UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2005 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-13603

For the quarterly period ended June 30, 2004

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

Commission File No. 1-13603

TE Products Pipeline Company, Limited Partnership

(Exact name of Registrant as specified in its charter)

Delaware		76-0329620
(State of Incorporation or Organization)		(I.R.S. Employer Identification Number)
2929 Allen Parkway P.O. Box 2521 Houston, Texas 77252-2521
(Address of principal executive offices, including zip code)
(713) 759-3636
(Registrant’s telephone number, including area code)

2929 Allen Parkway

P.O. Box 2521

Houston, Texas 77252-2521

(Address of principal executive offices, including zip code)

(713) 759-3636

(Registrant’s telephone number, including area code)

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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Item 1.		Financial Statements
Consolidated Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003	1
	Consolidated Balance Sheets as of March 31, 2005 (unaudited) and December 31, 2004
Consolidated Statements of Income for the three months and six months ended June 30, 2004 and 2003 (unaudited)	2
	Consolidated Statements of Income for the three months ended March 31, 2005 and 2004 (unaudited)
Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003 (unaudited)	3
	Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004 (unaudited)
~~Notes to the Consolidated Financial Statements (unaudited)~~	4Notes to the Consolidated Financial Statements (unaudited)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
~~Forward-Looking Statements~~	24Forward-Looking Statements
Item 3. Quantitative and Qualitative Disclosures About Market Risk	25
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures	25
Item 4.		Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	26
Item 1.		Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K	26
Item 6.		Exhibits
Signatures	31

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30, 2004		December 31, 2003
	March 31, 2005		December 31, 2004
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	—1	$	~~188~~—
Accounts receivable, trade (net of allowance for doubtful accounts of $374)	16,045		25,377
Accounts receivable, trade (net of allowance for doubtful accounts of $56 and $56)	17,980		21,090
Accounts receivable, related parties	21,~~763~~893		~~154~~3,455
Inventories	910,~~643~~539		1110,~~186~~093
Other	812,~~347~~839		1012,~~230~~143
Total current assets	3643,~~798~~252		4746,~~135~~781
Property, plant and equipment, at cost (net of accumulated depreciation and amortization of $295,707 and $279,395)	691,887		682,385
Property, plant and equipment, at cost (net of accumulated depreciation and amortization of $319,129 and $311,197)	726,540		722,334
Equity investments	~~169~~170,~~644~~526		~~155~~169,~~861~~873
Other assets	1713,~~739~~272		1516,~~267~~156
Total assets	$	~~916~~953,~~068~~590	$	~~900~~955,~~648~~144
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable and accrued liabilities	$	138,~~939~~740	$	1110,~~518~~211
Accounts payable, related parties	3170,~~866~~179		1266,~~277~~451
Accrued interest	167,~~645~~354		1517,~~877~~063
Other accrued taxes	65,~~360~~453		5,~~732~~605
Other	7,~~608~~129		139,~~983~~339
Total current liabilities	7698,~~418~~855		59108,~~387~~669
Senior Notes	~~386~~390,~~995~~432		~~392~~393,~~164~~317
Note Payable, Parent Partnership	~~246~~320,~~768~~536		~~211~~301,~~314~~686
Other liabilities and deferred credits	179,~~526~~849		149,~~995~~980
Commitments and contingencies
Partners’ capital:
General partner’s interest	2		2
Limited partner’s interest	~~188~~133,~~359~~916		~~222~~141,~~786~~490
Total partners’ capital	~~188~~133,~~361~~918		~~222~~141,~~788~~492
Total liabilities and partners’ capital	$	~~916~~953,~~068~~590	$	~~900~~955,~~648~~144

See accompanying Notes to Consolidated Financial Statements.

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended March 31,
	2004			2003			2004			2003
	2005			2004
Operating revenues:
Transportation – Refined products	$	3834,~~937~~965		$	3730,~~802~~971		$	~~69,908~~		$	~~64,696~~
Transportation – LPGs	1332,~~721~~231			1328,~~357~~780			~~42,501~~			~~44,178~~
Other	89,~~559~~820			713,~~646~~911			~~22,470~~			~~16,900~~
Total operating revenues	6177,~~217~~016			5873,~~805~~662			~~134,879~~			~~125,774~~
Costs and expenses:
Operating, general and administrative	2826,~~714~~505			2529,~~825~~048			~~57,762~~			~~46,326~~
Operating fuel and power	7,~~192~~629			78,~~724~~049			~~15,241~~			~~15,902~~
Depreciation and amortization	89,~~998~~298			68,~~929~~638			~~17,636~~			~~13,937~~
Taxes – other than income taxes	2,~~492~~908			2,~~428~~843			~~5,335~~			~~5,076~~
Total costs and expenses	47,396			42,906			95,974			81,241
Gains on sales of assets	(92		)	—
Operating income	13,821			15,899			38,905			44,533
Total costs and expenses	46,248			48,578
Interest expense – net	(6,581		)	(7,245		)	(13,490		)	(14,047		)
Operating income	30,768			25,084
Equity earnings (losses)	(509		)	64			(1,747		)	(1,195		)
Interest expense – net	(7,959		)	(6,909		)
Other income – net	173			55			445			49
Equity losses	(842		)	(1,238		)
Net income	$	6,904		$	8,773		$	24,113		$	29,340
Other income – net	149			272
Net income	$	22,116		$	17,209

See accompanying Notes to Consolidated Financial Statements.

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Six Months Ended June 30,
	Three Months Ended March 31,
	2004			2003
	2005			2004
Cash flows from operating activities:
Net income	$	2422,~~113~~116		$	2917,~~340~~209
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	179,~~636~~298			138,~~937~~638
Losses in equity investments, net of distributions	~~6,697~~842			1,~~195~~238
Non-cash portion of interest expense	1568			167
Decrease in accounts receivable	9,332			2,539
Gains on sales of assets	(92		)	—
Decrease (increase) in inventories	1,543			(2,925		)
Decrease in accounts receivable	3,110			6,793
Decrease in other current assets	1,883			2,429
(Increase) decrease in inventories	(446		)	1,015
(Decrease) increase in accounts payable and accrued expenses	(3,813		)	4,466
(Increase) decrease in other current assets	(696		)	3,700
Other	10,867			11,744
Decrease in accounts payable and accrued expenses	(9,933		)	(13,332		)
Net cash provided by operating activities	68,273			62,741
Other	715			(8,200		)
Net cash provided by operating activities	24,982			17,068
Cash flows from investing activities:
Investment in Mont Belvieu Storage Partners, L.P.	(17,211		)	—
Investment in Centennial Pipeline LLC	—			(1,000		)
Acquisition of additional interest in Centennial Pipeline LLC	—			(20,000		)
Capital expenditures	(14,140		)	(7,820		)
Acquisition of assets	(1,962		)	—
Net cash used in investing activities	(14,140		)	(8,820		)
Investment in Centennial Pipeline LLC	(1,500		)	(1,000		)
Capital expenditures, net	(24,657		)	(25,053		)
Net cash used in investing activities	(45,330		)	(46,053		)
Cash flows from financing activities:
Proceeds from term loan	70,087			57,356
Proceeds from note payable, Parent Partnership	38,788			35,474
Repayments of term loan	(34,633		)	(20,500		)
Repayments of notes payable, Parent Partnership	(19,938		)	(14,973		)
Equity contribution – Parent Partnership	—			1,896
Distributions paid	(29,691		)	(28,894		)
Distributions paid	(58,585		)	(51,200		)
Net cash used in financing activities	(10,841		)	(8,393		)
Net cash used in financing activities	(23,131		)	(12,448		)
Net increase (decrease) in cash and cash equivalents	1			(145		)
Net (decrease) increase in cash and cash equivalents	(188		)	4,240
Cash and cash equivalents at beginning of period	—			188
Cash and cash equivalents at beginning of period	188			485
Cash and cash equivalents at end of period	$	1		$	43
Cash and cash equivalents at end of period	$	—		$	4,725
Non-cash investing activities:
Net assets transferred to Mont Belvieu Storage Partners, L.P.	$	—		$	61,042
Supplemental disclosure of cash flows:
Cash paid for interest (net of amounts capitalized)	$	1215,~~881~~330		$	1512,~~809~~610

See accompanying Notes to Consolidated Financial Statements.

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

TE Products ~~Pipeline~~ Pipeline Company, Limited Partnership (the “Partnership”), a Delaware limited partnership, was formed in March 1990. TEPPCO Partners, L.P. (the “Parent Partnership”) owns a 99.999% interest in us as the sole limited partner. TEPPCO GP, Inc. (“TEPPCO GP” or “General Partner”), a wholly owned subsidiary of the Parent Partnership, holds a 0.001% ~~General~~general ~~Partner~~partner interest in us. Texas Eastern Products Pipeline Company, LLC (the “Company”), a Delaware limited liability company, serves as the general partner of our Parent Partnership. ~~The~~ Through February 23, 2005, the Company iswas aan indirect wholly owned subsidiary of Duke Energy Field Services, LLC (“DEFS”), a joint venture between Duke Energy Corporation (“Duke Energy”) and ConocoPhillips. Through February 23, 2005, Duke Energy held ~~holds~~ an interest of approximately 70% in DEFS, and ConocoPhillips ~~holds~~held the ~~remaining~~ remaining interest of approximately 30%. ~~TEPPCO~~ GPOn February 24, ~~as general partner~~2005, ~~performs~~the ~~all~~Company ofwas ~~the~~acquired ~~management~~by ~~and~~DFI ~~operating~~GP ~~functions~~Holdings ~~required~~L.P. ~~for~~(formerly usEnterprise inGP ~~accordance~~Holdings ~~with~~L.P.) ~~the~~(“DFI”), ~~Agreement~~an affiliate of ~~Limited~~EPCO, Inc. (“EPCO”), ~~Partnership~~a ofprivately ~~TE Products~~held ~~Pipeline~~company ~~Company,~~controlled ~~Limited~~by ~~Partnership~~Dan ~~(the~~L. ~~“Partnership~~Duncan, for ~~Agreement”)~~approximately $1.1 billion. WeAs ~~reimburse~~a ~~our General~~result ~~Partner~~of the transaction, DFI owns and controls the ~~Company~~2% ~~for~~general ~~all~~partner ~~reasonable~~interest ~~direct~~in our Parent Partnership and ~~indirect~~has ~~expenses~~the ~~that~~right to receive the incentive distribution ~~they~~rights ~~incur~~associated inwith ~~managing~~the usgeneral partner interest.

TEPPCO GP, as our general partner, performs all of the management and operating functions required for us in accordance with the Agreement of Limited Partnership of TE Products Pipeline Company, Limited Partnership (the “Partnership Agreement”). We reimburse our General Partner and the Company for all reasonable direct and indirect expenses that they incur in managing us.

As used in this Report, “we,” “us,” and “our” means TE Products Pipeline Company, Limited Partnership.

The accompanying unaudited consolidated financial statements reflect all adjustments that are, in the opinion of our management, of a normal and recurring nature and necessary for a fair statement of our financial position as of ~~June~~March 3031, ~~2004~~2005, and the results of our operations and cash flows for the periods presented. The results of operations for the three ~~months~~ ~~and six~~ months ended ~~June~~March 3031, ~~2004~~2005, are not necessarily indicative of of results of our operations for the full year ~~2004~~2005. You should read these interim financial statements in conjunction with our consolidated financial statements and notes thereto presented in the TE Products Pipeline Company, Limited Partnership Annual Report on Form 10-K for the year ended December 31, ~~2003~~2004. We have reclassified certain amounts from prior periods to conform with the current presentation.

We operate and report in one business segment: transportation and storage of refined products, liquefied petroleum gases (“LPGs”) and petrochemicals. Our interstate transportation operations, including rates charged to customers, are subject to regulations prescribed by the Federal Energy Regulatory Commission (“FERC”). We refer to refined products, LPGs and petrochemicals in this Report, collectively, as “petroleum products” or “products.”

At ~~June~~March 3031, ~~2004~~2005, and December 31, ~~2003~~2004, we had working capital deficits of $3955.6 million and $1261.39 million, respectively. Cash generated from operations and from our Parent Partnership’s credit facilities and debt and equity offerings are our primary sources of liquidity. Working capital deficits can occur primarily due to the timing of operating cash receipts from customers, payment of cash distributions and the payment of normal operating expenses and capital expenditures. Our Parent Partnership ~~has~~ has historically made capital contributions, loans or otherwise provided ~~liquidity~~ liquidity to us as needed, but the Parent Partnership has no contractual obligation to do so. At ~~June~~March 3031, ~~2004~~ 2005, our Parent Partnership had $~~290~~81.05 million in available borrowing capacity under its revolving credit facility and agreed to cover any working capital needs, if required.

New Accounting Pronouncements

In December 2003, the Financial Accounting Standards Board (“FASB”) revised FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (“FIN 46”). FIN 46, issued by the FASB in January 2003, requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The revised statement, FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (“FIN 46(R)”), clarifies some of the requirements of FIN 46, eases some implementation problems that companies experienced implementing FIN 46, adds new scope exceptions and makes the probability more likely for many companies that potential variable interest entities will be identified and

~~consolidated. We adopted the new requirements detailed in~~New ~~FIN~~Accounting 46(R) as of March 31, 2004. In connection with our adoption of FIN 46(R), we evaluated our investments in Centennial Pipeline LLC and Mont Belvieu Storage Partners, L.P. and determined that these entities are not materially affected by our adoption of FIN 46(R), and thus we have accounted for them as equity method investments (see Note 5. Equity Investments). Our adoption of FIN 46(R) did not have an effect on our financial position, results of operations or cash flows.Pronouncements

OnIn December 82004, the ~~2003,~~Financial ~~President~~Accounting ~~Bush~~Standards ~~signed~~Board ~~into~~(“FASB”) aissued ~~law a~~Statement ~~bill~~of ~~that~~Financial Accounting ~~expands~~Standards ~~Medicare~~(“SFAS”) No. 123(R), ~~primarily~~Share-Based Payment. SFAS ~~adding~~123(R) arequires compensation ~~prescription~~costs ~~drug~~related ~~benefit~~to ~~for Medicare~~share-~~eligible~~based ~~retirees~~payment ~~starting~~transactions to be recognized in ~~2006~~the financial statements. With Welimited ~~anticipate~~exceptions, ~~that~~ the ~~benefits~~amount ~~our~~of ~~Parent~~the ~~Partnership~~compensation ~~pays~~cost ~~after~~is ~~2006 could~~to be ~~lower~~measured asbased on athe ~~result~~grant-date fair value of the ~~new~~equity ~~Medicare~~or ~~provisions;~~liability ~~however~~instruments issued. In addition, atliability ~~this~~awards ~~time~~are ~~the~~to ~~retiree~~be ~~medical~~re-measured ~~obligations~~each ~~and~~reporting ~~costs~~period. Compensation ~~reported~~cost dowill ~~not~~be ~~reflect~~recognized ~~any~~over the period that an employee ~~changes~~provides asservice in exchange for the award. SFAS 123(R) is a ~~result~~revision of ~~this~~SFAS ~~legislation~~No. 123, ~~Deferring~~Accounting ~~the~~for ~~recognition~~Stock-Based ofCompensation, as ~~the~~amended ~~new~~by ~~Medicare~~SFAS ~~provisions’~~No. 148, ~~impact was~~Accounting ~~permitted~~for byStock-Based ~~FASB~~Compensation ~~Staff~~– ~~Position~~Transition and Disclosure and supersedes Accounting Principles Board (“~~FSP~~APB”) ~~Nos.~~Opinion ~~106-1 and 106-2~~No. 25, Accounting ~~and~~ ~~Disclosure~~for ~~Requirements~~Stock ~~Related~~Issued to ~~the~~Employees. SFAS ~~Medicare~~123(R) ~~Prescription~~is ~~Drug, Improvement~~effective ~~and~~for ~~Modernization~~public ~~Act~~companies as of ~~2003,~~the ~~due~~first tointerim ~~open~~or ~~questions about~~annual ~~some~~reporting period of the ~~new~~first ~~Medicare~~fiscal ~~provisions~~year beginning ~~and~~on aor ~~lack~~after ofJune 15, ~~authoritative~~2005. ~~accounting~~As ~~guidance~~such, ~~about~~we ~~certain~~will ~~matters. The~~adopt ~~final~~SFAS ~~accounting~~123(R) ~~guidance~~in ~~could~~the ~~require~~first ~~changes~~quarter toof ~~previously reported~~2006. Early ~~information~~adoption is permitted, but not required. WeAll ~~will~~public ~~adopt~~companies ~~the~~that ~~provisions~~adopted the fair-value-based method of ~~these~~accounting ~~FSPs~~must inuse the ~~quarter~~modified prospective ~~ended~~transition ~~September~~method ~~30,~~and ~~2004;~~may ~~however,~~elect weto use the modified retrospective transition method. We do not believe that ~~this~~the ~~regulation~~adoption of SFAS 123(R) will have a material ~~adverse~~ effect on our ~~financial~~ financial position, results of operations or cash flows.

In ~~December~~November ~~2003~~2004, the ~~FASB~~Emerging ~~issued~~Issues aTask ~~revision~~Force ~~to Statement of Financial Accounting Standards~~ (“~~SFAS~~EITF”) ~~No.~~reached ~~132,~~consensus ~~Employers’ Disclosures~~in ~~about~~EITF ~~Pensions and Other Post~~03-~~Retirement~~13, ~~Benefits. This~~Applying ~~revision~~the ~~required~~Conditions ~~that~~in ~~companies provide~~Paragraph ~~more~~42 ~~details~~of ~~about~~FASB ~~their~~Statement ~~plan assets~~No. 144, ~~benefit obligations, cash flows,~~ ~~benefit~~Accounting ~~costs~~for ~~and~~Impairment ~~other relevant information.~~ or ADisposal ~~description~~ of ~~investment~~Long-Lived ~~policies~~Assets, ~~and~~in ~~strategies~~Determining ~~and~~Whether ~~target~~to Report ~~allocation~~Discontinued ~~percentages~~Operations, orto ~~target~~clarify ~~ranges,~~whether ~~for~~a ~~these~~component ~~asset~~of ~~categories~~an ~~also~~enterprise that is ~~required~~ ineither ~~financial~~disposed ~~statements. Cash flows~~of ~~will~~or ~~include~~classified ~~projections~~as ofheld ~~future~~for ~~benefit~~sale ~~payments~~qualifies ~~and~~for anincome statement ~~estimate~~presentation ~~of contributions~~as todiscontinued beoperations. The ~~made~~EITF inratified the ~~next~~consensus ~~year~~on toNovember 30, 2004. The ~~fund~~consensus ~~pension~~is ~~and~~to ~~other~~be applied ~~postretirement~~prospectively ~~benefit~~with ~~plans. In addition~~regard to ~~expanded~~a ~~annual~~component ~~disclosures,~~of ~~the~~an ~~FASB~~enterprise that is ~~requiring~~either disposed ~~companies~~of ~~to report~~or ~~the~~classified ~~various~~as ~~elements~~held offor ~~pension~~sale ~~and~~in ~~other~~reporting ~~postretirement~~periods ~~benefit~~beginning ~~costs~~after onDecember 15, ~~a quarterly basis~~2004. The ~~guidance is~~consensus ~~effective~~may ~~for~~be ~~fiscal~~applied ~~years~~retrospectively ~~ending~~for ~~after~~previously ~~December 15,~~reported ~~2003,~~operating ~~and for~~results ~~quarters~~related ~~beginning~~to ~~after~~disposal ~~December 15,~~transactions ~~2003. We~~initiated ~~adopted~~within ~~the~~an ~~provisions~~enterprise’s ofreporting period ~~the~~that ~~revised~~included ~~SFAS~~the ~~132~~date ~~effective December 31,~~that ~~2003,~~this ~~and~~consensus ~~certain~~was ~~provisions~~ratified. ~~regarding~~The ~~disclosure~~adoption of ~~information~~EITF ~~about~~03-13 ~~estimated~~did ~~future~~not ~~benefit~~have ~~payments~~an ineffect ~~the~~on ~~first~~our ~~quarter~~financial position, results of ~~2004~~operations or cash flows.

~~NOTE~~In 2March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, an ~~INTANGIBLE~~interpretation ~~ASSETS~~of FASB Statement No. 143 (“FIN 47”). FIN 47 clarifies that the term, conditional asset retirement obligation as used in SFAS No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional upon a future event that may or may not be within the control of the entity. Even though uncertainty about the timing and/or method of settlement exists and may be conditional upon a future event, the obligation to perform the asset retirement activity is unconditional. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. The fair value of a liability for the conditional asset retirement obligation should be recognized when incurred generally upon acquisition, construction, or development or through the normal operation of the asset. SFAS 143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of reporting periods ending after December 15, 2005. Retrospective application for interim financial information is permitted but is not required. Early adoption of FIN 47 is encouraged. We are currently evaluating what impact FIN 47 will have on our financial statements, but at this time, we do not believe that the adoption of FIN 47 will have a material effect on our financial position, results of operations or cash flows.

We account for our intangible assets under SFAS No. 142, Goodwill and Other Intangible Assets, which was issued by the FASB in July 2001. SFAS 142 prohibits amortization of goodwill and intangible assets with indefinite useful lives, and instead requires testing for impairment at least annually. SFAS 142 requires that intangible assets with finite useful lives be amortized over their respective estimated useful lives. If an intangible asset has a finite useful life, but the precise length of that life is not known, that intangible asset shall be amortized over the best estimate of its useful life. At a minimum, we will assess the useful lives and residual values of all intangible assets on an annual basis to determine if adjustments are required.

The following table reflects the components of amortized intangible assets, included in other assets on the consolidated balance sheets at June 30, 2004, and December 31, 2003 (in thousands):

	June 30, 2004					December 31, 2003
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Transportation agreements	$	1,328	$	(227	)	$	1,328	$	(194	)

~~Amortization expense on intangible assets was $16,603 for~~NOTE ~~each of the three month periods ended June 30, 2004 and 2003, and $33,205 for each of the six month periods ended June 30, 2004 and 2003~~2. INTANGIBLE ASSETS

~~Estimated~~We account for our intangible assets under SFAS No. 142, Goodwill and Other Intangible Assets, which was issued by the FASB in July 2001. SFAS 142 prohibits amortization ~~expense~~of ongoodwill and intangible assets ~~will~~with indefinite useful lives, but instead requires testing for impairment at least annually. SFAS 142 requires that intangible assets with definite useful lives be $0amortized over their respective estimated useful lives.1 If ~~million~~an ~~for~~intangible asset ~~each~~has a finite useful life, but the precise length of that life is not known, that intangible asset shall be amortized over the best estimate of its ~~years~~useful ~~ending~~life. At ~~December 31~~a minimum, ~~2004~~we ~~through~~will assess ~~2008~~the useful lives and residual values of all intangible assets on an annual basis to determine if adjustments are required.

