employees to become employed by the Purchaser in the conduct
     of the Business subsequent to Closing, on terms of employment that are
     mutually acceptable to the Purchaser and each such Retained Employee.  The
     salaries and wages of Purchaser's offer of employment to the Retained
     Employees shall be substantially the same as their employment with the
     Vendor as of the Effective Time.

(c)  All Key Employees and Retained Employees who are located in Canada shall be
     hired by PMC, or at its option, by PMC (Nova Scotia) Company.  All Key
     Employees and Retained Employees located in the United States shall be
     hired by PMLP, or its general partner, Plains All American Inc.

10.2  BENEFITS

(a)  The Purchaser agrees to give the Retained Employees credit for their time
     for employment with the Vendor with respect to vacation eligibility.  The
     Vendor shall be and remain solely responsible for the payment of all
     benefits due to the Key Employees and Retained Employees that were earned,
     or accrued to the benefit of such employee, prior to Closing.  In addition,
     the Vendor shall be and shall remain solely responsible for the payment of
     all benefits due to all of its employees, including, without limitation,
     all severance, accrued vacation, health care, continuation coverage and
     other benefits to which its employees may be entitled as a result of the
     transactions contemplated hereby, whether or not such employees are hired
     by the Purchaser.

(b)  None of the employees of the Business are entitled to or participate in any
     defined benefit pension plan.  The Purchaser's offer of employment to Key
     Employees and Retained Employees shall include benefits with effect from
     the Closing Date which are comparable to the retirement, insurance,
     medical, hospital, dental, vision, drug, sick leave, vacation and
     disability benefits of the Vendor, if any, with respect to each such
     employee, prior to Closing.

10.3  BONUS PLAN

     The Purchaser's bonus plan with respect to Key Employees and Retained
Employees shall be as set out in Schedule 10.3.  In the event that any Key
Employees or Retained Employees shall at any time advance a Claim for
constructive dismissal arising from differences between the Purchaser's bonus
plan and the Vendor's bonus plan, the Vendor shall indemnify and hold harmless
the Purchaser with respect to such Claim.

                                      49

                                  ARTICLE XI
                      NON-COMPETITION AND CONFIDENTIALITY

11.1  NON-COMPETITION AND CONFIDENTIALITY

     The Vendor undertakes with the Purchaser that, except with the consent in
writing of the Purchaser it shall not:

(a)  for the period of five (5) years after the Closing Date, anywhere in North
     America, either on its own account or in conjunction with or on behalf of
     any other person, carry on or be engaged, concerned or interested, directly
     or indirectly, whether as shareholder, partner, agent or otherwise in
     carrying on any activity which is in competition with the Business;

(b)  for the period of five (5) years after the Closing Date, either on its own
     account or in conjunction with or on behalf of any other person, solicit or
     entice away or attempt to solicit or entice away from the Purchaser the
     custom of any person who shall at any time within the year preceding the
     date hereof have been a customer of the Vendor with respect to the
     Business;

(c)  for the period of five (5) years after the Closing Date, either on its own
     account or in conjunction with or on behalf of any other person, hire,
     enter into a consulting arrangement with, solicit or entice away or attempt
     to solicit or entice away (provided that media advertising for available
     positions shall be allowed) from the Purchaser any employee with respect to
     the Business;

(d)  at any time hereafter make use of or disclose or divulge to any person any
     confidential information (other than any information available to the
     public or disclosed or divulged pursuant to an order of a court of
     competent jurisdiction) relating to the identity of the customers of the
     Business and suppliers, its products, finance, contractual arrangements,
     business or methods of business and the Vendor shall use reasonable
     endeavours to prevent the publication or disclosure of any such
     confidential information.

11.2  SHAREHOLDER NON-COMPETITION AGREEMENTS

     The Vendor shall use its best efforts to obtain by Closing duly executed
non-competition agreements (the "SHAREHOLDER NON-COMPETITION AGREEMENTS")
substantially in the form attached hereto as Schedule 11.2, from Janet Irven
(for a duration of two (2) years) and from David LaBarre (for a duration of five
(5) years).

11.3  NON-USE OF TRADE MARKS AND TRADE NAME

     Immediately after Closing, the Vendor and Affiliates of the Vendor shall
change its corporate name, and cease all use of the word "CANPET", and all names
including the word "CANPET" and all derivatives thereof, including names which
are phonetically identical or similar thereto, the emblem or any words or
symbols representing same in relation to the Business and at all times
thereafter including (without limitation) all such use on company notepaper,
stationery, vehicles or promotional material and in connection with any services
provided or products manufactured or distributed by them.

                                      50

11.4  MODIFICATION

     While the restrictions contained in this Section are considered by the
Parties to be reasonable in all the circumstances, it is recognized that
restrictions of the nature in question may fail for technical reasons and
accordingly it is hereby agreed and declared that if any of such restrictions
shall be adjudged to be void as going beyond what is reasonable in all the
circumstances for the protection of the interests of the Purchaser but would be
valid if part of the wording thereof were deleted or the periods thereof reduced
or the range of activities or area dealt with thereby reduced in scope; the said
restriction shall apply with such modifications as may be necessary to make it
valid and effective.

                                  ARTICLE XII
                                 MISCELLANEOUS

12.1  NOTICES

     Any notice, direction or other instrument required or permitted to be given
hereunder or under any Ancillary Agreement must be in writing and given by
delivering, personally or by nationally recognized courier service, or sending
it by telecopy or other similar form of communication addressed:

(a)          to the Purchaser at:

             Plains Marketing Canada, L.P.
             c/o Plains Marketing, LP
             333 Clay Street, Suite 2900 (77002)
             P.O. Box 8648
             Houston, TX  77210-4648

             Attention:      Harry N. Pefanis
             Telecopier No.: (713) 646-4378

     and to: Plains Marketing, L.P.
             333 Clay Street, Suite 2900 (77002)
             P.O. Box 8648
             Houston, TX  77210-4648

             Attention:      Harry N. Pefanis
             Telecopier No.: (713) 646-4378

     and to: Plains Marketing, L.P.
             333 Clay Street, Suite 2900 (77002)
             P.O. Box 8648
             Houston, TX  77210-4648

             Attention:      Lawrence J. Dreyfuss
             Telecopier No.: (713) 646-4143

                                      51

(b)          to the Vendor at:

             Canpet Energy Group Inc.
             2600, 350 - 7th Avenue SW
             Calgary AB  T2P 3N9

             Attention:      W. David Duckett
             Facsimile No.:  (403) 233-0399

     and to: Canpet Energy Group (USA), Inc.
             c/o Canpet Energy Group Inc.
             2600, 350 - 7th Avenue SW
             Calgary AB  T2P 3N9

             Attention:      W. David Duckett
             Facsimile No.:  (403) 233-0399

Any such notice, direction or other instrument given as aforesaid shall be
deemed to have been effectively given, if sent by telecopier or other similar
form of telecommunications during or prior to the normal business hours of the
recipient, on the Business Day received, and if after business hours, on the
next Business Day following such transmission or, if delivered, to have been
received on the date of such delivery.  Any Party may change its address for
services from time to time by notice given in accordance with the foregoing and
any subsequent notice shall be sent to the Party at its changed address.

12.2 GOODS AND SERVICES TAX NUMBERS

     The Vendor represents and warrants to the Purchaser that Canpet Canada is a
registrant for goods and services tax purposes under the Excise Tax Act (Canada)
and that its goods and services tax registration number is 100787506.  The
Purchaser represents and warrants to the Vendor that PMC is a registrant for
goods and services purposes under the Excise Tax Act (Canada) and that its goods
and services tax registration number is 892946211.

12.3 PUBLICITY

     If disclosure of the transactions contemplated by this Agreement is to be
made by either party hereto, the disclosing Party shall consult in advance with
the other Parties and attempt in good faith to reflect such other Parties'
concerns in the disclosure.

12.4 TIME OF THE ESSENCE

     Time shall be of the essence of this Agreement.

12.5 BROKERS

     Each Party represents and warrants that no broker, agent or other
intermediary acted for such Party in connection with the purchase and sale of
the Assets and each Party shall indemnify and save harmless the other Party from
and against any Claims whatsoever for any commission or other

                                      52

remuneration payable or alleged to be payable to any broker, agent or other
intermediary who purports to act or have acted for such Party.

12.6 EXPENSES

     Except as otherwise expressly provided herein, all costs and expenses
(including the fees and disbursements of legal counsel, investment advisers and
auditors) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such expenses.
Further, no such expenses incurred by the Vendor shall be included in Interim
Costs for the purposes of Subsection 2.4(b)(ii), regardless of when such
expenses are incurred.

12.7 ENUREMENT

     This Agreement shall enure to the benefit of and be binding upon the
Parties and their successors.  This Agreement shall enure to the benefit of any
permitted assigns.

12.8 ASSIGNMENT

     Except as provided in this Section 12.8, none of the rights or obligations
hereunder shall be assignable or transferable by any Party without the prior
written consent of the other Party.  The Purchaser shall be entitled, upon
giving notice to the Vendor at any time on or prior to the Closing Date, to
assign the benefits of this Agreement to any Affiliates of the Purchaser subject
to the following two conditions:  (i) the Purchaser's assignees shall become
jointly and severally liable with the Purchaser, as a principal and not as a
surety, with respect to all of the representations, warranties, covenants,
indemnities and agreements of the Purchaser; and (ii) such assignees shall each
execute an agreement confirming such assignment and the assumption by the
assignee of all obligations of the Purchaser under this Agreement.

12.9 NON-MERGER

     Except as otherwise expressly provided in this Agreement, the covenants,
representations and warranties of the Parties contained in this Agreement shall
not merge on and shall survive the Closing and, notwithstanding such Closing, or
any investigation made by or on behalf of any Party, shall continue in full
force and effect.  The Closing shall not prejudice any right of one Party
against any other Party in respect of anything done or omitted hereunder or
under any of the Closing Agreements or in respect of any right to damages or
other remedies.

                                      53

12.10  FURTHER ASSURANCES

     At the Closing and thereafter as may be necessary and without further
consideration, the parties hereto shall execute, acknowledge and deliver such
other documents, novations, instruments and agreements and shall do such other
things as may be necessary to carry out their respective obligations under this
Agreement or to more fully assure the completion of the matters set forth in
this Agreement, including the acquisition by and conveyance to the Purchaser of
the Assets.

12.11  NO THIRD PARTY BENEFICIARIES

     No third parties shall have third party beneficiary status under this
Agreement.

     IN WITNESS WHEREOF this Agreement has been executed by the Parties as of
the date first above written.

PLAINS MARKETING CANADA, L.P.,              PLAINS MARKETING, L.P.,
by its general partner, PMC                 by its general partner,
(Nova Scotia) Company                       Plains All American Inc.

Per: /s/ Harry N. Pefanis                   Per: /s/ Harry N. Pefanis
     --------------------------------            -------------------------------

CANPET ENERGY GROUP INC.                    CANPET ENERGY GROUP (USA), INC.

Per: /s/ David Duckett                      Per: /s/ David Duckett
     --------------------------------            -------------------------------

Per: /s/ Ralph Cross                        Per: /s/ Mark Alenius
     --------------------------------            -------------------------------

                                                                 EXHIBIT 10.16

                        MASTER RAILCAR LEASING AGREEMENT

     This Lease Agreement dated as of the 25th day of May, 1998 (the
"Agreement"), with an effective date of June 1, 1998, by and between PIVOTAL
ENTERPRISES CORPORATION ("Pivotal") an Alberta corporation ("Lessor") and CANPET
ENERGY GROUP INC. ("Canpet") an Alberta corporation ("Lessee").

                                  WITNESSETH:

      1.  (a) Lease. Lessor agrees to furnish and lease to Lessee and Lessee
agrees to accept and use upon the terms and conditions herein set forth, the
cars covered by the riders attached hereto as schedule A and such additional
riders as may be added hereto from time to time by agreement of the parties, and
any and all other cars delivered to and accepted by Lessee. Each such rider
shall set forth the number of cars, the rental rate, term of use, car numbers,
and other pertinent information that may be desired by both parties. All cars
leased pursuant to such riders, or otherwise delivered to and accepted by
Lessee, are subject to the terms of this Agreement.

          (b)  Lease Term.   Lessee agrees to lease all of the cars listed on
the attached schedule for a period of ten years from the date of delivery at a
fixed price of $1,000.50 per month per car, payable in advance each month.
Lessee is responsible to Lessor the term of this lease (10 years).  Should the
Lessee decide not to keep the cars to the end of the lease period, the Lessee
shall pay in full all of the lease payments for the balance of the lease term
within 15 days of such action.

          The Lessee agrees to lease the said cars for an additional five years
(after the expiry of the initial 10 year lease term) at a market price. The
market price to be determined by the Lessor by obtaining two competitive market
quotes.

          The market price for additional lease term of five years must be
decided by the Lessor and the Lessee six months before the expiry of the initial
lease term. Should both parties be unable to agree to the market price, at that
time, the Lessor offer for the market price must prevail and Lessee agrees to
such market price as provided by the Lessor.

      2. Delivery. Lessor agrees to deliver the cars to Lessee at such point or
points as may be agreed to by the parties. Lessor's obligation as to such
delivery shall be excused during the pendency of delays resulting from causes
beyond its control.

          Lessee agrees to use the cars exclusively in its own service, except
as hereinafter provided, and none of the cars shall be shipped beyond the
boundaries of Canada or the United States except with the prior written consent
of Lessor.

      3. Rent. Lessee agrees to pay the rental charges with respect to each of
the cars from the date of delivery thereof and until such car is returned to and
accepted by Lessor, as agreed in Clause 1(b). Each monthly rental charge shall
be paid in advance on the first day of the month, prorating, however, any period
which is less than a full month on the basis of a month of thirty (30) days.
Lessee acknowledges and agrees that the obligation of Lessee to make payments
hereunder shall be absolute and unconditional under any and all circumstances,
regardless of any right of abatement, recoupment, setoff, counterclaim, defense,
suspension, deferment, diminution, reduction or any other right of Lessee or the
lack of any conflicting notice from Lessor, provided however, nothing herein
contained shall limit Lessee's right to otherwise claim damages from Lessor.
Such rental charges shall be paid to Lessor at the address set forth in the
riders to this Agreement.

      4. Acceptance. Each of the cars shall be subject to Lessee's inspection
upon delivery to Lessee. Failure to report any defect in the car within a
reasonable time after delivery of the car or the loading of each such car by
Lessee or at its direction shall constitute acceptance thereof by Lessee and
shall be conclusive evidence of the fit and suitable condition thereof for the
purpose of transporting the commodities then and thereafter loaded therein or
thereon. Lessee herewith agrees that it has inspected all of the cars listed on
the attached rider and found them to be in satisfactory condition.

      5. Records. Lessor agrees to keep records pertaining to the movement of
the cars, and Lessee agrees to promptly furnish Lessor with complete reports of
the car movements, including dates received, loaded and shipped, commodity,
destination and full junction routing, and all information which Lessee may
receive from railroad companies or other sources which may be of use to Lessor.
Lessor shall collect the mileage earned by the cars, and subject to all rules of
the tariffs of the railroads, Lessor shall credit to Lessee's rental account
such mileage as and when received from the railroads.

      6. Mileage. Lessee agrees to reimburse Lessor for any payment Lessor may
be required to make to any railroad, due to mileage equalization where
applicable, resulting from excess empty mileage incurred by the cars on such
railroad. For the purpose of this paragraph, the railroad mileage and junction
reports shall be prima facie evidence of the facts reported therein. In
addition, if Lessor is required to make any payments to a railroad resulting
from the empty movement of any of the cars while they are in Lessee's service,
Lessee agrees to reimburse Lessor for such payments.

      7. Loss or Damage. Lessee shall promptly notify Lessor upon receipt by
Lessee of knowledge of any damage to any of the cars. Lessee shall, at its
expense, perform, arrange, and pay for all maintenance and repairs made
necessary by ordinary wear and tear, or otherwise necessary to keep the cars in
good condition and repair under the Interchange Rules. Lessee shall not repair,
or authorize the repair of any of the cars without Lessor's prior written
consent, except that running repairs (as specified in the Association of
American Railroads rules for Interchange and the National Transportation Agency
regulations) may be performed without prior written consent. The amount Lessee
will pay for such running repairs shall not be in excess of the rate, in effect
at the time the repair is made, as provided by the Association of American
Railroads. If any car becomes unfit for service and requires repairs, other than
repairs made by

railroads, unless otherwise specified in any specific Rider attached hereto,
rental charges will cease five (5) days after receipt of such car at a shop
authorized by Lessor, provided that Lessee has notified Lessor prior to the time
the car is routed to shop. In the event Lessee fails to so notify Lessor, rental
charges shall cease five days after receipt by Lessor of notification of the
arrival of the car at a shop authorized by Lessor. In all cases, after a car has
been repaired, rental charges will resume on the date the car is available for
forwarding to Lessee. It is understood that no rental credits will be issued for
cars in a shop for repairs which are Lessee's responsibility.

     8. Removal from Service. In the event the physical condition of any car
shall become such that the car cannot be operated in railroad service as
determined by Lessor and Lessor elects to permanently remove such car from
Lessee's service, the rental with respect to such car shall terminate upon the
removal of such car. Lessor shall have the right, but shall not be obligated, to
substitute for any such car another car of the same type and capacity and the
rental in respect to such substituted car shall commence upon delivery of such
substituted car to Lessee.

     9. Lessee Responsibility. Lessee shall be responsible for and shall
indemnify Lessor and hold Lessor harmless and does hereby release Lessor from
the loss or destruction of, or damage to, the cars or any parts thereof, during
the term; provided, however, Lessee shall not be responsible to the extent the
then-prevailing Interchange Rules place responsibility upon a railroad
subscribing to the Interchange Rules; and provided, further, that Lessee shall
not be responsible if such loss, destruction, or damage to the cars or parts
thereof was caused by the sole active negligence or willful misconduct of
Lessor. Notwithstanding anything contained herein to the contrary, Lessee shall
be responsible for and shall indemnify Lessor and hold Lessor harmless and does
hereby release Lessor from the loss or destruction of, or damage to, a car or
any part thereof during the term of this Agreement which shall (i) be occasioned
by the misuse or negligence of Lessee, its consignee, agent or sublessee, (ii)
occur while such car is on the tracks of Lessee or any private siding or track,
or at the loading or unloading facility of Lessee or its consignee, agent or
sublessee, or on the track of any railroad that does not subscribe to the
Interchange Rules or any private or industrial railroad or (iii) be caused by
any commodity which may be transported or stored in or on such car.

          Lessee shall notify Lessor of the loss or destruction of any of the
cars within two (2) days of the date of such event. The amount of loss resulting
from the loss or destruction of a car shall be measured by its replacement value
as determined immediately prior to the time of such loss or destruction. The
"replacement value" shall equal the amount payable by a railroad subscribing to
the Interchange Rules for the car if the car had been in the service of such
railroad.

          Lessee shall maintain full insurance coverage for total replacement
value of the cars as per rider attached for accidental damage and loss.

     10. Loss or Damage to Lading. Lessor shall not be liable for any loss of or
damage to commodities or any part thereof, loaded or shipped in or on the cars,
and Lessee agrees to assume financial responsibility for, to indemnify Lessor
against and to save it harmless from any such loss or damage, unless caused by
the sole negligence of Lessor.

      11. Appliances. Lessee, at its own expense, shall either replace or
reimburse Lessor for the cost of replacing any appliance or removable part, if
destroyed, damaged, lost, removed or stolen, unless the railroads transporting
the cars have assumed full responsibility for such loss or damage, or unless
such loss or damage results from the negligence or omission of Lessor, its
agents or employees.