AtThe ~~June 30,~~following ~~2004,~~table reflects wethe ~~had~~components ~~$33.4 million~~ of ~~excess investment~~intangible inassets ~~our~~being ~~equity~~amortized, ~~investment~~included in ~~Centennial Pipeline LLC, which was~~other ~~created~~assets ~~upon~~on ~~formation of~~ the ~~company~~consolidated ~~(see~~balance ~~Note~~sheets ~~5. Equity Investments). The excess investment is included in our equity investments account~~ at ~~June~~ March 3031, ~~2004~~2005, and ~~is accounted for as an intangible asset with an~~December 31, ~~indefinite~~2004 ~~life. We~~(in ~~assess the intangible asset for impairment on an annual basis.~~thousands):

	March 31, 2005					December 31, 2004
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization

Intangible assets being amortized:
Transportation agreements	$	1,328	$	(277	)	$	1,328	$	(260	)

At March 31, 2005, we had $33.4 million of excess investment in our equity investment in Centennial Pipeline LLC, which was created upon formation of the company. The excess investment is included in our equity investments account at March 31, 2005. This excess investment is accounted for as an intangible asset with an indefinite life. We assess the intangible asset for impairment on an annual basis.

Amortization expense on intangible assets was $16,603 for each of the three month periods ended March 31, 2005 and 2004.

Estimated amortization expense on intangible assets will be $0.1 million for each of the years ending December 31, 2005 through 2009.

NOTE 3. INTEREST RATE SWAP

OnIn October 4, 2001, we entered into an interest rate swap agreement to hedge our exposure to changes in the fair value of our fixed rate 7.51% Senior Notes due 2028. We designated this swap agreement as a fair value hedge. The swap agreement has a notional amount of $210.0 million and matures in January 2028 to match the principal and maturity of ~~our~~the 7.51% Senior Notes. Under the swap agreement, we pay a floating rate of interest based on a three-month U.S. Dollar LIBOR rate, plus a spread, and receive a fixed rate of interest of 7.51%. During the ~~six~~ three months ended ~~June~~March 3031, ~~2004~~ 2005, and ~~2003~~2004, we recognized reductions in interest expense of $5.1.8 million and $42.9 6 million, respectively, related to the difference between the fixed rate and the floating rate of interest on the interest rate swap. During the quarter ended ~~June~~March 3031, ~~2004~~2005, we measured the hedge effectiveness of this interest rate swap and noted that no gain or loss from ineffectiveness was required to be recognized. The fair value of this interest rate swap was a ~~loss~~gain of approximately $20.95 million ~~at June 30, 2004,~~ and ~~a gain of approximately~~ $2.3.4 million at March 31, 2005, and December 31, ~~2003~~2004, respectively.

NOTE 4. INVENTORIES

Inventories are valued at the lower of cost (based on weighted average cost method) or market. The costs of inventories did not exceed market values at ~~June~~March 3031, ~~2004~~2005, and December 31, ~~2003~~2004. The major components of inventories were as follows (in thousands):

	June 30, 2004		December 31, 2003
	March 31, 2005		December 31, 2004
Refined products	$	~~995~~5,323	$	65,~~632~~665
LPGs	~~4,203~~706		~~517~~—
Materials and supplies	4,~~445~~510		4,~~037~~428
Total	$	910,~~643~~539	$	1110,~~186~~093

NOTE 5. EQUITY INVESTMENTS

~~In August 2000,~~We weown ~~entered~~a ~~into~~50% ~~agreements~~ownership interest ~~with~~in ~~Panhandle~~Centennial ~~Eastern~~ Pipeline Company LLC (“~~PEPL~~Centennial”), ~~a former subsidiary of CMS Energy Corporation,~~ and Marathon Ashland Petroleum LLC (“Marathon”) toowns ~~form~~the ~~Centennial~~remaining ~~Pipeline~~50% ~~LLC (“Centennial”)~~interest. ~~Centennial~~ Centennial owns an interstate refined petroleum products pipeline extending from the upper ~~Texas~~ Texas Gulf Coast to central Illinois. ~~Through~~ ~~February~~During the three months ended March 931, ~~2003~~2005, ~~each~~we ~~participant~~have ~~owned~~not ainvested any ~~one-third~~additional ~~interest~~funds in Centennial. On During ~~February~~the three months ended March 1031, ~~2003~~2004, we ~~and~~invested ~~Marathon each acquired~~ an additional 16$1.7%0 ~~interest~~million in Centennial, ~~from PEPL~~which ~~for~~is ~~$20.0~~included ~~million~~in ~~each~~the equity investment balance at March 31, ~~increasing~~2005. We ~~our~~have ~~ownership~~not ~~percentages~~received inany ~~Centennial to~~distributions ~~50%~~from ~~each. During~~Centennial ~~the~~since ~~six~~its formation.

6On January 1, 2003, we and Louis Dreyfus Energy Services L.P. (“Louis Dreyfus”) formed Mont Belvieu Storage Partners, L.P. (“MB Storage”). We and Louis Dreyfus each have a 50% ownership interest in MB Storage. The purpose of MB Storage is to expand services to the upper Texas Gulf Coast energy marketplace by increasing pipeline throughput and the mix of products handled through the existing system and establishing new receipt and delivery connections. MB Storage is a service-oriented, fee-based venture with no commodity trading activity. We operate the facilities for MB Storage.

~~months~~For the year ended ~~June~~December 3031, ~~2004~~ 2005, we ~~invested~~will receive the first $1.57 million per quarter (or $6.78 million on an annual basis) of MB Storage’s income before depreciation expense, as defined in the operating agreement. For the year ~~Centennial~~ended December 31, ~~which~~2004, we received the first $1.8 million per quarter (or $7.15 million on an annual basis) of MB Storage’s income before depreciation expense. Our share of MB Storage’s earnings is ~~included~~adjusted annually by the partners of MB Storage. Any amount of MB Storage’s annual income before depreciation expense in excess of $6.78 million for 2005 and $7.15 million for 2004 is allocated evenly between Louis Dreyfus and us. Depreciation expense on assets each party originally contributed to MB Storage is allocated between us and Louis Dreyfus based on the ~~equity~~net ~~investment~~book ~~balance~~value atof ~~June~~the assets contributed. Depreciation expense on assets constructed or acquired by MB Storage subsequent to formation is allocated evenly between us and Louis Dreyfus. For the three months ended March 3031, 2005 and 2004, our sharing ratio in the earnings of MB Storage was approximately 58.1% and 66.4%, respectively. During the three months ended March 31, 2005 and 2004, we received no distributions from MB Storage and made no contributions to MB Storage.

~~As of January 1, 2003, we and Louis Dreyfus Energy Services, L.P. (“Louis Dreyfus”) formed Mont Belvieu Storage Partners, L.P. (“MB Storage”).~~ We ~~and~~use ~~Louis~~the ~~Dreyfus~~equity ~~each own a 50%~~method ~~ownership interest in MB Storage. The purpose~~ of MBaccounting ~~Storage is~~ to ~~expand~~account ~~services~~for toour ~~the~~investments ~~upper~~in ~~Texas~~Centennial ~~Gulf Coast energy marketplace by increasing pipeline throughput~~ and ~~the mix of products handled through the existing system and establishing new receipt and delivery connections.~~ MB Storage ~~is a service-oriented, fee-based venture with no commodity trading activity~~. WeSummarized ~~operate~~combined ~~the~~financial ~~facilities~~information for MB ~~Storage. Effective~~Centennial ~~January 1, 2003, we contributed property, plant~~ and ~~equipment with a net book value of $67.1 million to~~ MB Storage~~. Additionally,~~ ~~as of the contribution date, Louis Dreyfus had invested $6.1 million~~ for ~~expansion projects for MB Storage that we were required to reimburse if~~ the ~~original~~three ~~joint~~months ~~development~~ended ~~and~~March 31, ~~marketing~~2005 ~~agreement was~~and ~~terminated~~2004, byis ~~either~~presented ~~party. This deferred~~below ~~liability was also contributed and credited to the capital account of Louis Dreyfus~~ (in MBthousands): ~~Storage.~~

We receive the first $1.8 million per quarter (or $7.15 million on an annual basis) of MB Storage’s income before depreciation expense less mandatory capital expenditures, as defined in the operating agreement. Any amount of MB Storage’s annual income before depreciation expense less mandatory capital expenditures in excess of $7.15 million is allocated evenly between Louis Dreyfus and us. Depreciation expense on assets each originally contributed to MB Storage is allocated between us and Louis Dreyfus based on the net book value of the assets contributed. Depreciation expense on assets constructed or acquired by MB Storage subsequent to formation is allocated evenly between us and Louis Dreyfus. For the six months ended June 30, 2004, our sharing ratio in the earnings of MB Storage was approximately 70.2%. During the six months ended June 30, 2004, we contributed $17.2 million to MB Storage, of which $16.5 million was used to acquire storage assets in April 2004. During the six months ended June 30, 2004, we received distributions of $5.0 million from MB Storage. These amounts are included in the equity investment balance at June 30, 2004.

We use the equity method of accounting to account for our investments in Centennial and MB Storage. Summarized combined financial information for Centennial and MB Storage for the six months ended June 30, 2004 and 2003, is presented below (in thousands):

	Six Months Ended June 30,
	2004			2003
Revenues	$	28,508		$	22,229
Net loss	(907		)	(3,839		)

Summarized combined balance sheet data for Centennial and MB Storage as of June 30, 2004, and December 31, 2003, is presented below (in thousands):

	June 30, 2004		December 31, 2003
Current assets	$	33,554	$	26,771
Noncurrent assets	382,178		351,241
Current liabilities	43,240		35,032
Long-term debt	140,000		140,000
Noncurrent liabilities	13,308		13,182
Partners’ capital	219,184		189,798

Our investment in Centennial includes an excess net investment amount of $33.4 million (see Note 2. Intangible Assets). Excess investment is the amount by which our investment balance exceeds our proportionate share of the net assets of the investment.

	Three Months Ended March 31,
	2005		2004
Revenues	$	18,797	$	12,151
Net income (loss)	548		(996		)

Summarized combined balance sheet data for Centennial and MB Storage as of March 31, 2005, and December 31, 2004, is presented below (in thousands):

	March 31, 2005		December 31, 2004
Current assets	$	48,376	$	39,228
Noncurrent assets	374,660		377,924
Current liabilities	39,799		36,015
Long-term debt	140,000		140,000
Noncurrent liabilities	21,935		20,383
Partners’ capital	221,302		220,754

NOTE 6. DEBT

Senior Notes

On January 27, 1998, we completed the issuance of $180.0 million principal amount of 6.45% Senior Notes due 2008, and $210.0 million principal amount of 7.51% Senior Notes due 2028 (collectively the “Senior Notes”). The 6.45% Senior Notes were issued at a discount of $0.3 million and are being accreted to their face value over the term of the notes. The 6.45% Senior Notes due 2008 are not subject to redemption prior to January 15, 2008. The 7.51% Senior Notes due 2028, issued at par, may be redeemed at any time after January 15, 2008, at our option, in whole or in part, at a premium.

The Senior Notes do not have sinking fund requirements. Interest on the Senior Notes is payable semiannually in arrears on January 15 and July 15 of each year. The Senior Notes are unsecured obligations and rank on a parity with all of our other unsecured and unsubordinated indebtedness. The indenture governing the Senior Notes contains covenants, including, but not limited to, covenants limiting the creation of liens securing indebtedness and sale and leaseback transactions. However, the indenture does not limit our ability to incur additional indebtedness. As of ~~June~~March 3031, ~~2004~~2005, we were in compliance with the covenants of the Senior Notes.

We have entered into an interest rate swap agreement to hedge our exposure to changes in the fair value on a portion of the Senior Notes discussed above. At March 31, 2005 and December 31, 2004, the Senior Notes include the fair value of our interest rate swap of $0.5 million and $3.4 million, respectively (see Note 3. Interest Rate Swap).

AtThe ~~June 30,~~following table ~~2004,~~summarizes the estimated fair values of the ~~6.45%~~ Senior Notes ~~and~~as ~~7.51%~~of ~~Senior~~March 31, ~~Notes~~2005, ~~were approximately $185.5 million~~ and ~~$211.7 million~~December 31, ~~respectively. Market~~2004 ~~prices~~(in ~~for recent transactions and rates currently available to us for debt with similar terms and maturities were used to estimate fair value.~~millions):

			Fair Value
	Face Value		March 31, 2005		December 31, 2004

6.45% Senior Notes, due January 2008	$	180.0	$	186.2	$	187.1
7.51% Senior Notes, due January 2028	210.0		223.2		225.6

Other Long Term Debt and Credit Facilities

We currently utilize debt financing available from our Parent Partnership through intercompany notes. The terms of the intercompany notes generally match the principal and interest payment dates under the Parent Partnership’s credit agreements. The interest rates charged by the Parent Partnership include the stated interest rate of the Parent Partnership, plus a premium to cover debt issuance costs. The interest rate is also decreased or increased to cover gains and losses, respectively, on any interest rate swaps that the Parent Partnership may have in place on its respective credit agreements. These credit facilities of the Parent Partnership are described below.

On ~~April~~February 620, ~~2001~~2002, our Parent Partnership ~~entered~~issued ~~into a~~ $500.0 million ~~revolving~~principal ~~credit~~amount of 7.625% ~~facility~~Senior ~~including~~Notes ~~the~~due ~~issuance~~2012. The of7.625% ~~letters~~Senior Notes ofwere ~~credit~~issued ofat upa todiscount of $202.02 million ~~(“Three~~ ~~Year~~and ~~Facility”). The~~are ~~interest rate~~being ~~was~~accreted ~~based,~~to attheir face ~~our~~value ~~Parent~~over ~~Partnership’s~~the ~~option,~~term onof ~~either~~ the ~~lender’s base~~notes. ~~rate~~The ~~plus~~Senior aNotes ~~spread,~~may orbe ~~LIBOR~~redeemed ~~plus~~at aany ~~spread~~time inat ~~effect~~our atParent Partnership’s option with the ~~time~~payment of ~~the~~accrued ~~borrowings. The~~interest ~~credit~~and ~~agreement~~a ~~for~~make-whole ~~the~~premium ~~Three Year~~determined ~~Facility~~by ~~contained~~discounting ~~certain~~remaining ~~restrictive~~interest ~~financial~~and ~~covenant~~principal ~~ratios. During~~payments ~~the~~using ~~first~~a ~~quarter~~discount ~~of 2003, our Parent~~rate ~~Partnership~~equal ~~repaid~~to ~~$182.0~~the ~~million~~rate of the ~~outstanding~~United ~~balance~~States ofTreasury ~~the~~securities ~~Three~~of ~~Year~~comparable ~~Facility~~remaining ~~with~~maturity ~~proceeds~~plus ~~from~~35 ~~the~~basis ~~issuance~~points. The ofindenture ~~its~~governing 6these 7.~~125~~625% Senior Notes ~~on January 30,~~contains ~~2003. On June 27~~covenants, ~~2003~~including, ~~our~~but ~~Parent~~not ~~Partnership~~limited ~~repaid~~to, ~~the~~covenants ~~outstanding~~limiting ~~balance~~the ~~under~~creation ~~the~~of ~~Three~~liens ~~Year~~securing ~~Facility~~indebtedness ~~with~~and ~~borrowings~~sale ~~under~~and aleaseback ~~new~~transactions. However, ~~credit~~the ~~facility,~~indenture ~~and~~does ~~canceled~~not ~~the~~limit our ~~Three~~Parent ~~Year~~Partnership’s ~~Facility~~ability to incur additional indebtedness.

On ~~February~~ January 2030, ~~2002~~2003, our Parent Partnership issued $~~500~~200.0 million principal amount of 76.~~625~~125% Senior Notes due ~~2012~~2013. The 76.~~625~~125% Senior Notes were issued at a discount of $21.24 million and are being accreted to their face value over the term of the notes. The Senior Notes may be redeemed at any time at our Parent Partnership’s option with the payment of accrued interest and a make-whole premium determined by discounting remaining interest and principal payments using a discount rate equal to the rate of the United States Treasury securities of comparable remaining maturity plus 35 basis points. The indenture governing the 6.125% Senior Notes contains covenants, including, but not limited to, covenants limiting the creation of liens securing indebtedness and sale and leaseback transactions. However, the indenture does not limit the Parent Partnership’s ability to incur additional indebtedness.

8On June 27, 2003, our Parent Partnership entered into a $550.0 million revolving credit facility with a three year term, including the issuance of letters of credit of up to $20.0 million (“Revolving Credit Facility”). The interest rate is based, at our Parent Partnership’s option, on either the lender’s base rate plus a spread, or LIBOR plus a spread in effect at the time of the borrowings. The credit agreement for the Revolving Credit Facility contains certain restrictive financial covenant ratios. On October 21, 2004, our Parent Partnership amended the Revolving Credit Facility to (i) increase the facility size to $600.0 million, (ii) extend the term to October 21, 2009, (iii) remove certain restrictive covenants, (iv) increase the available amount for the issuance of letters of credit up to $100.0 million and (v) decrease the LIBOR rate spread charged at the time of each borrowing. On February 23, 2005, the Parent Partnership amended its Revolving Credit Facility to remove the requirement that DEFS must at all times own, directly or indirectly, 100% of the Company, to allow for its acquisition by DFI (see Note 1. Organization and Basis of Presentation). On March 31, 2005, $432.0 million was outstanding under the Revolving Credit Facility at a weighted average interest rate of 3.4%.

~~option~~As ~~with~~of ~~the~~March 31, 2005, ~~payment~~and ofDecember 31, ~~accrued~~2004, ~~interest~~we ~~and~~had aintercompany ~~make-whole~~notes ~~premium~~payable to our ~~determined~~Parent byPartnership ~~discounting~~of ~~remaining~~$320.5 ~~interest~~million and ~~principal~~$301.7 ~~payments~~million, ~~using~~respectively, awhich ~~discount~~represented ~~rate~~borrowings ~~equal~~under to the ~~rate~~Parent ofPartnership’s ~~the~~Revolving ~~United~~Credit Facility, ~~States~~7.625% ~~Treasury~~Senior ~~securities~~Notes ~~of comparable~~and ~~remaining~~6.125% ~~maturity~~Senior ~~plus~~Notes. 35The ~~basis~~weighted ~~points. The~~average interest ~~indenture~~rate ~~governing~~on ~~these~~the ~~7.625%~~note ~~Senior~~payable ~~Notes~~to ~~contains~~the Parent Partnership at March 31, ~~covenants~~2005, ~~including~~was 4.5%. At March 31, ~~but~~2005, accrued ~~not~~interest ~~limited~~includes $1.7 million due to, ~~covenants~~our ~~limiting~~Parent Partnership. For the ~~creation~~three ~~of liens~~months ~~securing~~ended ~~indebtedness~~March 31, 2005 and ~~sale~~2004, ~~and~~interest ~~leaseback~~costs ~~transactions. However,~~incurred on the ~~indenture~~note ~~does~~payable ~~not~~to ~~limit~~ our ~~Parent~~ Parent Partnership’s ~~ability~~totaled to$3.4 ~~incur~~million ~~additional~~and ~~indebtedness~~$2.9 million, respectively.

On January 30, 2003, our Parent Partnership issued $200.0 million principal amount of 6.125% Senior Notes due 2013. The 6.125% Senior Notes were issued at a discount of $1.4 million and are being accreted to their face value over the term of the notes. The Parent Partnership used $182.0 million of the proceeds from the offering to reduce the outstanding principal on the Three Year Facility to $250.0 million. The balance of the net proceeds received was used for general Parent Partnership purposes. The Senior Notes may be redeemed at any time at our Parent Partnership’s option with the payment of accrued interest and a make-whole premium determined by discounting remaining interest and principal payments using a discount rate equal to the rate of the United States Treasury securities of comparable remaining maturity plus 35 basis points. The indenture governing the 6.125% Senior Notes contains covenants, including, but not limited to, covenants limiting the creation of liens securing indebtedness and sale and leaseback transactions. However, the indenture does not limit the Parent Partnership’s ability to incur additional indebtedness.

On June 27, 2003, our Parent Partnership entered into a $550.0 million revolving credit facility with a three year term, including the issuance of letters of credit of up to $20.0 million (“Revolving Credit Facility”). The interest rate is based, at our Parent Partnership’s option, on either the lender’s base rate plus a spread, or LIBOR plus a spread in effect at the time of the borrowings. The credit agreement for the Revolving Credit Facility contains certain restrictive financial covenant ratios. Our Parent Partnership borrowed $263.0 million under the Revolving Credit Facility and repaid the outstanding balance of the Three Year Facility. At June 30, 2004, $260.0 million was outstanding under the Revolving Credit Facility.

As of June 30, 2004, and December 31, 2003, we had an intercompany note payable to our Parent Partnership of $246.8 million and $211.3 million, respectively, which represented borrowings under the Parent Partnership’s Revolving Credit Facility, 7.625% Senior Notes and 6.125% Senior Notes. The weighted average interest rate on the note payable to the Parent Partnership at June 30, 2004, was 5.2%. At June 30, 2004, accrued interest includes $4.1 million due to the Parent Partnership. For the six months ended June 30, 2004 and 2003, interest costs incurred on the note payable to the Parent Partnership totaled $6.1 million and $6.0 million, respectively.

NOTE 7. QUARTERLY DISTRIBUTONS OF AVAILABLE CASH

We make quarterly cash distributions of all of our available cash, generally defined as consolidated cash receipts less consolidated cash disbursements and cash reserves established by the General Partner in its sole discretion. We pay distributions of 99.999% to the Parent Partnership and 0.001% to the General Partner.

During the six months ended June 30, 2004 and 2003, we paid cash distributions totaling $58.6 million and $51.2 million, respectively, to our Parent Partnership. On August 6, 2004, we will pay a cash distribution to our Parent Partnership of $29.7 million for the quarter ended June 30, 2004.

NOTE 7. QUARTERLY DISTRIBUTONS OF AVAILABLE CASH

We make quarterly cash distributions of all of our Available Cash, generally defined as consolidated cash receipts less consolidated cash disbursements and cash reserves established by the General Partner in its sole discretion. We pay distributions of 99.999% to the Parent Partnership and 0.001% to the General Partner.

During the three months ended March 31, 2005 and 2004, we paid cash distributions to our Parent Partnership totaling $29.7 million and $28.9 million, respectively. On May 6, 2005, we will pay a cash distribution to our Parent Partnership of $29.7 million for the quarter ended March 31, 2005.

NOTE 8. EMPLOYEE BENEFIT PLANS

Retirement Plans

The Parent Partnership has adopted the TEPPCO Retirement Cash Balance Plan (“TEPPCO RCBP”), which is a non-contributory, trustee-administered pension plan. In addition, certain executive officers participate in the TEPPCO Supplemental Benefit Plan (“TEPPCO SBP”), which is a non-contributory, nonqualified, defined benefit retirement plan. The TEPPCO SBP was established to restore benefit reductions caused by the maximum benefit limitations that apply to qualified plans. The benefit formula for all eligible employees is a cash balance formula. Under a cash balance formula, a plan participant accumulates a retirement benefit based upon pay credits and current interest credits. The pay credits are based on a participant’s salary, age and service. The Parent Partnership uses a December 31 measurement date for these plans.

The components of ~~net~~ net pension benefits costs allocated to us for the TEPPCO RCBP and the TEPPCO ~~SBP~~ SBP for the three months ~~and six months~~ ended ~~June~~March 3031, ~~2004~~2005 and ~~2003~~2004, were as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended March 31,
	2004			2003			2004			2003
	2005			2004
Service cost benefit earned during the period	$	~~635~~656		$	~~540~~596		$	~~1,271~~		$	~~1,080~~
Interest cost on projected benefit obligation	~~120~~152			87123			~~241~~			~~174~~
Expected return on plan assets	(~~157~~209		)	(~~108~~155		)	~~(315~~		)	~~(216~~		)
Amortization of prior service cost	2			21			4			4
Recognized net actuarial loss	37			410			7			9
Net pension benefits costs	$	~~603~~608		$	~~525~~575		$	~~1,208~~		$	~~1,051~~

Other Postretirement Benefits

Effective January 1, 2001, the Parent Partnership provides certain health care and life insurance benefits for retired employees on a contributory and non-contributory basis (“TEPPCO OPB”). Employees become eligible for these benefits if they meet certain age and service requirements at retirement, as defined in the plans. The Parent Partnership provides a fixed dollar contribution, which does not increase from year to year, towards retired employee medical costs. The retiree pays all health care cost increases due to medical inflation. The Parent Partnership uses a December 31 measurement date for this plan.

The components of net postretirement benefits costs allocated to us for the TEPPCO OPB for the three months and six months ended June 30, 2004 and 2003, were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
Service cost benefit earned during the period	$	29	$	23	$	58	$	46
Interest cost on accumulated postretirement benefit obligation	33		29		65		58
Amortization of prior service cost	28		28		56		56
Recognized net actuarial loss	—		—		1		—
Net postretirement benefits costs	$	90	$	80	$	180	$	160

The components of net postretirement benefits cost allocated to us for the TEPPCO OPB for the three months ended March 31, 2005 and 2004, were as follows (in thousands):

	Three Months Ended March 31,
	2005		2004

Service cost benefit earned during the period	$	30	$	26
Interest cost on accumulated postretirement benefit obligation	35		32
Amortization of prior service cost	28		28
Recognized net actuarial loss	3		—
Net postretirement benefits costs	$	96	$	86

Estimated Future Benefit Contributions

The Parent Partnership expects to contribute approximately $3.05 million to ~~the~~its retirement plans and ~~other~~ other postretirement benefit plans in ~~2004~~2005. We expect to be allocated a share of these contributions.

NOTE 9. COMMITMENTS AND CONTINGENCIES

In the fall of 1999 and on December 1, 2000, the Company and the Parent Partnership were named as defendants in two separate lawsuits in Jackson County Circuit Court, ~~Jackson~~ Jackson County, Indiana, styled Ryan E. McCleery and Marcia S. McCleery, et al. v. Texas Eastern Corporation, et al. (including the Company and ~~the~~ Parent Partnership) and Gilbert Richards and Jean Richards v. Texas Eastern Corporation, et al. (including the Company and ~~the~~ Parent Partnership). In both cases, the ~~plaintiffs~~ plaintiffs contend, among other things, that we and other defendants stored and ~~disposed~~ disposed of toxic and hazardous substances and hazardous wastes in a manner that caused the materials to be released into the air, soil and water. They further contend that the release caused damages to the plaintiffs. In their complaints, the plaintiffs allege strict liability for both personal injury and property damage together with gross negligence, continuing nuisance, trespass, criminal mischief and loss of consortium. The plaintiffs are seeking compensatory, punitive and treble damages. On January 27, ~~We have filed an answer to both complaints~~2005, ~~denying~~we ~~the~~entered ~~allegations,~~into ~~as well~~Release asand ~~various~~Settlement ~~other~~Agreements ~~motions. In April 2004,~~with the ~~court granted a partial motion for summary judgment in~~McCleery ~~favor~~plaintiffs ofand the ~~defendants,~~Richards plaintiffs dismissing ~~two~~all of ~~the~~these plaintiffs’ ~~personal injury~~ claims ~~in their entirety~~. ItThe ~~is anticipated~~settlement ~~that~~terms ~~the~~included ~~plaintiffs will appeal this ruling~~a $2. ~~These~~0 ~~cases~~million ~~are~~payment ~~not~~to ~~covered~~the ~~by insurance. Discovery is ongoing~~plaintiffs, ~~and~~which wedid ~~are~~not ~~defending ourselves vigorously against the lawsuits. The plaintiffs~~ have ~~not~~a ~~stipulated~~material ~~the amount of damages that they are~~adverse ~~seeking~~effect inon ~~the~~our ~~suits. We~~financial ~~cannot estimate the loss~~position, ifresults ~~any,~~of ~~associated~~operations ~~with~~or ~~these~~cash ~~pending lawsuits~~flows.

~~On December 21,~~Although ~~2001,~~ we ~~were~~did ~~named~~not settle aswith aall ~~defendant~~plaintiffs inand awe ~~lawsuit~~therefore inremain ~~the~~named ~~10th Judicial~~parties ~~District,~~in ~~Natchitoches~~the ~~Parish,~~Ryan ~~Louisiana,~~E. ~~styled~~McCleery ~~Rebecca~~and LMarcia S. ~~Grisham~~McCleery, et al. v. TE ~~Products~~Texas ~~Pipeline Company, Limited~~Eastern ~~Partnership. In this case~~Corporation, ~~the~~ ~~plaintiffs~~et ~~contend~~al. ~~that our pipeline~~action, ~~which~~a ~~crosses~~co-defendant ~~the~~has ~~plaintiffs’ property,~~agreed ~~leaked toxic products onto their property and, consequently, caused damages~~ to ~~them. We have filed an~~indemnify ~~answer~~us tofor ~~the~~all ~~plaintiffs’~~remaining ~~petition~~claims ~~denying~~asserted ~~the allegations and are defending ourselves vigorously~~ against ~~the lawsuit~~us. ~~The plaintiffs have not stipulated the amount of damages they are seeking in the suit; however~~ Consequently, ~~this~~we ~~case is covered by insurance. We~~ do not believe that the outcome of ~~this lawsuit~~these remaining claims will have a material adverse effect on our financial position, results of operations or cash flows.

InOn ~~May 2003~~December 21, 2001, ~~the~~we ~~Company~~were ~~was~~ named as a defendant in a lawsuit ~~styled John R. James, et al. v. J Graves Insulation Company, et al. as filed~~ in the ~~first~~10th Judicial District ~~Court~~, Natchitoches ~~Caddo~~ Parish, Louisiana~~. There~~, ~~are~~styled ~~numerous plaintiffs~~Rebecca ~~identified~~L. inGrisham ~~the~~et ~~action that are alleged to have suffered damages~~al. asv. TE ~~the~~Products ~~result~~Pipeline ofCompany, ~~alleged exposure to asbestos-containing products and~~Limited ~~materials~~Partnership. ~~According~~In tothis ~~the petition and as a result of a preliminary investigation~~case, the ~~Company~~plaintiffs ~~believes~~contend that ~~the only~~our ~~claim asserted against it results from one individual for the period from July 1971 through June 1972~~pipeline, ~~who~~which iscrosses ~~alleged to have worked on a facility owned by~~ the ~~Company~~plaintiffs’~~s predecessor.~~ ~~This~~property, ~~period~~leaked ~~represents~~toxic aproducts ~~small~~onto ~~portion~~their ofproperty ~~the~~and, ~~total~~consequently ~~alleged exposure~~caused ~~period~~damages ~~from~~to ~~January 1964 through December 2001 for this individual~~them. ~~The~~We ~~individual’s~~have ~~claims involve~~filed ~~numerous~~an ~~employers and alleged job sites. The Company has been unable~~ answer to ~~confirm involvement by~~ the ~~Company or~~plaintiffs’ ~~its~~petition ~~predecessors~~denying ~~with~~ the ~~alleged location~~allegations, and itwe isare ~~uncertain at this time~~defending ~~whether~~ourselves ~~this case is covered by insurance. Discovery is planned, and the Company intends to defend itself~~ vigorously against ~~this~~the lawsuit. The plaintiffs have not stipulated the amount of damages ~~that~~ they are seeking in ~~this~~the suit~~. We~~; ~~are~~however, ~~obligated to reimburse the Company for any costs it incurs related to~~ this ~~lawsuit. We~~case ~~cannot estimate~~is ~~the~~covered ~~loss,~~by ~~if any, associated with this pending lawsuit~~insurance. We do not believe that the outcome of this lawsuit will have a material adverse effect on our financial position, results of operations or cash flows.

OnIn ~~April~~May 2, 2003, ~~Centennial~~the Company was ~~served~~named ~~with~~as a ~~petition~~defendant in a ~~matter~~lawsuit styled ~~Adams~~John R. James, et al. v. ~~Centennial~~J ~~Pipeline~~Graves ~~Company~~Insulation ~~LLC~~Company, et al. ~~This~~ ~~matter~~as ~~involves~~filed ~~approximately~~in ~~2,000~~the ~~plaintiffs~~first ~~who~~Judicial ~~allege~~District ~~that~~Court, ~~over~~Caddo ~~200~~Parish, Louisiana. There are numerous

~~defendants,~~plaintiffs identified ~~including~~in ~~Centennial,~~the ~~generated,~~action ~~transported,~~that ~~and/or disposed~~are ofalleged ~~hazardous~~to ~~and~~have ~~toxic~~suffered ~~waste~~damages atas ~~two~~the result ~~sites~~of inalleged ~~Bayou~~exposure ~~Sorrell,~~to ~~Louisiana, an~~asbestos-containing ~~underground~~products ~~injection~~and ~~well~~materials. According to the petition and as a ~~landfill.~~ result of ~~The~~a ~~plaintiffs~~preliminary ~~allege~~investigation, ~~personal~~the ~~injuries,~~Company ~~allergies,~~believes ~~birth~~that ~~defects, cancer~~the ~~and~~only ~~death. The~~claim ~~underground~~asserted ~~injection~~against ~~well~~it ~~has~~results ~~been~~from inone ~~operation~~individual ~~since~~for ~~May~~the ~~1976. Based~~period ~~upon~~from ~~current~~July 1971 through ~~information~~June 1972, ~~Centennial~~who ~~appears~~is alleged to behave worked on a defacility ~~minimis~~owned by ~~contributor,~~the ~~having~~Company’s ~~used~~predecessor. This ~~the~~period represents ~~disposal~~a ~~site~~small ~~during~~portion of the ~~two~~total ~~month~~alleged ~~time~~exposure period offrom January 1964 through December 2001 tofor ~~January 2002~~this individual. ~~Marathon~~The individual’s claims involve numerous employers and alleged job sites. The Company has been ~~handling~~unable ~~this~~to confirm ~~matter~~involvement ~~for~~by ~~Centennial~~the ~~under~~Company or its ~~operating~~ ~~agreement~~predecessors with ~~Centennial~~the alleged location, and it is uncertain at this time whether this case is covered by insurance. Discovery is planned, and the Company intends to defend itself vigorously against this lawsuit. WeThe plaintiffs have anot ~~50%~~stipulated ~~ownership~~the ~~interest~~amount of damages that they are seeking in this ~~Centennial~~suit. We are obligated to reimburse ~~Based~~the ~~upon~~Company ~~Centennial’s~~for ~~limited~~any ~~involvement~~costs ~~with~~it incurs related to this lawsuit. We cannot estimate the ~~disposal~~loss, ~~site~~if any, associated wewith this pending lawsuit. We do not believe that the outcome of this ~~matter~~lawsuit will have a material adverse effect on our financial position, results of operations or cash flows.

On ~~December~~ April 162, 2003, Centennial was served with a petition in a matter styled Adams, ~~the~~et al. v. Centennial Pipeline Company LLC, ~~the~~et ~~Parent~~al. This ~~Partnership~~matter ~~and other~~involves ~~Parent~~approximately ~~Partnership~~2,000 plaintiffs ~~entities~~who ~~were~~allege ~~named~~that asover 200 defendants, inincluding aCentennial, generated, ~~lawsuit~~transported, inand/or ~~the 128th~~disposed ~~District~~of ~~Court~~hazardous ofand ~~Orange~~toxic ~~County~~waste at two sites in Bayou Sorrell, ~~Texas~~Louisiana, ~~styled~~an ~~Elwood~~underground ~~Karr~~injection etwell ~~al.~~and va landfill. The ~~Centennial~~plaintiffs allege personal ~~Pipeline~~injuries, ~~LLC~~allergies, etbirth aldefects, cancer and death. InThe ~~this~~underground injection well has been in ~~case,~~operation ~~the~~since ~~plaintiffs~~May 1976. Based upon ~~contend~~current ~~that~~information, ~~our~~Centennial ~~pipeline~~appears ~~leaked~~to ~~toxic~~be ~~substances~~a onde ~~their~~minimis ~~property~~contributor, ~~causing~~having ~~them~~used ~~property~~the ~~damage.~~disposal site during the two month time period of December 2001 Weto ~~have~~January 2002. Marathon ~~filed~~has anbeen handling ~~answer~~this tomatter ~~the~~for ~~plaintiffs’~~Centennial ~~petition,~~under ~~denying~~its ~~the allegations~~operating ~~and~~agreement ~~are~~with Centennial. We ~~defending~~have ~~ourselves~~a ~~vigorously~~50% ~~against~~ownership interest ~~this~~in ~~lawsuit~~Centennial. ~~This~~On ~~case~~November 30, 2004, isthe ~~covered~~court approved a class settlement, which included an $80,000 payment by ~~insurance~~Centennial. WeThe dotime ~~not~~period ~~believe~~for parties ~~that~~to appeal this settlement expired in March 2005, and the ~~outcome~~class settlement ofbecame ~~this~~final. The terms of ~~lawsuit~~the ~~will~~settlement did not have a material adverse effect on our financial position, results of operations or cash flows.

InOn ~~addition~~February 4, ~~to the~~2005, ~~litigation~~we ~~discussed~~received ~~above,~~a weletter ~~have~~notifying ~~been,~~us inof ~~the~~a ~~ordinary~~claim ~~course~~for ofapproximately ~~business,~~$1.45 ~~a defendant~~million in damages ~~various~~allegedly ~~lawsuits~~due ~~and~~to a ~~party~~shipper tobeing ~~various~~delivered ~~other~~off-specification ~~legal~~gasoline during ~~proceedings,~~November 2004. We are ~~some~~contesting ofliability ~~which~~for ~~are~~this ~~covered~~matter, inand ~~whole~~to orthe inextent ~~part~~there bymay ~~insurance.~~be Weliability, we ~~believe~~would ~~that~~seek reimbursement from the ~~outcome~~ ofthird ~~these~~party ~~lawsuits~~refiner ~~and~~who ~~other~~supplied ~~proceedings~~the gasoline ~~will~~into ~~not~~our ~~individually~~pipeline orsystem. We indo not believe that the ~~aggregate~~ outcome of this matter will have a future material adverse effect on our ~~consolidated~~ financial position, results of operations or cash flows.

~~Our~~In ~~operations~~addition ~~are subject~~ to ~~federal, state and local laws and regulations governing~~ the ~~discharge~~litigation ofdiscussed ~~materials~~above, ~~into~~we ~~the~~have ~~environment.~~been, ~~Failure to comply with these laws and regulations may result~~ in the ~~assessment~~ordinary course of ~~administrative~~business, ~~civil and~~a ~~criminal~~defendant ~~penalties,~~in ~~imposition~~various oflawsuits ~~injunctions delaying or prohibiting certain activities~~ and ~~the~~a ~~need~~party to ~~perform~~various ~~investigatory~~other ~~and~~legal ~~remedial activities. Although we believe our operations are in material compliance with applicable environmental laws and regulations~~proceedings, ~~risks~~ some of ~~significant~~which ~~costs and liabilities~~ are ~~inherent~~covered in ~~pipeline~~whole ~~operations,~~or ~~and we~~in ~~cannot~~part ~~assure~~by ~~you that significant costs and liabilities will not be incurred~~insurance. ~~Moreover,~~We itbelieve ~~is possible~~ that ~~other developments, such as~~the ~~increasingly~~outcome ~~strict~~of ~~environmental~~these ~~laws~~lawsuits and ~~regulations~~other ~~and~~proceedings ~~enforcement~~will ~~policies thereunder,~~not ~~and~~individually ~~claims for damages to property~~ or ~~persons resulting from our operations, could result~~ in ~~substantial costs and liabilities to us. We believe that changes in environmental~~the ~~laws~~aggregate ~~and regulations will not~~ have a future material adverse effect on our consolidated financial position, results of operations or cash flows ~~in the near term~~.

OnOur ~~March 26, 2004,~~operations ~~an initial decision in ARCO Products Co., et al. v. SFPP, Docket~~are ~~OR96-2-000,~~subject etto ~~al. was issued by the FERC~~federal, ~~which~~state ~~made~~and ~~several~~local ~~significant determinations~~laws ~~with~~and ~~respect~~regulations togoverning ~~finding “changed circumstances” under~~ the ~~Energy~~ ~~Policy~~discharge ~~Act~~ of ~~1992~~materials ~~(“EP~~into ~~Act”). The decision lists factors that will be considered by~~ the FERC, which include showing a substantial change in economic circumstances, the time factor that will be reviewed, what will be considered the basis of the rate and a pipeline’s documentary requirementsenvironment. ~~The~~ ~~decision~~Failure ~~largely clarifies, but does not fully quantify, the standard required for a complainant~~ to ~~demonstrate~~comply ~~that~~with anthese ~~oil pipeline’s rates~~laws ~~are~~and noregulations ~~longer~~may ~~subject~~result ~~to the rate protection of the EP Act by demonstrating that a substantial change~~ in ~~circumstances has occurred since 1992 with respect to~~ the ~~basis~~assessment of ~~the~~administrative, ~~rates~~civil ~~being challenged.~~ and Incriminal ~~the decision~~penalties, ~~the~~imposition ~~FERC found that a limited number~~ of ~~rate~~injunctions ~~elements will~~delaying ~~significantly~~or ~~affect~~prohibiting ~~the economic basis for a pipeline company’s~~certain ~~rates. The~~activities ~~elements~~and ~~identified in~~ the ~~decision~~ ~~are~~need ~~volume~~to ~~changes,~~perform ~~allowed~~investigatory ~~total return~~ and ~~total~~remedial ~~cost of service (including major cost elements of rate base such as tax rates and tax allowances, among others)~~activities. ~~The~~Although ~~FERC~~we ~~did reject,~~believe ~~however,~~our ~~the~~operations ~~use~~are ~~of changes~~ in ~~tax rate and income tax allowances as~~ ~~standalone~~material ~~factors. The~~compliance ~~FERC~~with ~~further found~~applicable ~~that~~environmental iflaws ~~a complainant can show that a pipeline’s volumes~~ and ~~overall~~regulations, ~~cost~~risks of ~~service collectively reflect a~~ significant ~~increase~~costs ~~in net earnings between the establishment of the challenged rate pre-1992~~ and ~~the~~liabilities ~~time~~are ofinherent ~~the complaint, based primarily on the combined impact of changes~~ in ~~volumes~~pipeline ~~and changes in overall cost of service~~operations, ~~the complainant has met its burden relative~~and towe ~~establishing~~cannot ~~“changed~~assure ~~circumstances.” It~~you ~~appears~~that ~~likely~~significant ~~that~~costs ~~the~~and ~~decision~~liabilities will ~~be appealed. We have~~ not ~~yet determined the impact, if~~be ~~any, that the decision could have on our rates if they were reviewed under the criteria of this decision~~incurred. Moreover,

Onit ~~July 20, 2004,~~is ~~the United States Court of Appeals for the District of Columbia Circuit~~possible ~~issued~~that aother ~~decision in BP West Coast Products~~developments, ~~LLC~~such v.as ~~Federal~~increasingly ~~Energy Regulatory~~strict ~~Commission~~environmental ~~and~~laws ~~United States of America, which reviewed the decisions that the FERC issued in Opinion Nos. 435, 435-A, 435-B~~ and ~~Clarification~~regulations and ~~Rehearing~~enforcement ~~Order. In these~~policies ~~opinions~~thereunder, ~~the~~and ~~FERC~~claims ~~considered~~for ~~the~~damages ~~tariffs of SFPP, L.P. (“SFPP”) and~~to ~~complaints~~property ~~and~~or ~~other~~persons ~~filings~~resulting byfrom ~~shipper~~our ~~customers~~operations, ofcould ~~SFPP. The~~result ~~Court determined,~~ in ~~part, that SFPP, a~~substantial ~~publicly~~costs ~~traded~~and ~~limited~~liabilities ~~partnership, is not allowed~~ to ~~include income tax allowance in its cost-of-service analysis in the determination of just and reasonable rates that were not grandfathered under the EP Act~~us. ~~With~~We ~~respect to SFPP’s grandfathered rates,~~believe ~~the Court remanded to the FERC for further review, in light of the Court’s holding on income tax allowance, of the FERC’s determination~~ that changes in ~~the~~ ~~FERC’s~~environmental ~~tax~~laws ~~allowance~~and ~~policy~~regulations dowill not ~~constitute~~have ~~“substantially~~a ~~changed~~material ~~circumstances”~~adverse ~~under~~effect ~~the EP Act. The Court’s decision~~ on ~~income tax allowance does not affect~~ our ~~current~~financial ~~rates and rate structure because our rates are not based on the cost-of-service methodology. However~~position, ~~the~~results ~~Court’s decision might become relevant to us should we (i) elect in the future to use cost-~~of~~-service~~ tooperations ~~support our rates~~ or ~~(ii)~~cash ~~be required to use such~~flows ~~methodology~~in tothe ~~defend~~near ~~our indexed rates against a shipper complaint~~term.

InOn ~~1994~~March 26, ~~the~~2004, an ~~Louisiana~~initial ~~Department~~decision ofin ~~Environmental~~ARCO ~~Quality~~Products ~~(“LDEQ”)~~Co., et al. ~~issued~~v. aSFPP, ~~compliance~~Docket ~~order~~OR96-2-000, ~~for~~et ~~environmental~~al. ~~contamination~~was atissued ~~our~~by ~~Arcadia,~~the ~~Louisiana~~FERC, ~~facility~~which made several significant determinations with respect to finding “changed circumstances” under the Energy Policy Act of 1992 (“EP Act”). InThe ~~1999~~decision largely clarifies, ~~our~~but does not ~~Arcadia~~fully ~~facility~~quantify, ~~and~~the ~~adjacent~~standard ~~terminals~~required ~~were~~for ~~directed~~a bycomplainant ~~the~~to ~~Remediation~~demonstrate that an ~~Services~~oil ~~Division~~pipeline’s rates are no longer subject to the rate protection of the ~~LDEQ~~EP Act by demonstrating that a substantial change in circumstances has occurred since 1992 with respect to ~~pursue~~the ~~remediation~~basis of ~~this~~the ~~contamination~~rates being challenged. AtIn ~~June 30,~~the ~~2004~~decision, wethe ~~have~~FERC anfound ~~accrued~~that ~~liability~~a limited number of ~~$0.3 million~~rate ~~for~~elements ~~remediation~~will ~~costs~~significantly ataffect ~~our~~the ~~Arcadia~~economic ~~facility~~basis for a pipeline company’s rates. ~~Effective~~The elements identified in ~~March 2004~~the decision are volume changes, weallowed ~~executed~~total anreturn ~~access~~and ~~agreement~~total ~~with~~cost-of-service an(including ~~adjacent~~major ~~industrial~~cost ~~landowner~~elements ~~who~~of israte ~~located~~base such as ~~upgradient~~tax ofrates ~~the~~and ~~Arcadia~~tax ~~facility~~allowances, among others). ~~This~~The ~~agreement~~FERC ~~enables~~did reject, however, the ~~landowner~~use toof ~~proceed~~changes ~~with~~in ~~remediation~~tax rate and income ~~activities~~tax atallowances ~~our~~as ~~Arcadia~~standalone ~~facility~~factors. It appears ~~for~~likely ~~which~~that itthe ~~has~~decision ~~accepted~~will ~~shared responsibility~~be appealed. We dohave not ~~expect~~yet ~~that~~ determined the ~~completion~~impact, ofif any, that the ~~remediation~~decision, ~~program~~if ~~proposed~~it tois ~~the~~ultimately ~~LDEQ~~upheld, ~~will~~would have ~~a future~~on ~~material~~our ~~adverse~~rates ~~effect~~if they onwere ~~our~~reviewed ~~financial~~under ~~position,~~the ~~results~~criteria of ~~operations or~~this ~~cash flows~~decision.