      12. Linings. Lessee shall be responsible for the maintenance and
replacement of interior lining during the term of this agreement, and at
Lessor's sole option, Lessee shall either repair, replace or remove such lining
at Lessee's expense at the termination of this agreement.

      13. Claims. Lessee agrees to indemnify and hold Lessor harmless from and
against any loss, liability, claim, damage or expense (including, unless Lessee
assumes the defense, the reasonable cost of investigating and defending against
any claim for damages) arising out of or in connection with the use of the cars
during the term of this Agreement, excepting, however, any loss, liability,
claim, damage, or expense which accrues with respect to any of the cars (i)
while such car is in a repair shop undergoing repairs; (ii) which is
attributable to the sole active negligence or willful misconduct of Lessor, its
agents or employees; or (iii) for which a railroad or railroads have assumed
full responsibility, including investigating and defending against any claim for
damages.

      14. Marks. Other than the restoration of Lessor's marks on the cars, no
lettering or marking of any kind shall be placed upon any of the cars by Lessee
except with the prior written consent of Lessor.

      15. Load Limits. Lessee agrees not to load any of the cars in excess of
the load limit stenciled thereon.

      16. Charges. Lessee shall be liable for any demurrage, track storage or
detention charge imposed in connection with any of the cars as well as loss of
or damage to any car while on any private siding or track or on any private or
industrial railroad or in the custody of any carrier not subject to the
Association of American Railroads Rules for Interchange or the National
Transportation Agency regulations.

      17. Sublease and Assignment. Lessee shall make no transfer or assignment
of its interest under this Agreement in and to the cars without Lessor's prior
written consent, and any attempted transfer or assignment without such consent
shall be void, except that Lessee may sublease any of the cars to its customers
for single trips consistent with its normal merchandising methods; provided,
however, that notwithstanding any such sublease, Lessee shall continue to remain
liable to Lessor under all conditions and terms of this Agreement. No right,
title, or interest in any of the cars shall vest in Lessee by reason of this
Agreement or by reason of the delivery to or use by Lessee of the cars, except
the right to use the cars in accordance with the terms of this Agreement. Lessee
shall keep the cars free of any lien or encumbrance created by or through Lessee
and agrees to indemnify Lessor and hold Lessor harmless from any cost or
expense, including attorneys' fees, with respect to such a lien or encumbrance.

      18. Default. If Lessee defaults in the payment of any sum of money to be
paid under this Agreement and such default continues for a period of three (3)
days after notice to Lessee of such default; or if Lessee fails to perform any
covenant or condition required to be performed by Lessee which failure shall not
be remedied within ten (10) days after notice thereof from Lessor to Lessee; or
if Lessee shall dissolve, make or commit any act of bankruptcy, or if any
proceeding under any bankruptcy, or insolvency statute or any laws relating to
relief of debtors is commenced by Lessee, or if any such proceeding is commenced
against Lessee and same shall not have been removed within thirty (30) days of
the date of the filing thereof, or if a receiver, trustee, or liquidator is
appointed for Lessee or for all or a substantial part of Lessee's assets with
Lessee's consent, or if without Lessee's consent the same shall not have been
removed within thirty (30) days of the date of the appointment thereof, or if an
order, judgment or decree be entered by a court of competent jurisdiction and
continue unpaid and in effect for any period of thirty (30) consecutive days
without a stay of execution; or if a writ of attachment or execution is levied
on any car and is not discharged within ten (10) days thereafter, Lessor may
exercise one or more of the following remedies with respect to the cars:

         (a) Immediately terminate this Agreement and Lessee's rights hereunder;

         (b) Require Lessee to return the cars to Lessor at Lessee's expense,
and if Lessee fails to so comply, Lessor may take possession of such car without
demand or notice and without court order or legal process;

         (c) Lease the cars to such persons, at such rental and for such period
of time as Lessor shall elect. Lessor shall apply the proceeds from such
leasing, less all cost and expenses incurred in the recovery, repair, storage,
and renting of such cars, toward the payment of Lessee's obligations hereunder.
Lessee shall remain liable for any deficiency, which, at Lessor's option, shall
be paid monthly, as suffered, or immediately, or at the end of the term as
damages for Lessee's default;

         (d) Bring legal action to recover all rent for the balance of the lease
term or other amounts then accrued or thereafter accruing from Lessee to Lessor
under any provision hereof; or

         (e)  Pursue any other remedy which Lessor may have.

         Each remedy is cumulative and may be enforced separately or
concurrently.  If Lessee fails to perform any of its obligations hereunder,
Lessor, at Lessee's expense, and without waiving any rights it may have against
Lessee for such nonperformance, may itself render such performance.  Further,
Lessee shall reimburse Lessor for all costs and expenses including reasonable
attorneys' fees expended by Lessor in the enforcement of its rights and remedies
hereunder, and Lessee shall pay interest on any amount owing to Lessor from the
time such amount becomes due hereunder at a monthly rate of one and one-half
percent (1-1/2%); such rate to be reduced, however, to the extent it exceeds the
maximum rate permitted by applicable law. In addition, Lessee shall, without
expense to Lessor, assist Lessor in repossessing the cars and shall, for a
reasonable time if required, furnish suitable trackage space for the storage of
the cars.

         If applicable, Lessor shall be entitled to the remedies of a
Lessor/Owner under all applicable bankruptcy laws.

      19.  Return Provisions.

         (a) Upon the termination of each rider, Lessee agrees, subject to the
provision of paragraph 8 above, to return the cars to Lessor at a point or
points designated by Lessor, in the same or in as good a condition as received,
ordinary wear and tear excepted, free and clear from all accumulations or
deposits from commodities transported in or on the cars while in the service of
Lessee. If any car is not returned to Lessor free from such accumulations or
deposits, Lessee shall reimburse Lessor for any expense incurred in cleaning
such car.

         (b) In the event of any car or tank fittings or appurtenances,
including interior lining for cars so equipped, shall become damaged, suffers
corrosion, or other damage related to or connected with the commodity, along
with other material placed or allowed to accumulate in or on the car and to how
the car is exposed, Lessee shall be liable for such damage, regardless of how it
is caused, and whether or not it is due to Lessee's negligence. Such damage
shall not be considered "ordinary wear and tear."

      20. Taxes. All federal, state, provincial, and local taxes levied or
assessed against the cars furnished Lessee under this Agreement, payable on
account of the ownership of such cars, shall be paid by Lessor, and all returns
and reports in connection therewith shall be made by Lessor. All taxes payable
on account of or measured by the rental paid or the use of such cars (excluding
any tax which is based solely upon or measured solely by Lessor's net income)
shall be the responsibility of Lessee. In the event any taxes or assessments,
other than those payable on account of ownership, are levied against the cars or
the rental paid for the use of the cars covered by any rider to this Agreement
by any federal, state, provincial or local authority, in addition to those taxes
or assessments in effect on the effective date of such rider, Lessee agrees to
pay to Lessor, in addition to any other amounts due, a sum equal to the amount
of any such taxes or assessments.

      21. Mortgages; Liens. It is understood that some or all of the cars
furnished Lessee under this Agreement and Lessor's rights under this Agreement
may at the time of delivery to Lessee or at some future time during the term of
this Agreement be subject to the terms of any lien or encumbrance (a "Lien")
including a Mortgage, Deed of Trust, Equipment Trust, Pledge, or Bill of Sale or
similar security arrangement. Lessee agrees that any or all of the cars may be
stenciled or marked to set forth the ownership of any such cars in the name of
the holder of any Lien (the "Lien holder") including a mortgagee, trustee,
pledgee, assignee or security holder and that this Agreement and Lessee's rights
hereunder are and shall at all times be subject and subordinate to any and all
rights of any Lien holder. Lessee agrees that upon the written request of Lessor
or any Lien holder at any time or from time to time, Lessee will enter into a
written agreement with any Lien holder(s): (i) that the Lien(s) will have
priority and be entitled to all rights therein as though the Lien were made
before this Agreement and on the making of this Agreement Lessee had knowledge
of the Lien; (ii) confirming the security created by the Lien and rights given
to the Lien holder(s); and (iii) postponing and deferring this Agreement and its

rights hereunder and to the cars and agreeing that they will be subject and
subordinate to the Lien(s) and the rights of the Lien holder.

          This Agreement and/or any of Lessor's rights hereunder, including
rentals, may have been assigned and may in the future be assigned to any Lien
holder(s) or others.  Lessee hereby consents to and accepts any such Assignment.
Lessee acknowledges notice of any such Assignment and of any Lien which is filed
under Section 11303 of the Interstate Commerce Act of the United States of
America.  However, Lessee is to pay all rentals hereunder to Lessor and have all
its dealings hereunder with Lessor until notified to the contrary by any person
proving to Lessee's reasonable satisfaction that he is the assignee of this
Agreement and/or the relevant rights of Lessor hereunder and is entitled to
intervene.  Lessee represents that it has received no notice of any other
mortgage, charge, hypothecation or encumbrance on or of any assignment, sale or
disposition of any car covered hereby or of any of Lessor's rights hereunder.
Lessee agrees that no claim or defense which Lessee may have against Lessor
shall be asserted or enforced against any assignee of this Agreement and/or any
rights of Lessor hereunder.

     22. Notices. Any notice, demand or request required or permitted to be
made, given or served by either party to or upon the other hereunder, shall be
in writing and shall be deemed to have been made when deposited in the United
States or Canada mail, certified or registered mail, postage prepaid and
addressed to Lessor or Lessee at the address set forth in a rider to this
Agreement.

     23. Successors. This Agreement shall be binding upon the parties hereto,
their respective successors, assigns and legal representatives, and shall remain
in full force and effect from the date hereof until the completion of the
leasing arrangement shown on attached riders of the last car or cars hereunder,
and all such cars are returned to Lessor.

     24.  Governing Law.  This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Alberta.

     25. Insurance. Lessee shall, at all times prior to return of the cars to
Lessor in accordance with the terms of this Agreement and during any storage
period at its own expense, cause to be carried and maintained public liability
and property damage insurance in respect of the cars against the risks and in
the amounts, if any, customarily insured against by Lessee in respect to similar
equipment owned or leased by it, as further described in Clause 9.

     26. Additional Provisions. Additional provisions of this Agreement may be
set forth in a rider, which, if executed by Lessor and Lessee, is incorporated
herein by this reference.

     27. Representations and Warranties of Lessee. Lessee represents and
warrants that, as of the date of this Agreement:

          Lessee is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and is
either duly qualified to do business and is in good standing in such other
jurisdictions in which the business and activities of Lessee

require such qualification, or its failure to so qualify in such other
jurisdiction will not have a material adverse impact on this Agreement.

      (a)  Lessee has full corporate power to enter into this Agreement.

      (b) The Agreement had been duly authorized, executed, and delivered by
Lessee, and constitutes a valid, legal and binding agreement, enforceable in
accordance with its terms.

      (c) No approval is required by Lessee from any governmental or public body
or authority with respect to the entering into or performance of this Agreement.

      (d) The entering into and performance of this Agreement will not conflict
with, or result in a breach of, the terms, conditions, or provisions of (i) any
law, or any regulation, order, injunction, permit, franchise, or decree of any
court or governmental instrumentality, and (ii) any indenture, agreement, or
other instrument to which Lessee is party or by which it or any of its property
is bound.

     28.  Modifications.  In the event the U.S. Department of Transportation,
or the National Transportation Agency or any other governmental agency or non-
governmental organization having jurisdiction over the operation, safety or use
of railroad equipment, requires that Lessor add, modify, or in any manner adjust
the cars subject to this Agreement in order to qualify them for operation in
railroad interchange, unless otherwise specified in any specific Rider attached
hereto, Lessee agrees to pay an additional monthly charge of $1.75 per car for
each $100 expended by Lessor on such car, or such other monthly charge in lieu
thereof, as may be provided for modifications, in any rider hereto, in any case,
effective as of the date the car is released from the shop after application of
such additions, modifications or, adjustments (hereinafter the "Modifications").
No rental credits will be issued on cars entering the shop for any Modifications
for the first thirty (30) days. In the event Lessor, in its sole discretion,
determines, prior to making any Modifications, that the cost thereof is not
economical to expend in view of the estimated remaining useful life of such car,
and Lessor elects to permanently remove such car from Lessee's service rather
than have such car taken to a car shop for such Modifications, the rental with
respect to such car shall terminate upon the date specified in writing by
Lessor, provided that such date must be prior to the date the Modifications are
so required to be made.

     29.  Captions.  Captions to any provision of this Agreement are for ease of
reference only and are not be construed to be part of this Agreement.

          IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement (such execution may be by two or more counterparts, each of which
shall be deemed an original) the day and year first above written.

LESSEE:                          CANPET ENERGY GROUP INC.

                                 By:     /s/  David Duckett
                                         ----------------------

                                 Title:    President & CEO
                                         ----------------------

LESSOR:                          PIVOTAL ENTERPRISES CORPORATON

                                 By:     /s/
                                         ----------------------

                                 Title:    President
                                         ----------------------

                                                                   EXHIBIT 10.36

TO: The Lenders under the Amended and Restated Credit Agreement (LETTER OF
    CREDIT AND HEDGED INVENTORY FACILITY) dated as of May 4, 2001, as amended
    and in effect through the Third Amendment thereto (the "Agreement"), among
    Plains Marketing, L.P. ("Borrower"), All American Pipeline, L.P. and Plains
    All American Pipeline, L.P., as guarantors, Fleet National Bank, as
    Administrative Agent, and the Lenders named therein.

           FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

Ladies and Gentlemen:

     Capitalized terms used herein and not otherwise defined shall have the
meaning given them in the Agreement, and reference is hereby made to the
Agreement for all purposes in connection herewith.  This Amendment is a Loan
Document.

     All American proposes to purchase certain pipeline assets and equity
interests in partnerships owning certain pipeline assets as previously disclosed
by US Borrower to Administrative Agent and Lenders (the "Subject Acquisition").
The cash purchase price of the Subject Acquisition is approximately
$147,000,000, plus a contingent payment of up to $30,000,000 (the "Contingent
Payment Obligation"); provided, in the event certain third-party rights to
purchase certain of the assets are exercised (the "First Refusal Rights"), such
purchase price will be approximately $114,000,000, plus the Contingent Payment
Obligation.  The Subject Acquisition does not constitute a Permitted Acquisition
and therefore is not permitted under Section 7.7(c) of the Agreement.

     US Borrower is seeking consent to the Subject Acquisition, including the
exclusion of the Contingent Payment Obligation as a Liability.

     The undersigned Lender hereby consents to the treatment of the Subject
Acquisition as if it were a Permitted Acquisition, and to the exclusion of the
Contingent Payment Obligation as a Liability, subject to the following:

          (a) Administrative Agent shall have received and approved copies of
     all environmental evaluations, reports or reviews related to properties to
     be acquired pursuant to the Subject Acquisition.

          (b) Administrative Agent and each Lender shall have received any
     updated or revised business and/or financial projections with respect to
     the assets and operations to be acquired pursuant to the Subject
     Acquisition, and, except for (i) adjustments in the event of the exercise
     of the First Refusal Rights, or (ii) revisions accompanied by a
     corresponding purchase price adjustment, no such projection shall
     materially and adversely differ from those projections previously delivered
     to Administrative Agent and Lenders.

          (c) All American, as acquirer, shall have received an environmental
     indemnity with respect to individual claims greater than $200,000 ("Covered
     Claims") as follows: (i) 50% of Covered Claims which in the aggregate
     exceed $2,000,000 but do not exceed $6,000,000, and (ii) 100% of Covered
     Claims which in the aggregate exceed $6,000,000

     but do not exceed $30,000,000, to be effective for not less than two years
     following the Subject Acquisition closing date, and otherwise reasonably
     satisfactory to Administrative Agent with respect to such liabilities.

          (d) Administrative Agent shall have received and approved copies of
     all documentation relating to the Subject Acquisition documents and all
     other related documents as Administrative Agent may request.

          (e) The cash portion of the purchase price, together with associated
     transaction costs and expenses, shall not exceed $160,000,000, plus the
     Contingent Payment Obligation; provided, in the event of the exercise of
     the First Refusal Rights, the cash portion of the purchase price, together
     with associated transaction costs and expenses, shall not exceed
     $127,000,000, plus the Contingent Payment Obligation.

          (f) Both immediately prior to and immediately following the
     consummation of the Subject Acquisition, no Material Adverse Change shall
     have occurred since December 31, 2000, and no Default or Event of Default
     shall have occurred and be continuing.

          (g) All American shall have delivered Security Documents pursuant to
     Section 6.14 of the Agreement with respect to the assets acquired pursuant
     to the Subject Acquisition, provided, with respect to those assets
     constituting undivided interests in joint venture pipeline assets or
     general partnership interests requiring the consent or approval of third
     parties to the delivery of such Security Documents, All American shall use
     its commercially reasonable best efforts, as determined by Administrative
     Agent, to deliver such Security Documents with respect to such assets.

     The effectiveness of this Amendment shall be conditioned upon the
contemporaneous effectiveness of an amendment to the Revolver Agreement on
substantially identical terms and shall become effective upon (i) consent of
Majority Lenders, (ii) acceptance hereof by Borrower, and (iii) payment of a
$5,000 consent fee to each Lender (unless such Lender shall have received such
consent fee pursuant to the amendment to the Revolver Agreement).  Please
execute a copy of this letter in the space provided below to evidence your
consent to the foregoing and fax a copy to the Administrative Agent (c/o Terry
Ronan) at 617-434-3652 by 5:00 p.m., Monday, October 29th.

     Thank you for your assistance on such short notice.

                              FLEET NATIONAL BANK, Administrative Agent

                              By:   /s/ Terrence Ronan
                                 -----------------------------------------
                                  Terrence Ronan, Managing Director

We hereby consent to the foregoing

First Union National Bank

By: /s/  Robert R. Wetteroff
   --------------------------------------
    Name: Robert R. Wetteroff
    Title:   Senior Vice President

Bank of America, N.A.

By:   /s/  Ronald E. McKaig
   --------------------------------------
    Name: Ronald E. McKaig
    Title:   Managing Director

Bank One NA

By:   /s/  Charles Kingswell-Smith
   --------------------------------------
    Name: Charles Kingswell-Smith
    Title:   First Vice President

Fortis Capital Corp.

By:   /s/  Darrell W. Holley
   --------------------------------------
    Name: Darrell W. Holley
    Title:  Managing Director

By:   /s/  Deirdre Sanborn
   --------------------------------------
    Name: Deirdre Sanborn
    Title:   Vice President

U.S. Bank, National Association

By:   /s/  Monte E. Deckerd
   --------------------------------------
    Name: Monte E. Deckerd
    Title:   Vice President

Bank of Scotland

By:   /s/  Joseph Fratus
   --------------------------------------
    Name: Joseph Fratus
    Title:   Vice President

The Bank of Nova Scotia

By:   /s/  M. D. Smith
   --------------------------------------
    Name: M. D. Smith
    Title:   Agent

Wells Fargo Bank (Texas)

By:   /s/   John Lane
   --------------------------------------
    Name: John Lane
    Title:   Vice President

Toronto Dominion (Texas), Inc.

By:   /s/   Jim Bridwell
   --------------------------------------
    Name: Jim Bridwell
    Title:   Vice President

Credit Agricole Indosuez

By:   /s/   Brian Knezeak
   --------------------------------------
    Name: Brian Knezeak
    Title:   FVP, Manager

By:   /s/   Michael D. Willis
   --------------------------------------
    Name: Michael D. Willis
    Title:   VP, Credit Analysis

Union Bank of California, N.A.

By:   /s/  Randall Osterberg
   --------------------------------------
    Name: Randall Osterberg
    Title:   Senior Vice President

Southwest Bank of Texas, N.A.