On ~~March~~July 1720, ~~2003~~2004, the weCourt ~~experienced~~of Appeals for the District of Columbia Circuit issued an opinion in BP West Coast Producers LLC v. FERC. In reviewing a ~~release~~series of ~~511~~orders ~~barrels~~involving SFPP, L.P., the court held among other things that the FERC had not adequately justified its policy of ~~jet~~providing an oil pipeline limited partnership with an ~~fuel~~income ~~from~~tax aallowance ~~storage~~equal ~~tank~~to atthe ~~our~~proportion ~~Blue~~of ~~Island~~its ~~terminal~~limited ~~located~~partnership interests inowned ~~Cook~~by ~~County~~corporate partners. Under the FERC’s initial ruling, SFPP, L.P. was permitted an income tax ~~Illinois~~allowance on its cost-of-service filing for 42.7% of the net operating (pre-tax) income expected from operations and was denied an income tax allowance equal to 57.3% of its limited partnership interests that were held by non-corporate partners. The court remanded the case back to the FERC for further review. As a result of the ~~release~~court’s remand, on December 2, we2004, ~~have~~the ~~entered~~FERC ~~into~~issued ana ~~Agreed~~Request ~~Order~~for ~~with~~Comments seeking comments on whether the court’s ~~State~~ruling applies only to the specific facts of ~~Illinois~~the SFPP, L. WeP. ~~are~~proceeding or ~~complying~~also ~~with~~extends ~~the~~to ~~Agreed~~other ~~Order~~capital structures involving partnerships and other ~~are~~forms inof ~~the~~ownership. The ~~process~~ultimate outcome of ~~negotiating~~the aFERC’s ~~final~~inquiry ~~settlement~~on ~~with~~income ~~the~~tax ~~State~~allowance should not affect our current rates and rate structure because our rates are not based on cost-of-service ~~Illinois~~methodology. WeHowever, dothe ~~not~~outcome ~~expect~~of ~~that~~the ~~compliance~~income ~~with~~tax ~~the~~allowance ~~Agreed~~would ~~Order~~become orrelevant ~~the~~to ~~settlement~~us ~~will~~should ~~have~~we a(i) elect in the future ~~material adverse~~to ~~effect~~use oncost-of-service ~~our~~to ~~financial~~support ~~position~~our rates, ~~results~~or of(ii) be required ~~operations~~to oruse ~~cash~~such ~~flows~~methodology to defend our indexed rates.

In 1994, the Louisiana Department of Environmental Quality (“LDEQ”) issued a compliance order for environmental contamination at our Arcadia, Louisiana, facility. In 1999, our Arcadia facility and adjacent terminals were directed by the Remediation Services Division of the LDEQ to pursue remediation of this contamination. At ~~June~~March 3031, ~~2004~~ 2005, we have an accrued liability of $2.0.2 million ~~related~~for remediation tocosts ~~various~~at ~~sites~~our Arcadia facility. ~~requiring~~Effective ~~environmental~~in March 2004, we executed an access agreement with an adjacent industrial landowner who is located upgradient of the Arcadia facility. This agreement enables the landowner to proceed with remediation activities at our Arcadia facility for which it has accepted shared responsibility. We do not expect that the completion of the remediation ~~programs~~program proposed ~~associated~~to ~~with~~the ~~these~~LDEQ ~~activities~~ will have a future material adverse effect on our financial position, results of operations or cash flows.

WeOn March 17, ~~regularly~~2003, we experienced a release of 511 barrels of jet fuel from a ~~review~~storage tank at our ~~long-lived~~Blue ~~assets~~Island ~~for~~terminal ~~impairment~~located in ~~accordance~~Cook ~~with~~County, ~~SFAS No~~Illinois. As ~~144~~a result of the release, ~~Accounting~~we have entered ~~for~~into ~~the~~an ~~Impairment~~Agreed orOrder ~~Disposal~~with the State of ~~Long-Lived~~Illinois ~~Assets~~which required us to conduct an environmental investigation. At ~~June 30~~this time, ~~2004,~~ we have ~~identified~~complied with the terms of the Agreed Order, and the results of ~~certain~~the ~~assets~~environmental ~~that~~investigation weindicated ~~are~~there ~~assessing~~were ~~for~~no ~~recoverability~~soil ~~resulting~~or groundwater impacts from ~~recent operational~~the ~~changes~~release. We are ~~continuing~~in the toprocess ~~monitor~~of ~~these~~negotiating ~~circumstances~~a ~~surrounding~~final settlement with the ~~assets;~~State ~~however~~of Illinois, weand we do not ~~believe~~ expect that ~~the~~compliance ~~resolution~~with of the ~~matter~~settlement will have a future material adverse effect on our financial ~~condition~~ position, results of operations or cash flows.

Centennial entered into credit facilities totaling $150.0 million and, as of June 30, 2004, $150.0 million was outstanding under those credit facilities. The proceeds were used to fund construction and conversion costs of Centennial’s pipeline system. We and Marathon have each guaranteed one half of Centennial’s debt, up to a maximum amount of $75.0 million each.

On July 22, 2004, we experienced a release of approximately 12 barrels of jet fuel from a sump at our Lebanon, Ohio, terminal. The released jet fuel was contained within a storm water retention pond located on the terminal property. Six migratory waterfowl were affected by the jet fuel and were subsequently euthanized by or at the request of the United States Fish and Wildlife Service (“USFWS”). On October 1, 2004, the USFWS served us with a Notice of Violation, alleging that we violated 16 USC 703 of the Migratory Bird Treaty Act for the “take[ing] of migratory birds by illegal methods.” On February 7, 2005, we entered into a Memorandum of Understanding with the USFWS, settling all aspects of this matter. The terms of this settlement did not have a material effect on our financial position, results of operations or cash flows.

On July 27, 2004, we received notice from the United States Department of Justice (“DOJ”) of its intent to seek a civil penalty against us related to our November 21, 2001, release of approximately 2,575 barrels of jet fuel from our 14-inch diameter pipeline located in Orange County, Texas. The DOJ, at the request of the Environmental Protection Agency, is seeking a civil penalty against us for alleged violations of the Clean Water Act (“CWA”) arising out of this release. The maximum statutory penalty calculated for this alleged violation of the CWA is $2.8 million. We are in discussions with the DOJ regarding this matter and have responded to its request for additional information. We do not expect a civil penalty, if any, to have a material adverse effect on our financial position, results of operations or cash flows.

At March 31, 2005, we have an accrued liability of $1.5 million related to sites requiring environmental remediation activities. We do not expect that the completion of remediation programs associated these activities will have a future material adverse effect on our financial position, results of operations or cash flows.

Centennial entered into credit facilities totaling $150.0 million, and as of March 31, 2005, $150.0 million was outstanding under those credit facilities. The proceeds were used to fund construction and conversion costs of its pipeline system. We and Marathon have each guaranteed one-half of Centennial’s debt, up to a maximum amount of $75.0 million each.

On February 24, 2005, the Company was acquired from DEFS by DFI. The Company owns a 2% general partner interest in our Parent Partnership and is the general partner of the Parent Partnership. On March 11, 2005, the Bureau of Competition of the Federal Trade Commission (“FTC”) delivered written notice to DFI’s legal advisor that it was conducting a non-public investigation to determine whether DFI’s acquisition of the Company may substantially lessen competition. The FTC has contacted the Company requesting data. The Company intends to cooperate fully with any such investigations and inquiries requested by the FTC or any other regulatory authorities.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

You should read ~~the~~ the following review of our financial position and results of operations in conjunction with our Consolidated Financial Statements ~~and the notes thereto~~. Material period-to-period variances in the consolidated statements of income are discussed under “Results of Operations.” The “Financial Condition and Liquidity” section analyzes our cash flows and financial position. “Other Considerations” addresses trends, future plans and contingencies that are reasonably likely to materially affect ~~our~~ future liquidity or earnings. The Consolidated Financial Statements should be read in conjunction with the financial statements and related notes, together with our discussion and analysis of financial position and results of ~~operations~~ operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2003~~ 2004.

Critical Accounting Policies and Estimates

A summary of the ~~significant~~ significant accounting policies we have adopted and followed in the preparation of our consolidated financial statements is detailed in our consolidated ~~financial~~ financial statements for the year ended December 31, ~~2003~~2004, included in our ~~Annual~~ Annual Report on Form 10-K. Certain of these accounting policies require the use of estimates. The following estimates, in our opinion, are subjective in nature, require the exercise of judgment and involve complex analysis: revenue and expense accruals, including ~~accruals for~~ power costs, property taxes, environmental costs and property, plant and equipment. These estimates are based on our knowledge and understanding of current conditions and actions we may take in the future. Changes in ~~these~~ these estimates will occur as a result of the passage of time and the occurrence of future events. Subsequent changes in these estimates may have a significant impact on our financial condition and results of operations.

Management Overview of the ~~Six~~Three Months Ended ~~June~~ 30March 31, ~~2004~~2005

We reported net income of $2422.1 million for the ~~six~~three months ended ~~June 30~~March 31, ~~2004~~2005, compared with net income of $2917.~~3 million~~2 million for the ~~six~~three months ended ~~June 30~~March 31, ~~2003, and $6~~2004.9 Our ~~million~~results ~~for~~were ~~the~~impacted ~~three~~by ~~months~~increased refined ~~ended~~products ~~June~~and ~~30,~~LPG ~~2004,~~transportation ~~compared~~revenues ~~with~~and ~~net~~volumes ~~income~~delivered. ofThese ~~$8.8~~increases were ~~million~~partially ~~for~~offset ~~the~~by ~~three months~~lower ~~ended~~propane ~~June~~inventory 30fee revenues, ~~2003. Our results~~increased ~~for~~environmental ~~the~~expenses ~~three~~and ~~months~~increased ~~and~~rental ~~six~~expense ~~months~~from ~~ended~~our ~~June~~Centennial Pipeline ~~30,~~LLC ~~2004,~~(“Centennial”) ~~were~~capacity ~~impacted~~lease ~~by higher~~agreement. Additionally, pipeline integrity ~~costs~~expenses decreased of $24.64 million ~~and~~compared ~~$8.0~~to ~~million, respectively, which essentially offset increased revenues from both~~ our ~~refined~~first ~~products~~quarter ~~and~~2004 ~~propane businesses~~costs. We anticipate that our pipeline integrity expenses ~~costs~~ for ~~2004~~2005 will be approximately $317.06 million tolower ~~$5.0 million higher~~ than our ~~2003~~2004 ~~costs~~expenses due ~~as we continue~~ to ~~perform~~the ~~pipeline maintenance~~completion ~~under~~of ~~our integrity management program~~projects.

WeCertain ~~are focused on~~factors ~~opportunities, challenges and risks that~~ are inherent in our business. These include the safe, reliable and ~~efficient~~ efficient operation of the pipelines and facilities that we own or operate while meeting increased regulations that govern the operation of our assets and the costs associated with such regulations. We are also focused on our continued growth through expansion of the assets that we own and through acquisition of assets that complement our ~~current~~ current operations. We remain confident that our current strategy and focus will provide continued growth in earnings and cash distributions. These ~~growth~~ opportunities include continued ~~development~~growth, ofresulting ~~refined~~from ~~products~~our ~~and~~recent ~~propane~~capacity expansion and ~~market~~grass ~~opportunities,~~roots ~~including~~facility ~~pipeline~~investments and ~~terminal~~growing ~~expansions~~demand for Gulf Coast sourced products.

We are ~~continuing~~subject to economic ~~pursue~~and aother ~~plan~~factors tothat ~~make system~~affect ~~changes~~our toindustry. The ~~allow~~demand for ~~bi-directional~~refined ~~flow~~products ~~and~~is ~~deliveries~~dependent upon ~~into~~ the ~~Shreveport~~ price, ~~Louisiana~~prevailing ~~market~~economic ~~area. We have~~conditions ~~completed~~and ~~feasibility~~demographic ~~studies~~changes in the markets served, trucking and ~~are~~railroad infreight, ~~discussions~~agricultural ~~with~~usage ~~potential~~and military ~~customers~~usage; ~~regarding~~ the ~~transportation~~demand offor ~~volumes~~propane ~~through~~is sensitive to the ~~pipeline~~weather ~~system~~and prevailing ineconomic ~~this~~conditions; ~~area. Engineering~~and ~~design~~the ~~work~~ demand for petrochemicals is ~~currently~~dependent ~~under~~upon ~~way~~prices for toproducts ~~reverse~~produced ~~the~~from ~~flow~~petrochemicals. ofWe ~~the~~are ~~pipeline~~also ~~segment~~subject ~~from~~to regulatory ~~Shreveport~~factors tosuch Elas ~~Dorado,~~the ~~Arkansas. The project~~amounts iswe ~~scheduled~~are allowed to becharge ~~completed~~our bycustomers for the services ~~end~~we ofprovide ~~2004~~on our regulated pipeline systems.

WeConsistent ~~are~~with ~~planning to build a new refined~~our ~~products~~business ~~truck loading terminal in Bossier City~~strategy, ~~Louisiana. The~~we ~~facility~~continuously ~~will~~evaluate ~~include~~possible ~~six~~acquisitions ~~storage~~of ~~tanks~~assets ~~and~~that awould ~~fully~~complement ~~automated~~our ~~two-bay~~current ~~truck loading rack~~operations. ~~The~~ Such ~~terminal~~acquisition ~~will~~efforts ~~expand~~involve ~~delivery~~participation ~~capacity~~by ofus ~~refined~~in ~~products~~processes tothat ~~the~~have ~~Northwest~~been ~~Louisiana~~made public and ~~East~~involve ~~Texas~~a ~~markets~~number byof ~~more~~potential ~~than 20~~buyers,~~000~~ ~~barrels~~as ~~per day. The~~well ~~facility will increase the~~as ~~delivery~~situations ofin ~~branded~~which ~~and~~we ~~unbranded~~believe ~~premium~~we ~~and~~are ~~regular~~the ~~gasoline, as~~only

well as low-sulfur diesel fuels, which will meet the different product specifications of both market areas. The project is scheduled to be completed in the first quarter of 2005.

We have begun a Phase II project to further expand our delivery capacity of liquefied petroleum gases (“LPGs”) to the Northeast by 8,000 to 10,000 barrels per day. In 2003, we increased the delivery capability between Todhunter, Ohio, and Coshocton, Ohio, by 8,000 to 10,000 barrels per day and increased storage and improved loading capability at Oneonta, New York. The Phase II expansion includes the construction of three pump stations between Coshocton and Greensburg, Pennsylvania, and two stations from Greensburg to Watkins Glen, New York. Additional work on the pipeline segment between Greensburg and Philadelphia, Pennsylvania, will increase delivery rates to the Philadelphia area. Improvements will also be made at our Dubois, Pennsylvania, and Eagle, Pennsylvania, terminals. The project is scheduled to be completed in the fourth quarter of 2004.

Our Business

TE Products Pipeline Company, Limited Partnership, a Delaware limited partnership, was formed in March 1990. TEPPCO Partners, L.P. (“Parent Partnership”) owns a 99.999% interest in us as the sole limited partner. TEPPCO GP, Inc. (“TEPPCO GP” or “General Partner”), a subsidiary of the Parent Partnership, holds a 0.001% General Partner interest in us. Texas Eastern Products Pipeline Company, LLC (the “Company”), a Delaware limited liability company, serves as the general partner of our Parent Partnership. The Company is a wholly owned subsidiary of Duke Energy Field Services, LLC (“DEFS”), a joint venture between Duke Energy Corporation (“Duke Energy”) and ConocoPhillips. Duke Energy holds an interest of approximately 70% in DEFS, and ConocoPhillips holds the remaining interest of approximately 30%. TEPPCO GP, as general partner, performs all of our management and operating functions required in accordance with the Agreement of Limited Partnership of TE Products Pipeline Company, Limited Partnership. We reimburse our General Partner and the Company for all reasonable direct and indirect expenses that they incur in managing us.

We operate and report in one business segment: transportation and storage of refined products, LPGs and petrochemicals. Revenues are earned from transportation and storage of refined products and LPGs, intrastate transportation of petrochemicals, sales of product inventory and other ancillary services. Our two largest operating expense items are labor and electric power. We generally realize higher revenues during the first and fourth quarters of each year as our operations are somewhat seasonal. Refined products volumes are generally higher during the second and third quarters because of greater demand for gasolines during the spring and summer driving seasons. LPGs volumes are generally higher from November through March due to higher demand in the Northeast for propane, a major fuel for residential heating. Our results also include our equity investments in Centennial Pipeline LLC (“Centennial”) and Mont Belvieu Storage Partners, L.P. (“MB Storage”) (see Note 5. Equity Investments).

We are one of three operating subsidiaries of our Parent Partnership. Our Parent Partnership is managed by its general partner, the Company, which has approximately 1,000 employees dedicated to the operations and management of the operating subsidiaries. Our Parent Partnership allocates operating, general and administrative expenses to us for legal, insurance, financial, communication and other administrative services based upon the estimated level of effort devoted to our various operations. We believe that the method for allocating corporate operating, general and administrative expenses to us is reasonable.

~~Results~~party or one of ~~Operations~~a very limited number of potential buyers in negotiations with the potential seller. These acquisition efforts often involve assets which, if acquired, would have a material effect on our financial position, results of operations or cash flows.

Our The following table presents volumes delivered and average tariff per barrel for the three months and six months ended June 30, 2004 and 2003 (in thousands, except tariff information):Business

	Three Months Ended June 30,				Percentage Increase	Six Months Ended June 30,				Percentage Increase
	2004		2003		(Decrease)	2004		2003		(Decrease)
Volumes Delivered
Refined products	41,936		42,256		(1)%	74,458		72,488		3%
LPGs	8,794		6,832		29%	22,002		20,532		7%
Total	50,730		49,088		3%	96,460		93,020		4%
Average Tariff per Barrel
Refined products	$	0.93	$	0.89	5%	$	0.94	$	0.89	6%
LPGs	1.56		1.96		(20)%	1.93		2.15		(10)%
Average system tariff per barrel	$	1.04	$	1.04	—	$	1.17	$	1.17	—

TE Products Pipeline Company, Limited Partnership (the “Partnership”), a Delaware limited partnership, was formed in March 1990. TEPPCO Partners, L.P. (the “Parent Partnership”) owns a 99.999% interest in us as the sole limited partner. TEPPCO GP, Inc. (“TEPPCO GP” or “General Partner”), a wholly owned subsidiary of the Parent Partnership, holds a 0.001% general partner interest in us. Texas Eastern Products Pipeline Company, LLC (the “Company”), a Delaware limited liability company, serves as the general partner of our Parent Partnership. Through February 23, 2005, the Company was an indirect wholly owned subsidiary of Duke Energy Field Services, LLC (“DEFS”), a joint venture between Duke Energy Corporation (“Duke Energy”) and ConocoPhillips. Through February 23, 2005, Duke Energy held an interest of approximately 70% in DEFS, and ConocoPhillips held the remaining interest of approximately 30%. On February 24, 2005, the Company was acquired by DFI GP Holdings L.P. (formerly Enterprise GP Holdings L.P.) (“DFI”), an affiliate of EPCO, Inc. (“EPCO”), a privately held company controlled by Dan L. Duncan, for approximately $1.1 billion. As a result of the transaction, DFI owns and controls the 2% general partner interest in our Parent Partnership and has the right to receive the incentive distribution rights associated with the general partner interest.

~~Three Months~~TEPPCO ~~Ended~~GP, ~~June 30~~as our general partner, ~~2004~~performs ~~Compared~~all of the management and operating functions required for us in accordance with ~~Three~~the ~~Months~~Agreement ~~Ended~~of ~~June 30~~Limited Partnership of TE Products Pipeline Company, Limited Partnership (the “Partnership Agreement”). We reimburse our General Partner and the ~~2003~~Company for all reasonable direct and indirect expenses that they incur in managing us.

We ~~reported~~operate ~~net~~and report in ~~income~~one business segment: transportation and storage of ~~$6.9~~refined ~~million~~products, ~~for~~LPGs ~~the~~and ~~three~~petrochemicals. Revenues ~~months~~are ~~ended~~earned ~~June 30,~~from ~~2004,~~transportation ~~compared~~and ~~with~~storage ~~net~~of ~~income~~refined products and LPGs, intrastate transportation of petrochemicals, ~~$8.8~~sales ~~million~~of ~~for~~product ~~the~~inventory ~~three~~and ~~months~~other ~~ended~~ancillary ~~June 30, 2003~~services. ~~Net~~Our ~~income~~two ~~decreased~~largest ~~$1.9~~operating ~~million~~expense items are ~~primarily~~labor ~~due~~and toelectric anpower. We ~~increase~~generally realize ofhigher ~~$4.5~~revenues ~~million~~during inthe ~~costs~~first and ~~expenses~~fourth ~~and~~quarters aof each year since ~~decrease~~our ofoperations $0are somewhat seasonal.6 Refined ~~million~~products involumes ~~equity~~are ~~earnings,~~generally ~~partially~~higher ~~offset~~during bythe ansecond ~~increase~~and third quarters because of ~~$2.4~~ ~~million~~greater indemand ~~operating~~for ~~revenues,~~gasolines aduring ~~decrease~~the ofspring $0and summer driving seasons.7 ~~million~~LPGs involumes ~~interest~~are generally higher from November through ~~expense~~March due –to ~~net~~higher ~~and~~demand anin ~~increase~~the ofNortheast ~~$0.1~~for ~~million~~propane, ina ~~other~~major ~~income~~fuel –for residential ~~net~~heating. WeOur ~~discuss~~results ~~the~~also include ~~factors~~our ~~influencing~~equity ~~our~~investments in Centennial and Mont Belvieu Storage Partners, ~~operating~~L.P. ~~performance~~(“MB ~~below~~Storage”) (see Note 5. Equity Investments).