By:   /s/   A. Stephen Kennedy
   --------------------------------------
    Name: A. Stephen Kennedy
    Title:   Senior Vice President

BNP Paribas

By:   /s/   Edward K. Chin
   --------------------------------------
    Name: Edward K. Chin
    Title:   Director

By:   /s/   Keith Cox
   --------------------------------------
    Name: Keith Cox
    Title:   Director

Comerica Bank-Texas

By:   /s/  Huma Vadgama
   --------------------------------------
    Name:  Huma Vadgama
    Title: Corporate Banking Officer

Octagon Investment Partners IV, Ltd.

By:        Octagon Credit Investors, LLC
           as collateral manager

By:   /s/  Michael B. Nechamkin
   --------------------------------------
    Name:  Michael B. Nechamkin
    Title: Portfolio Manager

Captiva III Finance Ltd (Acct. 275),
    as advised by Pacific Invesment
    Management Company, LLC

By:   /s/  David Dyer
   --------------------------------------
    Name:  David Dyer
    Title: Director

Captiva IV Finance Ltd. (Acct. 275),
    as advised by Pacific Investment
    Management Company, LLC

By:   /s/  David Dyer
   --------------------------------------
    Name:  David Dyer
    Title: Director

Royalton Company (Acct 280)

By:  Pacific Investment Management
     Company, LLC, as its
     Investment Advisor

By:   /s/  Mohan V. Phansalkar
   --------------------------------------
    Name:  Mohan V. Phansalkar
    Title: Executive Vice President

Bedford CDO, Limited (Acct. 1276)

By:  Pacific Investment Management
     Company, LLC, as its
     Investment Advisor

By:   /s/  Mohan V. Phansalkar
   --------------------------------------
    Name:  Mohan V. Phansalkar
    Title: Executive Vice President

Delano Company (Acct. 274)

By:  Pacific Investment Management
     Company, LLC, as its
     Investment Advisor

By:   /s/  Mohan V. Phansalkar
   --------------------------------------
    Name:  Mohan V. Phansalkar
    Title: Executive Vice President

Addison CDO, Limited (Acct. 1279)

By:  Pacific Investment Management
     Company, LLC, as its
     Investment Advisor

By:   /s/  Mohan V. Phansalkar
   --------------------------------------
    Name:  Mohan V. Phansalkar
    Title: Executive Vice President

Jissekikun Funding, Ltd. (Acct 1288)

By:  Pacific Investment Management Company, LLC,
     as its Investment Advisor

By:   /s/   Mohan V. Phansalkar
   --------------------------------------
    Name:   Mohan V. Phansalkar
    Title:  Executive Vice President

Balboa CDO I, Limited

By:  Pacific Investment Management Company, LLC,
     as its Investment Advisor

By:   /s/   Mohan V. Phansalkar
   --------------------------------------
    Name:   Mohan V. Phansalkar
    Title:  Executive Vice President

Sequils-Magnum, Ltd.

By:  Pacific Investment Management Company, LLC,
     as its Investment Advisor

By:   /s/   Mohan V. Phansalkar
   --------------------------------------
    Name:   Mohan V. Phansalkar
    Title:  Executive Vice President

San Joaquin CDO I Limited

By:  Pacific Investment Management Company, LLC,
     as its Investment Advisor

By:   /s/  Mohan V. Phansalkar
   --------------------------------------
    Name:  Mohan V. Phansalkar
    Title: Executive Vice President

Highland Loan Funding V Ltd.

By:  Highland Capital Management, L.P.
     as Collateral Manager

By:   /s/  Mark Okada
   --------------------------------------
    Name:  Mark Okada, CFV
    Title: Executive Vice President

Pilgrim America High Income Investments Inc. Ltd.

By:  ING Pilgrim Investments, Inc.
     as its investment manager

By:   /s/  Charles E. LeMieux
   --------------------------------------
    Name:  Charles E. LeMieux, CFA
    Title: Vice President

TCW Select Loan Fund, Limited

By:  TCW Advisors, Inc.
     as its Collateral Manager

By:   /s/  Richard F. Kurth
   --------------------------------------
    Name:  Richard F. Kurth
    Title: Vice President

By:   /s/  Mark L. Gold
   --------------------------------------
    Name:  Mark L. Gold
    Title: Managing Director

Flagship CLO 2001-1

By:  Flagship Capital Management, Inc.

By:   /s/  James T. Anderson
   --------------------------------------
    Name:  James T. Anderson
    Title: Managing Director

Flagship CLO II

By:   /s/  James T. Anderson
   --------------------------------------
    Name:  James T. Anderson
    Title: Attorney in Fact

ML CLO XII Pilgrim America (Cayman) Ltd.

By:  ING Pilgrim Investments, Inc.
     as its investment manager

By:   /s/  Charles E. LeMieux
   --------------------------------------
    Name:  Charles E. LeMieux, CFA
    Title: Vice President

Octagon Investment Partners II, LLC

By:  Octagon Credit Investors, LLC
     as sub-investment manager

By:   /s/  Michael B. Nechamkin
   --------------------------------------
    Name:  Michael B. Nechamkin
    Title: Portfolio Manager

Pilgrim Prime Rate Trust

By:  ING Pilgrim Investments, Inc.
     as its investment manager

By:   /s/  Charles E. LeMieux
   --------------------------------------
    Name:  Charles E. LeMieux, CFA
    Title: Vice President

Pilgrim Senior Income Fund

By:  ING Pilgrim Investments, Inc.
     as its investment manager

By:   /s/  Charles E. LeMieux
   --------------------------------------
    Name:  Charles E. LeMieux, CFA
    Title: Vice President

Octagon Investment Partners III, Ltd.

By:  Octagon Credit Investors, LLC
     as Portfolio Manager

By:   /s/  Michael B. Nechamkin
   --------------------------------------
    Name:  Michael B. Nechamkin
    Title: Portfolio Manager

Siemans Financial Services, Inc.

By:   /s/  Frank Amodio
   --------------------------------------
    Name:  Frank Amodio
    Title: Vice President-Credit

Guaranty Bank

By:   /s/  Jim R. Hamilton
   ---------------------------------
    Name:  Jim R. Hamilton
    Title: Senior Vice President,
           Regional Manager

ML CLO XX Pilgrim America (Cayman) Ltd.

By: ING Pilgrim Investments, LLC
    as its investment manager

By:   /s/  Charles E. LiMieux
   ---------------------------------
    Name:  Charles E. LiMieux, CFA
    Title: Vice President

Pilgrim CLO 1999-1 Ltd.

By: ING Pilgrim Investments, LLC
    as its investment manager

By:   /s/  Charles E. LiMieux
   ---------------------------------
    Name:  Charles E. LiMieux, CFA
    Title: Vice President

Sequils Pilgrim-1 Ltd.

By: ING Pilgrim Investments, LLC
    as its investment manager

By:   /s/  Charles E. LiMieux
   ---------------------------------
    Name:  Charles E. LiMieux, CFA
    Title: Vice President

Maplewood (Cayman) Ltd.

By: Mass Mutual Life Insurance Co., as Investment Manager

By:   /s/  Steven J. Katz
   ---------------------------------
    Name:  Steven J. Katz
    Title: Second Vice President and
           Associate General Counsel
           Term Loan Lender

Massachusetts Mutual Life Insurance Company

By:   /s/  Steven J. Katz
   ---------------------------------
    Name:  Steven J. Katz
    Title: Second Vice President and
           Associate General Counsel
           Term Loan Lender

SAAR Holdings CDO Limited

By: Mass Mutual Life Insurance Co., as Collateral Manager

By:   /s/  Steven J. Katz
   ---------------------------------
    Name:  Steven J. Katz
    Title: Second Vice President and
           Associate General Counsel
           Term Loan Lender

Persens CDO I, Limited

By: Mass Mutual Life Insurance Co., as Portfolio Manager

By:   /s/  Steven J. Katz
   ---------------------------------
    Name:  Steven J. Katz
    Title: Second Vice President and
           Associate General Counsel
           Term Loan Lender

Somers CDO, Limited

By: Mass Mutual Life Insurance Co., as Collateral Manager

By:   /s/  Steven J. Katz
   ---------------------------------
    Name:  Steven J. Katz
    Title: Second Vice President and
           Associate General Counsel
           Term Loan Lender

Simsbury CLO, Limited

By: Mass Mutual Life Insurance Co.
    as Collateral Manager

By:   /s/   Steven J. Katz
   --------------------------------------
    Name:   Steven J. Katz
    Title:  Second Vice President

Suffield CLO, Limited

By: David L. Babson & Co.
    as Collateral Manager

By:   /s/  Mary Ann McCarthy
   --------------------------------------
    Name:  Mary Ann McCarthy
    Title: Managing Director
           Term Loan Lender

Bill & Melinda Gates Foundation

By: David L. Babson & Company Inc.
    as Investment Advisers

By:   /s/  Mary Ann McCarthy
   --------------------------------------
    Name:  Mary Ann McCarthy
    Title: Managing Director
           Term Loan Lender

[Letter of Credit and Hedged Inventory Credit Agreement]

PLAINS MARKETING, L.P., Borrower
ALL AMERICAN PIPELINE, L.P., Guarantor

By:  Plains Marketing GP Inc., General Partner

     By: /s/ Phil Kramer
        --------------------------------------
          Phil Kramer, Exec. Vice President

PLAINS ALL AMERICAN PIPELINE, L.P., Guarantor

By:  Plains AAP, L.P., General Partner

By:  Plains All American GP LLC, its General Partner

     By: /s/ Phil Kramer
        --------------------------------------
          Phil Kramer, Exec. Vice President

                                 CONSENT AND AGREEMENT

     Each of the undersigned hereby consents to the provisions of this Amendment
and the transactions contemplated herein and hereby (i) acknowledges and agrees
that any and all indebtedness, liabilities or obligations arising under or in
connection with the Notes are Obligations and are secured indebtedness under,
and are secured by, each and every Security Document to which it is a party,
(ii) re-pledges, re-grants and re-assigns a security interest in and lien on all
of its assets described as collateral in any Security Document, (iii) ratifies
and confirms its Guaranty dated May 4, 2001 made by it for the benefit of
Administrative Agent and Lenders, and (iv) expressly acknowledges and agrees
that the undersigned guarantees all indebtedness, liabilities and obligations
arising under or in connection with any and all Notes pursuant to the terms of
such Guaranty, and agrees that its obligations and covenants thereunder are
unimpaired hereby and shall remain in full force and effect.

                              PLAINS MARKETING CANADA LLC

                              By:  Plains Marketing, L.P., its sole member

                                    By:  Plains Marketing GP Inc.,
                                         its general partner

                                    By:  /s/ Phil Kramer
                                        --------------------------------------
                                         Phil Kramer, Exec. Vice President

                              PMC (NOVA SCOTIA) COMPANY

                              By:   /s/ Phil Kramer
                                  ---------------------------------------------
                                    Phil Kramer, Exec. Vice President

                              PLAINS MARKETING CANADA, L.P.

                              By:  PMC (Nova Scotia) Company,
                                    General Partner

                              By:   /s/ Phil Kramer
                                  ---------------------------------------------
                                    Phil Kramer, Exec. Vice President

                                                                   EXHIBIT 10.37

TO: The Lenders under the Amended and Restated Credit Agreement (REVOLVING
    CREDIT FACILITY) dated as of May 4, 2001, as amended and in effect through
    the Third Amendment thereto (the "Agreement"), among Plains Marketing, L.P.
    ("US Borrower"), All American Pipeline, L.P. and Plains All American
    Pipeline, L.P., as guarantors, Fleet National Bank, as Administrative Agent,
    The Toronto-Dominion Bank, as Canadian Agent, PMC (Nova Scotia) Company
    ("Term Borrower"), Plains Marketing Canada, L.P. ("Canadian Revolver
    Borrower"), and the Lenders named therein.

           FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

Ladies and Gentlemen:

     Capitalized terms used herein and not otherwise defined shall have the
meaning given them in the Agreement, and reference is hereby made to the
Agreement for all purposes in connection herewith.  This Amendment is a Loan
Document.

     All American proposes to purchase certain pipeline assets and equity
interests in partnerships owning certain pipeline assets as previously disclosed
by US Borrower to Administrative Agent and Lenders (the "Subject Acquisition").
The cash purchase price of the Subject Acquisition is approximately
$147,000,000, plus a contingent payment of up to $30,000,000 (the "Contingent
Payment Obligation"); provided, in the event certain third-party rights to
purchase certain of the assets are exercised (the "First Refusal Rights"), such
purchase price will be approximately $114,000,000, plus the Contingent Payment
Obligation.  The Subject Acquisition does not constitute a Permitted Acquisition
and therefore is not permitted under Section 7.7(c) of the Agreement.  In
addition, clause (C)(iv)(b) of the definition of Permitted Acquisitions set
forth in the Agreement generally provides that the aggregate total purchase
price for acquisitions that are not otherwise covered by clause (A) or (B) of
such definition which exceed $5,000,000 from the date of the Agreement through
the US Maturity Date cannot exceed $50,000,000.

     US Borrower is seeking consent to (i) the Subject Acquisition, including
the exclusion of the Contingent Payment Obligation as a Liability, and (ii)
amend clause (C)(iv)(b) of the definition of Permitted Acquisitions such that
only acquisitions after October 25, 2001, excluding the acquisition of the
Wapella pipeline system, be included in the aggregate $50,000,000 limitation.

     The undersigned Lender hereby consents to the treatment of the Subject
Acquisition as if it were a Permitted Acquisition, and to the exclusion of the
Contingent Payment Obligation as a Liability, subject to the following:

          (a) Administrative Agent shall have received and approved copies of
     all environmental evaluations, reports or reviews related to properties to
     be acquired pursuant to the Subject Acquisition.

          (b) Administrative Agent and each Lender shall have received any
     updated or revised business and/or financial projections with respect to
     the assets and operations to be acquired pursuant to the Subject
     Acquisition, and, except for (i) adjustments in the event of the exercise
     of the First Refusal Rights, or (ii) revisions accompanied by a

     corresponding purchase price adjustment, no such projection shall
     materially and adversely differ from those projections previously delivered
     to Administrative Agent and Lenders.

          (c) All American, as acquirer, shall have received an environmental
     indemnity with respect to individual claims greater than $200,000 ("Covered
     Claims") as follows: (i) 50% of Covered Claims which in the aggregate
     exceed $2,000,000 but do not exceed $6,000,000, and (ii) 100% of Covered
     Claims which in the aggregate exceed $6,000,000 but do not exceed
     $30,000,000, to be effective for not less than two years following the
     Subject Acquisition closing date, and otherwise reasonably satisfactory to
     Administrative Agent with respect to such liabilities.

          (d) Administrative Agent shall have received and approved copies of
     all documentation relating to the Subject Acquisition documents and all
     other related documents as Administrative Agent may request.

          (e) The cash portion of the purchase price, together with associated
     transaction costs and expenses, shall not exceed $160,000,000, plus the
     Contingent Payment Obligation; provided, in the event of the exercise of
     the First Refusal Rights, the cash portion of the purchase price, together
     with associated transaction costs and expenses, shall not exceed
     $127,000,000, plus the Contingent Payment Obligation.

          (f) Both immediately prior to and immediately following the
     consummation of the Subject Acquisition, no Material Adverse Change shall
     have occurred since December 31, 2000, and no Default or Event of Default
     shall have occurred and be continuing.

          (g) All American shall have delivered Security Documents pursuant to
     Section 6.14 of the Agreement with respect to the assets acquired pursuant
     to the Subject Acquisition, provided, with respect to those assets
     constituting undivided interests in joint venture pipeline assets or
     general partnership interests requiring the consent or approval of third
     parties to the delivery of such Security Documents, All American shall use
     its commercially reasonable best efforts, as determined by Administrative
     Agent, to deliver such Security Documents with respect to such assets.

     The undersigned Lender hereby consents to amending clause (C)(iv)(b) of the
definition of "Permitted Acquisition" in its entirety to read as follows:

     (b) if the total purchase price of any such acquisition exceeds $5,000,000,
     then the aggregate of the total purchase prices (including any assumed
     Indebtedness) for all such acquisitions from October 25, 2001 through the
     US Maturity Date does not exceed $50,000,000 (which amount, for the
     avoidance of doubt, excludes acquisitions described in the preceding clause
     (iv)(a)), excluding (x) the acquisition of the Wapella pipeline system, and
     (y) any acquisition otherwise expressly consented to by the requisite
     Lenders prescribed by Section 10.1(a).

     The undersigned Lender hereby consents to amending Section 10.5(c)(iv) in
its entirety to read as follows:

          (iv) Each assignee Canadian Revolver Lender shall be a financial
     institution that is (i) not a non-resident of Canada for the purposes of
     the Income Tax Act (Canada);  or (ii) an "authorized foreign bank" as
     defined in section 2 of the Bank Act (Canada) and in subsection 248(1) of
     the Income Tax Act (Canada), that is not subject to the restrictions and
     requirements referred to in subsection 524(2) of the Bank Act (Canada) and
     which will receive all amounts paid or credited to it under its Canadian
     Revolver Loans and Canadian Revolver Note in respect of its "Canadian
     banking business" for the purposes of paragraph 212(13.3)(a) of the Income
     Tax Act (Canada).

     The effectiveness of this Amendment shall be conditioned upon the
contemporaneous effectiveness of an amendment to the Marketing Credit Agreement
on substantially identical terms and shall become effective upon (i) consent of
Majority Lenders, (ii) acceptance hereof by Borrower, and (iii) payment of a
$5,000 consent fee to (i) each commercial bank that is a Lender and (ii) each
institutional fund family with one or more funds that are Lenders.  Please
execute a copy of this letter in the space provided below to evidence your
consent to the foregoing and fax a copy to the Administrative Agent (c/o Terry
Ronan) at 617-434-3652 by 5:00 p.m., Monday, October 29th.

     Thank you for your assistance on such short notice.

                              FLEET NATIONAL BANK, Administrative Agent

                              By:    /s/  Terrence Ronan
                                 ------------------------------------------
                                 Terrence Ronan, Managing Director

We hereby consent to the foregoing

First Union National Bank

By:   /s/ Robert R. Wetteroff
   ---------------------------------
 Name: Robert R. Wetteroff
 Title: Senior Vice President

Bank of American, N.A.

By:   /s/ Ronald E. McKaig
   ---------------------------------
 Name: Ronald E. McKaig
 Title: Managing Director

Bank One, N.A.

By:   /s/ Charles Kingswell-Smith
   ---------------------------------
 Name: Charles Kingswell-Smith
 Title: First Vice President

Fortis Capital Corp.

By:   /s/ Darrell W. Holley
   ---------------------------------
 Name: Darrell W. Holley
 Title: Managing Director

By:    /s/ Deirdre Sanborn
   ---------------------------------
 Name: Deirdre Sanborn
 Title: Vice President

U.S. Bank National Association

By:   /s/ Monte E. Deckerd
   ---------------------------------
 Name: Monte E. Deckerd
 Title: Vice President

Bank of Scotland

By:   /s/ Joseph Fratus
   ---------------------------------
 Name: Joseph Fratus
 Title: Vice President

Wells Fargo Bank (Texas)

By:   /s/ John Lane
   ---------------------------------
 Name: John Lane
 Title: Vice President

The Bank of Nova Scotia

By:   /s/ M. D. Smith
   ---------------------------------
 Name: M. D. Smith
 Title: Agent

Credit Agricole Indosuez

By:   /s/ Brian Knezeak
   ---------------------------------
 Name: Brian Knezeak
 Title: FVP, Manager

By:   /s/ Michael D. Willis
   ---------------------------------
 Name: Michael D. Willis
 Title: VP, Credit Analysis

Toronto Dominion (Texas), Inc.

By:   /s/ Jim Bridwell
   ---------------------------------
 Name: Jim Bridwell
 Title: Vice President

Southwest Bank of Texas, N.A.