~~Revenues~~We ~~from refined~~are ~~products~~one ~~transportation~~of ~~increased $1.1 million for the~~ three ~~months~~ ~~ended~~operating ~~June 30,~~subsidiaries ~~2004, compared with the three months ended June 30, 2003, primarily due to an increase in distillate volumes transported as a result~~ of aour ~~strong~~Parent ~~trucking market~~Partnership. ~~For the~~Our ~~three~~Parent ~~months~~Partnership ~~ended~~is ~~June 30,~~managed ~~2004,~~by ~~the refined products average tariff~~its ~~increased~~general 5%partner, ~~from~~ the ~~prior~~Company, ~~year period primarily due to higher market-based tariff rates~~ which ~~went~~has ~~into~~approximately ~~effect in July 2003~~1,000 ~~and~~employees ~~decreased short-haul~~dedicated ~~deliveries of product received into our system from Centennial at Creal Springs, Illinois. Prior~~ to the ~~construction~~ ofoperations ~~Centennial, deliveries on our pipeline system were limited by our pipeline capacity,~~ and ~~transportation~~management ~~services~~of ~~for~~the ~~our~~operating ~~customers were allocated in accordance with a proration policy~~subsidiaries. ~~With~~Our ~~this~~Parent ~~incremental~~Partnership ~~pipeline~~allocates ~~capacity~~operating, ~~our previously~~ ~~constrained~~general ~~system~~and ~~has~~administrative ~~expanded~~expenses ~~deliveries~~to inus ~~markets~~for ~~both~~legal, ~~south~~insurance, ~~and north of Creal Springs. In February 2003~~financial, wecommunication ~~entered~~and ~~into~~other aadministrative ~~lease~~services ~~agreement~~based ~~with~~upon ~~Centennial~~the ~~that~~estimated ~~increased our~~level ~~flexibility~~of toeffort ~~deliver~~devoted ~~refined products~~ to our ~~market~~various ~~areas~~operations. ~~During the three months ended June~~ ~~30,~~ ~~2004,~~We ~~overall~~believe ~~refined~~that ~~product~~the ~~volumes~~methods ~~transported~~for ~~decreased~~allocating ~~primarily~~corporate ~~due to lower short-haul volumes received into our system from Centennial~~operating, ~~partially~~general ~~offset by increased demand~~ and ~~market~~administrative ~~share~~expenses ~~for~~to ~~products~~us ~~supplied~~are ~~from the U~~reasonable.~~S. Gulf Coast into Midwest markets.~~

Revenues from LPGs transportation increased $0.4 million for the three months ended June 30, 2004, compared with the three months ended June 30, 2003, primarily due to higher deliveries of isobutane to Chicago area refineries and increased short-haul propane deliveries to Gulf Coast petrochemical customers, partially offset by lower deliveries of propane in the upper Midwest and Northeast market areas attributable to the impact of high propane prices and low inventories at Mont Belvieu during the second quarter of 2004. The LPGs average rate per barrel decreased 20% from the prior year period primarily as a result of increased short-haul deliveries during the three months ended June 30, 2004.16

~~Other operating~~Results ~~revenues~~of increased $0.9 million for the three months ended June 30, 2004, compared with the three months ended June 30, 2003, primarily due to higher margins on product inventory sales, higher refined products tender deduction fees and higher propane deliveries at our Providence, Rhode Island import facility. These increases were partially offset by lower revenues from product exchanges, which are used to position product in the Midwest market area.Operations

16The following table presents volumes delivered in barrels and average tariff per barrel for the three months ended March 31, 2005 and 2004 (in thousands, except tariff information):

Costs and expenses increased $4.5 million for the three months ended June 30, 2004, compared with the three months ended June 30, 2003. The increase was made up of a $2.9 million increase in operating, general and administrative expenses, a $2.1 million increase in depreciation and amortization expense and a $0.1 million increase in taxes – other than income taxes, partially offset by a $0.6 million decrease in operating fuel and power. Operating, general and administrative expenses increased primarily due to a $2.6 million increase in pipeline integrity management expenses associated with our integrity management program, a $0.8 million increase in rental expense from the Centennial pipeline capacity lease agreement that we entered into in February 2003, and an increase in consulting and contract services primarily related to compliance with the Sarbanes-Oxley Act of 2002. These increases were partially offset by lower labor costs and decreased general and administrative supplies expense, and lower expenses in the 2004 period associated with the write-off of receivables related to customer bankruptcies and other customer non-payments in 2003. Depreciation expense increased from the prior year period because of assets placed in service during 2003, partially offset by an increase in the estimated remaining life of a section of our pipeline system in the Northeast, as a result of pipeline improvements made as part of our integrity management program. Taxes – other than income taxes increased as a result of higher property balances. Operating fuel and power expense decreased primarily as a result of a more efficient use of our transportation assets, partially offset by increased mainline throughput.

	Three Months Ended March 31,				Percentage Increase
	2005		2004		(Decrease)
Volumes Delivered
Refined products	38,595		32,522		19	%
LPGs	14,801		13,208		12	%
Total	53,396		45,730		17	%

Average Tariff per Barrel
Refined products	$	0.91	$	0.95	(4	)%
LPGs	2.18		2.18		—
Average system tariff per barrel	$	1.26	$	1.31	(4	)%

~~Net~~Three ~~losses~~Months ~~from equity~~Ended ~~investments increased $0.6 million for the three months ended June~~March 3031, ~~2004,~~2005 ~~compared~~Compared with ~~the~~Three Months ~~three~~Ended ~~months ended June~~March 3031, ~~2003, as shown below (in thousands):~~2004

	Three Months Ended June 30,						Increase (Decrease)
	2004			2003
Centennial	$	(2,286	)	$	(1,827	)	$	(459	)
MB Storage	1,785			1,899			(114		)
Other	(8		)	(8		)	—
Total equity earnings (losses)	$	(509	)	$	64		$	(573	)

Revenues from refined products transportation increased $4.0 million for the three months ended March 31, 2005, compared with the three months ended March 31, 2004, due to an overall increase of 19% in the refined products volumes delivered. This increase was primarily due to deliveries of products moved on Centennial. Centennial has provided our system with additional pipeline capacity for movement of products originating in the U.S. Gulf Coast area. Prior to the construction of Centennial, deliveries on our pipeline system were limited by our pipeline capacity, and transportation services for our customers were allocated in accordance with a proration policy. With this incremental pipeline capacity, our previously constrained system has expanded deliveries in markets both south and north of Creal Springs. In February 2003, we entered into a lease agreement with Centennial that increased our flexibility to deliver refined products to our market areas. Volume increases were due to increased demand and market share for products supplied from the U.S. Gulf Coast into Midwest markets. The refined products average rate per barrel decreased 4% from the prior year period primarily due to the impact of greater growth in the volume of products delivered under a Centennial tariff compared to the growth in deliveries under our tariff, which resulted in an increased proportion of lower tariff barrels transported on our system.

~~Equity~~Revenues ~~losses~~from inLPGs ~~Centennial~~transportation increased ~~primarily due to higher operating expenses, partially offset by an increase in transportation volumes on Centennial. Equity earnings from our 50% ownership interest in MB Storage decreased~~ $03.15 million for the three months ended ~~June~~ March 3031, ~~2004~~ 2005, compared with the three months ended ~~June~~March 3031, ~~2003. In~~ ~~April~~ 2004, MBdue ~~Storage~~to higher ~~acquired~~deliveries ~~storage~~of ~~assets~~propane ~~and~~in ~~contracts~~the ~~for~~upper ~~$33.5~~Midwest ~~million,~~and ofNortheast ~~which~~market weareas and ~~contributed~~increased ~~$16.5~~short-haul ~~million~~propane deliveries to U. ~~The~~S. ~~decrease~~Gulf Coast petrochemical customers in ~~equity~~the ~~earnings~~first ~~was~~quarter ~~due~~of to2005. ~~increased~~Prior ~~amortization~~year ~~and~~LPG ~~depreciation~~transportation ~~expense~~revenues onwere ~~the~~negatively ~~acquired~~impacted ~~storage~~by ~~assets~~a ~~and~~price ~~contracts,~~spike ~~partially~~in ~~offset~~the byMont ~~increased~~Belvieu propane price in ~~storage~~late ~~revenue~~February 2004, ~~shuttle~~which ~~revenue~~resulted ~~and~~in ~~rental~~our ~~revenue~~sourced ~~primarily~~propane ~~from~~being ~~the acquired~~less ~~contracts~~competitive ~~and~~than ~~lower~~propane ~~pipeline~~from ~~rehabilitation~~other ~~expenses~~source ~~on the MB Storage system~~points.

~~Interest~~Other ~~expense~~operating revenues decreased $04.51 million for the three months ended ~~June~~March 3031, ~~2004~~2005, compared with the three months ended ~~June~~March 3031, ~~2003~~2004, primarily due to lower ~~allocations~~ ~~of interest expense from the Parent Partnership, partially offset~~propane byinventory ~~higher~~fees ~~debt~~in ~~balances~~2005 ~~The~~and ~~Parent Partnership had~~ lower ~~interest~~volume ~~expense primarily due to a higher percentage~~ of ~~variable~~product ~~interest~~inventory ~~rate debt during the three months ended June 30~~sales, ~~2004, that carried a lower rate of interest as~~partially ~~compared~~offset toby ~~fixed interest rate debt. The~~ higher ~~percentage~~refined ofproducts ~~variable~~tender ~~interest~~deduction ~~rate~~and ~~debt~~loading ~~resulted from the expiration of an interest rate swap in April 2004~~revenues. Interest capitalized increased $0.2 million for the three months ended June 30, 2004, compared with the three months ended June 30, 2003, as a result of increased balances of construction work-in-progress.

~~Other~~Costs ~~income~~and ~~– net~~expenses ~~increased~~decreased $02.13 million for the three months ended ~~June~~March 3031, ~~2004~~2005, compared with the three months ended ~~June~~March 3031, ~~2003~~2004, due to decreased operating, general and administrative expenses and decreased operating fuel and power, partially offset by increased depreciation and amortization expense and increased taxes – other than income taxes. Operating, general and administrative expenses decreased primarily due to a $4.4 million decrease in pipeline inspection and repair costs associated with our integrity management program, partially offset by a $0.6 million increase in rental expense from the Centennial pipeline capacity lease agreement, a $0.8 million increase in labor and benefits expense primarily associated with vesting provisions in certain of our compensation plans as a result of changes in control of the Company and a $0.6 million increase in environmental remediation and assessment costs. Depreciation expense increased $0.7 million primarily due to ~~higher~~assets retired to depreciation ~~interest~~expense in 2005. Operating fuel and power decreased $0.4 million primarily due to adjustments to power accruals. Taxes – other than income ~~earned~~taxes onincreased ~~cash~~due to ~~investments~~increases in property tax accruals.

~~Six~~Interest ~~Months~~expense increased ~~Ended~~$1.0 ~~June~~million for the three months ended March 3031, 2005, compared with the three months ended March 31, 2004, as a result of higher ~~Compared~~outstanding debt balances under the note payable with ~~Six~~our ~~Months~~Parent ~~Ended~~Partnership, and ~~June~~an increased percentage of fixed-rate debt in 2005, compared with 2004. Interest capitalized decreased $0.1 million for the three months ended March 3031, ~~2003~~2005, compared with the three months ended March 31, 2004, as a result of decreased construction work-in-progress balances.

WeNet ~~reported~~losses ~~net~~from equity ~~income~~investments ofdecreased ~~$24.1 million~~ for the ~~six~~three months ended ~~June~~March 3031, ~~2004~~2005, compared with ~~net income of $29.3 million for~~ the ~~six~~three months ended ~~June~~March 3031, ~~2003. Net~~ ~~income decreased $5.2 million primarily due to an increase of $14.7 million in costs and expenses and a decrease of $0.6 million in equity earnings~~2004, ~~partially~~as ~~offset~~shown bybelow ~~an increase of $9.1 million~~ (in operating revenues, a decrease of $0.6 million in interest expense – net and an increase of $0.4 million in other income – net. We discuss the factors influencing our operating performance below.thousands):

Revenues from refined products transportation increased $5.2 million for the six months ended June 30, 2004, compared with the six months ended June 30, 2003, due to an overall increase of 3% in the refined products volumes delivered, primarily due to increases in motor fuel and distillate volumes transported as a result of a strong trucking market. These increases were primarily due to deliveries of products received into our pipeline from Centennial at Creal Springs, Illinois. Centennial has provided our system with additional pipeline capacity for products originating in the U.S. Gulf Coast area. Prior to the construction of Centennial, deliveries on our pipeline system were limited by our pipeline capacity, and transportation services for our customers were allocated in accordance with a proration policy. With this incremental pipeline capacity, our previously constrained system has expanded deliveries in markets both south and north of Creal Springs. In February 2003, we entered into a lease agreement with Centennial that increased our flexibility to deliver refined products to our market areas. Volume increases were due to increased demand and market share for products supplied from the U.S. Gulf Coast into Midwest markets. The refined products average rate per barrel increased 6% from the prior year period primarily due to higher market-based tariff rates which went into effect in July 2003, partially offset by the impact of the Midwest origin point for barrels received from Centennial, which resulted in decreased short-haul barrels transported on our system.

	Three Months Ended March 31,						Increase
	2005			2004			(Decrease)
Centennial	$	(3,471	)	$	(3,856	)	$	385
MB Storage	2,634			2,629			5
Other	(5		)	(11		)	6
Total equity losses	$	(842	)	$	(1,238	)	$	396

~~Revenues~~Equity ~~from~~losses ~~LPGs~~in ~~transportation~~Centennial decreased $10.74 million for the ~~six~~three months ended ~~June~~March 3031, ~~2004~~2005, compared with the ~~six~~three months ended ~~June~~March 3031, ~~2003~~2004, primarily due to ~~lower~~to ~~deliveries~~higher oftransportation ~~propane~~revenues inand ~~the~~volumes, ~~upper~~partially ~~Midwest~~offset ~~and~~by ~~Northeast market areas~~higher ~~attributable~~transmix torelated ~~warmer~~product ~~weather~~replacement ~~during~~costs ~~the~~and ~~first~~product ~~three~~measurement ~~months~~losses during ofthe ~~2004~~2005 period. ~~Additionally,~~Equity earnings in ~~late~~MB ~~February~~Storage remained virtually unchanged for the three months ended March ~~2004~~31, ~~the~~2005, ~~Mont~~compared ~~Belvieu~~with ~~propane~~the ~~price~~three ~~spiked,~~months ~~which~~ended ~~resulted~~March 31, in2004. In ~~our~~April 2004, ~~sourced~~MB ~~propane~~Storage acquired ~~being~~storage ~~less~~and ~~competitive~~pipeline ~~than~~assets ~~propane~~and ~~from~~contracts ~~other~~for ~~source~~approximately ~~points~~$34. ~~This~~0 ~~decrease~~million, ~~was~~of which ~~partially~~we ~~offset~~contributed by$16.5 million. ~~increased~~Equity ~~deliveries~~earnings ofincreased ~~isobutane~~due to ~~Chicago~~increased ~~area~~storage ~~refineries~~revenue, ~~and increased~~shuttle ~~short-haul~~revenue ~~propane~~and ~~deliveries~~rental torevenue ~~Gulf~~primarily ~~Coast~~from ~~petrochemical~~the ~~customers. The~~acquired ~~LPGs~~contracts, ~~average~~lower ~~rate~~pipeline rehabilitation ~~per~~expenses ~~barrel~~on ~~decreased 10%~~the ~~from~~MB ~~the~~Storage ~~prior~~system ~~year~~and ~~period~~lower ~~primarily~~general asand administrative aexpenses ~~result~~offset ofby increased ~~short-haul deliveries~~depreciation ~~during~~and ~~the~~amortization expense ~~six~~on ~~months~~storage ~~ended~~assets ~~June 30,~~and ~~2004~~contracts acquired.

~~Other operating~~Financial ~~revenues~~Condition increased $5.6 million for the six months ended June 30, 2004, compared with the six months ended June 30, 2003, primarily due to higher propane inventory fees, higher refined products tender deduction fees, higher margins on product inventory sales and ~~higher propane deliveries at our Providence, Rhode Island import facility.~~Liquidity

~~Costs~~Cash ~~and~~flows ~~expenses increased $14.7 million~~ for the ~~six months ended June 30, 2004, compared~~three ~~with the six~~ months ended ~~June~~March 3031, ~~2003. The~~2005 ~~increase was made up of an $11.4 million increase in operating, general~~ and administrative expenses, a $3.7 million increase in depreciation and amortization expense and a $0.3 million increase in taxes – other than income taxes, partially offset by a $0.7 million decrease in operating fuel and power. Operating, general and administrative expenses increased primarily due to an $8.0 million increase in pipeline integrity management expenses associated with our integrity management program, a $1.7 million increase in rental expense from the Centennial pipeline capacity lease agreement that we entered into in February 2003, a $2.1 million increase in consulting and contract services primarily related to compliance with the Sarbanes-Oxley Act of 2002 and acquisition related activities, and a $0.4 million increase in environmental assessment and remediation activities, partially offset by lower labor costs and decreased general and administrative supplies expense, and lower expenses in the 2004 period associated with the write-off of receivables related to customer bankruptcies and other customer non-payments in 2003. Depreciation expense increased from the prior year period because of assets placed in service during 2003, ~~partially~~were ~~offset~~as byfollows ~~an increase~~ (in the estimated remaining life of a section of our pipeline system in the Northeast, as a result of pipeline improvements made as part of our integrity management program. Taxes – other than income taxes increased as a result of higher property balances. Operatingthousands):

	Three Months Ended March 31,
	2005			2004

Cash provided by (used in):
Operating activities	$	24,982		$	17,068
Investing activities	(14,140		)	(8,820		)
Financing activities	(10,841		)	(8,393		)

~~fuel and power expense decreased primarily as a result of a more~~Operating ~~efficient use of our transportation assets, partially offset by increased mainline throughput.~~Activities

Net ~~losses~~cash from operating ~~equity~~activities ~~investments increased $0.6 million~~ for the ~~six~~three months ended ~~June~~ March 3031, 2005 and 2004, ~~compared~~were comprised ~~with~~of the ~~six~~following ~~months ended June 30, 2003, as shown below~~ (in thousands):

	Six Months Ended June 30,						Increase (Decrease)
	Three Months Ended March 31,
	2004			2003
	2005			2004
Centennial	$	(6,143	)	$	(5,005	)	$	(1,138	)
Net income	$	22,116		$	17,209
MB Storage	4,414			3,844			570
Depreciation and amortization	9,298			8,638
Other	(18		)	(34		)	16
Losses in equity investments	842			1,238
Total equity losses	$	(1,747	)	$	(1,195	)	$	(552	)
Non-cash portion of interest expense	68			7
Cash used in working capital and other	(7,342		)	(10,024		)
Net cash from operating activities	$	24,982		$	17,068

Equity losses in Centennial increased primarily due to the acquisition of an additional 16.7% interest in Centennial on February 10, 2003, bringing our ownership interest to 50%, and higher operating expenses, partially offset by an increase in transportation volumes on Centennial. Equity earnings from our 50% ownership interest in MB Storage increased $0.6 million for the six months ended June 30, 2004, compared with the six months ended June 30, 2003. In April 2004, MB Storage acquired storage assets and contracts for $33.5 million, of which we contributed $16.5 million. The increase in equity earnings is due to increased storage revenue, shuttle revenue and rental revenue primarily from the acquired contracts and lower pipeline rehabilitation expenses on the MB Storage system, partially offset by increased amortization and depreciation expense on storage assets and contracts acquired.18

~~Interest~~For ~~expense~~a discussion of ~~decreased~~changes ~~$0.2~~in ~~million~~net ~~for~~income, ~~the~~depreciation ~~six~~and ~~months~~amortization ~~ended~~and ~~June 30,~~equity ~~2004~~earnings, ~~compared~~see ~~with~~Results ~~the~~of ~~six~~Operations ~~months~~in ~~ended~~Item ~~June~~2. ~~30,~~ Management’s ~~2003,~~Discussion ~~primarily~~and ~~due~~Analysis ~~to lower allocations~~ of ~~interest~~Financial ~~expense~~Condition ~~from~~and ~~the Parent Partnership, partially offset~~Results byof ~~higher debt balances~~Operations. ~~The~~Cash ~~Parent~~provided by ~~Partnership~~operating ~~had~~activities ~~lower~~increased ~~interest~~$7.9 ~~expense~~million ~~primarily~~for ~~due~~the tothree amonths ~~higher~~ended ~~percentage of~~March 31, ~~variable~~2005, ~~interest~~compared ~~rate~~with ~~debt during~~ the three months ended ~~June~~March 3031, 2004, ~~that~~ ~~carried~~primarily ~~a lower rate of interest as compared~~ due to ~~fixed interest rate debt. The higher percentage of variable interest rate debt resulted from~~ the ~~expiration~~timing of ancash ~~interest~~disbursements ~~rate~~and ~~swap~~cash ~~in April 2004. Interest~~receipts ~~capitalized increased $0.4 million~~ for ~~the~~working ~~six months ended June 30, 2004, compared~~capital ~~with~~components ~~the~~and ~~six~~higher ~~months~~net ~~ended~~income ~~June 30,~~partially ~~2003,~~offset asby ahigher ~~result~~depreciation ofand amortization ~~increased~~in ~~balances of~~the ~~construction~~2005 ~~work-in-progress~~period.

~~Other~~We ~~income~~believe –that ~~net~~we will ~~increased~~continue $0to have adequate liquidity to fund future recurring operating and investing activities.4 Our ~~million~~primary ~~for~~cash requirements ~~the~~consist ~~six~~of ~~months~~normal ~~ended~~operating ~~June 30~~expenses, ~~2004~~capital expenditures to sustain existing operations and revenue generating expenditures, ~~compared~~interest ~~with~~payments ~~the~~on ~~six~~our ~~months~~Senior ~~ended~~Notes ~~June 30~~and on borrowings under our Parent Partnership’s credit facilities and distributions to our Parent Partnership. Short-term cash requirements, ~~2003~~such as operating expenses, ~~primarily~~capital ~~due~~expenditures to ~~higher~~sustain ~~interest~~existing operations and ~~income~~quarterly ~~earned~~distributions onto our Parent Partnership, are expected to be funded through operating cash ~~investments~~flows. Long-term cash requirements for expansion projects are expected to be funded by several sources, including cash flows from operating activities, borrowings under our Parent Partnership’s credit facilities and the issuance by our Parent Partnership of additional equity and debt securities. The timing of any debt or offerings by our Parent Partnership will depend on various factors, including prevailing market conditions, interest rates and our Parent Partnership’s financial condition and credit rating at the time.

~~Financial~~At ~~Condition~~March 31, 2005, and ~~Liquidity~~December 31, 2004 we had working capital deficits of $55.6 million and $61.9 million, respectively. Cash generated from operations and from our Parent Partnership’s credit facilities and debt and equity offerings are our primary sources of liquidity. Working capital deficits can occur primarily due to the timing of operating cash receipts from customers, payment of cash distributions and the payment of normal operating expenses and capital expenditures. We are a wholly owned subsidiary of the Parent Partnership. We expect that our Parent Partnership will make capital contributions, loans or otherwise provide liquidity to us as needed, but the Parent Partnership has no contractual obligation to do so. We anticipate that the Parent Partnership will provide the necessary liquidity to protect its investment in us. At March 31, 2005, our Parent Partnership had $81.5 million in available borrowing capacity under its revolving credit facility to cover any working capital needs, and expects that cash flows from operating activities, the sale of additional debt or equity offerings will provide necessary liquidity to us.

~~Cash flows for the six months ended June 30, 2004 and 2003, were~~Investing ~~as follows (in thousands):~~Activities

	Six Months Ended June 30,
	2004			2003
Cash provided by (used in):
Operating activities	$	68,273		$	62,741
Investing activities	(45,330		)	(46,053		)
Financing activities	(23,131		)	(12,448		)

Cash flows used in investing activities totaled $14.1 million for the three months ended March 31, 2005, and were comprised of $14.1 million of capital expenditures. Cash flows used in investing activities totaled $8.8 million for the three months ended March 31, 2004, and were comprised of $7.8 million of capital expenditures and $1.0 million of cash contributions for our ownership interest in Centennial.

19Financing Activities

~~Operating~~Cash flows used in ~~Activities~~financing activities totaled $10.8 million for the three months ended March 31, 2005, and were comprised of $29.7 million of distributions paid to our Parent Partnership and $19.9 million of repayments on our term loan, partially offset by $38.8 million of proceeds from our term loan. Cash flows used in financing activities totaled $8.4 million for the three months ended March 31, 2004, and were comprised of $28.9 million of distributions paid to our Parent Partnership and $15.0 million of repayments on our term loan, partially offset by $35.5 million of proceeds from our term loan.

~~Net~~Centennial ~~cash~~entered ~~from~~into credit ~~operating~~facilities ~~activities~~totaling ~~for~~$150.0 ~~the~~million ~~six~~and, ~~months~~as ~~ended~~of ~~June~~March 3031, ~~2004~~2005, $150.0 million was outstanding under those credit facilities. The proceeds were used to fund construction and ~~2003,~~conversion ~~was~~costs of Centennial’s pipeline system. We and Marathon Ashland Petroleum LLC have ~~comprised~~each guaranteed one-half of ~~the~~Centennial’s ~~following~~debt, ~~(in~~up ~~thousands):~~to a maximum of $75.0 million each.

	Six Months Ended June 30,
	2004		2003
Net income	$	24,113	$	29,340
Depreciation and amortization	17,636		13,937
Losses in equity investments	1,747		1,195
Distributions from equity investments	4,950		—
Non-cash portion of interest expense	15		16
Cash used in working capital and other	19,812		18,253
Net cash from operating activities	$	68,273	$	62,741

~~Cash provided by~~Parent ~~operating~~Partnership ~~activities~~Credit increased $5.5 million for the six months ended June 30, 2004, compared with the six months ended June 30, 2003, primarily due to distributions received from MB Storage and the timing of payments for working capital components during the six months ended June 30, 2004.Facilities

We ~~believe~~currently ~~that~~utilize wedebt ~~will~~financing ~~continue~~available tofrom ~~have~~our ~~adequate~~Parent ~~liquidity~~Partnership tothrough ~~fund~~intercompany ~~future recurring operating and investing activities~~notes. ~~Our~~ ~~primary cash~~The ~~requirements~~terms ~~consist~~ of ~~normal~~the ~~operating~~intercompany ~~expenses,~~notes ~~capital~~generally ~~expenditures~~match tothe ~~sustain existing~~principal ~~operations~~ and ~~revenue generating expenditures,~~ interest ~~payments on~~ ~~our~~payment ~~Senior~~dates ~~Notes and on borrowings~~ under ~~our~~the Parent Partnership’s credit ~~facilities~~ ~~and distributions to our Parent Partnership~~agreements. ~~Short-term~~The ~~cash~~interest ~~requirements,~~rates ~~such~~charged ~~as operating~~by ~~expenses,~~the ~~capital~~Parent Partnership ~~expenditures~~include tothe ~~sustain~~stated ~~existing~~interest ~~operations~~rate ~~and quarterly~~of ~~distributions~~the ~~to our~~ Parent Partnership, ~~are~~plus ~~expected~~a premium to becover ~~funded through~~debt ~~operating~~issuance ~~cash flows~~costs. ~~Long-term cash requirements for expansion~~ ~~projects~~The ~~are~~interest ~~expected~~rate tois bealso ~~funded~~decreased byor ~~several~~increased ~~sources,~~to ~~including~~cover ~~cash~~gains ~~flows~~and ~~from~~losses, ~~operating activities~~respectively, ~~borrowings~~on ~~under~~any ~~our~~interest ~~Parent~~rate ~~Partnership’s~~swaps ~~credit facilities~~that ~~and~~ the ~~issuance by our~~ Parent Partnership ~~of additional equity and~~ ~~debt~~may ~~securities. The~~have ~~timing~~in ofplace ~~any debt or offerings by our Parent Partnership will depend~~ on ~~various~~its ~~factors, including~~respective ~~prevailing~~credit ~~market~~agreements. These ~~conditions,~~credit ~~interest~~facilities ~~rates~~of ~~and~~the ~~our~~ Parent Partnership’s ~~financial~~are ~~condition~~described ~~and credit rating at the time~~below.

AtOn June 3027, ~~2004~~ 2003, our ~~and~~Parent ~~December 31,~~Partnership ~~2003~~entered into a $550.0 million revolving credit facility with a three year term, weincluding ~~had~~the ~~working~~issuance ~~capital~~of ~~deficits~~letters of ~~$39.6 million~~credit ~~and~~of up to $1220.30 million, ~~respectively~~(“Revolving Credit Facility”). ~~Cash~~The ~~generated~~interest ~~from~~rate ~~operations~~is ~~and~~based, ~~from~~at our Parent Partnership’s ~~credit facilities~~option, ~~and~~on ~~debt~~the lender’s ~~and~~base ~~equity~~rate ~~offerings~~plus ~~are~~a ~~our~~spread, ~~primary~~or ~~sources~~LIBOR ~~of liquidity. Working~~plus ~~capital~~a ~~deficits~~spread ~~can occur~~in ~~primarily~~effect ~~due~~at to the ~~timing~~ time of ~~operating~~the ~~cash~~borrowings. The ~~receipts~~credit ~~from customers,~~agreement ~~payment~~for ~~of cash distributions and~~ the ~~payment~~Revolving ofCredit ~~normal~~Facility ~~operating~~contains ~~expenses~~certain ~~and~~restrictive financial ~~capital~~covenant ~~expenditures~~ratios. WeOn ~~are a wholly~~October 21, ~~owned~~2004, ~~subsidiary of~~ the Parent Partnership~~. We~~ ~~expect~~amended ~~that~~its ~~our~~Revolving ~~Parent~~Credit ~~Partnership~~Facility ~~will~~to ~~make~~(i) increase the ~~capital~~facility ~~contributions, loans~~size orto ~~otherwise~~$600.0 ~~provide~~million, ~~liquidity~~(ii) extend the term to usOctober 21, 2009, as(iii) remove ~~needed~~certain restrictive covenants, ~~but~~(iv) increase the ~~Parent~~ ~~Partnership~~available ~~has~~amount nofor ~~contractual~~the ~~obligation~~issuance toof doletters ~~so. We~~of ~~anticipate~~credit ~~that~~up ~~the~~to ~~Parent~~$100.0 ~~Partnership~~million ~~will~~and (v) decrease ~~provide~~ the ~~necessary~~ ~~liquidity~~LIBOR torate ~~protect~~spread ~~its~~charged ~~investment~~at inthe ustime of each borrowing. AtOn ~~June~~February 3023, ~~2004~~2005, ~~our~~ the Parent Partnership ~~had~~amended ~~$290.0~~its ~~million~~Revolving Credit Facility to remove the inrequirement ~~available~~that ~~borrowing~~DEFS ~~capacity~~must ~~under~~at ~~its~~all ~~revolving~~times ~~credit~~own, ~~facility~~directly toor ~~cover any~~indirectly, ~~working~~100% ~~capital~~of the ~~needs~~Company, ~~and~~to ~~expects~~allow ~~that~~for ~~cash~~its ~~flows~~acquisition ~~from~~by ~~operating activities~~DFI. At March 31, ~~the~~2005, ~~sale~~$432.0 ofmillion ~~additional~~was outstanding ~~debt~~under orthe ~~equity~~Revolving ~~offerings~~Credit ~~will~~Facility ~~provide necessary~~at ~~liquidity~~a toweighted usaverage interest rate of 3.4%.

~~Investing~~On January 30, 2003, ~~Activities~~our Parent Partnership issued $200.0 million principal amount of 6.125% Senior Notes due 2013. The 6.125% Senior Notes were issued at a discount of $1.4 million and are being accreted to their face value over the term of the notes. The Senior Notes may be redeemed at any time at our Parent Partnership’s option with the payment of accrued interest and a make-whole premium determined by discounting remaining interest and principal payments using a discount rate equal to the rate of the United States Treasury securities of comparable remaining maturity plus 35 basis points. The indenture governing the 6.125% Senior Notes contains covenants, including, but not limited to, covenants limiting the creation of liens securing indebtedness and sale and leaseback transactions. However, the indenture does not limit the Parent Partnership’s ability to incur additional indebtedness.

~~Cash~~As ~~flows~~of ~~used in~~March 31, ~~investing~~2005, ~~activities~~and ~~totaled~~December 31, ~~$45.3~~2004, ~~million~~we ~~for~~had ~~the~~intercompany ~~six~~notes ~~months~~payable ~~ended~~to our ~~June 30,~~Parent ~~2004,~~Partnership ~~and were comprised~~ of $24320.65 million ofand ~~capital expenditures,~~ $17301.27 million, ofrespectively, ~~cash~~which represented ~~contributions~~borrowings ~~for~~under ~~our~~the ~~ownership~~Parent ~~interest~~Partnership’s ~~in MB~~Revolving ~~Storage~~Credit Facility, $27.0625% ~~million~~Senior ~~for~~Notes ~~the~~and ~~acquisition~~6.125% ofSenior ~~assets and $1~~Notes.5 ~~million~~The ofweighted ~~cash~~average ~~contributions~~interest ~~for~~rate ~~our~~on ~~ownership~~the ~~interest~~note inpayable ~~Centennial. Cash~~to ~~flows~~the ~~used~~Parent inPartnership ~~investing~~at ~~activities totaled~~March 31, ~~$46.1~~2005, ~~million~~was ~~for~~4.5%. At ~~the six months ended June~~March 3031, ~~2003~~2005, accrued ~~and~~interest ~~were~~includes ~~comprised of~~ $~~25.~~1.7 million ofdue ~~capital~~to ~~expenditures,~~our ~~$20~~Parent Partnership.0 For ~~million~~the ~~for~~three ~~our~~months ~~acquisition~~ended ofMarch 31, ~~the~~2005 ~~additional~~and 2004, interest incosts ~~Centennial~~incurred on ~~February 10,~~the ~~2003,~~note ~~and~~payable ~~$1.0 million~~to ofour ~~cash~~Parent Partnership ~~contributions~~totaled ~~for~~$3.4 ~~our~~million ~~ownership~~and ~~interest~~$2.9 inmillion, ~~Centennial~~respectively.

20Cash Distributions

~~Financing~~During the three months ~~Activities~~ended March 31, 2005 and 2004, we paid cash distributions to our Parent Partnership totaling $29.7 million and $28.9 million, respectively. On May 6, 2005, we will pay a cash distribution to our Parent Partnership of $29.7 million for the quarter ended March 31, 2005.

CashFuture flowsCapital usedNeeds in financing activities totaled $23.1 million for the six months ended June 30, 2004, and were comprised of $58.6 million of distributions paid to our Parent Partnership and $34.6 million of repayments on our term loan, partially offset by $70.1 million of proceeds for our term loan. Cash flows used in financing activities totaled $12.4 million for the six months ended June 30, 2003, and were comprised of $51.2 million of distributions paid to our Parent Partnership and $20.5 million of repayments on our term loan, partially offset by $57.4 million of proceeds for our term loan and $1.9 million in contributions from our Parent Partnership.Commitments

~~Centennial~~We ~~entered~~estimate ~~into~~that capital ~~credit~~expenditures, ~~facilities~~excluding ~~totaling~~acquisitions, for 2005 will be approximately $~~150~~59.0 6 million ~~and,~~(which asincludes $2.3 million of ~~June 30,~~capitalized ~~2004,~~interest). We expect to spend approximately $~~150~~22.0 7 million ~~was~~for ~~outstanding~~revenue ~~under~~generating ~~those~~projects ~~credit~~and ~~facilities~~facility improvements. ~~The~~We ~~proceeds~~expect ~~were~~to ~~used~~spend approximately $20.0 million to ~~fund~~sustain ~~construction~~existing operations, including ~~and~~life-cycle ~~conversion~~replacements ~~costs~~for ofequipment ~~Centennial’s~~at various facilities and pipeline and tank replacements and $14.6 million for various system upgrade projects. We ~~and~~continually ~~Marathon~~review ~~Ashland~~and ~~Petroleum~~evaluate ~~LLC~~potential ~~have~~capital improvements ~~each~~and ~~guaranteed~~expansions ~~one half~~that ofwould ~~Centennial’s~~be ~~debt,~~complementary up to aour ~~maximum~~present ~~of $75~~system.0 These ~~million~~expenditures ~~each.~~can vary

~~Parent Partnership Credit Facilities~~20

Wegreatly ~~currently~~depending ~~utilize~~on ~~debt~~the ~~financing~~magnitude ~~available~~of ~~from~~ our ~~Parent Partnership through intercompany notes~~transactions. ~~The terms of the intercompany notes generally match the principal and interest payment dates under the Parent Partnership’s credit agreements.~~ ~~The interest rates charged~~We bymay ~~the~~finance ~~Parent~~capital ~~Partnership~~expenditures ~~include~~through ~~the~~internally ~~stated~~generated ~~interest rate of the Parent Partnership~~funds, ~~plus a premium to cover~~ debt ~~issuance costs. The interest rate is also decreased~~ or ~~increased~~capital tocontributions ~~cover~~from ~~gains~~our ~~and losses, respectively, on any interest rate swaps that the~~ Parent Partnership ~~may~~or ~~have~~any incombination ~~place on its respective credit agreements~~thereof. ~~These credit facilities of the Parent Partnership are described below.~~

OnOur ~~April 6, 2001,~~debt ~~our Parent Partnership entered into a $500.0 million revolving credit~~repayment ~~facility~~obligations ~~including~~consist ~~the issuance~~ of ~~letters~~payments offor ~~credit~~principal ofand upinterest toon (i) our $20320.05 million ~~(“Three~~ ~~Year~~principal ~~Facility”). The~~amount ~~interest~~due ~~rate was~~to ~~based,~~the ~~at our~~ Parent Partnership’s ~~option,~~related onto ~~either~~our share of the ~~lender~~Parent Partnership’s ~~base~~Revolving ~~rate plus~~Credit aFacility ~~spread,~~due ~~or LIBOR plus a spread~~ in ~~effect at the time of the~~October 2009, ~~borrowings~~7. ~~The~~625% ~~credit~~Senior ~~agreement~~Notes ~~for the~~due ~~Three~~in ~~Year~~February 2012 ~~Facility~~and ~~contained certain restrictive financial covenant ratios~~6. ~~During~~125% ~~the~~Senior ~~first~~Notes ~~quarter~~due ~~of 2003,~~in February 2013, (ii) our ~~Parent Partnership repaid~~ $~~182~~210.0 million ~~of the outstanding balance of the Three Year Facility with proceeds from the issuance of its 6~~7.~~125~~51% Senior Notes ondue January 3015, ~~2003. On June 27~~2028, ~~2003,~~and (iii) our ~~Parent Partnership repaid the outstanding balance under~~ ~~the~~$180.0 ~~Three~~million ~~Year~~6.45% ~~Facility~~Senior ~~with~~Notes ~~borrowings~~due ~~under~~January 15, ~~a new credit facility and canceled the Three Year Facility~~2008.

OnWe ~~June 27,~~are also contingently ~~2003,~~liable ~~our~~as ~~Parent~~guarantor ~~Partnership~~for ~~entered~~the ~~into~~lesser aof one half or $~~550~~75.0 million ~~revolving credit~~principal ~~facility~~amount ~~with~~(plus ainterest) ~~three~~of ~~year term, including~~ the ~~issuance~~borrowings of ~~letters~~Centennial. ofIn ~~credit of~~January 2003, upwe toentered ~~$20.0~~into ~~million~~a ~~(“Revolving~~pipeline ~~Credit~~capacity ~~Facility”). The~~lease ~~interest~~agreement ~~rate~~with isCentennial ~~based,~~for ~~at our Parent Partnership’s option,~~a onperiod ~~either~~of ~~the~~five ~~lender’s~~years ~~base~~that ~~rate~~contains ~~plus~~ a ~~spread,~~minimum orthroughput ~~LIBOR~~requirement. For ~~plus~~the ayear ~~spread~~ended ~~in effect~~December 31, at2004, ~~the~~we exceeded ~~time of~~ the ~~borrowings. The~~minimum ~~credit~~throughput ~~agreement~~requirements ~~for~~on the ~~Revolving~~lease ~~Credit~~agreement. We ~~Facility~~are ~~contains~~also ~~certain restrictive~~contingently ~~financial~~liable ~~covenant~~as ~~ratios.~~ guarantor ~~Our~~for ~~Parent Partnership borrowed~~ $~~263~~500.0 million ~~under~~principal ~~the~~amount ~~Revolving Credit~~of ~~Facility~~7.625% ~~and~~Senior ~~repaid~~Notes ~~the~~due ~~outstanding~~2012 ~~balance~~issued ofin ~~the Three Year~~February 2002 ~~Facility. At~~and ~~June 30,~~for ~~2004,~~ $~~260~~200.0 million ~~was~~principal ~~outstanding~~amount ~~under~~of ~~the~~6.125% ~~Revolving~~Senior ~~Credit~~Notes ~~Facility~~due 2013 issued in January 2003 by our Parent Partnership.

~~On January 30,~~During ~~2003,~~the ~~our~~three ~~Parent Partnership issued $200.0 million principal~~months ~~amount~~ended ~~of 6.125% Senior Notes due 2013.~~March ~~The~~31, ~~6.125%~~2004, ~~Senior~~we ~~Notes~~contributed ~~were issued at a discount of~~ $1.40 million ~~and are~~to ~~being~~Centennial ~~accreted~~ to ~~their~~cover operating ~~face~~needs ~~value~~and ~~over~~capital ~~the term of the notes~~expenditures. ~~The Parent Partnership used $182.0 million~~ ofNo ~~the~~amounts ~~proceeds~~were ~~from~~contributed ~~the offering~~ to ~~reduce~~either ~~the~~Centennial ~~outstanding~~or ~~principal~~MB onStorage ~~the~~during ~~Three~~the ~~Year~~three ~~Facility~~months toended ~~$250.0~~March 31, ~~million~~2005. ~~The~~During ~~balance~~2005, ofwe ~~the net proceeds received was used for general Parent Partnership purposes. The Senior Notes~~ may be ~~redeemed~~required atto ~~any~~contribute ~~time~~cash atto ~~our~~Centennial ~~Parent Partnership’s option with the payment~~to ofcover ~~accrued~~capital ~~interest~~expenditures, ~~and~~acquisitions aor ~~make-whole~~other ~~premium~~operating ~~determined~~needs ~~by discounting remaining interest~~ and ~~principal payments using a discount rate equal~~ to ~~the~~MB ~~rate~~Storage ~~of the United States Treasury securities of comparable remaining maturity plus 35 basis points. The indenture governing the 6.125% Senior Notes contains covenants, including, but not limited~~ to, ~~covenants~~cover ~~limiting~~significant ~~the~~capital ~~creation~~expenditures ofor ~~liens securing indebtedness and sale and leaseback transactions. However, the indenture does not limit the Parent Partnership’s ability to incur~~ additional ~~indebtedness~~acquisitions.

AsOff-Balance ofSheet June 30, 2004, and December 31, 2003, we had an intercompany note payable to our Parent Partnership of $246.8 million and $211.3 million, respectively, which represented borrowings under the ParentArrangements

21We do not rely on off-balance sheet borrowings to fund our acquisitions. We have no off-balance sheet commitments for indebtedness other than the limited guaranty of the Centennial debt, the Parent Partnership debt and leases covering assets utilized in several areas of our operations.

~~Partnership’s~~Contractual Revolving Credit Facility, 7.625% Senior Notes and 6.125% Senior Notes. The weighted average interest rate on the note payable to the Parent Partnership at June 30, 2004, was 5.2%. At June 30, 2004, accrued interest includes $4.1 million due to the Parent Partnership. For the six months ended June 30, 2004 and 2003, interest costs incurred on the note payable to the Parent Partnership totaled $6.1 million and $6.0 million, respectively.Obligations

~~Cash~~The following table ~~Distributions~~summarizes our debt repayment obligations and material contractual commitments as of March 31, 2005 (in millions):

	Amount of Commitment Expiration Per Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		After 5 Years

Note payable, Parent Partnership	$	320.5	$	—	$	—	$	320.5	$	—
6.45% Senior Notes due 2008 (1)	180.0		—		180.0		—		—
7.51% Senior Notes due 2028 (1)	210.0		—		—		—		210.0
Debt subtotal	710.5		—		180.0		320.5		210.0

Operating leases	57.0		12.2		21.8		8.6		14.4
Capital expenditure obligations (2)	0.8		0.8		—		—		—
Other liabilities and deferred credits (3)	0.7		—		0.6		0.1		—
Total	$	769.0	$	13.0	$	202.4	$	329.2	$	224.4

~~Future~~(1) We entered into an interest rate swap ~~Capital~~agreement ~~Needs~~to hedge our exposure to changes in the fair value of our 7.51% Senior Notes due 2028. At March 31, 2005, the 7.51% Senior Notes include an adjustment to increase the fair value of the debt by $0.5 million related to this interest rate swap agreement. At March 31, 2005, our 6.45% Senior Notes include $0.1 million of unamortized debt discount. The fair value adjustment and ~~Commitments~~unamortized debt discount are excluded from this table.

~~We estimate that capital expenditures, excluding acquisitions, for 2004 will be approximately $78.7 million~~ (~~which includes $~~2~~.0 million of capitalized interest~~)~~. We expect~~ Includes toaccruals ~~spend approximately $54.4 million for revenue generating projects and facility improvements that will include the expansion~~ of ~~our~~cost ~~pipelines extending~~incurred ~~from~~but ~~Seymour~~not toyet ~~Indianapolis,~~paid ~~Indiana,~~relating ~~further expansions of our Northeast pipeline system and construction of a new truck loading terminal in Bossier City, Louisiana. We expect~~ to ~~spend~~ ~~approximately $22.3 million of~~ capital ~~costs to sustain existing operations, including life-cycle replacements for equipment at various facilities and pipeline and tank replacements~~projects. We continually review and evaluate potential capital improvements and expansions that would be complementary to our present system. These expenditures can vary greatly depending on the magnitude of our transactions. We may finance capital expenditures through internally generated funds, debt, capital contributions from our Parent Partnership or any combination thereof.

Our debt repayment obligations consist of payments for principal and interest on (i) our $246.8 million principal amount due to the Parent Partnership related to our share of the Parent Partnership’s Revolving Credit Facility due in June 2006, 7.625% Senior Notes due in February 2012 and 6.125% Senior Notes due in February 2013, (ii) our $210.0 million 7.51% Senior Notes due January 15, 2028, and (iii) our $180.0 million 6.45% Senior Notes due January 15, 2008.21

~~We are also~~(3) Excludes ~~contingently~~approximately ~~liable as guarantor for the lesser of one half or~~ $759.01 million ~~principal~~ ~~amount (plus interest)~~ of ~~Centennial’s~~long-term ~~borrowings. In~~deferred ~~January 2003,~~revenue ~~we entered into a pipeline capacity lease agreement with Centennial for a period of five years that contains a minimum throughput requirement. During the year ended December 31~~payments, ~~2003,~~which ~~and for the six~~are ~~months~~being ~~ended~~transferred ~~June 30,~~to ~~2004,~~income weover ~~exceeded~~ the ~~minimum~~term ~~throughput requirements~~of on the ~~lease~~respective ~~agreement~~revenue contracts. ~~We are~~The ~~also~~amount ~~contingently~~of ~~liable~~commitment asby year ~~guarantor~~is ~~for~~our ~~$500.0~~best ~~million~~estimate ~~principal amount~~ of ~~7.625%~~projected ~~Senior~~payments ~~Notes due 2012 issued in February 2002 and for $200.0 million principal amount~~ of ~~6.125%~~these ~~Senior~~long-term ~~Notes due 2013 issued in January 2003 by our Parent Partnership~~liabilities.