By:   /s/ A. Stephen Kennedy
   ---------------------------------
 Name: A. Stephen Kennedy
 Title: Senior Vice President

Union Bank of California, N.A.

By:   /s/ Randall Octerberg
   ---------------------------------
 Name: Randall Octerberg
 Title: Senior Vice President

Comerica Bank-Texas

By:   /s/ H. Vadgama
   ---------------------------------
 Name: Huma Vadgama
 Title: Corporate Bank Net Officer

Heller Financial, Inc.

By:   /s/ Andrew J. Pluta
   ---------------------------------
 Name: Andrew J. Pluta
 Title: Vice President

BNP Paribas

By:   /s/ Edward K. Chin
   ---------------------------------
 Name: Edward K. Chin
 Title: Director

By:    /s/  Keith Cox
   ---------------------------------
  Name: Keith Cox
  Title: Director

Heller Financial Canada, Ltd.

By:   /s/ Stephen B. Smith
   ---------------------------------
 Name: Stephen B. Smith
 Title: Senior Vice President

The Toronto-Dominion Bank

By:   /s/ Loretta Palandri
   ---------------------------------
 Name: Loretta Palandri
 Title: Vice President - Corporate Credit

Bank of America Canada

By:   /s/ Donald R. Chung
   ---------------------------------
 Name: Donald R. Chung
 Title: Vice President Corporate Investment Banking

BNP Paribas (Canada)

By:   /s/ Paul McCuaig
   ---------------------------------
 Name: Paul McCuaig
 Title: Vice President, Energy & Project Finance

By:   /s/ Michael Gosselin
   ---------------------------------
 Name: Michael Gosselin
 Title: Director, Energy & Project Finance

Morgan Stanley Prime Income Trust

By:   /s/ Sheila Finnerty
   ---------------------------------
 Name: Sheila Finnerty
 Title: Executive Director

Emerald Orchard, Limited

By:   /s/   Dana Schwalie
   ---------------------------------
    Name: Dana Schwalie
    Title: Attorney-in-Fact

Allstate Life Insurance Company

By:
   ---------------------------------
    Name:
    Title:

Variable Insurance Products Fund II:
Asset Manager Portfolio

By:   /s/   John H. Costello
   ---------------------------------
    Name:  John H. Costello
    Title: Assistant Treasurer

Variable Insurance Products Fund II:
Asset Manager Portfolio

By:   /s/   John H. Costello
   ---------------------------------
    Name:   John H. Costello
    Title:  Assistant Treasurer

Fidelity Advisor Series II:
Fidelity Advisor Floating Rate High Income Fund

By:   /s/   John H. Costello
   ---------------------------------
    Name:   John H. Costello
    Title:  Assistant Treasurer

* The above Fidelity entities own the Term Loan

By:   /s/   William A. Hayes
   ---------------------------------
    Name:   William A. Hayes
    Title:  Director

First Union Institutional Debt Management, Inc. ("IDM")

In its individual capacity and as Collateral Manager
on behalf of the investment funds under its management
as listed in Annex A hereto

Annex A
As of date of this Agreement, IDM serves as Collateral
Manager on behalf of the following funds:

 . ELC (Cayman) Ltd 1999-III
 . ELC (Cayman) Ltd 2000-I
 . APEX (IDM) CDO I, Ltd.
 . TRYON CLO Ltd. 2000-1

Monument Capital Ltd.

By:   /s/   Robert Bayor
   ---------------------------------
    Name:   Robert Bayor
    Title:  Vice President

New Alliance Global CDO Limited

By:   /s/   Robert Bayor
   ---------------------------------
    Name:   Robert Bayor
    Title:  Vice President

Carlyle High Yield Partners II, Ltd.

By:   /s/   Linda M. Pace
   ---------------------------------
    Name:   Linda M. Pace
    Title:  Vice President

Carlyle High Yield Partners III, Ltd.

By:   /s/   Linda M. Pace
   ---------------------------------
    Name:   Linda M. Pace
    Title:  Vice President

Winged Foot Funding Trust

By:   /s/   Ann E. Morris
   ---------------------------------
    Name:   Ann E. Morris
    Title:  Authorized Agent

K2H CNC LLC

By:   /s/   Susan Lee
   ---------------------------------
    Name:   Susan Lee
    Title:  Authorized Agent

First Dominion Funding

By:   /s/   Andrew H. Marshak
   ---------------------------------
    Name:   Andrew H. Marshak
    Title:  Authorized Signatory

Jupiter Funding Trust

By:   /s/   Ann E. Morris
   ---------------------------------
    Name:   Ann E. Morris
    Title:  Authorized Agent

Olympic Funding Trust, Series 1999-1

By:   /s/   Ann E. Morris
   ---------------------------------
    Name:   Ann E. Morris
    Title:  Authorized Agent

First Dominion Funding II

By:   /s/   Andrew H. Marshak
   ---------------------------------
    Name:   Andrew H. Marshak
    Title:  Authorized Signatory

Franklin CLO I, Limited

By:   /s/   Chauncey Lufkin
   ---------------------------------
    Name:   Chauncey Lufkin
    Title:  Vice President

K2H Pondview LLC

By:   /s/  Susan Lee
   ---------------------------------
    Name:  Susan Lee
    Title: Authorized Agent

Muirfield Trading LLC

By:   /s/  Ann E. Morris
   ---------------------------------
    Name:  Ann E. Morris
    Title: Asst. Vice President

Franklin CLO II, Limited

By:   /s/  Chauncey Lufkin
   ---------------------------------
    Name:  Chauncey Lufkin
    Title: Vice President

K2H ING-1 LLC

By:   /s/  Susan Lee
   ---------------------------------
    Name:  Susan Lee
    Title: Authorized Agent

K2H ING-2 LLC

By:   /s/  Susan Lee
   ---------------------------------
    Name:  Susan Lee
    Title: Authorized Agent

K2H ING-3 LLC

By:   /s/  Susan Lee
   ---------------------------------
    Name:  Susan Lee
    Title: Authorized Agent

K2H Concord LLC

By:   /s/  Susan Lee
   ---------------------------------
    Name:  Susan Lee
    Title: Authorized Agent

K2H Crescent-2 LLC

By:   /s/  Susan Lee
   ---------------------------------
    Name:  Susan Lee
    Title: Authorized Agent

K2H Crescent-3 LLC

By:   /s/  Susan Lee
   ---------------------------------
    Name:  Susan Lee
    Title: Authorized Agent

The Sumitomo Trust & Banking Co., Ltd.
 New York Branch

By:   /s/  Elizabeth A. Quirk
   ---------------------------------
    Name:  Elizabeth A. Quirk
    Title: Vice President

Van Kampen
Senior Income Trust

By: Van Kampen Investment Advisory Corp.

By:   /s/  Darvin D. Pierce
   ---------------------------------
    Name:  Darvin D. Pierce
    Title: Executive Director

K2H Waterside LLC

By:   /s/  Susan Lee
   ---------------------------------
    Name:  Susan Lee
    Title: Authorized Agent

K2H Highland-2 LLC

By:   /s/  Susan Lee
   ---------------------------------
    Name:  Susan Lee
    Title: Authorized Agent

K2H Pamco LLC

By:   /s/  Susan Lee
   ---------------------------------
    Name:  Susan Lee
    Title: Authorized Agent

Archimedes Funding III, Ltd

By: ING Capital Advisors, LLC,
    as Collateral Manager

By:   /s/  Greg M. Masuda
   ---------------------------------
    Name:  Greg M. Masuda
    Title: Vice President

Balanced High Yield Fund II, Ltd.

By: ING Capital Advisors, LLC,
    as Asset Manager

By:   /s/  Greg M. Masuda
   ---------------------------------
    Name:  Greg M. Masuda
    Title: Vice President

The ING Capital Senior Secured
 High Income Holdings Fund, Ltd

By: ING Capital Advisors, LLC,
    as Investment Manager

By:   /s/  Greg M. Masuda
   ---------------------------------
    Name:  Greg M. Masuda
    Title: Vice President

ORYX CLO, LTD.

By: ING Capital Advisors, LLC,
    as Collateral Manager

By:   /s/  Greg M. Masuda
   ---------------------------------
    Name:  Greg M. Masuda
    Title: Vice President

Swiss Life US Rainbow Limited

By: ING Capital Advisors, LLC,
    as Investment Manager

By:   /s/  Greg M. Masuda
   ---------------------------------
    Name:  Greg M. Masuda
    Title: Vice President

SEQUILS-ING I (HBDGM), Ltd.

By: ING Capital Advisors, LLC,
    as Collateral Manager

By:   /s/  Greg M. Masuda
   ---------------------------------
    Name:  Greg M. Masuda
    Title: Vice President

PLAINS MARKETING, L.P., US Borrower
ALL AMERICAN PIPELINE, L.P., Guarantor

By:  Plains Marketing GP Inc., General Partner

     By: /s/   Phil Kramer
        ---------------------------------
          Phil Kramer, Exec. Vice President

PLAINS MARKETING CANADA, L.P., Canadian Revolver Borrower

By:  PMC (Nova Scotia) Company, General Partner

By:  /s/   Phil Kramer
   -----------------------------------------
     Phil Kramer, Exec. Vice President

PMC (NOVA SCOTIA) COMPANY, Term Borrower

By:  /s/   Phil Kramer
   -----------------------------------------
     Phil Kramer, Exec. Vice President

PLAINS ALL AMERICAN PIPELINE, L.P., Guarantor

By:  Plains AAP, L.P., General Partner

By:  Plains All American GP LLC, its general partner

     By:  /s/   Phil Kramer
        -----------------------------------------
          Phil Kramer, Exec. Vice President

                             CONSENT AND AGREEMENT

     The undersigned hereby consents to the provisions of this Amendment and the
transactions contemplated herein and hereby (i) acknowledges and agrees that any
and all indebtedness, liabilities or obligations arising under or in connection
with the Notes are Obligations and are secured indebtedness under, and are
secured by, each and every Security Document to which it is a party, (ii) re-
pledges, re-grants and re-assigns a security interest in and lien on all of its
assets described as collateral in any Security Document, (iii) ratifies and
confirms its Guaranty dated May 4, 2001 made by it for the benefit of
Administrative Agent and Lenders, and (iv) expressly acknowledges and agrees
that the undersigned guarantees all indebtedness, liabilities and obligations
arising under or in connection with any and all Notes, pursuant to the terms of
such Guaranty, and agrees that its obligations and covenants thereunder are
unimpaired hereby and shall remain in full force and effect.

                              PLAINS MARKETING CANADA LLC

                              By:  Plains Marketing, L.P., its sole member

                                    By:  Plains Marketing GP Inc.,
                                         its general partner

                                    By:  /s/ Phil Kramer
                                       -----------------------------------------
                                         Phil Kramer, Exec. Vice President

                                                                   EXHIBIT 10.38

           FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
                [Letter of Credit and Hedged Inventory Facility]

     FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT [Letter of Credit
and Hedged Inventory Facility] (this "Amendment") dated as of the 31st day of
January, 2002, by and among PLAINS MARKETING, L.P. ("Borrower"), ALL AMERICAN
PIPELINE, L.P. and PLAINS ALL AMERICAN PIPELINE, L.P., as guarantors, FLEET
NATIONAL BANK, as Administrative Agent, and the Lenders party hereto.

                              W I T N E S S E T H:

     WHEREAS, Borrower, All American, Plains MLP, Administrative Agent and
Lenders entered into that certain Amended and Restated Credit Agreement [Letter
of Credit and Hedged Inventory Facility] dated as of May 4, 2001 (as amended,
supplemented, or restated to the date hereof, the "Original Agreement") for the
purposes and consideration therein expressed, pursuant to which Lenders became
obligated to make and made loans to Borrower as therein provided; and

     WHEREAS, Borrower, All American, Plains MLP, Administrative Agent and
Lenders desire to amend the Original Agreement for the purposes described
herein;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement, in consideration
of the loans that may hereafter be made by Lenders to Borrower, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:

                    ARTICLE I. -- Definitions and References

     (S) 1.1.  Terms Defined in the Original Agreement.  Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.

     (S) 1.2.  Other Defined Terms.  Unless the context otherwise requires, the
following terms when used in this Amendment shall have the meanings assigned to
them in this (S) 1.2.

          "Amendment" means this Fifth Amendment to Amended and Restated Credit
     Agreement [Letter of Credit and Hedged Inventory Facility].

          "Amendment Documents" means this Amendment.

          "Credit Agreement" means the Original Agreement as amended hereby.

                                       1

                           ARTICLE II. -- Amendments

     (S) 2.1.  Definitions.  The definition of "Consolidated Net Worth" set
forth in Section 1.1 of the Original Agreement is hereby amended in its entirety
to read as follows:

          "Consolidated Net Worth" means the remainder of all Consolidated
     assets, as determined in accordance with GAAP, of Plains MLP and its
     Subsidiaries minus the sum of (i) Plains MLP's Consolidated liabilities, as
     determined in accordance with GAAP, and (ii) the book value of any equity
     interests in any of Plains MLP's Subsidiaries which equity interests are
     owned by a Person other than Plains MLP or a Wholly Owned Subsidiary of
     Plains MLP.  The effect of any increase or decrease of net worth in any
     period as a result of items of income or loss not reflected in the
     determination of net income but reflected in the determination of
     comprehensive income (to the extent provided under GAAP as in effect on the
     date hereof) shall be excluded in determining Consolidated Net Worth.

     The definition of "Permitted Acquisitions" set forth in Section 1.1 of the
Original Agreement is hereby amended in its entirety to read as follows:

          "Permitted Acquisitions" means (A) the acquisition of the capital
     stock or other equity interest in a Person whose business, assets and
     operations consist of Petroleum Products and/or gas marketing, gathering,
     transportation, storage, terminaling and pipeline operation; provided, if a
     Restricted Person acquires less than all of the capital stock or other
     equity interest acquired, such business, assets and operations shall
     consist of transportation, storage, terminaling and/or pipeline operations
     and associated gathering assets, or (B) the acquisition of all or a portion
     of a line of business or the business, assets or operations of a Person
     (whether in a single transaction or a series of related transactions)
     consisting of Petroleum Products and/or gas marketing, gathering,
     transportation, storage, terminaling and pipeline operation; provided, if a
     Restricted Person acquires less than all of the ownership interest of the
     business, assets or operations acquired, such business, assets and
     operations shall consist of transportation, storage, terminaling and/or
     pipeline operations and associated gathering assets; provided, further, in
     each case under clauses (A) and (B) above (i) prior to and after giving
     effect to such acquisition no Default or Event of Default shall have
     occurred and be continuing; and (ii) all representations and warranties
     shall be true and correct as if restated immediately following the
     consummation of such acquisition, except to the extent that any such
     representation or warranty was made as of a specific date or updated,
     modified or supplemented as of a subsequent date with the consent of
     Majority Lenders.

     The definition of "Permitted Investments" set forth in Section 1.1 of the
Original Agreement is hereby amended in its entirety to read as follows:

     "Permitted Investments" means:

          (a) Cash Equivalents,

                                       2

          (b) Investments described in the Disclosure Schedule,

          (c) Investments by Plains MLP or any of its Subsidiaries in (1) any
     Wholly Owned Subsidiary of Plains MLP which is (or substantially
     contemporaneously with such Investment will become) Borrower or a
     Guarantor, or (2) any business, asset or operation which is (or
     contemporaneously with such Investment becomes) wholly-owned by Plains MLP
     or any Wholly Owned Subsidiary of Plains MLP which is (or substantially
     contemporaneously with such Investment will become) Borrower or a
     Guarantor,

          (d) Investments in publicly traded units of master limited
     partnerships whose dividends are "qualifying income" as such term is
     defined in Section 7704 of the Code (provided, the amount of any such
     Investments under this clause (d) minus any amounts received on such
     Investments (excluding dividends thereon) shall not at any time exceed the
     Dollar Equivalent of $5,000,000),

          (e) Permitted Acquisitions,

          (f) Investments by Plains MLP or any of its Subsidiaries in (i) any
     Person owning transportation, terminaling, storage and/or pipeline assets
     and associated gathering assets in which Plains MLP or any Wholly Owned
     Subsidiary of Plains MLP owns, directly or indirectly, less than all of the
     capital stock or other equity interest, or (ii) transportation,
     terminaling, storage and/or pipeline assets and associated gathering assets
     in which Plains MLP or any Wholly Owned Subsidiary of Plains MLP owns,
     directly or indirectly, less than all of the ownership interest therein,
     such Investments under clauses (i) and (ii) above in an aggregate amount
     not to exceed at any one time outstanding (A) the Dollar Equivalent of
     $35,000,000 minus (B) any outstanding Indebtedness under Section
     7.1(f)(ii),

          (g) subject to Section 7.18(d), Investments directly or indirectly by
     Restricted Persons in Unrestricted Subsidiaries (i) consisting of Qualified
     Equity Proceeds, and (ii) Investments other than Qualified Equity Proceeds
     in an aggregate amount not to exceed, at any one time outstanding, the
     Dollar Equivalent of $100,000,000; for calculation purposes hereof: (1) any
     return on investment from any Unrestricted Subsidiary shall reduce the
     aggregate outstanding Investments subject to the limitation set forth in
     clause (ii) by an amount equal to the Non-Equity Investment to Total
     Investment Ratio times such investment return (e.g., if an Unrestricted
     Subsidiary is capitalized with $100,000,000, $40,000,000 of which is
     Qualified Equity Proceeds and $60,000,000 of which is subject to the
     limitation set forth in clause (ii), and $10,000,000 is returned by such
     Unrestricted Subsidiary, the $60,000,000 subject to clause (ii) would be
     reduced by 6/10ths or $6,000,000 of such return); (2) in the event any
     Unrestricted Subsidiary is designated a Restricted Person pursuant to
     Section 7.18, executes and delivers Security Documents pursuant to Section
     6.14 and becomes a Guarantor pursuant to Section 6.17, the aggregate
     outstanding Investments subject to the limitation set forth in clause (ii)
     shall be reduced by the lesser of (i) Investments in such redesignated
     Subsidiary not constituting Qualified Equity Proceeds and (ii) the Non-
     Equity Investment to Total Investment Ratio times the fair market value of
     such redesignated Subsidiary as of the

                                       3

     date of such designation as a Restricted Person, as reasonably determined
     by Borrower; as used herein, "Qualified Equity Proceeds" means proceeds of
     private or public offerings of equity securities by Restricted Persons
     after January 31, 2002 that within three months after the receipt thereof
     are (1) contributed as capital to one or more specified Unrestricted
     Subsidiaries, or (2) expressly designated as funds to be contributed as
     capital to one or more specified Unrestricted Subsidiaries, and are
     contributed pursuant to such designation within six months after such
     designation, and "Non-Equity Investment to Total Investment Ratio" means
     with respect to any Unrestricted Subsidiary, the ratio of (I) Investments
     in such Unrestricted Subsidiary not constituting Qualified Equity Proceeds
     to (II) all Investments in such Unrestricted Subsidiary, and

          (h) other Investments, excluding Investments in Unrestricted
     Subsidiaries, such other Investments not to exceed in the aggregate in
     respect of all Restricted Persons the Dollar Equivalent of $10,000,000.

     The definition of "Restricted Person" set forth in Section 1.1 of the
Original Agreement is hereby amended in its entirety to read as follows:

          "Restricted Person" means any of Plains MLP and each Subsidiary of
     Plains MLP, including but not limited to Borrower, All American, and each
     Subsidiary of Borrower and All American, but excluding, for the avoidance
     of doubt, Unrestricted Subsidiaries.