~~During~~We ~~the~~expect ~~six months~~to ~~ended~~repay ~~June 30,~~the ~~2004~~long-term, wesenior unsecured ~~contributed~~obligations ~~$1.5~~and ~~million~~note topayable ~~Centennial~~ to ~~cover~~ ~~operating~~our ~~needs~~Parent ~~and~~Partnership ~~capital~~through ~~expenditures. During~~ the issuance ~~six~~of ~~months~~additional ~~ended~~long-term ~~June 30,~~senior ~~2004,~~unsecured wedebt ~~contributed $17.2~~at ~~million~~the totime MBthe ~~Storage,~~2008 ofand 2028 ~~which~~debts ~~$16.5~~mature, ~~million~~with ~~was~~proceeds ~~used~~from tothe ~~for~~dispositions ~~its acquisition~~ of ~~storage~~ assets, ~~in April 2004. We may be required to contribute~~ cash ~~to Centennial during the~~flows ~~remainder~~from ofoperations, ~~2004~~and tocontributions ~~cover~~from ~~capital~~our ~~expenditures,~~Parent ~~acquisitions~~Partnership or ~~other~~any ~~operating~~combination ~~needs~~of ~~and~~the toabove ~~MB Storage to cover significant capital expenditures or additional acquisitions~~items.

~~Off-Balance Sheet~~Sources ~~Arrangements~~of Future Capital

We doexpect ~~not~~that ~~rely~~our oncash ~~off-balance~~flow ~~sheet~~from ~~borrowings~~operating activities will be adequate to fund ~~our~~cash ~~acquisitions~~distributions and capital additions necessary to sustain existing operations. However, Weexpansionary ~~have~~capital noprojects ~~off-balance~~and ~~sheet~~acquisitions ~~commitments~~may ~~for~~require ~~indebtedness~~additional ~~other~~capital ~~than~~contributions ~~the~~from ~~limited~~our ~~guaranty~~Parent Partnership. The ofParent ~~the~~Partnership has ~~Centennial~~funded ~~debt~~its capital commitments from operating cash flow, borrowings under bank credit facilities, the ~~Parent~~issuance ~~Partnership~~of long term debt in capital markets and ~~leases~~the public ~~covering~~offering ~~assets~~of Limited Partner Units. ~~utilized~~We inexpect ~~several~~future ~~areas~~capital ofneeds ~~our~~will ~~operations~~be similarly funded.

22Our Parent Partnership has filed with the SEC a universal shelf registration statement that, subject to agreement on terms at the time of use and appropriate supplementation, allows it to issue, in one or more offerings, up to an aggregate of $2.0 billion of equity securities, debt securities or a combination thereof. At December 31, 2004, our Parent Partnership had $2.0 billion available under this shelf registration, subject to customary marketing terms and conditions.

~~Contractual~~Our ~~Obligations~~Parent Partnership’s senior unsecured debt is rated BBB with negative implications by Standard and Poors (“S&P”) and Baa3 by Moody’s Investors Service (“Moody’s”). S&P assigned this rating on February 24, 2005, following the announcement of the acquisition of the Company by DFI, which is not rated by S&P. Our senior unsecured debt is also rated BBB with negative implications by S&P and Baa3 by Moody’s. The Moody’s ratings are stable. A rating reflects only the view of a rating agency and is not a recommendation to buy, sell or hold any indebtedness. Any rating can be revised upward or downward or withdrawn at any time by a rating agency if it determines that the circumstances warrant such a change.

TheOther following table summarizes our debt repayment obligations and material contractual commitments as of June 30, 2004 (in millions):Considerations

	Amount of Commitment Expiration Per Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Note payable, Parent Partnership	$	246.8	$	—	$	246.8	$	—	$	—
6.45% Senior Notes due 2008 (1)	180.0		—		—		180.0		—
7.51% Senior Notes due 2028 (1)	210.0		—		—		—		210.0
Debt subtotal	636.8		—		246.8		180.0		210.0
Operating leases	49.8		11.6		20.1		8.5		9.6
Total	$	686.6	$	11.6	$	266.9	$	188.5	$	219.6

Our operations are subject to federal, state and local laws and regulations governing the discharge of materials into the environment. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, imposition of injunctions delaying or prohibiting certain activities and the need to perform investigatory and remedial activities. Although we believe our operations are in material compliance with applicable environmental laws and regulations, risks of significant costs and liabilities are inherent in pipeline operations, and we cannot assure you that significant costs and liabilities will not be incurred. Moreover, it is possible that other developments, such as increasingly strict environmental laws and regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from our operations, could result in substantial costs and liabilities to us. We believe that changes in environmental laws and regulations will not have a material adverse effect on our financial position, results of operations or cash flows in the near term.

In 1994, the Louisiana Department of Environmental Quality (1“LDEQ”) We ~~entered~~issued ~~into~~a ancompliance ~~interest~~order ~~rate~~for environmental ~~swap~~contamination ~~agreement~~at toour ~~hedge~~Arcadia, Louisiana, facility. In 1999, our ~~exposure~~Arcadia tofacility and adjacent ~~changes~~terminals inwere directed by the ~~fair~~Remediation ~~value~~Services Division of ~~our~~the ~~7.51%~~LDEQ ~~Senior~~to pursue ~~Notes~~remediation ~~due~~of ~~2028~~this contamination. At ~~June~~March 3031, ~~2004~~2005, ~~the~~we 7have an accrued liability of $0.~~51%~~2 ~~Senior~~million ~~Notes~~for remediation ~~include~~costs at our Arcadia facility. Effective in March 2004, we executed an access agreement with an ~~adjustment~~adjacent toindustrial ~~decrease~~landowner ~~the~~who ~~fair~~is ~~value~~located upgradient of the ~~debt by $2~~Arcadia facility.9 This ~~million~~agreement ~~related~~enables tothe ~~this~~landowner ~~interest~~to ~~rate~~proceed ~~swap~~with ~~agreement. At~~remediation ~~June 30,~~activities ~~2004,~~at our ~~6.45%~~Arcadia ~~Senior~~facility ~~Notes~~for which ~~include~~it $3has accepted shared responsibility.0 ~~million~~We do not expect that the completion of ~~unamortized~~the ~~debt~~remediation ~~discount.~~ program proposed ~~The~~to ~~fair~~the ~~value~~LDEQ ~~adjustment~~will ~~and~~have ~~unamortized~~a ~~debt~~future ~~discount~~material ~~are~~adverse ~~excluded~~effect on our financial ~~from~~position, ~~this~~results ~~table~~of operations or cash flows.

We expect to repay the long-term, senior unsecured obligations and note payable to our Parent Partnership through the issuance of additional long-term senior unsecured debt at the time the 2008 and 2028 debts mature, with proceeds from the dispositions of assets, cash flows from operations, contributions from our Parent Partnership or any combination of the above items.22

~~Sources~~On March 17, 2003, we experienced a release of ~~Future~~511 ~~Capital~~barrels of jet fuel from a storage tank at our Blue Island terminal located in Cook County, Illinois. As a result of the release, we have entered into an Agreed Order with the State of Illinois, which required us to conduct an environmental investigation. At this time, we have complied with the terms of the Agreed Order, and the results of the environmental investigation indicated there were no soil or groundwater impacts from the release. We are in the process of negotiating a final settlement with the State of Illinois, and we do not expect that compliance with the settlement will have a future material adverse effect on our financial position, results of operations or cash flows.

WeOn July 22, ~~expect~~2004, ~~that~~we ~~our cash~~experienced ~~flow~~a release of approximately 12 barrels of jet fuel from ~~operating~~a ~~activities~~sump ~~will~~at beour ~~adequate~~Lebanon, toOhio, ~~fund~~terminal. The ~~cash~~released ~~distributions~~jet fuel was contained within a ~~and~~storm ~~capital~~water ~~additions~~retention ~~necessary~~pond tolocated ~~sustain~~on ~~existing~~the ~~operations~~terminal property. ~~However,~~Six ~~expansionary~~migratory ~~capital~~waterfowl ~~projects~~were ~~and~~affected by the ~~acquisitions~~jet ~~may~~fuel ~~require~~and ~~additional~~were ~~capital~~subsequently ~~contributions~~euthanized ~~from~~by ~~our~~or ~~Parent~~at the request of the United States ~~Partnership~~Fish and Wildlife Service (“USFWS”). ~~The~~On ~~Parent~~October 1, 2004, ~~Partnership~~the ~~has funded~~USFWS ~~its~~served ~~capital~~us ~~commitments~~with ~~from~~a ~~operating~~Notice ~~cash~~of ~~flow~~Violation, ~~borrowings~~alleging ~~under~~that ~~bank~~we violated ~~credit~~16 ~~facilities,~~USC 703 of the ~~issuance~~Migratory Bird Treaty Act for the “take[ing] of ~~long~~migratory birds ~~term~~by ~~debt~~illegal inmethods.” On ~~capital~~February 7, 2005, ~~markets~~we ~~and~~entered into a Memorandum of Understanding with the USFWS, settling ~~public~~all ~~offering~~aspects of ~~Limited~~this ~~Partner Units~~matter. The terms of Wethis ~~expect~~settlement ~~future~~did ~~capital~~not ~~needs~~have ~~will~~a bematerial ~~similarly~~adverse ~~funded~~effect on our financial position, results of operations or cash flows.

~~Our Parent~~On ~~Partnership~~July 27, ~~has~~2004, ~~filed~~we ~~with~~received notice from the ~~Securities~~United ~~and~~States ~~Exchange~~Department ~~Commission~~of Justice (“DOJ”) of its intent to seek a ~~universal shelf~~civil ~~registration~~penalty ~~statement~~against ~~that,~~us ~~subject~~related to ~~effectiveness~~our November 21, ~~agreement~~2001, onrelease ~~terms~~of approximately 2,575 barrels of jet fuel from our 14-inch diameter pipeline located in Orange County, Texas. The DOJ, at the ~~time~~request of ~~use~~the ~~and~~Environmental Protection ~~appropriate supplementation~~Agency, ~~allows~~is itseeking toa civil ~~issue,~~penalty inagainst ~~one~~us for alleged violations of the Clean Water Act (“CWA”) orarising ~~more~~out ~~offerings,~~of upthis torelease. The anmaximum statutory ~~aggregate~~penalty calculated for this alleged violation of the CWA is $2.08 million. We ~~billion~~are ofin ~~equity~~discussions ~~securities,~~with the ~~debt~~DOJ ~~securities~~regarding orthis amatter ~~combination~~and ~~thereof.~~ have responded to its request for additional Atinformation. We ~~June 30~~do not expect a civil penalty, ~~2004~~if any, ~~our~~to ~~Parent~~have ~~Partnership~~a ~~has~~material ~~$2.0~~adverse ~~billion~~effect ~~remaining~~on our financial position, ~~under~~results ~~this~~of ~~shelf~~operations ~~registration~~or cash flows.

~~Our~~At ~~Parent~~March 31, ~~Partnership’s~~2005, ~~senior~~we ~~unsecured~~have ~~debt~~an isaccrued ~~rated~~liability ~~BBB~~of ~~by Standard and Poors (“S&P”) and Baa3 by Moody’s Investors Service (“Moody’s”)~~$1. ~~Our~~5 ~~senior~~million ~~unsecured~~related ~~debt~~to isvarious ~~also~~sites ~~rated BBB by S&P and Baa3 by~~requiring ~~Moody’s. Both~~environmental ~~ratings~~remediation ~~are stable~~activities. AWe do ~~rating~~not ~~reflects~~expect ~~only~~that the ~~view~~completion of aremediation ~~rating agency~~programs ~~and~~associated iswith ~~not a recommendation to buy, sell or hold any indebtedness. Any rating can be revised upward or downward~~these oractivities ~~withdrawn~~will athave ~~any time by~~ a ~~rating~~future ~~agency~~material ifadverse iteffect ~~determines~~on ~~that~~our ~~the~~financial ~~circumstances~~position, ~~warrant~~results ~~such~~of aoperations ~~change~~or cash flows.

~~Other~~Recent ~~Considerations~~Accounting Pronouncements

~~Our~~See ~~operations~~discussion ~~are~~of ~~subject~~new toaccounting ~~federal,~~pronouncements ~~state~~in ~~and~~Note ~~local~~1. Organization ~~laws~~ and ~~regulations~~Basis ~~governing the discharge~~ of ~~materials~~Presentation ~~into~~- ~~the~~New ~~environment.~~Accounting ~~Failure to comply with these laws~~Pronouncements ~~and regulations may result~~ in the ~~assessment~~accompanying ofconsolidated financial statements.

23Forward-Looking Statements

~~administrative,~~The ~~civil~~matters ~~and~~discussed herein ~~criminal~~include ~~penalties,~~“forward-looking ~~imposition~~statements” within the meaning of ~~injunctions~~various ~~delaying~~provisions orof ~~prohibiting~~the ~~certain~~Securities ~~activities~~Act of 1933 and the ~~need~~Securities toExchange ~~perform~~Act of ~~investigatory~~1934. All ~~and~~statements, ~~remedial~~other ~~activities.~~ than ~~Although~~statements of historical facts, included in this document that address activities, events or developments that we ~~believe~~expect ~~our~~or ~~operations~~anticipate ~~are~~will or may occur in ~~material~~the ~~compliance~~future, ~~with~~including such things as estimated future capital ~~applicable~~expenditures ~~environmental~~(including ~~laws~~the amount and ~~regulations~~nature thereof), ~~risks~~business ofstrategy ~~significant~~and measures ~~costs~~to implement strategy, competitive strengths, goals, expansion and ~~liabilities~~growth ~~are~~of ~~inherent~~our inbusiness ~~pipeline~~and operations, plans, references to future success, references to intentions as to future matters and weother ~~cannot~~such ~~assure~~matters ~~you~~are forward-looking ~~that~~statements. These ~~significant~~statements ~~costs~~are based on certain assumptions and ~~liabilities~~analyses ~~will~~made ~~not~~by beus ~~incurred.~~in ~~Moreover~~light of our experience and our perception of historical trends, itcurrent isconditions and ~~possible~~expected ~~that~~future ~~other~~ developments, ~~such~~as well as ~~increasingly~~other ~~strict~~factors ~~environmental~~we believe are ~~laws~~appropriate ~~and~~under ~~regulations~~the ~~and~~circumstances. However, ~~enforcement~~whether ~~policies~~actual ~~thereunder,~~results and ~~claims~~developments ~~for~~will conform with our ~~damages~~expectations and predictions is subject to ~~property~~a ornumber ~~persons~~of ~~resulting~~risks ~~from~~and ~~our~~uncertainties, including ~~operations~~general economic, ~~could~~market ~~result~~or inbusiness conditions, the opportunities ~~substantial~~(or ~~costs~~lack ~~and~~thereof) ~~liabilities~~that may be presented to and pursued by us. , competitive Weactions ~~believe~~by ~~that~~other pipeline companies, changes in ~~environmental~~ laws ~~and~~or regulations, ~~will~~and ~~not~~other ~~have~~factors, amany ~~material~~of ~~adverse~~which ~~effect~~are onbeyond our ~~financial position~~control. Consequently, ~~results~~all of ~~operations~~the forward-looking statements made in this document are qualified by these cautionary statements and we cannot assure you that actual results or ~~cash~~developments ~~flows~~that inwe anticipate will be realized or, even if substantially realized, that they will have the ~~near~~expected ~~term.~~consequences to or effect on us or our business or

In 1994, the Louisiana Department of Environmental Quality (“LDEQ”) issued a compliance order for environmental contamination at our Arcadia, Louisiana, facility. In 1999, our Arcadia facility and adjacent terminals were directed by the Remediation Services Division of the LDEQ to pursue remediation of this contamination. At June 30, 2004, we have an accrued liability of $0.3 million for remediation costs at our Arcadia facility. Effective in March 2004, we executed an access agreement with an adjacent industrial landowner who is located upgradient of the Arcadia facility. This agreement enables the landowner to proceed with remediation activities at our Arcadia facility for which it has accepted shared responsibility. We do not expect that the completion of the remediation program proposed to the LDEQ will have a future material adverse effect on our financial position, results of operations or cash flows.23

Onoperations. For ~~March 17,~~additional ~~2003,~~discussion ~~we experienced a release~~ of ~~511~~such ~~barrels~~risks ~~of jet~~and ~~fuel~~uncertainties, ~~from~~see aour ~~storage~~Annual ~~tank~~Report aton ~~our~~Form 10-K ~~Blue~~for ~~Island~~the ~~terminal~~year ~~located~~ended ~~in Cook County~~December 31, ~~Illinois. As~~2004, aand ~~result~~other offilings ~~the release,~~ we have ~~entered~~made ~~into an Agreed Order~~ with the ~~State~~Securities ~~of Illinois. We are complying with the Agreed Order~~ and ~~are~~ ~~in the process of negotiating a final settlement with the State of~~Exchange ~~Illinois~~Commission. ~~We do not expect that compliance with the Agreed Order or the settlement will have a future material adverse effect on our financial position, results of operations or cash flows.~~

AtItem ~~June 30, 2004, we have an accrued liability of $2~~3.0 Quantitative ~~million related to various sites~~and ~~requiring~~Qualitative ~~environmental~~Disclosures ~~remediation~~About ~~activities. We~~Market ~~do not expect that the completion of remediation programs associated with these activities will have a future material adverse effect on our financial position, results of operations or cash flows.~~Risk

We ~~regularly review~~may ~~our~~be ~~long-lived~~exposed ~~assets~~to market ~~for~~risk ~~impairment~~through changes in ~~accordance~~commodity ~~with~~prices ~~SFAS~~and ~~No.~~interest ~~144, Accounting for the Impairment or Disposal of Long-Lived Assets~~rates. AtWe ~~June 30,~~do ~~2004,~~not we have ~~identified certain~~foreign ~~assets~~exchange ~~that~~risks. Our weRisk ~~are~~Management ~~assessing~~Committee ~~for~~has ~~recoverability resulting from recent~~established ~~operational~~policies ~~changes. We are continuing~~ to monitor ~~these~~and ~~circumstances~~control ~~surrounding~~these ~~the~~market ~~assets;~~risks. ~~however,~~The weRisk ~~do not~~Management ~~believe~~Committee ~~that~~is ~~the~~comprised, ~~resolution~~in ~~of the matter will have a material effect on our financial condition~~part, ~~results~~ of ~~operations~~senior orexecutives ~~cash~~of ~~flows~~the Company.

~~Recent~~We have utilized and ~~Accounting~~expect ~~Pronouncements~~to continue to utilize interest rate swap agreements to hedge a portion of our fair value risks. Interest rate swap agreements are used to manage the fixed interest rate mix of our debt portfolio and overall cost of borrowing. The interest rate swap related to our fair value risk is intended to reduce our exposure to changes in the fair value of our fixed rate Senior Notes. The interest rate swap agreement involves the periodic exchange of payments without the exchange of the notional amount upon which the payments are based. The related amount payable to or receivable from counterparties is included as an adjustment to accrued interest.

~~See~~At ~~discussion~~March 31, of2005, we ~~new~~had ~~accounting~~outstanding ~~pronouncements~~$180.0 inmillion ~~Note 1~~principal amount of 6. ~~Organization~~45% Senior Notes due 2008 and ~~Basis~~$210.0 million principal amount of ~~Presentation~~ -7.51% ~~New~~Senior ~~Accounting~~Notes ~~Pronouncements~~due in2028. At March 31, 2005, the ~~accompanying~~estimated ~~consolidated~~fair ~~financial~~value ~~statements~~of the 6.45% Senior Notes and 7.51% Senior Notes were approximately $186.2 million and $223.2 million, respectively.

~~Forward~~In October 2001, we entered into an interest rate swap agreement to hedge our exposure to changes in the fair value of our fixed rate 7.51% Senior Notes due 2028. We designated this swap agreement as a fair value hedge. The swap agreement has a notional amount of $210.0 million and matures in January 2028 to match the principal and maturity of the Senior Notes. Under the swap agreement, we pay a floating rate of interest based on a three-~~Looking~~month U.S. Dollar LIBOR rate, plus ~~Statements~~a spread, and receive a fixed rate of interest of 7.51%. During the three months ended March 31, 2005, and 2004, we recognized reductions in interest expense of $1.8 million and $2.6 million, respectively, related to the difference between the fixed rate and the floating rate of interest on the interest rate swap. During the quarter ended March 31, 2005, we measured the hedge effectiveness of this interest rate swap and noted that no gain or loss from ineffectiveness was required to be recognized. The fair value of this interest rate swap was a gain of approximately $0.5 million and $3.4 million at March 31, 2005, and December 31, 2004, respectively. Utilizing the balance of the 7.51% Senior Notes outstanding at March 31, 2005, and including the effects of hedging activities, assuming market interest rates increase 100 basis points, the potential annual increase in interest expense is $2.1 million.

~~The~~As ~~matters~~of ~~discussed~~March 31, ~~herein~~2005, ~~include~~and ~~“forward-looking~~December 31, ~~statements”~~2004, ~~within~~we ~~the~~had ~~meaning~~intercompany ofnotes ~~various provisions~~payable ofto ~~the~~our Parent ~~Securities~~Partnership ~~Act~~ of ~~1933~~$320.5 million and ~~the Securities Exchange Act of 1934~~$301. ~~All~~7 ~~statements~~million, ~~other~~respectively, ~~than~~which ~~statements~~represented ofborrowings ~~historical~~under ~~facts,~~the ~~included~~Parent inPartnership’s ~~this~~Revolving ~~document that address~~Credit ~~activities~~Facility, ~~events~~7.625% orSenior ~~developments~~Notes ~~that~~and we6.125% ~~expect~~Senior orNotes. ~~anticipate~~The ~~will~~weighted ~~or may~~average ~~occur~~interest inrate on the ~~future,~~note ~~including~~payable ~~such~~to ~~things as estimated future capital expenditures (including~~ the ~~amount~~Parent ~~and~~Partnership ~~nature~~at ~~thereof)~~March 31, ~~business strategy and~~ ~~measures to implement strategy~~2005, ~~competitive~~was ~~strengths,~~4.5%. At ~~goals~~March 31, ~~expansion and~~2005, ~~growth~~accrued ofinterest ~~our~~includes ~~business~~$1.7 ~~and~~million ~~operations,~~due ~~plans, references~~ to ~~future~~our ~~success, references~~Parent ~~to intentions as to future matters and other such matters are forward-looking statements~~Partnership. ~~These statements~~For ~~are~~the ~~based~~three onmonths ~~certain~~ended ~~assumptions and analyses made by us in light of~~March 31, ~~our~~2005 ~~experience~~ and ~~our perception of historical trends~~2004, ~~current~~interest ~~conditions~~costs ~~and expected~~incurred ~~future~~on ~~developments~~the asnote ~~well~~payable asto ~~other~~our ~~factors we believe are~~Parent ~~appropriate~~Partnership ~~under~~totaled ~~the circumstances~~$3. ~~However,~~4 ~~whether~~million ~~actual results~~ and ~~developments~~$2.9 ~~will conform with our expectations and predictions is subject to a number of risks and uncertainties~~million, ~~including~~ ~~general economic, market or business~~respectively.