     The following definition of "Restriction Exception" is hereby added to
Section 1.1 of the Original Agreement in appropriate alphabetical order:

          "Restriction Exception" means (i) any instrument governing
     Indebtedness or equity interests, or any other agreement relating to any
     property or assets, of a Person whose capital stock or other equity
     interests are partially acquired by a Restricted Person pursuant to a
     Permitted Acquisition, as such instrument or agreement is in effect at the
     time of such acquisition (except with respect to Indebtedness incurred in
     connection with, or in contemplation of, such acquisition), which is not
     applicable to any Restricted Person, or the property or assets of any
     Restricted Person, other than the partially-acquired Person, or the
     property or assets of such partially-acquired Person or such partially-
     acquired Person's Subsidiaries; provided that in the case of Indebtedness,
     such Indebtedness is permitted hereunder, or (ii) provisions with respect
     to the disposition or distribution of assets in joint venture agreements or
     other similar agreements entered into in the ordinary course of business.

     The definition of "Subsidiary" set forth in Section 1.1 of the Original
Agreement is hereby amended in its entirety to read as follows:

          "Subsidiary" means, with respect to any Person, any corporation,
     association, partnership, limited liability company, joint venture, or
     other business or corporate entity, enterprise or organization which is
     directly or indirectly (through one or more intermediaries) controlled or
     owned more than fifty percent by such Person; provided,

                                       4

     however, that no Unrestricted Subsidiary shall be deemed a "Subsidiary" of
     Plains MLP or any Subsidiary of Plains MLP for purposes of any Loan
     Document except as provided in Section 7.18.

     The following definition of "Unrestricted Subsidiary" is hereby added to
Section 1.1 of the Original Agreement in appropriate alphabetical order:

          "Unrestricted Subsidiary" shall have the meaning given it in Section
7.18.

     (S) 2.2.  Agreement to Deliver Security Documents.   Section 6.14 of the
Original Agreement is hereby amended in its entirety to read as follows:

          Section 6.14.  Agreement to Deliver Security Documents.  Restricted
     Persons will deliver, and will cause each Person, other than Unrestricted
     Subsidiaries, in which it owns any capital stock or other equity interest
     (other than interests described in clause (d) of the definition of
     "Permitted Investments") to deliver, to further secure the Obligations
     whenever requested by Administrative Agent in its sole and absolute
     discretion, deeds of trust, mortgages, chattel mortgages, security
     agreements, financing statements and other Security Documents in form and
     substance satisfactory to Administrative Agent for the purpose of granting,
     confirming, and perfecting first and prior liens or security interests in
     any real or personal property now owned or hereafter acquired by any
     Restricted Person; provided, with respect to any such property for which
     the consent or approval of third parties is required for the delivery of
     such Security Documents, Restricted Persons shall not be required to
     deliver, or to cause such Person to deliver, such Security Documents with
     respect to such property, but shall use their commercially reasonable best
     efforts, as determined by Administrative Agent, to deliver, or to cause
     such Person to deliver, such Security Documents with respect to such
     property.  Without limiting the foregoing, each  Restricted Person shall be
     required to grant a Lien in favor of Administrative Agent for the benefit
     of Lenders encumbering such Restricted Person's ownership interest in any
     Unrestricted Subsidiary; provided, no Security Document granting any such
     Lien on such ownership interest in such Unrestricted Subsidiary shall
     restrict or limit the ownership or operation of such Unrestricted
     Subsidiary except as otherwise restricted or limited herein.

     (S) 2.3.  Guaranties of Subsidiaries.  The first sentence of Section 6.17
of the Original Agreement is hereby amended in its entirety to read as follows:

     Each Subsidiary of Plains MLP, and any other Person, other than
     Unrestricted Subsidiaries, in which any Subsidiary of Plains MLP owns any
     capital stock or other equity interest (other than interests described in
     clause (d) of the definition of "Permitted Investments"), now existing or
     created, acquired or coming into existence after the date hereof shall,
     promptly upon request by Administrative Agent, execute and deliver to
     Administrative Agent an absolute and unconditional guaranty of the timely
     repayment of the Obligations and the due and punctual performance of the
     obligations of Borrower hereunder (in each case for which such Subsidiary
     is not a borrower, account party or similar primary and direct obligor),
     which guaranty shall be satisfactory to Administrative Agent in form and
     substance; provided, with respect to any such Subsidiary or other Person
     that is not a Wholly Owned Subsidiary of Plains MLP, for which consent or

                                       5

     approval of third parties is required for the delivery of such guaranty,
     such Subsidiary or such other Person shall not be required to deliver such
     guaranty, but shall use its commercially reasonable best efforts, as
     determined by Administrative Agent, to deliver such guaranty.
     Notwithstanding any provision contained herein, in no event shall any
     Unrestricted Subsidiary be required to execute and deliver any guaranty
     for, or in respect of, the Obligations, or any part thereof.

     (S) 2.4.  Limitation on Indebtedness.  Section 7.1(f) of the Original
Agreement is hereby amended in its entirety to read as follows:

          (f) guaranties by Plains MLP, Borrower or any Guarantor of trade
     payables incurred and paid in the ordinary course of business on ordinary
     trade terms by (A) any Restricted Person, or (B) any other Person in which
     Plains MLP or any Wholly Owned Subsidiary of Plains MLP owns less than all
     of such Person's capital stock or other equity interest; provided, that the
     outstanding trade payables amount guaranteed at any time under this clause
     (B) shall not exceed (1) $50,000,000 minus (2) any outstanding Investments
     under clause (f) of the definition of Permitted Investments.

     (S) 2.5.  Limitation on Liens.  The reference to "Section 7.1(g)" set forth
in Section 7.2(i) of the Original Agreement is hereby amended to refer instead
to "Section 7.1(h)".

     (S) 2.6.  Limitations on Mergers; Issuances of Securities.  The second,
third and fourth sentences of Section 7.4 are hereby amended in their entirety
to read as follows:

     Any Person, other than Borrower, that is a Subsidiary of a Restricted
     Person may, however, be merged into or consolidated with (i) another
     Subsidiary of such Restricted Person, so long as (A) neither is a
     Guarantor, or (B) a Guarantor is the surviving business entity, (ii) such
     Restricted Person, so long as such Restricted Person is the surviving
     business entity, or (iii) any other Person pursuant or incidental to, or in
     connection with, any contemporaneous or substantially contemporaneous
     Permitted Acquisition, provided that such merging or consolidating
     Subsidiary (1) is not Borrower, Guarantor or a Wholly Owned Subsidiary of
     Plains MLP, other than a Wholly Owned Subsidiary that was formed, acquired
     or created solely for purposes of such acquisition or otherwise conducted
     no operations and owned no assets, other than of an inconsequential amount
     and (2) does not own any Collateral.  Plains MLP will not issue any
     securities other than (i) limited partnership interests and any options or
     warrants giving the holders thereof only the right to acquire such
     interests, (ii) general partnership interests to General Partner, and (iii)
     debt securities permitted by Section 7.1(g).  No Subsidiary of Plains MLP
     will issue any additional shares of its capital stock, partnership
     interests or other securities or any options, warrants or other rights to
     acquire such additional shares, partnership interests or other securities,
     except a Subsidiary of a Restricted Person may issue additional shares,
     partnership interests or other securities (i) to Persons so long as such
     Restricted Person's and Plains MLP's aggregate ownership in such issuing
     Subsidiary is not diminished after giving effect thereto, or (ii) to any
     other Person pursuant or incidental to, or in connection with, any
     contemporaneous or substantially contemporaneous Permitted Acquisition,
     provided that such issuing Subsidiary (1) is not

                                       6

     Borrower, Guarantor or a Wholly Owned Subsidiary of Plains MLP, other than
     a Wholly Owned Subsidiary that was formed, acquired or created solely for
     purposes of such acquisition or otherwise conducted no operations and owned
     no assets, other than of an inconsequential amount and (2) does not own any
     Collateral.

     The fifth sentence of Section 7.4 is hereby deleted in its entirety.

     (S) 2.7.  Limitation on Sales of Property.  Section 7.5 of the Original
Agreement is hereby amended by deleting "and" at the end of clause (c), adding
an amended clause (d) as follows:

          (d) in exchange for other property; provided that (i) such exchange is
     for fair consideration, (ii) the property to be acquired in such exchange
     constitutes a Permitted Acquisition, (iii) the fair market value of such
     property being exchanged is not in the aggregate in excess of the Dollar
     Equivalent of $25,000,000 in any Fiscal Year, as reasonably determined by
     Borrower (any such determination in excess of $10,000,000 being determined
     in good faith by certified resolution of the board of directors of the
     corporate general partner of Borrower and subject to, at Administrative
     Agent's reasonable request, confirmation by appraisal), and (iv) such
     exchange will not materially impair or diminish the value of the Collateral
     or any Restricted Person's financial condition, business or operations; and

and redesignating existing clause "(d)" as clause "(e)".

     The first sentence following such new clause (d) and redesignated clause
(e) of Section 7.5 is hereby amended in its entirety to read as follows:

     No Restricted Person will sell, transfer or otherwise dispose of capital
     stock of or interest in any of its Subsidiaries except (i) to Plains MLP or
     a Wholly Owned Subsidiary of Plains MLP or (ii) to any other Person
     pursuant or incidental to, or in connection with, any contemporaneous or
     substantially contemporaneous Permitted Acquisition, provided that such
     Subsidiary whose capital stock or interests are being transferred (1) is
     not Borrower, Guarantor or a Wholly Owned Subsidiary of Plains MLP, other
     than a Wholly Owned Subsidiary that was formed, acquired or created solely
     for purposes of such acquisition or otherwise conducted no operations and
     owned no assets, other than of an inconsequential amount and (2) does not
     own any Collateral; provided, in the event any limited partner interests
     issued by Plains Marketing Canada, L.P. to CanPet Energy Group (USA), Inc.
     or CanPet Energy Group Inc. pursuant to Section 7.4 are exchanged for units
     issued by Plains MLP, Lenders hereby consent to the contribution by Plains
     MLP to Borrower of any and all such partnership interests.

     The reference to "clause (a) or (c)" in the last sentence of Section 7.5 is
hereby amended to refer instead to "clauses (a), (c) or (d)".

     (S) 2.8.  Limitation on Dividends and Redemptions.  The first sentence of
Section 7.6 of the Original Agreement is hereby amended in its entirety to read
as follows:

                                       7

          Section 7.6  Limitation on Dividends and Redemptions.  No Restricted
     Person will declare or pay any dividends on, or make any other distribution
     in respect of, any class of its capital stock or any partnership, limited
     liability company or other interest in it, nor will any Restricted Person
     directly or indirectly purchase, redeem, acquire or retire (or make any
     capital contribution to purchase, redeem, acquire or retire) any shares of
     the capital stock of or partnership or limited liability company interests
     in any Restricted Person (whether such interests are now or hereafter
     issued, outstanding or created), or cause or permit any reduction or
     retirement of the capital stock of any Restricted Person, while any Loan or
     any Commitment is outstanding.

     (S) 2.9.  Prohibited Contracts.  The reference to "as described in the
Disclosure Schedule" set forth in the first sentence of Section 7.10 of the
Original Agreement is hereby amended to refer instead to "as described in the
Disclosure Schedule or pursuant to a Restriction Exception, the substance of
which, in detail satisfactory to Administrative Agent, is promptly reported to
Administrative Agent".

     (S) 2.10.  Debt Coverage Ratio.  Section 7.12 of the Original Agreement is
hereby amended in its entirety to read as follows:

          Section 7.12  Debt Coverage Ratio.  (a) At the end of any Fiscal
     Quarter, (b) on any date on which General Partner declares a distribution
     permitted under Section 7.6 and (c) on the date of any Permitted
     Acquisition, both immediately prior to and after giving effect to the
     consummation thereof, the Debt Coverage Ratio will not be greater than 4.00
     to 1.0.  As used herein, "Debt Coverage Ratio" means the ratio of (a)
     Consolidated Funded Indebtedness to (b) Consolidated EBITDA for the four
     Fiscal Quarter period (or other period specified below) most recently ended
     prior to the date of determination for which financial statements
     contemplated by Section 6.2(a) or (b) are available to Borrower; provided,
     for purposes of this Section 7.12, if, since the beginning of the four
     Fiscal Quarter period ending on the date for which Consolidated EBITDA is
     determined, any Restricted Person shall have made any asset disposition or
     acquisition, shall have consolidated or merged with or into any Person
     (other than another Restricted Person), or shall have made any disposition
     or acquisition of a Restricted Person or disposition or acquisition of any
     partial ownership interest in any other Person, Consolidated EBITDA shall
     be calculated giving pro forma effect thereto as if the disposition,
     acquisition, consolidation or merger had occurred on the first day of such
     period; provided, with respect to any Person not constituting a Subsidiary
     of Plains MLP, such pro forma calculation of Consolidated EBITDA, with
     respect to any such Person, shall be limited to not more than 75% of (i)
     such Restricted Person's ownership interest in such Person times (ii) the
     difference of such Person's (A) Consolidated EBITDA minus (B) Interest
     Expense and capital expenditures.  Such pro forma effect shall include
     adjustments with respect to management fees previously distributed with
     respect to the assets subject to the CanPet Acquisition and the acquisition
     of the remaining 50% of the Manito Pipeline in mid calendar year 2000, and
     shall otherwise be determined (i) in good faith by the chief financial
     officer of Borrower, and (ii) without giving effect to any anticipated or
     proposed change in operations, revenues, expenses or other items included
     in the computation of Consolidated EBITDA, except with the consent of
     Majority Lenders.

                                       8

     (S) 2.11.  Unrestricted Subsidiaries.  Article VII of the Original
Agreement is hereby amended by adding a new Section 7.18 at the end thereof, to
read as follows:

          Section 7.18  Unrestricted Subsidiaries.  Plains MLP or any Wholly
     Owned Subsidiary of Plains MLP may designate one or more direct
     Subsidiaries that are not Borrower or Guarantors (each such Subsidiary, and
     each of its Subsidiaries, each an "Unrestricted Subsidiary"), which
     Unrestricted Subsidiaries shall be subject to the following:

     (a)  No Unrestricted Subsidiary shall be deemed to be a "Restricted Person"
          or a "Subsidiary" of Plains MLP for purposes of this Agreement or any
          other Loan Document, and no Unrestricted Subsidiary shall be subject
          to or included within the scope of any provision herein or in any
          other Loan Document, including without limitation any representation,
          warranty, covenant or Event of Default  herein or in any other Loan
          Document, except as set forth in this Section 7.18.

     (b)  No Restricted Person shall guarantee or otherwise become liable in
          respect of any Liability or other obligation of, grant any Lien on any
          of its property to secure any Liability or other obligation of, make
          any Investment in (except as described in clause (g) of the definition
          of  Permitted Investments), or provide any other form of credit
          support to, any Unrestricted Subsidiary, and no Restricted Person
          shall enter into any contract or agreement with any Unrestricted
          Subsidiary, except in the course of ordinary business on terms no less
          favorable to such Restricted Person, as applicable, than could be
          obtained in a comparable arm's length transaction with a non-Affiliate
          of such Restricted Person.

     (c)  Borrower shall at all times maintain, as between Restricted Persons
          and Unrestricted Subsidiaries, the separate existence of each
          Unrestricted Subsidiary.

     (d)  No Restricted Person shall make any Investment in any Unrestricted
          Subsidiary pursuant to clause(g) of the definition of "Permitted
          Investment" except in connection with the capitalization of an
          Unrestricted Subsidiary to consummate a proposed acquisition,
          disclosed to Administrative Agent in writing, of (1) the acquisition
          of the capital stock or other equity interest in a Person whose
          business, assets and operations consist of Petroleum Products and/or
          gas marketing, gathering, transportation, storage, terminaling and
          pipeline operation; provided, if a Restricted Person acquires less
          than all of the capital stock or other equity interest acquired, such
          business, assets and operations shall consist of transportation,
          storage, terminaling and/or pipeline operations and associated
          gathering assets, or (2) the acquisition of all or a portion of a line
          of business or the business, assets or operations of a Person (whether
          in a single transaction or a series of related transactions)
          consisting of Petroleum Products and/or gas marketing, gathering,
          transportation, storage, terminaling and pipeline operation; provided,
          if a Restricted Person acquires less than all of the ownership
          interest of the business, assets or operations acquired, such
          business, assets and operations

                                       9

          shall consist of transportation, storage, terminaling and/or pipeline
          operations and associated gathering assets; provided, further, the
          aggregate amount of any such Permitted Investments in such
          Unrestricted Subsidiary in excess of the purchase price and associated
          acquisition costs relating to such acquisition shall, promptly
          following the consummation of such acquisition, be distributed back to
          such investing Restricted Person.  In the event such Unrestricted
          Subsidiary shall fail to timely consummate such specified acquisition
          or such specified acquisition shall otherwise be abandoned, such
          Unrestricted Subsidiary shall be deemed to be a "Subsidiary" of Plains
          MLP for purposes of this Agreement and shall be subject to the terms
          and conditions hereof.

     (e)  Restricted Persons shall notify each Lender Party, not later than five
          (5) Business Days after any executive officer of Restricted Persons
          has knowledge of, under any Environmental Law, any claim of the Dollar
          Equivalent of $1,000,000 or more, any notice of potential liability
          which might be reasonably likely to exceed such amount, or any other
          material adverse claim thereunder asserted against any Unrestricted
          Subsidiary or with respect to any Unrestricted Subsidiary's
          properties, stating that such notice is being given pursuant to this
          Section 7.18.

     The board of directors of the corporate general partner of the Borrower may
     designate any Unrestricted Subsidiary to become a Restricted Person if a
     Default or Event of Default is not continuing, such designation would not
     result in a Default or an Event of Default, and immediately thereafter such
     Subsidiary has no outstanding Indebtedness.  Immediately thereafter,
     Borrower shall promptly notify the Administrative Agent of such designation
     and provide to it an officer's certificate that such designation was made
     in compliance with this Section 7.18.

                  ARTICLE III. -- Conditions of Effectiveness

     (S) 3.1.  Effective Date. This Amendment shall become effective as of the
date first written above, when and only when:

          (i) Administrative Agent shall have received, at Administrative
     Agent's office (A) a counterpart of this Amendment executed and delivered
     by Borrower, Plains MLP, All American and Majority Lenders, and (B) a
     contemporaneous amendment to the Revolver Agreement, amending various
     provisions therein consistent with the amendments set forth herein, in form
     and substance acceptable to Administrative Agent, executed and delivered by
     such Persons so as to make such amendment effective,

          (ii) in consideration hereof Borrower shall have paid to
     Administrative Agent for the account of each Lender executing and
     delivering this Amendment an amendment fee in immediately available funds
     equal to one-twentieth of one percent (0.05%) of each such Lender's
     Percentage Share of the Maximum Facility Amount; and

          (iii) Administrative Agent shall have additionally received all of the
     following documents, each document (unless otherwise indicated) being dated
     the date of receipt

                                       10

     thereof by Administrative Agent, duly authorized, executed and delivered,
     and in form and substance satisfactory to Administrative Agent:

               (A) Officer's Certificate.  A certificate of a duly authorized
          officer of General Partner, to the effect that all of the
          representations and warranties set forth in Article IV hereof are true
          and correct at and as of the date thereof, and

               (B) Supporting Documents.  Such supporting documents as
          Administrative Agent may reasonably request.

                 ARTICLE IV. -- Representations and Warranties

     (S) 4.1.  Representations and Warranties of Plains MLP and Borrower.  In
order to induce Administrative Agent and Lenders to enter into this Amendment,
Plains MLP and Borrower represent and warrant to Administrative Agent and each
Lender that:

          (a) The representations and warranties contained in Article V of the
     Original Agreement are true and correct at and as of the time of the
     effectiveness hereof, except to the extent that such representation and
     warranty was made as of a specific date.

          (b) Each Restricted Person is duly authorized to execute and deliver
     this Amendment and each other Amendment Document, to the extent a party
     thereto, and each Borrower is and will continue to be duly authorized to
     borrow and perform its obligations under the Credit Agreement.  Each
     Restricted Person has duly taken all action necessary to authorize the
     execution and delivery of this Amendment and each other Amendment Document,
     to the extent a party thereto, and to authorize the performance of their
     respective obligations hereunder.

          (c) The execution and delivery by each Restricted Person of this
     Amendment and each other Amendment Document, to the extent a party thereto,
     the performance by each Restricted Person of its respective obligations
     hereunder and thereunder, and the consummation of the transactions
     contemplated hereby and thereby, do not and will not conflict with any
     provision of any Law or of the organizational documents of any Restricted
     Person, or of any material agreement, judgment, license, order or permit
     applicable to or binding upon any Restricted Person, or result in the
     creation of any Lien upon any assets or properties of any Restricted
     Person, except in favor of Administrative Agent for the benefit of Lenders
     and other Permitted Liens.  Except for those which have been duly obtained,
     no consent, approval, authorization or order of any Tribunal or third party
     is required in connection with the execution and delivery by any Restricted
     Person of this Amendment or any other Amendment Document, or to consummate
     the transactions contemplated hereby and thereby.

          (d)  When duly executed and delivered, each of this Amendment and each
     other Amendment Document, and each of the Loan Documents, as amended hereby
     and thereby, will be a legal and binding instrument and agreement of each
     Restricted Person to the extent a party thereto, enforceable in accordance
     with its terms, (subject, as to

                                       11

     enforcement of remedies, to applicable bankruptcy, insolvency and similar
     laws applicable to creditors' rights generally).

                          ARTICLE V. -- Miscellaneous

     (S) 5.1.  Ratification of Agreements.  The Original Agreement, as hereby
amended, is hereby ratified and confirmed in all respects.  The Loan Documents
(including but not limited to each Guaranty), as they may be amended or affected
by this Amendment or any other Amendment Document, are hereby ratified and
confirmed in all respects by each Restricted Person to the extent a party
thereto.  Any reference to the Credit Agreement in any Loan Document shall be
deemed to refer to this Amendment also.   The execution, delivery and
effectiveness of this Amendment and the other Amendment Documents shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of Administrative Agent or any Lender under the Credit Agreement or any
other Loan Document nor constitute a waiver of any provision of the Credit
Agreement or any other Loan Document.

     (S) 5.2.  Ratification of Security Documents.  Restricted Persons,
Administrative Agent, and Lenders each acknowledge and agree that any and all
indebtedness, liabilities or obligations arising under or in connection with the
LC Obligations or the Notes are Obligations and are secured indebtedness under,
are guarantied by, and are secured by, each and every Security Document to which
any Restricted Person is a party.  Each Restricted Person hereby re-pledges, re-
grants and re-assigns a security interest in and lien on every asset of the such
Restricted Person described as Collateral in any Security Document and re-
guarantees all Obligations under the Credit Agreement.

     (S) 5.3.  Ratification of Intercreditor Agreement.  Each Lender hereby
acknowledges and confirms that all Obligations under the Credit Agreement, as
amended hereby, and the "Obligations" under the Marketing Credit Agreement, as
amended on the date hereof, shall be and shall remain subject to the terms and
entitled to the benefits of the Intercreditor Agreement.

     (S) 5.4.  Survival of Agreements.  All representations, warranties,
covenants and agreements of the Restricted Persons herein shall survive the
execution and delivery of this Amendment and the performance hereof, including
without limitation the making or granting of each Loan, and shall further
survive until all of the Obligations under the Credit Agreement are paid in
full.  All statements and agreements contained in any certificate or instrument
delivered by any Restricted Person hereunder or under the Credit Agreement to
Administrative Agent or any Lender shall be deemed to constitute representations
and warranties by, or agreements and covenants of, such Restricted Person under
this Amendment and under the Credit Agreement.

     (S) 5.5.  Loan Documents.  This Amendment and each other Amendment Document
is a Loan Document, and all provisions in the Credit Agreement pertaining to
Loan Documents apply hereto.

     (S) 5.6.  GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW

                                       12

YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA IN ALL RESPECTS,
INCLUDING CONSTRUCTION, VALIDITY AND PERFORMANCE.

     (S) 5.7.  Counterparts.  This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Amendment.

                                       13

     IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.

BORROWER:                     PLAINS MARKETING, L.P.

                              By:  Plains Marketing GP Inc., General Partner

                              By:   /s/ Phil Kramer
                                    -------------------------------------
                                    Phil Kramer, Exec. Vice President

GUARANTORS:                   ALL AMERICAN PIPELINE, L.P.

                              By:  Plains Marketing GP Inc., General Partner

                              By:   /s/ Phil Kramer
                                    -------------------------------------
                                    Phil Kramer, Exec. Vice President

                              PLAINS ALL AMERICAN PIPELINE, L.P.

                              By:  Plains AAP, L.P., General Partner

                              By:  Plains All American LLC, General Partner

                              By:   /s/ Phil Kramer
                                    -------------------------------------
                                    Phil Kramer, Exec. Vice President

                                       14

LENDER PARTIES:               FLEET NATIONAL BANK,
                              Administrative Agent, LC Issuer and Lender

                              By:   /s/  Terrence Ronan
                                    -------------------------------------
                                    Terrence Ronan, Managing Director

                              FIRST UNION NATIONAL BANK, Lender

                              By:   /s/  Robert R. Wetteroff
                                    -------------------------------------
                                    Robert R. Wetteroff, Sr. Vice Pres.

                              BANK OF AMERICA, N.A., Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              BANK ONE, NA, Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              FORTIS CAPITAL CORP., Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              U.S. BANK NATIONAL ASSOCIATION, Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              BANK OF SCOTLAND, Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                                       15

                              WELLS FARGO BANK (TEXAS),
                              NATIONAL ASSOCIATION, Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              THE BANK OF NOVA SCOTIA, Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              CREDIT AGRICOLE INDOSUEZ, Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              TORONTO DOMINION (TEXAS), INC., Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              SOUTHWEST BANK OF TEXAS, N.A., Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              UNION BANK OF CALIFORNIA, N.A., Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                                       16

                              COMERICA BANK-TEXAS, Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              BNP PARIBAS, Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              GUARANTY BANK, Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                              SIEMENS FINANCIAL SERVICES INC., Lender

                              By:
                                    -------------------------------------
                                    Name:
                                    Title:

                                       17

                             CONSENT AND AGREEMENT

     Each of the undersigned hereby consents to the provisions of this Amendment
and the transactions contemplated herein and hereby (i) acknowledges and agrees
that any and all indebtedness, liabilities or obligations arising under or in
connection with the Notes are Obligations and are secured indebtedness under,
and are secured by, each and every Security Document to which it is a party,
(ii) re-pledges, re-grants and re-assigns a security interest in and lien on all
of its assets described as collateral in any Security Document, (iii) ratifies
and confirms its Guaranty dated May 4, 2001 made by it for the benefit of
Administrative Agent and Lenders, and (iv) expressly acknowledges and agrees
that the undersigned guarantees all indebtedness, liabilities and obligations
arising under or in connection with any and all Notes pursuant to the terms of
such Guaranty, and agrees that its obligations and covenants thereunder are
unimpaired hereby and shall remain in full force and effect.

                              PLAINS MARKETING CANADA LLC

                              By:  Plains Marketing, L.P., its sole member

                                    By:  Plains Marketing GP Inc.,
                                         its general partner

                                    By:   /s/ Phil Kramer
                                       -------------------------------------
                                       Phil Kramer, Exec. Vice President

                              PMC (NOVA SCOTIA) COMPANY

                              By:   /s/ Phil Kramer
                                   -------------------------------------
                                   Phil Kramer, Exec. Vice President

                              PLAINS MARKETING CANADA, L.P.

                              By:  PMC (Nova Scotia) Company,
                                    General Partner

                              By:   /s/ Phil Kramer
                                   -------------------------------------
                                   Phil Kramer, Exec. Vice President

                                       18

                                                                   EXHIBIT 10.39

           FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
                          [Revolving Credit Facility]

          THIS FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
[Revolving Credit Facility] (this "Amendment") dated as of the 31st day of
January, 2002, by and among PLAINS MARKETING, L.P. ("US Borrower"), ALL AMERICAN
PIPELINE, L.P. and PLAINS ALL AMERICAN PIPELINE, L.P., as guarantors, FLEET
NATIONAL BANK, as Administrative Agent, THE TORONTO-DOMINION BANK, as Canadian
Agent, PMC (NOVA SCOTIA) COMPANY ("Term Borrower"), PLAINS MARKETING CANADA,
L.P. ("Canadian Revolver Borrower"), and the Lenders party hereto.

                              W I T N E S S E T H:

          WHEREAS, US Borrower, All American, Plains MLP, Administrative Agent,
Canadian Agent, Term Borrower, Canadian Revolver Borrower and Lenders entered
into that certain Amended and Restated Credit Agreement [Revolving Credit
Facility] dated as of May 4, 2001 (as amended, supplemented, or restated to the
date hereof, the "Original Agreement") for the purposes and consideration
therein expressed, pursuant to which Lenders became obligated to make and made
loans to US Borrower, Term Borrower and Canadian Revolver Borrower as therein
provided; and

          WHEREAS, US Borrower, All American, Plains MLP, Administrative Agent,
Canadian Agent, Term Borrower, Canadian Revolver Borrower and Lenders desire to
amend the Original Agreement for the purposes described herein;

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and in the Original Agreement, in
consideration of the loans that may hereafter be made by Lenders to US Borrower,
Term Borrower and Canadian Revolver Borrower, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:

                    ARTICLE I. -- Definitions and References
                                  --------------------------

          (S) 1.1.  Terms Defined in the Original Agreement.  Unless the context
                    ---------------------------------------
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.

          (S) 1.2.  Other Defined Terms.  Unless the context otherwise requires,
                    -------------------
the following terms when used in this Amendment shall have the meanings assigned
to them in this (S) 1.2.

                    "Amendment" means this Fifth Amendment to Amended and
                     ---------
          Restated Credit Agreement [Revolving Credit Facility].

                    "Amendment Documents" means this Amendment.
                     -------------------

                    "Credit Agreement" means the Original Agreement as amended
                     ----------------
          hereby.

                                       1

                           ARTICLE II. -- Amendments
                                          ----------

          (S) 2.1.  Definitions.  The definition of "Consolidated Net Worth" set
                    -----------
forth in Section 1.1 of the Original Agreement is hereby amended in its entirety
to read as follows:

                    "Consolidated Net Worth" means the remainder of all
                     ----------------------
          Consolidated assets, as determined in accordance with GAAP, of Plains
          MLP and its Subsidiaries minus the sum of (i) Plains MLP's
          Consolidated liabilities, as determined in accordance with GAAP, and
          (ii) the book value of any equity interests in any of Plains MLP's
          Subsidiaries which equity interests are owned by a Person other than
          Plains MLP or a Wholly Owned Subsidiary of Plains MLP. The effect of
          any increase or decrease of net worth in any period as a result of
          items of income or loss not reflected in the determination of net
          income but reflected in the determination of comprehensive income (to
          the extent provided under GAAP as in effect on the date hereof) shall
          be excluded in determining Consolidated Net Worth.

          The definition of "Permitted Acquisitions" set forth in Section 1.1 of
the Original Agreement is hereby amended in its entirety to read as follows:

                    "Permitted Acquisitions" means (A) the acquisition of the
                     ----------------------
          capital stock or other equity interest in a Person whose business,
          assets and operations consist of Petroleum Products and/or gas
          marketing, gathering, transportation, storage, terminaling and
          pipeline operation; provided, if a Restricted Person acquires less
                              --------
          than all of the capital stock or other equity interest acquired, such
          business, assets and operations shall consist of transportation,
          storage, terminaling and/or pipeline operations and associated
          gathering assets, or (B) the acquisition of all or a portion of a line
          of business or the business, assets or operations of a Person (whether
          in a single transaction or a series of related transactions)
          consisting of Petroleum Products and/or gas marketing, gathering,
          transportation, storage, terminaling and pipeline operation; provided,
                                                                       --------
          if a Restricted Person acquires less than all of the ownership
          interest of the business, assets or operations acquired, such
          business, assets and operations shall consist of transportation,
          storage, terminaling and/or pipeline operations and associated
          gathering assets; provided, further, in each case under clauses (A)
                            --------  -------
          and (B) above (i) prior to and after giving effect to such acquisition
          no Default or Event of Default shall have occurred and be continuing;
          and (ii) all representations and warranties shall be true and correct
          as if restated immediately following the consummation of such
          acquisition, except to the extent that any such representation or
          warranty was made as of a specific date or updated, modified or
          supplemented as of a subsequent date with the consent of Majority
          Lenders.

          The definition of "Permitted Investments" set forth in Section 1.1 of
the Original Agreement is hereby amended in its entirety to read as follows:

          "Permitted Investments" means:
           ---------------------

                    (a) Cash Equivalents,

                                       2

          (b) Investments described in the Disclosure Schedule,

          (c) Investments by Plains MLP or any of its Subsidiaries in (1) any
     Wholly Owned Subsidiary of Plains MLP which is (or substantially
     contemporaneously with such Investment will become) a Borrower or a
     Guarantor, or (2) any business, asset or operation which is (or
     contemporaneously with such Investment becomes) wholly-owned by Plains MLP
     or any Wholly Owned Subsidiary of Plains MLP which is (or substantially
     contemporaneously with such Investment will become) a Borrower or a
     Guarantor,

          (d) Investments in publicly traded units of master limited
     partnerships whose dividends are "qualifying income" as such term is
     defined in Section 7704 of the Code (provided, the amount of any such
                                          --------
     Investments under this clause (d) minus any amounts received on such
                                       -----
     Investments (excluding dividends thereon) shall not at any time exceed the
     Dollar Equivalent of $5,000,000),

          (e) Permitted Acquisitions,

          (f) Investments by Plains MLP or any of its Subsidiaries in (i) any
     Person owning transportation, terminaling, storage and/or pipeline assets
     and associated gathering assets in which Plains MLP or any Wholly Owned
     Subsidiary of Plains MLP owns, directly or indirectly, less than all of the
     capital stock or other equity interest, or (ii) transportation,
     terminaling, storage and/or pipeline assets and associated gathering assets
     in which Plains MLP or any Wholly Owned Subsidiary of Plains MLP owns,
     directly or indirectly, less than all of the ownership interest therein,
     such Investments under clauses (i) and (ii) above in an aggregate amount
     not to exceed at any one time outstanding (A) the Dollar Equivalent of
     $35,000,000 minus (B) any outstanding Indebtedness under Section
                 -----
     7.1(f)(ii),

          (g) subject to Section 7.17(d), Investments directly or indirectly by
     Restricted Persons in Unrestricted Subsidiaries (i) consisting of Qualified
     Equity Proceeds, and (ii) Investments other than Qualified Equity Proceeds
     in an aggregate amount not to exceed, at any one time outstanding, the
     Dollar Equivalent of $100,000,000; for calculation purposes hereof: (1) any
     return on investment from any Unrestricted Subsidiary shall reduce the
     aggregate outstanding Investments subject to the limitation set forth in
     clause (ii) by an amount equal to the Non-Equity Investment to Total
     Investment Ratio times such investment return (e.g., if an Unrestricted
                      -----
     Subsidiary is capitalized with $100,000,000, $40,000,000 of which is
     Qualified Equity Proceeds and $60,000,000 of which is subject to the
     limitation set forth in clause (ii), and $10,000,000 is returned by such
     Unrestricted Subsidiary, the $60,000,000 subject to clause (ii) would be
     reduced by 6/10ths or $6,000,000 of such return); (2) in the event any
     Unrestricted Subsidiary is designated a Restricted Person pursuant to
     Section 7.17, executes and delivers Security Documents pursuant to Section
     6.14 and becomes a Guarantor pursuant to Section 6.17, the aggregate
     outstanding Investments subject to the limitation set forth in clause (ii)
     shall be reduced by the lesser of (i) Investments in such redesignated
     Subsidiary not constituting Qualified Equity Proceeds and (ii) the Non-
     Equity Investment to Total

                                       3

     Investment Ratio times the fair market value of such redesignated
     Subsidiary as of the date of such designation as a Restricted Person, as
     reasonably determined by US Borrower; as used herein, "Qualified Equity
                                                            ----------------
     Proceeds" means proceeds of private or public offerings of equity
     --------
     securities by Restricted Persons after January 31, 2002 that within three
     months after the receipt thereof are (1) contributed as capital to one or
     more specified Unrestricted Subsidiaries, or (2) expressly designated as
     funds to be contributed as capital to one or more specified Unrestricted
     Subsidiaries, and are contributed pursuant to such designation within six
     months after such designation, and "Non-Equity Investment to Total
                                         ------------------------------
     Investment Ratio" means with respect to any Unrestricted Subsidiary, the
     ----------------
     ratio of (I) Investments in such Unrestricted Subsidiary not constituting
     Qualified Equity Proceeds to (II) all Investments in such Unrestricted
     Subsidiary, and

          (h) other Investments, excluding Investments in Unrestricted
     Subsidiaries, such other Investments not to exceed in the aggregate in
     respect of all Restricted Persons the Dollar Equivalent of $10,000,000.

     The definition of "Restricted Person" set forth in Section 1.1 of the
Original Agreement is hereby amended in its entirety to read as follows:

          "Restricted Person" means any of Plains MLP and each Subsidiary of
           -----------------
     Plains MLP, including but not limited to US Borrower, All American, Term
     Borrower, Canadian Revolver Borrower and each Subsidiary of US Borrower,
     All American, Term Borrower, and Canadian Revolver Borrower, but excluding,
     for the avoidance of doubt, Unrestricted Subsidiaries.

          The following definition of "Restriction Exception" is hereby added to
Section 1.1 of the Original Agreement in appropriate alphabetical order:

          "Restriction Exception" means (i) any instrument governing
           ---------------------
     Indebtedness or equity interests, or any other agreement relating to any
     property or assets, of a Person whose capital stock or other equity
     interests are partially acquired by a Restricted Person pursuant to a
     Permitted Acquisition, as such instrument or agreement is in effect at the
     time of such acquisition (except with respect to Indebtedness incurred in
     connection with, or in contemplation of, such acquisition), which is not
     applicable to any Restricted Person, or the property or assets of any
     Restricted Person, other than the partially-acquired Person, or the
     property or assets of such partially-acquired Person or such partially-
     acquired Person's Subsidiaries; provided that in the case of Indebtedness,
                                     --------
     such Indebtedness is permitted hereunder, or (ii) provisions with respect
     to the disposition or distribution of assets in joint venture agreements or
     other similar agreements entered into in the ordinary course of business.

     The definition of "Subsidiary" set forth in Section 1.1 of the Original
Agreement is hereby amended in its entirety to read as follows:

          "Subsidiary" means, with respect to any Person, any corporation,
           ----------
     association, partnership, limited liability company, joint venture, or
     other business or corporate entity,

                                       4

     enterprise or organization which is directly or indirectly (through one or
     more intermediaries) controlled or owned more than fifty percent by such
     Person; provided, however, that no Unrestricted Subsidiary shall be deemed
             --------  -------
     a "Subsidiary" of Plains MLP or any Subsidiary of Plains MLP for purposes
     of any Loan Document except as provided in Section 7.17.

     The following definition of "Unrestricted Subsidiary" is hereby added to
Section 1.1 of the Original Agreement in appropriate alphabetical order:

               "Unrestricted Subsidiary" shall have the meaning given it in
                -----------------------
Section 7.17.