24Item 4. Controls and Procedures

~~conditions,~~The ~~the~~principal executive ~~opportunities~~officer ~~(or lack thereof) that may be presented to~~ and ~~pursued~~principal byfinancial ~~us, competitive~~officer ~~actions~~of byour ~~other~~General ~~pipeline companies~~Partner, ~~changes in laws or~~after ~~regulations,~~evaluating ~~and~~the ~~other~~effectiveness ~~factors, many~~ of ~~which are beyond~~ our ~~control. Consequently,~~disclosure ~~all~~controls ofand ~~the~~procedures ~~forward-looking~~(as ~~statements~~defined ~~made~~ in ~~this~~Exchange ~~document~~Act ~~are~~Rules 13a-15(e) and ~~qualified~~15d-15(e)) byas ~~these~~of ~~cautionary statements~~March 31, ~~and~~2005, wehave ~~cannot~~concluded ~~assure you~~ that, ~~actual~~as ~~results~~of orsuch ~~developments~~date, ~~that~~our wedisclosure ~~anticipate~~controls and ~~will~~procedures beare ~~realized~~adequate ~~or,~~and ~~even~~effective ifto ~~substantially~~ensure ~~realized,~~ that ~~they~~material ~~will have the~~information ~~expected~~relating ~~consequences~~ to ~~or effect on~~ us ~~or our business or operations. For additional discussion of such risks~~ and ~~uncertainties,~~ ~~see~~ our ~~Annual~~consolidated ~~Report~~subsidiaries onwould ~~Form~~be ~~10-K~~made ~~for~~known ~~the~~to ~~year~~them ~~ended~~by ~~December 31,~~others ~~2003,~~within ~~and~~those ~~other filings we have made with the Securities and Exchange Commission~~entities.

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~24

WeChanges ~~may be exposed to market risk through changes~~ in ~~commodity~~Internal ~~prices~~Control ~~and~~over ~~interest rates. We do not have foreign exchange risks. Our Risk Management Committee has~~Financial ~~established policies to monitor and control these market risks. The Risk Management Committee is comprised, in part, of senior executives of the Company.~~Reporting

WeThere ~~have~~has ~~utilized and~~been ~~expect~~no ~~to continue to utilize interest rate swap agreements to hedge a~~change ~~portion~~in of our ~~fair~~internal ~~value~~control ~~risks. Interest~~over ~~rate~~financial ~~swap~~reporting ~~agreements~~during ~~are used to manage~~ the ~~fixed~~first ~~interest~~quarter ~~rate~~of ~~mix~~2005 ofthat ~~our~~has ~~debt~~materially ~~portfolio~~affected, ~~and~~or ~~overall~~is ~~cost~~reasonably oflikely ~~borrowing. The interest rate swap related~~ to ~~our fair~~materially ~~value~~affect, ~~risk is intended to reduce~~ our ~~exposure~~internal tocontrol ~~changes~~over infinancial ~~the fair value of our fixed rate Senior Notes~~reporting. ~~The interest~~As ~~rate~~a ~~swap~~result, ~~agreement~~no ~~involves~~corrective ~~the~~actions ~~periodic exchange of payments without~~were ~~the~~required ~~exchange of the notional amount upon which the payments are based. The related amount payable to~~ or ~~receivable from counterparties is included as an adjustment to accrued interest~~undertaken.

AtPART ~~June 30, 2004, we had outstanding $180~~II.~~0 million principal amount of 6.45% Senior Notes due 2008 and $210.0 million principal amount of 7.51% Senior Notes due 2028.~~ AtOTHER ~~June 30, 2004, the estimated fair values of the 6.45% Senior Notes and 7.51% Senior Notes were approximately $185.5 million and $211.7 million, respectively.~~INFORMATION

~~On October 4,~~Item 2001, we entered into an interest rate swap agreement to hedge our exposure to changes in the fair value of our fixed rate 7.51% Senior Notes due 2028. We designated this swap agreement as a fair value hedge. The swap agreement has a notional amount of $210.0 million and matures in January 2028 to match the principal and maturity of our 7.51% Senior Notes. Under the swap agreement, we pay a floating rate of interest based on a three-month U.S. Dollar LIBOR rate, plus a spread, and receive a fixed rate of interest of 7.51%. During the six months ended June 30, 2004 and 2003, we recognized reductions in interest expense of $5.1 ~~million and $4~~.~~9 million, respectively, related to the difference between the fixed rate and the floating rate of interest on the interest rate swap.~~ ~~During~~Legal the quarter ended June 30, 2004, we measured the hedge effectiveness of this interest rate swap and noted that no gain or loss from ineffectiveness was required to be recognized. The fair value of this interest rate swap was a loss of approximately $2.9 million at June 30, 2004, and a gain of approximately $2.3 million at December 31, 2003. Utilizing the balance of the 7.51% Senior Notes outstanding at June 30, 2004, and including the effects of hedging activities, assuming market interest rates increase 100 basis points, the potential annual increase in interest expense is $2.1 million.Proceedings

AsWe ofhave ~~June 30~~been, ~~2004,~~in the ~~and~~ordinary ~~December 31,~~course ~~2003~~of business, wea ~~had~~defendant anin ~~intercompany~~various ~~note~~lawsuits ~~payable~~and toa ~~our~~party ~~Parent~~to ~~Partnership~~various ofother ~~$246.8~~legal ~~million and $211.3 million~~proceedings, ~~respectively,~~some of which ~~represented~~ ~~borrowings~~are ~~under~~covered ~~the~~in ~~Parent~~whole ~~Partnership’s~~or ~~Revolving~~in ~~Credit~~part ~~Facility,~~by 7insurance.~~625%~~ We ~~Senior~~believe ~~Notes~~that ~~and~~the outcome ~~6.125%~~of ~~Senior~~these ~~Notes.~~lawsuits ~~The~~and ~~weighted~~other ~~average interest~~proceedings ~~rate~~will onnot ~~the~~individually ~~note~~or ~~payable~~in to the ~~Parent Partnership at June 30,~~ ~~2004,~~aggregate ~~was~~have ~~5.2%. At~~a ~~June 30,~~material ~~2004, accrued~~adverse ~~interest~~effect ~~includes~~on ~~$4.1~~our ~~million~~consolidated ~~due~~financial position, toresults ~~the~~of ~~Parent~~operations ~~Partnership. For~~or ~~the~~cash ~~six months ended June~~flows. ~~30, 2004~~ ~~and~~See ~~2003,~~discussion ~~interest~~of ~~costs~~legal ~~incurred~~proceedings onin ~~the~~Note ~~note~~9. Commitments ~~payable~~and toContingencies ~~the~~in ~~Parent Partnership~~the ~~totaled~~accompanying ~~$6.1~~consolidated ~~million~~financial ~~and $6~~statements.~~0 million, respectively.~~

Item ~~4. Controls~~ ~~and Procedures~~6. Exhibits

The principal executive officer and principal financial officer of the Company, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2004, have concluded that, as of such date, our disclosure controls and procedures are adequate and

Exhibit Number		Description

3.1		Second Amended and Restated Agreement of Limited Partnership of TE Products Pipeline Company, Limited Partnership, effective September 21, 2001 (Filed as Exhibit 3.8 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended September 30, 2001, and incorporated herein by reference).
4.1		Form of Indenture between TE Products Pipeline Company, Limited Partnership and The Bank of New York, as Trustee, dated as of January 27, 1998 (Filed as Exhibit 4.3 to TE Products Pipeline Company, Limited Partnership’s Registration Statement on Form S-3 (Commission File No. 333-38473) and incorporated herein by reference).
4.2		Form of Indenture between TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as subsidiary guarantors, and First Union National Bank, NA, as trustee, dated as of February 20, 2002 (Filed as Exhibit 99.2 to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) dated as of February 20, 2002 and incorporated herein by reference).
4.3		First Supplemental Indenture between TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as subsidiary guarantors, and First Union National Bank, NA, as trustee, dated as of February 20, 2002 (Filed as Exhibit 99.3 to Form 8-K of TEPPCO Partners, L.P (Commission File No. 1-10403) dated as of February 20, 2002 and incorporated herein by reference).
4.4		Second Supplemental Indenture, dated as of June 27, 2002, among TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P., and Jonah Gas Gathering Company, as Initial Subsidiary Guarantors, and Val Verde Gas Gathering Company, L.P., as New Subsidiary Guarantor, and Wachovia Bank, National Association, formerly known as First Union National Bank, as trustee (Filed as Exhibit 4.6 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended June 30, 2002 and incorporated herein by reference).
4.5		Third Supplemental Indenture among TEPPCO Partners, L.P. as issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies,

effective to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.

		L.P., Jonah Gas Gathering Company and Val Verde Gas Gathering Company, L.P. as Subsidiary Guarantors, and Wachovia Bank, National Association, as trustee, dated as of January 30, 2003 (Filed as Exhibit 4.7 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2002, and incorporated herein by reference).
10.1		Supplemental Agreement to Employment Agreement between the Company and Barry R. Pearl dated as of February 23, 2005 (Filed as Exhibit 10.1 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 2005 and incorporated herein by reference).
10.2		Supplemental Agreement to Employment and Non-Compete Agreement between the Company and J. Michael Cockrell dated as of February 23, 2005 (Filed as Exhibit 10.2 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 2005 and incorporated herein by reference).
10.3		Supplemental Form Agreement to Form of Employment Agreement between the Company and John N. Goodpasture, Stephen W. Russell, C. Bruce Shaffer and Barbara A. Carroll dated as of February 23, 2005 (Filed as Exhibit 10.3 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 2005 and incorporated herein by reference).
10.4		Supplemental Form Agreement to Form of Employment and Agreement between the Company and Thomas R. Harper, Charles H. Leonard, James C. Ruth and Leonard W. Mallett dated as of February 23, 2005 (Filed as Exhibit 10.4 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 2005 and incorporated herein by reference).
31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~During~~* Filed the second quarter of 2004, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, those internal controls subsequent to the date of the evaluationherewith. ~~As a result, no corrective actions were required or undertaken.~~

~~PART~~** Furnished ~~II. OTHER~~herewith pursuant ~~INFORMATION~~to Item 601(b)-(32) of Regulation S-K.

~~Item~~+ A management ~~1. Legal~~contract ~~Proceedings~~or compensation plan or arrangement.

We have been, in the ordinary course of business, a defendant in various lawsuits and a party to various other legal proceedings, some of which are covered in whole or in part by insurance. We believe that the outcome of these lawsuits and other proceedings will not individually or in the aggregate have a material adverse effect on our consolidated financial position, results of operations or cash flows. See discussion of legal proceedings in Note 9. Commitments and Contingencies in the accompanying consolidated financial statements.26

~~Item 6. Exhibits and Reports on Form 8-K.~~SIGNATURES

~~(a) Exhibits:~~Pursuant to the requirements 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.

Exhibit Number		Description
	TE Products Pipeline Company, Limited Partnership
3.1		Second Amended and Restated Agreement of Limited Partnership of TE Products Pipeline Company, Limited Partnership, effective September 21, 2001 (Filed as Exhibit 3.8 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended September 30, 2001, and incorporated herein by reference).
	(Registrant)
4.1		Form of Indenture between TE Products Pipeline Company, Limited Partnership and The Bank of New York, as Trustee, dated as of January 27, 1998 (Filed as Exhibit 4.3 to TE Products Pipeline Company, Limited Partnership’s Registration Statement on Form S-3 (Commission File No. 333-38473) and incorporated herein by reference).
	(A Delaware Limited Partnership)
4.2		Form of Indenture between TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as subsidiary guarantors, and First Union National Bank, NA, as trustee, dated as of February 20, 2002 (Filed as Exhibit 99.2 to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) dated as of February 20, 2002 and incorporated herein by reference).
		By:		TEPPCO GP, Inc.,
4.3		First Supplemental Indenture between TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as subsidiary guarantors, and First Union National Bank, NA, as trustee, dated as of February 20, 2002 (Filed as Exhibit 99.3 to Form 8-K of TEPPCO Partners, L.P (Commission File No. 1-10403) dated as of February 20, 2002 and incorporated herein by reference).
		as General Partner
4.4		Second Supplemental Indenture, dated as of June 27, 2002, among TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P., and Jonah Gas Gathering Company, as Initial Subsidiary Guarantors, and Val Verde Gas Gathering Company, L.P., as New Subsidiary Guarantor, and Wachovia Bank, National Association, formerly known as First Union National Bank, as trustee (Filed as Exhibit 4.6 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended June 30, 2002 and incorporated herein by reference).
		By:	/s/ BARRY R. PEARL
				Barry R. Pearl,
				President, Chief Executive
				Officer and Director
		By:	/s/ CHARLES H. LEONARD
			Charles H. Leonard,
			Senior Vice President, Chief Financial Officer and Director
Date: April 28, 2005

2627

4.5		Third Supplemental Indenture among TEPPCO Partners, L.P. as issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P., Jonah Gas Gathering Company and Val Verde Gas Gathering Company, L.P. as Subsidiary Guarantors, and Wachovia Bank, National Association, as trustee, dated as of January 30, 2003 (Filed as Exhibit 4.7 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2002, and incorporated herein by reference).
10.1+		Duke Energy Corporation Executive Savings Plan (Filed as Exhibit 10.7 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 1999 and incorporated herein by reference).
10.2+		Duke Energy Corporation Executive Cash Balance Plan (Filed as Exhibit 10.8 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 1999 and incorporated herein by reference).
10.3+		Duke Energy Corporation Retirement Benefit Equalization Plan (Filed as Exhibit 10.9 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 1999 and incorporated herein by reference).
10.4+		Texas Eastern Products Pipeline Company 1994 Long Term Incentive Plan executed on March 8, 1994 (Filed as Exhibit 10.1 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 1994 and incorporated herein by reference).
10.5+		Texas Eastern Products Pipeline Company 1994 Long Term Incentive Plan, Amendment 1, effective January 16, 1995 (Filed as Exhibit 10.12 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended June 30, 1999 and incorporated herein by reference).
10.6+		Texas Eastern Products Pipeline Company Non-employee Directors Unit Accumulation Plan, effective April 1, 1999 (Filed as Exhibit 10.30 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended September 30, 1999 and incorporated herein by reference).
10.7+		Texas Eastern Products Pipeline Company Non-employee Directors Deferred Compensation Plan, effective November 1, 1999 (Filed as Exhibit 10.31 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended September 30, 1999 and incorporated herein by reference).
10.8+		Texas Eastern Products Pipeline Company Phantom Unit Retention Plan, effective August 25, 1999 (Filed as Exhibit 10.32 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended September 30, 1999 and incorporated herein by reference).
10.9+		Form of Employment Agreement between the Company and Thomas R. Harper, Charles H. Leonard, James C. Ruth, John N. Goodpasture, Leonard W. Mallett, Stephen W. Russell, David E. Owen, and Barbara A. Carroll (Filed as Exhibit 10.20 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 1998 and incorporated herein by reference).
10.10+		Employment Agreement with Barry R. Pearl (Filed as Exhibit 10.30 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 2001 and incorporated herein by reference).
10.11		Services and Transportation Agreement between TE Products Pipeline Company, Limited Partnership and Fina Oil and Chemical Company, BASF Corporation and BASF Fina Petrochemical Limited Partnership, dated February 9, 1999 (Filed as Exhibit 10.22 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 1999 and incorporated herein by reference).
10.12		Call Option Agreement, dated February 9, 1999 (Filed as Exhibit 10.23 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 1999 and incorporated herein by reference).

10.13+		Texas Eastern Products Pipeline Company, LLC 2000 Long Term Incentive Plan, Amendment and Restatement, effective January 1, 2000 (Filed as Exhibit 10.28 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2000 and incorporated herein by reference).
10.14+		TEPPCO Supplemental Benefit Plan, effective April 1, 2000 (Filed as Exhibit 10.29 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2000 and incorporated herein by reference).
10.15		Contribution, Assignment and Amendment Agreement among TEPPCO Partners, L.P., TE Products Pipeline Company, Limited Partnership, TCTM, L.P., Texas Eastern Products Pipeline Company, LLC, and TEPPCO GP, Inc., dated July 26, 2001 (Filed as Exhibit 3.6 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended June 30, 2001 and incorporated herein by reference).
10.16		Certificate of Formation of TEPPCO Colorado, LLC (Filed as Exhibit 3.2 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 1998 and incorporated herein by reference).
10.17		Amended and Restated Credit Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent and LC Issuing Bank, and Certain Lenders, dated as of April 6, 2001 ($500,000,000 Revolving Facility) (Filed as Exhibit 10.31 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 2001 and incorporated herein by reference).
10.18		Credit Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent, and Certain Lenders, dated as of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit 10.32 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 2001 and incorporated herein by reference).
10.19		Amendment 1, dated as of September 28, 2001, to the Amended and Restated Credit Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent and LC Issuing Bank, and Certain Lenders, dated as of April 6, 2001 ($500,000,000 Revolving Facility) (Filed as Exhibit 10.33 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended September 30, 2001 and incorporated herein by reference).
10.20		Amendment 1, dated as of September 28, 2001, to the Credit Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent, and Certain Lenders, dated as of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit 10.34 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended September 30, 2001 and incorporated herein by reference).
10.21		Amendment and Restatement, dated as of November 13, 2001, to the Credit Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent, and Certain Lenders, dated as of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit 10.35 to Form 10-K of TEPPCO Partners, L.P (Commission File No. 1-10403) for the year ended December 31, 2001 and incorporated herein by reference).
10.22		Second Amendment and Restatement, dated as of November 13, 2001, to the Amended and Restated Credit Agreement amount TEPPCO Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent and LC Issuing Bank, and Certain Lenders, dated as of April 6, 2001 ($500,000,000 Revolving Facility) (Filed as Exhibit 10.36 to Form 10-K of TEPPCO Partners, L.P (Commission File No. 1-10403) for the year ended December 31, 2001 and incorporated herein by reference).
10.23		Credit Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent and Certain Lenders, as Lenders dated as of March 28, 2002 ($200,000,000 Revolving Credit Facility) (Filed as Exhibit 10.44 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the three months ended March 31, 2002 and incorporated herein by reference).

10.24		Amended and Restated Credit Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank, as Administrative Agent and LC Issuing Bank and Certain Lenders, as Lenders dated as of March 28, 2002 ($500,000,000 Revolving Facility) (Filed as Exhibit 10.45 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the three months ended March 31, 2002 and incorporated herein by reference).
10.25		Amendment, dated as of June 27, 2002 to the Amended and Restated Credit Agreement among TEPPCO Partners, L.P., as Borrower, SunTrust Bank, as Administrative Agent, and Certain Lenders, dated as of March 28, 2002 ($500,000,000 Revolving Credit Facility) (Filed as Exhibit 99.3 to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) dated as of July 2, 2002 and incorporated herein by reference).
10.26		Amendment 1, dated as of June 27, 2002 to the Credit Agreement among TEPPCO Partners, L.P., as Borrower, SunTrust Bank, as Administrative Agent and Certain Lenders, dated as of March 28, 2002 ($200,000,000 Revolving Credit Facility) (Filed as Exhibit 99.4 to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) dated as of July 2, 2002 and incorporated herein by reference).
10.27+		Texas Eastern Products Pipeline Company, LLC 2002 Phantom Unit Retention Plan, effective June 1, 2002 (Filed as Exhibit 10.49 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended June 30, 2002, and incorporated herein by reference).
10.28+		Amended and Restated TEPPCO Supplemental Benefit Plan, effective November 1, 2002 (Filed as Exhibit 10.44 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2002, and incorporated herein by reference).
10.29+		Texas Eastern Products Pipeline Company, LLC 2000 Long Term Incentive Plan, Second Amendment and Restatement, effective January 1, 2003 (Filed as Exhibit 10.45 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2002, and incorporated herein by reference).
10.30+		Amended and Restated Texas Eastern Products Pipeline Company, LLC Management Incentive Compensation Plan, effective January 1, 2003 (Filed as Exhibit 10.46 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2002, and incorporated herein by reference).
10.31+		Amended and Restated TEPPCO Retirement Cash Balance Plan, effective January 1, 2002 (Filed as Exhibit 10.47 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2002, and incorporated herein by reference).
10.32		Formation Agreement between Panhandle Eastern Pipe Line Company and Marathon Ashland Petroleum LLC and TE Products Pipeline Company, Limited Partnership, dated as of August 10, 2000 (Filed as Exhibit 10.48 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2002, and incorporated herein by reference).
10.33		Amended and Restated Limited Liability Company Agreement of Centennial Pipeline LLC dated as of August 10, 2000 (Filed as Exhibit 10.49 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2002, and incorporated herein by reference).
10.34		Guaranty Agreement, dated as of September 27, 2002, between TE Products Pipeline Company, Limited Partnership and Marathon Ashland Petroleum LLC for Note Agreements of Centennial Pipeline LLC (Filed as Exhibit 10.50 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2002, and incorporated herein by reference).
10.35		LLC Membership Interest Purchase Agreement By and Between CMS Panhandle Holdings, LLC, As Seller and Marathon Ashland Petroleum LLC and TE Products Pipeline Company, Limited Partnership, Severally as Buyers, dated February 10, 2003 (Filed as Exhibit 10.51 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2002, and incorporated herein by reference).
10.36		Joint Development Agreement between TE Products Pipeline Company, Limited Partnership and Louis Dreyfus Plastics Corporation dated February 10, 2000 (Filed as

		Exhibit 10.52 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended March 31, 2003, and incorporated herein by reference).
10.37		Credit Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent and LC Issuing Bank and The Lenders Party Hereto, as Lenders, dated as of June 27, 2003 ($550,000,000 Revolving Facility) (Filed as Exhibit 10.52 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended June 30, 2003, and incorporated herein by reference).
10.38		Agreement of Limited Partnership of Mont Belvieu Storage Partners, L.P. dated effective January 21, 2003. (Filed as Exhibit 10.53 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended September 30, 2003, and incorporated herein by reference).
10.39		Letter of Agreement Clarifying Rights and Obligations of the Parties Under the Mont Belvieu Storage Partners, L.P., Partnership Agreement and the Mont Belvieu Venture, LLC, LLC Agreement, dated October 13, 2003. (Filed as Exhibit 10.54 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the quarter ended September 30, 2003, and incorporated herein by reference).
31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith. ** Furnished herewith pursuant to Item 601(b)-(32) of Regulation S-K. + A management contract or compensation plan or arrangement.

(b) Reports on Form 8-K filed with or furnished to the Securities and Exchange Commission during the quarter ended June 30, 2004:

A Report on Form 8-K was filed on June 7, 2004, including as an exhibit the audited balance sheet of Texas Eastern Products Pipeline Company, LLC, as of December 31, 2003.

SIGNATURES

Pursuant to the requirements 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.

	TE Products Pipeline Company, Limited Partnership
	(Registrant)
	(A Delaware Limited Partnership)
		By:	TEPPCO GP, Inc.,
			as General Partner
		By:	/s/ BARRY R. PEARL
			Barry R. Pearl,
			President, Chief Executive
			Officer and Director
		By:	/s/ CHARLES H. LEONARD
			Charles H. Leonard,
			Senior Vice President, Chief Financial
			Officer and Director
Date: August 4, 2004

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