     (S) 2.2.  Agreement to Deliver Security Documents.   Section 6.14 of the
               ---------------------------------------
Original Agreement is hereby amended in its entirety to read as follows:

               Section 6.14.  Agreement to Deliver Security Documents.
                              ---------------------------------------
     Restricted Persons will deliver, and will cause each Person, other than
     Unrestricted Subsidiaries, in which it owns any capital stock or other
     equity interest (other than interests described in clause (d) of the
     definition of "Permitted Investments"), to deliver, to further secure the
     Obligations whenever requested by Administrative Agent in its sole and
     absolute discretion, deeds of trust, mortgages, chattel mortgages, security
     agreements, financing statements and other Security Documents in form and
     substance satisfactory to Administrative Agent for the purpose of granting,
     confirming, and perfecting first and prior liens or security interests in
     any real or personal property now owned or hereafter acquired by any
     Restricted Person; provided, with respect to any such property for which
                        --------
     the consent or approval of third parties is required for the delivery of
     such Security Documents, Restricted Persons shall not be required to
     deliver, or to cause such Person to deliver, such Security Documents with
     respect to such property, but shall use their commercially reasonable best
     efforts, as determined by Administrative Agent, to deliver, or to cause
     such Person to deliver, such Security Documents with respect to such
     property.  Without limiting the foregoing, each Restricted Person shall be
     required to grant a Lien in favor of Administrative Agent for the benefit
     of Lenders encumbering such Restricted Person's ownership interest in any
     Unrestricted Subsidiary; provided, no Security Document granting any such
                              --------
     Lien on such ownership interest in such Unrestricted Subsidiary shall
     restrict or limit the ownership or operation of such Unrestricted
     Subsidiary except as otherwise restricted or limited herein.

     (S) 2.3.  Guaranties of Subsidiaries.  The first sentence of Section 6.17
               --------------------------
of the Original Agreement is hereby amended in its entirety to read as follows:

     Each Subsidiary of Plains MLP, and any other Person, other than
     Unrestricted Subsidiaries, in which any Subsidiary of Plains MLP owns any
     capital stock or other equity interest (other than interests described in
     clause (d) of the definition of "Permitted Investments"), now existing or
     created, acquired or coming into existence after the date hereof shall,
     promptly upon request by Administrative Agent, execute and deliver to
     Administrative Agent an absolute and unconditional guaranty of the timely
     repayment of the Obligations and the due and punctual performance of the
     obligations of US Borrower, Term Borrower, and Canadian Revolver Borrower
     hereunder (in each case for which such

                                       5

     Subsidiary is not a borrower, account party or similar primary and direct
     obligor), which guaranty shall be satisfactory to Administrative Agent in
     form and substance; provided, with respect to any such Subsidiary or other
                         --------
     Person that is not a Wholly Owned Subsidiary of Plains MLP, for which
     consent or approval of third parties is required for the delivery of such
     guaranty, such Subsidiary or such other Person shall not be required to
     deliver such guaranty, but shall use its commercially reasonable best
     efforts, as determined by Administrative Agent, to deliver such guaranty.
     Notwithstanding any provision contained herein, in no event shall any
     Unrestricted Subsidiary be required to execute and deliver any guaranty
     for, or in respect of, the Obligations, or any part thereof.

     (S) 2.4.  Limitation on Indebtedness.  Section 7.1(f) of the Original
               --------------------------
Agreement is hereby amended in its entirety to read as follows:

               (f) guaranties by Plains MLP, any Borrower or any Guarantor of
     trade payables incurred and paid in the ordinary course of business on
     ordinary trade terms by (i) any Restricted Person, or (ii) any other Person
     in which Plains MLP or any Wholly Owned Subsidiary of Plains MLP owns less
     than all of such Person's capital stock or other equity interest; provided,
                                                                       --------
     that the outstanding trade payables amount guaranteed at any time under
     this clause (ii) shall not exceed (A) $50,000,000 minus (B) any outstanding
                                                       -----
     Investments under clause (f) of the definition of Permitted Investments.

     (S) 2.5.  Limitation on Liens.  The reference to "Section 7.1(g)" set
               -------------------
forth in Section 7.2(i) of the Original Agreement is hereby amended to refer
instead to "Section 7.1(h)".

     (S) 2.6.  Limitations on Mergers; Issuances of Securities. The second,
               -----------------------------------------------
third and fourth sentences of Section 7.4 are hereby amended in their entirety
to read as follows:

     Any Person, other than US Borrower, Term Borrower, or Canadian Revolver
     Borrower, that is a Subsidiary of a Restricted Person may, however, be
     merged into or consolidated with (i) another Subsidiary of such Restricted
     Person, so long as (A) neither is a Guarantor, or (B) a Guarantor is the
     surviving business entity, (ii) such Restricted Person, so long as such
     Restricted Person is the surviving business entity, or (iii) any other
     Person pursuant or incidental to, or in connection with, any
     contemporaneous or substantially contemporaneous Permitted Acquisition,
     provided that such merging or consolidating Subsidiary (1) is not a
     --------
     Borrower, Guarantor or a Wholly Owned Subsidiary of Plains MLP, other than
     a Wholly Owned Subsidiary that was formed, acquired or created solely for
     purposes of such acquisition or otherwise conducted no operations and owned
     no assets, other than of an inconsequential amount and (2) does not own any
     Collateral.  Plains MLP will not issue any securities other than (i)
     limited partnership interests and any options or warrants giving the
     holders thereof only the right to acquire such interests, (ii) general
     partnership interests to General Partner, and (iii) debt securities
     permitted by Section 7.1(g).  No Subsidiary of Plains MLP will issue any
     additional shares of its capital stock, partnership interests or other
     securities or any options, warrants or other rights to acquire such
     additional shares, partnership interests or other securities, except a
     Subsidiary of a Restricted Person may issue additional shares, partnership
     interests or other securities (i) to Persons so long as such Restricted
     Person's and Plains MLP's

                                       6

     aggregate ownership in such issuing Subsidiary is not diminished after
     giving effect thereto, or (ii) to any other Person pursuant or incidental
     to, or in connection with, any contemporaneous or substantially
     contemporaneous Permitted Acquisition, provided that such issuing
                                            --------
     Subsidiary (1) is not a Borrower, Guarantor or a Wholly Owned Subsidiary of
     Plains MLP, other than a Wholly Owned Subsidiary that was formed, acquired
     or created solely for purposes of such acquisition or otherwise conducted
     no operations and owned no assets, other than of an inconsequential amount
     and (2) does not own any Collateral.

     The fifth sentence of Section 7.4 is hereby deleted in its entirety.

     (S) 2.7.  Limitation on Sales of Property. Section 7.5 of the Original
               -------------------------------
Agreement is hereby amended by deleting "and" at the end of clause (c), adding
an amended clause (d) as follows:

               (d) in exchange for other property; provided that (i) such
                                                   --------
     exchange is for fair consideration, (ii) the property to be acquired in
     such exchange constitutes a Permitted Acquisition, (iii) the fair market
     value of such property being exchanged is not in the aggregate in excess of
     the Dollar Equivalent of $25,000,000 in any Fiscal Year, as reasonably
     determined by US Borrower (any such determination in excess of $10,000,000
     being determined in good faith by certified resolution of the board of
     directors of the corporate general partner of US Borrower and subject to,
     at Administrative Agent's reasonable request, confirmation by appraisal),
     and (iv) such exchange will not materially impair or diminish the value of
     the Collateral or any Restricted Person's financial condition, business or
     operations; and

and redesignating existing clause "(d)" as clause "(e)".

     The first sentence following such new clause (d) and redesignated clause
(e) of Section 7.5 is hereby amended in its entirety to read as follows:

     No Restricted Person will sell, transfer or otherwise dispose of capital
     stock of or interest in any of its Subsidiaries except (i) to Plains MLP or
     a Wholly Owned Subsidiary of Plains MLP or (ii) to any other Person
     pursuant or incidental to, or in connection with, any contemporaneous or
     substantially contemporaneous Permitted Acquisition, provided that such
                                                          --------
     Subsidiary whose capital stock or interests are being transferred (1) is
     not a Borrower, Guarantor or a Wholly Owned Subsidiary of Plains MLP, other
     than a Wholly Owned Subsidiary that was formed, acquired or created solely
     for purposes of such acquisition or otherwise conducted no operations and
     owned no assets, other than of an inconsequential amount and (2) does not
     own any Collateral; provided, in the event any limited partner interests
                         --------
     issued by Canadian Revolver Borrower to CanPet Energy Group (USA), Inc. or
     CanPet Energy Group Inc. pursuant to Section 7.4 are exchanged for units
     issued by Plains MLP, Lenders hereby consent to the contribution by Plains
     MLP to US Borrower of any and all such partnership interests.

     The reference to "clause (a) or (c)" in the last sentence of Section 7.5 is
hereby amended to refer instead to "clauses (a), (c) or (d)".

                                       7

     (S) 2.8.  Limitation on Dividends and Redemptions. The first sentence of
               ---------------------------------------
Section 7.6 of the Original Agreement is hereby amended in its entirety to read
as follows :

               Section 7.6  Limitation on Dividends and Redemptions. No
                            ---------------------------------------
     Restricted Person will declare or pay any dividends on, or make any other
     distribution in respect of, any class of its capital stock or any
     partnership, limited liability company or other interest in it, nor will
     any Restricted Person directly or indirectly purchase, redeem, acquire or
     retire (or make any capital contribution to purchase, redeem, acquire or
     retire) any shares of the capital stock of or partnership or limited
     liability company interests in any Restricted Person (whether such
     interests are now or hereafter issued, outstanding or created), or cause or
     permit any reduction or retirement of the capital stock of any Restricted
     Person, while any Loan or any US Commitment or any Canadian Commitment is
     outstanding.

     (S) 2.9.  Prohibited Contracts.  The reference to "as described in the
               --------------------
Disclosure Schedule" set forth in the first sentence of Section 7.10 of the
Original Agreement is hereby amended to refer instead to "as described in the
Disclosure Schedule or pursuant to a Restriction Exception, the substance of
which, in detail satisfactory to Administrative Agent, is promptly reported to
Administrative Agent".

     (S) 2.10. Debt Coverage Ratio. Section 7.12 of the Original Agreement is
               -------------------
hereby amended in its entirety to read as follows:

     Section 7.12  Debt Coverage Ratio.  (a) At the end of any Fiscal
                   -------------------
Quarter, (b) on any date on which General Partner declares a distribution
permitted under Section 7.6 and (c) on the date of any Permitted Acquisition,
both immediately prior to and after giving effect to the consummation thereof,
the Debt Coverage Ratio will not be greater than 4.00 to 1.0.  As used herein,
"Debt Coverage Ratio" means the ratio of (a) Consolidated Funded Indebtedness to
- --------------------
(b) Consolidated EBITDA for the four Fiscal Quarter period (or other period
specified below) most recently ended prior to the date of determination for
which financial statements contemplated by Section 6.2(a) or (b) are available
to Borrower; provided, for purposes of this Section 7.12, if, since the
             --------
beginning of the four Fiscal Quarter period ending on the date for which
Consolidated EBITDA is determined, any Restricted Person shall have made any
asset disposition or acquisition, shall have consolidated or merged with or into
any Person (other than another Restricted Person), or shall have made any
disposition or acquisition of a Restricted Person or disposition or acquisition
of any partial ownership interest in any other Person, Consolidated EBITDA shall
be calculated giving pro forma effect thereto as if the disposition,
acquisition, consolidation or merger had occurred on the first day of such
period; provided, with respect to any Person not constituting a Subsidiary of
        --------
Plains MLP, such pro forma calculation of Consolidated EBITDA, with respect to
any such Person, shall be limited to not more than 75% of (i) such Restricted
Person's ownership interest in such Person times (ii) the difference of such
                                           -----
Person's (A) Consolidated EBITDA minus (B) Interest Expense and capital
                                 -----
expenditures.  Such pro forma effect shall include adjustments with respect to
management fees previously distributed with respect to the assets subject to the
CanPet Acquisition and the acquisition of the remaining 50% of the Manito
Pipeline in mid calendar year 2000, and shall otherwise be determined (i) in
good faith by the chief financial officer of Borrower, and (ii) without giving

                                       8

effect to any anticipated or proposed change in operations, revenues, expenses
or other items included in the computation of Consolidated EBITDA, except with
the consent of Majority Lenders.

     (S) 2.11.  Unrestricted Subsidiaries.  Article VII of the Original
                -------------------------
Agreement is hereby amended by adding a new Section 7.17 at the end thereof, to
read as follows:

               Section 7.17  Unrestricted Subsidiaries.  Plains MLP or any
                             -------------------------
     Wholly Owned Subsidiary of Plains MLP may designate one or more direct
     Subsidiaries that are not Borrowers or Guarantors (each such Subsidiary,
     and each of its Subsidiaries, each an "Unrestricted Subsidiary"), which
                                            ------------------------
     Unrestricted Subsidiaries shall be subject to the following:

     (a)       No Unrestricted Subsidiary shall be deemed to be a "Restricted
               Person" or a "Subsidiary" of Plains MLP for purposes of this
               Agreement or any other Loan Document, and no Unrestricted
               Subsidiary shall be subject to or included within the scope of
               any provision herein or in any other Loan Document, including
               without limitation any representation, warranty, covenant or
               Event of Default herein or in any other Loan Document, except as
               set forth in this Section 7.17.

     (b)       No Restricted Person shall guarantee or otherwise become liable
               in respect of any Liability or other obligation of, grant any
               Lien on any of its property to secure any Liability or other
               obligation of, make any Investment in (except as described in
               clause (g) of the definition of Permitted Investments), or
               provide any other form of credit support to, any Unrestricted
               Subsidiary, and no Restricted Person shall enter into any
               contract or agreement with any Unrestricted Subsidiary, except in
               the course of ordinary business on terms no less favorable to
               such Restricted Person, as applicable, than could be obtained in
               a comparable arm's length transaction with a non-Affiliate of
               such Restricted Person.

     (c)       Borrowers shall at all times maintain, as between Restricted
               Persons and Unrestricted Subsidiaries, the separate existence of
               each Unrestricted Subsidiary.

     (d)       No Restricted Person shall make any Investment in any
               Unrestricted Subsidiary pursuant to clause(g) of the definition
               of "Permitted Investment" except in connection with the
               capitalization of an Unrestricted Subsidiary to consummate a
               proposed acquisition, disclosed to Administrative Agent in
               writing, of (1) the acquisition of the capital stock or other
               equity interest in a Person whose business, assets and operations
               consist of Petroleum Products and/or gas marketing, gathering,
               transportation, storage, terminaling and pipeline operation;
               provided, if a Restricted Person acquires less than all of the
               --------
               capital stock or other equity interest acquired, such business,
               assets and operations shall consist of transportation, storage,
               terminaling and/or pipeline operations and associated gathering
               assets, or (2) the acquisition of all or a portion of a line of
               business or the business, assets or operations of a Person
               (whether in a single transaction or a series of related
               transactions) consisting of Petroleum Products and/or gas
               marketing, gathering, transportation, storage, terminaling and
               pipeline operation;
                                       9

               provided, if a Restricted Person acquires less than all of the
               --------
               ownership interest of the business, assets or operations
               acquired, such business, assets and operations shall consist of
               transportation, storage, terminaling and/or pipeline operations
               and associated gathering assets; provided, further, the aggregate
                                                --------  -------
               amount of any such Permitted Investments in such Unrestricted
               Subsidiary in excess of the purchase price and associated
               acquisition costs relating to such acquisition shall, promptly
               following the consummation of such acquisition, be distributed
               back to such investing Restricted Person. In the event such
               Unrestricted Subsidiary shall fail to timely consummate such
               specified acquisition or such specified acquisition shall
               otherwise be abandoned, such Unrestricted Subsidiary shall be
               deemed to be a "Subsidiary" of Plains MLP for purposes of this
               Agreement and shall be subject to the terms and conditions
               hereof.

     (e)       Restricted Persons shall notify each Lender Party, not later than
               five (5) Business Days after any executive officer of Restricted
               Persons has knowledge of, under any Environmental Law, any claim
               of the Dollar Equivalent of $1,000,000 or more, any notice of
               potential liability which might be reasonably likely to exceed
               such amount, or any other material adverse claim thereunder
               asserted against any Unrestricted Subsidiary or with respect to
               any Unrestricted Subsidiary's properties, stating that such
               notice is being given pursuant to this Section 7.17.

     The board of directors of the corporate general partner of the US Borrower
     may designate any Unrestricted Subsidiary to become a Restricted Person if
     a Default or Event of Default is not continuing, such designation would not
     result in a Default or an Event of Default, and immediately thereafter such
     Subsidiary has no outstanding Indebtedness.  Immediately thereafter, US
     Borrower shall promptly notify the Administrative Agent of such designation
     and provide to it an officer's certificate that such designation was made
     in compliance with this Section 7.17.

                  ARTICLE III. -- Conditions of Effectiveness
                                  ---------------------------

     (S) 3.1.  Effective Date.  This Amendment shall become effective as of the
               --------------
date first written above, when and only when

               (i)  Administrative Agent shall have received, at Administrative
     Agent's office (A) a counterpart of this Amendment executed and delivered
     by US Borrower, Term Borrower, Canadian Revolver Borrower, Plains MLP, All
     American and Majority Lenders, and consented to by each Guarantor, (B) a
     contemporaneous amendment to the Marketing Credit Agreement, amending
     various provisions therein consistent with the amendments set forth herein,
     in form and substance acceptable to Administrative Agent, executed and
     delivered by such Persons so as to make such amendment effective;

               (ii) (A) In consideration hereof, US Borrower shall have paid to
     Administrative Agent for the account of each Lender executing and
     delivering this Amendment an amendment fee in immediately available funds
     equal to one-twentieth of one percent (0.05%) of each such Lender's
     Commitment, and (B) US Borrower shall have paid all

                                       10

     other fees required to be paid to Administrative Agent or any Lender
     pursuant to any Loan Documents, including fees and expenses of Thompson &
     Knight LLP, counsel to Administrative Agent; and

         (iii)  Administrative Agent shall have additionally received all of the
     following documents, each document (unless otherwise indicated) being dated
     the date of receipt thereof by Administrative Agent, duly authorized,
     executed and delivered, and in form and substance satisfactory to
     Administrative Agent:

                (A) Officer's Certificate. A certificate of a duly authorized
                    ---------------------
         officer of General Partner, to the effect that all of the
         representations and warranties set forth in Article IV hereof are true
         and correct at and as of the date thereof, and

                (B) Supporting Documents. Such supporting documents as
                    --------------------
         Administrative Agent may reasonably request.

                 ARTICLE IV. -- Representations and Warranties
                                ------------------------------

     (S) 4.1.  Representations and Warranties of Plains MLP and Borrowers. In
               ----------------------------------------------------------
order to induce Administrative Agent and Lenders to enter into this Amendment,
Plains MLP and Borrowers represent and warrant to Administrative Agent and each
Lender that:

               (a) The representations and warranties contained in Article V of
     the Original Agreement are true and correct at and as of the time of the
     effectiveness hereof, except to the extent that such representation and
     warranty was made as of a specific date.

               (b) Each Restricted Person is duly authorized to execute and
     deliver this Amendment and each other Amendment Document, to the extent a
     party thereto, and each Borrower is and will continue to be duly authorized
     to borrow and perform its obligations under the Credit Agreement. Each
     Restricted Person has duly taken all action necessary to authorize the
     execution and delivery of this Amendment and each other Amendment Document,
     to the extent a party thereto, and to authorize the performance of their
     respective obligations hereunder.

               (c) The execution and delivery by each Restricted Person of this
     Amendment and each other Amendment Document, to the extent a party thereto,
     the performance by each Restricted Person of its respective obligations
     hereunder and thereunder, and the consummation of the transactions
     contemplated hereby and thereby, do not and will not conflict with any
     provision of any Law or of the organizational documents of any Restricted
     Person, or of any material agreement, judgment, license, order or permit
     applicable to or binding upon any Restricted Person, or result in the
     creation of any Lien upon any assets or properties of any Restricted
     Person, except in favor of Administrative Agent or Canadian Agent for the
     benefit of Lenders and other Permitted Liens. Except for those which have
     been duly obtained, no consent, approval, authorization or order of any
     Tribunal or third party is required in connection with the execution and
     delivery by

                                       11

     any Restricted Person of this Amendment or any other Amendment Document, or
     to consummate the transactions contemplated hereby and thereby.

               (d) When duly executed and delivered, each of this Amendment and
     each other Amendment Document, and each of the Loan Documents, as amended
     hereby and thereby, will be a legal and binding instrument and agreement of
     each Restricted Person to the extent a party thereto, enforceable in
     accordance with its terms, (subject, as to enforcement of remedies, to
     applicable bankruptcy, insolvency and similar laws applicable to creditors'
     rights generally).

                          ARTICLE V. -- Miscellaneous
                                        -------------

     (S) 5.1.  Ratification of Agreements. The Original Agreement, as hereby
               --------------------------
amended, is hereby ratified and confirmed in all respects. The Loan Documents
(including but not limited to each Guaranty), as they may be amended or affected
by this Amendment or any other Amendment Document, are hereby ratified and
confirmed in all respects by each Restricted Person to the extent a party
thereto. Any reference to the Credit Agreement in any Loan Document shall be
deemed to refer to this Amendment also. The execution, delivery and
effectiveness of this Amendment and the other Amendment Documents shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of Administrative Agent, Canadian Agent or any Lender under the Credit
Agreement or any other Loan Document nor constitute a waiver of any provision of
the Credit Agreement or any other Loan Document.

     (S) 5.2.  Ratification of Security Documents. Restricted Persons,
               ----------------------------------
Administrative Agent, and Lenders each acknowledge and agree that any and all
indebtedness, liabilities or obligations, arising under or in connection with
the LC Obligations or the Notes, are Obligations and are secured indebtedness
under, are guarantied by, and are secured by, each and every Security Document
to which any Restricted Person is a party. Each Restricted Person hereby re-
pledges, re-grants and re-assigns a security interest in and lien on every asset
of the such Restricted Person described as Collateral in any Security Document
and re-guarantees all Obligations under the Credit Agreement.

     (S) 5.3.  Ratification of Intercreditor Agreement. Each Lender hereby
               ---------------------------------------
acknowledges and confirms that all Obligations under the Credit Agreement, as
amended hereby, and the "Obligations" under the Marketing Credit Agreement, as
amended on the date hereof, shall be and shall remain subject to the terms and
entitled to the benefits of the Intercreditor Agreement.

     (S) 5.4.  Survival of Agreements. All representations, warranties,
               ----------------------
covenants and agreements of the Restricted Persons herein shall survive the
execution and delivery of this Amendment and the performance hereof, including
without limitation the making or granting of each Loan, and shall further
survive until all of the Obligations under the Credit Agreement are paid in
full. All statements and agreements contained in any certificate or instrument
delivered by any Restricted Person hereunder or under the Credit Agreement to
Administrative Agent, Canadian Agent or any Lender shall be deemed to constitute
representations and warranties by, or agreements and covenants of, such
Restricted Person under this Amendment and under the Credit Agreement.

                                       12

     (S) 5.5.  Loan Documents. This Amendment and each other Amendment Document
               --------------
is a Loan Document, and all provisions in the Credit Agreement pertaining to
Loan Documents apply hereto.

     (S) 5.6.  GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
               -----------------------------------------------------------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF
- -------------------------------------------------------------------------------
THE UNITED STATES OF AMERICA IN ALL RESPECTS, INCLUDING CONSTRUCTION, VALIDITY
- --------------------------------------------------------------------------
AND PERFORMANCE.
- ---------------

     (S) 5.7.  Counterparts. This Amendment may be separately executed in
               ------------
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Amendment.

                                       13

     IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.

US BORROWER:             PLAINS MARKETING, L.P.

                         By: Plains Marketing GP Inc., General Partner

                         By: /s/ Phil Kramer
                             ---------------------------------------------------
                                Phil Kramer, Exec. Vice President

GUARANTORS:              ALL AMERICAN PIPELINE, L.P.

                         By: Plains Marketing GP Inc., General Partner

                         By: /s/ Phil Kramer
                             --------------------------------------------------
                                Phil Kramer, Exec. Vice President

                         PLAINS ALL AMERICAN PIPELINE, L.P.

                         By: Plains AAP, L.P., General Partner

                         By: Plains All American LLC, General Partner

                         By: /s/ Phil Kramer
                             ---------------------------------------------------
                                Phil Kramer, Exec. Vice President

CANADIAN REVOLVER
BORROWER:                PLAINS MARKETING CANADA, L.P.,

                         By: PMC (Nova Scotia) Company, General Partner

                         By: /s/ Phil Kramer
                             ---------------------------------------------------
                                Phil Kramer, Exec. Vice Pres.

TERM BORROWER:           PMC (NOVA SCOTIA) COMPANY

                         By: /s/ Phil Kramer
                             ---------------------------------------------------
                                Phil Kramer, Exec. Vice Pres.

                                       14

LENDER PARTIES:               FLEET NATIONAL BANK,
                              Administrative Agent, LC Issuer and Lender

                              By: /s/ Terrence Ronan
                                  ----------------------------------------------
                                     Terrence Ronan, Managing Director

                              FIRST UNION NATIONAL BANK, Lender

                              By: /s/ Robert R. Wetteroff
                                  ----------------------------------------------
                                     Robert R. Wetteroff, Sr. Vice Pres.

                              BANK OF AMERICA, N.A., Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              BANK ONE, NA, Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              FORTIS CAPITAL CORP., Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              By: ______________________________________________
                                     Name:
                                     Title:

                              U.S. BANK NATIONAL ASSOCIATION, Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              BANK OF SCOTLAND, Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                                       15

                              WELLS FARGO BANK (TEXAS),
                              NATIONAL ASSOCIATION, Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              THE BANK OF NOVA SCOTIA, Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              CREDIT AGRICOLE INDOSUEZ, Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              By: ______________________________________________
                                     Name:
                                     Title:

                              TORONTO DOMINION (TEXAS), INC., Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              SOUTHWEST BANK OF TEXAS, N.A., Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              UNION BANK OF CALIFORNIA, N.A., Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                                       16

                              COMERICA BANK-TEXAS, Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              BNP PARIBAS, Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                              By: ______________________________________________
                                     Name:
                                     Title:

                              HELLER FINANCIAL, INC., Lender

                              By: ______________________________________________
                                     Name:
                                     Title:

                                       17

                              THE TORONTO-DOMINION BANK,
                              Canadian Administration Agent

                              By:_____________________________________________
                                   Name:
                                   Title:

                              THE TORONTO-DOMINION BANK,
                              Canadian Revolver Lender

                              By:_____________________________________________
                                   Name:
                                   Title:

                              BNP PARIBAS (CANADA), Canadian Revolver Lender

                              By:_____________________________________________
                                   Name:
                                   Title:

                              By:_____________________________________________
                                   Name:
                                   Title:

                              HELLER FINANCIAL CANADA, LTD.,
                              Canadian Revolver Lender

                              By:_____________________________________________
                                   Name:
                                   Title:

                                       18

                              PILGRIM PRIME RATE TRUST
                              PILGRIM SENIOR INCOME FUND
                              ML CLO XX PILGRIM AMERICA (CAYMAN) LTD.
                              ML CLO XII PILGRIM AMERICA (CAYMAN) LTD.
                              PILGRIM CLO 1999 - 1 LTD.
                              SEQUILS - PILGRIM I, LTD.
                              PILGRIM AMERICA HIGH INCOME
                              INVESTMENTS LTD., each a Lender

                              By:  ING Pilgrim Investments, LLC,
                                    as its investment manager

                              By:_____________________________________________
                                   Name:
                                   Title:

                              MORGAN STANLEY PRIME INCOME TRUST, Lender

                              By:_____________________________________________
                                   Name:
                                   Title:

                              FLAGSHIP CLO 2001-1
                              FLAGSHIP CLO II, each a Lender

                              By:  Flagship Capital Management, Inc.

                              By:_____________________________________________
                                   Title:

                              ALLSTATE LIFE INSURANCE COMPANY
                              AIMCO CDO SERIES 2000-A
                              AIMCO CLO SERIES 2001-A, each a Lender

                              By:_____________________________________________
                                   Name:

                              By:_____________________________________________
                                   Name:
                              Its Authorized Signatories

                                       19

                              SWISS LIFE US RAINBOW LIMITED            THE ING
                              INCOME HOLDINGS FUND, LTD.
                              ARCHIMEDES FUNDING IV (CAYMAN), LTD.
                              NEMEAN CLO, LTD., each a Lender

                              By:  ING Capital Advisors LLC,
                                    as Investment Manager

                              By:_____________________________________________
                                   Title:

                              ARCHIMEDES FUNDING III, LTD.
                              SEQUILS-ING-I (HBDGM), LTD.
                              ORYX CLO, LTD., each a Lender

                              By:  ING Capital Advisors LLC,
                                   as Collateral Manager

                              By:_____________________________________________
                                   Title:

                              BALANCED HIGH YIELD FUND II, LTD., Lender

                              By:  ING Capital Advisors LLC,
                                   as Asset Manager

                              By:_____________________________________________
                                   Title:

                              FIDELITY ADVISOR SERIES II: FIDELITY ADVISOR
                              FLOATING RATE HIGH INCOME FUND, a Lender

                              By:_____________________________________________
                                   Title:

                                       20

                         TRYON CLO LTD. 2000-I
                         ELC (CAYMAN) LTD. 1999-II
                         ELC (CAYMAN) LTD. 1999-III
                         ELC (CAYMAN) LTD. 2000-I
                         APEX (IDM) CDO I, LTD., each a Lender

                         By:____________________________________________________
                              Title:

                         MONUMENT CAPITAL LTD., Lender
                         By:  Alliance Capital Management, L.P.,
                              as Investment Manager

                         By:  Alliance Capital Management Corporation,
                              as General Partner

                         By:____________________________________________________
                              Name:
                              Title:

                         NEW ALLIANCE GLOBAL CDO LIMITED, Lender
                         By:  Alliance Capital Management, L.P., as Sub-advisor

                         By:  Alliance Capital Management Corporation,
                              as General Partner

                         By:____________________________________________________
                              Name:
                              Title:

                         SENIOR LOAN FUND
                         BLACKROCK SENIOR LOAN TRUST, each a Lender

                         By:____________________________________________________
                              Name:
                              Title:

                         CARLYLE HIGH YIELD PARTNERS II, LTD.
                         CARLYLE HIGH YIELD PARTNERS III, LTD.,
                         each a Lender

                         By:____________________________________________________
                              Name:
                              Title:

                                       21

                         WINGED FOOT FUNDING TRUST
                         By:____________________________________________________
                              Name:
                              Title:

                         JUPITER FUNDING TRUST
                         By:____________________________________________________
                              Name:
                              Title:

                         OLYMPIC FUNDING TRUST, SERIES 1999-1
                         By:____________________________________________________
                              Name:
                              Title:

                         MUIRFIELD TRADING LLC, each a Lender
                         By:____________________________________________________
                              Name:
                              Title:

                         FIRST DOMINION FUNDING I
                         FIRST DOMINION FUNDING II, each a Lender

                         By:____________________________________________________
                              Name:
                              Title:

                         SEQUILS-CUMBERLAND I, LTD., Lender

                         By:  Deerfield Capital Management, L.L.C.
                              as its Collateral Manager

                         By:____________________________________________________
                              Name:
                              Title

                         EMERALD ORCHARD, LIMITED, Lender
                         By:____________________________________________________
                              Name:
                              Title:

                                       22

                         HIGHLAND LOAN FUNDING V LTD., Lender

                         By:  Highland Capital Management, L.P.,
                              as Collateral Manager
                         By:____________________________________________________
                              Name:
                              Title:

                                       23

                         AMARA I FINANCE, LTD.
                         AMARA 2 FINANCE, LTD.
                         OASIS COLLATERALIZED HIGH INCOME
                         PORTFOLIO-1, LTD., each a Lender

                         By:   INVESCO Senior Secured Management, Inc.,
                               as Subadviser

                         By:_____________________________________________
                               Name:
                               Title:

                         AERIES FINANCE II LTD., Lender

                         By:   INVESCO Senior Secured Management, Inc.
                               as Sub-Managing Agent

                         By:______________________________________________
                               Name:
                               Title:

                         AVALON CAPITAL LTD.
                         AVALON CAPITAL LTD. 2, each a Lender

                         By:   INVESCO Senior Secured Management, Inc.
                               as Portfolio Advisor

                         By:______________________________________________
                               Name:
                               Title:

                         CERES II FINANCE LTD., Lender

                         By:   INVESCO Senior Secured Management, Inc.,
                               as Sub-Managing Agent (Financial)

                         By:_____________________________________________
                               Name:
                               Title:

                                       24

                         CHARTER VIEW PORTFOLIO, Lender

                         By:   INVESCO Senior Secured Management, Inc.,
                               as Investment Advisor

                         By:__________________________________________________
                               Name:
                               Title:

                         By:   INVESCO Senior Secured Management, Inc.,
                               as attorney in fact

                         By:__________________________________________________
                               Name:
                               Title:

                         SEQUILS-LIBERTY, LTD.

                         By:   INVESCO Senior Secured Management, Inc.,
                               as Collateral Manager

                         By:__________________________________________________
                               Name:
                               Title:

                         MASSACHUSETTS MUTUAL LIFE INSURANCE
                         COMPANY, Lender

                         By:   David L. Babson & Company Inc.,
                               as Investment Advisor

                         By:__________________________________________________
                               Name:
                               Title:

                         MAPLEWOOD (CAYMAN) LIMITED, Lender

                         By:   David L. Babson & Company Inc. under delegated
                               authority from Massachusetts Mutual Life
                               Insurance Company as Investment Manager

                         By:__________________________________________________
                               Name:
                               Title:

                                       25

                         SAAR HOLDINGS CDO LIMITED
                         SIMSBURY CLO, LIMITED
                         SOMERS CDO, LIMITED, each a Lender

                         By:   David L. Babson & Company Inc. under delegated
                               authority from Massachusetts Mutual Life
                               Insurance Company as Collateral Manager

                         By:___________________________________________________
                               Name:
                               Title:

                         SUFFIELD CLO, LIMITED, Lender

                         By:   David L. Babson & Company Inc.,
                               as Collateral Manager

                         By:___________________________________________________
                               Name:
                               Title:

                         PERSEUS CDO I, LIMITED, Lender

                         By:   David L. Babson & Company Inc. under delegated
                               authority from Massachusetts Mutual Life
                               Insurance Company as Portfolio Manager

                         By:____________________________________________________
                               Name:
                               Title:

                         BILL & MELINDA GATES FOUNDATION, Lender

                         By:   David L. Babson & Company Inc.,
                               as Investment Adviser

                         By:____________________________________________________
                               Name:
                               Title:

                                       26

                         OAK HILL CREDIT PARTNERS I, LIMITED, Lender

                         By:   Oak Hill CLO Management I, LLC,
                               as Investment Manager

                         By:__________________________________________
                               Name:
                               Title:

                         OCTAGON INVESTMENT PARTNERS II, LLC, Lender

                         By:   Octagon Credit Investors, LLC,
                               as sub-investment manager

                         By:____________________________________________
                               Name:
                               Title:

                         OCTAGON INVESTMENT PARTNERS III, LTD.,
                         Lender

                         By:   Octagon Credit Investors, LLC,
                               as Portfolio Manager

                         By:_____________________________________________
                               Name:
                               Title:

                         OCTAGON INVESTMENT PARTNERS IV, LTD.,
                         Lender

                         By:   Octagon Credit Investors, LLC,
                               as collateral manager

                         By:_____________________________________________
                               Name:
                               Title:

                                       27

                         DELANO COMPANY
                         ROYALTON COMPANY
                         BEDFORD CDO, LIMITED
                         ADDISON CDO, LIMITED
                         JISSEKIKUN FUNDING, LTD.
                         BALBOA CDO I, LIMITED
                         SEQUILS-MAGNUM, LTD.
                         SAN JOAQUIN CDO I LIMITED, each a Lender

                         By:   Pacific Investment Management Company, LLC,
                               as its Investment Advisor

                         By:________________________________________________
                               Name:
                               Title:

                         CAPTIVA III FINANCE LTD.
                         CAPTIVA IV FINANCE LTD., each a Lender
                         as advised by Pacific Investment Management
                          Company LLC

                         By:________________________________________________
                               Name:
                               Title:

                         THE SUMITOMO TRUST & BANKING CO.,
                         LTD. NEW YORK BRANCH, Lender

                         By:________________________________________________
                               Name:
                               Title:

                         TCW SELECT LOAN FUND, LIMITED, Lender

                         By:  TCW Advisors, Inc., as its Collateral Manager

                         By:________________________________________________
                               Name:
                               Title:

                         By:________________________________________________
                               Name:
                               Title:

                                       28

                         MOUNTAIN CAPITAL CLO I LTD.
                         MOUNTAIN CAPITAL CLO II LTD. each a Lender

                         By:  Mountain Capital Advisors,
                              as its Investment Manager

                         By:_______________________________________________
                               Name:
                               Title:

                                       29

                              KZH ING-1 LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                              KZH ING-2 LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                              KZH ING-3 LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                              KZH CNC LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                              KZH WATERSIDE LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                              KZH PONDVIEW LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                                       30

                              KZH CRESCENT LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                              KZH CRESCENT-2 LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                              KZH CRESCENT-3 LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                              KZH HIGHLAND-2 LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                              KZH PAMCO LLC, Lender

                              By:___________________________________
                                   Name:
                                   Title:

                              FRANKLIN CLO II, LIMITED

                              By:___________________________________
                                   Name:
                                   Title:

                                       31

                             CONSENT AND AGREEMENT
                             ---------------------

     The undersigned hereby consents to the provisions of this Amendment and the
transactions contemplated herein and hereby (i) acknowledges and agrees that any
and all indebtedness, liabilities or obligations arising under or in connection
with the Notes are Obligations and are secured indebtedness under, and are
secured by, each and every Security Document to which it is a party, (ii) re-
pledges, re-grants and re-assigns a security interest in and lien on all of its
assets described as collateral in any Security Document, (iii) ratifies and
confirms its Guaranty dated May 4, 2001 made by it for the benefit of
Administrative Agent and Lenders, and (iv) expressly acknowledges and agrees
that the undersigned guarantees all indebtedness, liabilities and obligations
arising under or in connection with any and all Notes pursuant to the terms of
such Guaranty, and agrees that its obligations and covenants thereunder are
unimpaired hereby and shall remain in full force and effect.

                              PLAINS MARKETING CANADA LLC

                              By:  Plains Marketing, L.P., its sole member

                              By:  Plains Marketing GP Inc.,
                                   its general partner

                              By:____________________________________________
                                   Phil Kramer, Exec. Vice President

                                                                    EXHIBIT 21.1

      Subsidiaries and Partnerships of Plains All American Pipeline, L.P.

Corporations

 .  Plains Marketing GP Inc.

 .  PMC (Nova Scotia) Company

 .  Plains Marketing & Transportation, Inc.

Partnerships

 .  Plains Marketing, L.P.

 .  All American Pipeline, L.P.

 .  Plains Marketing Canada, L.P

Limited Liability Companies

 .  Plains Marketing Canada LLC

                                                                    EXHIBIT 23.1

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File Nos. 333-91141, 333-54118, 333-74920) and Form S-3
(File Nos. 333-59224, 333-68446) of Plains All American Pipeline, L.P. of our
reports dated March __, 2002, relating to the consolidated financial statements,
which appear in this Form 10-K.

Houston, Texas
March __, 2002