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~~2006 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~Commission File No. 1-13603~~

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)
(State of Incorporation		(I.R.S. Employer
2929 Allen Parkway P.O. Box 2521 Houston, Texas 77252-2521
or Organization)		Identification Number)
(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 a large accelerated filer, an accelerated filer, or a ~~(as~~non-accelerated ~~defined~~filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check one): Large accelerated filer o Accelerated Filer o Non-accelerated Filer ý

Indicate by check mark whether the registrant is a shell company (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
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	~~Financial Statements~~
	Consolidated Balance Sheets as of March 31, 2005 (unaudited) and December 31, 2004
Consolidated Balance Sheets as of March 31, 2006 (unaudited) and December 31, 2005 (unaudited)
	Consolidated Statements of Income for the three months ended March 31, 2005 and 2004 (unaudited)
Consolidated Statements of Income for the three months ended March 31, 2006 (unaudited) and 2005 (unaudited) (as restated)
	Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004 (unaudited)
Consolidated Statements of Cash Flows for the three months ended March 31, 2006 (unaudited) and 2005 (unaudited) (as restated)
	Notes to the Consolidated Financial Statements (unaudited)
Consolidated Statement of Partners’ Capital for the three months ended March 31, 2006 (unaudited)
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Notes to the Consolidated Financial Statements (unaudited)
	Forward-Looking Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Cautionary Note Regarding Forward-Looking Statements
Item 4.		Controls and Procedures
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 4.	Controls and Procedures
Item 1.		Legal Proceedings
PART II. OTHER INFORMATION
Item 6.		Exhibits
Item 1.	Legal Proceedings
Signatures
Item 1A.	Risk Factors
Item 6.	Exhibits
Signatures

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

(~~in thousands~~Unaudited)

	March 31, 2005		December 31, 2004
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1	$	—
Accounts receivable, trade (net of allowance for doubtful accounts of $56 and $56)	17,980		21,090
Accounts receivable, related parties	1,893		3,455
Inventories	10,539		10,093
Other	12,839		12,143
Total current assets	43,252		46,781
Property, plant and equipment, at cost (net of accumulated depreciation and amortization of $319,129 and $311,197)	726,540		722,334
Equity investments	170,526		169,873
Other assets	13,272		16,156
Total assets	$	953,590	$	955,144
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable and accrued liabilities	$	8,740	$	10,211
Accounts payable, related parties	70,179		66,451
Accrued interest	7,354		17,063
Other accrued taxes	5,453		5,605
Other	7,129		9,339
Total current liabilities	98,855		108,669
Senior Notes	390,432		393,317
Note Payable, Parent Partnership	320,536		301,686
Other liabilities and deferred credits	9,849		9,980
Commitments and contingencies
Partners’ capital:
General partner’s interest	2		2
Limited partner’s interest	133,916		141,490
Total partners’ capital	133,918		141,492
Total liabilities and partners’ capital	$	953,590	$	955,144

(in thousands)

See accompanying Notes to Consolidated Financial Statements.

	March 31,		December 31,
	2006		2005
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	—
Accounts receivable, trade (net of allowance for doubtful accounts of $0 and $45)	17,497		26,338
Accounts receivable, related parties	1,254		2,182
Inventories	17,715		16,449
Other	14,267		14,911
Total current assets	50,733		59,880
Property, plant and equipment, at cost (net of accumulated depreciation and amortization of $349,501 and $340,562)	810,237		808,761
Equity investments	150,876		157,335
Other assets	17,188		16,566
Total assets	$	1,029,034	$	1,042,542

LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable and accrued liabilities	$	8,156	$	13,540
Accounts payable, related parties	10,070		19,973
Accrued interest	7,562		16,151
Other accrued taxes	6,309		7,524
Other	6,694		7,220
Total current liabilities	38,791		64,408
Senior Notes	382,982		389,048
Note Payable, Parent Partnership	222,348		206,906
Other liabilities and deferred credits	20,266		14,500
Commitments and contingencies
Partners’ capital:
General partner’s interest	4		4
Limited partner’s interest	364,643		367,676
Total partners’ capital	364,647		367,680
Total liabilities and partners’ capital	$	1,029,034	$	1,042,542

1See accompanying Notes to Unaudited Consolidated Financial Statements.

~~TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP~~1

~~CONSOLIDATED~~TE ~~STATEMENTS~~PRODUCTS OFPIPELINE ~~INCOME~~COMPANY, LIMITED PARTNERSHIP

~~(Unaudited)~~CONSOLIDATED STATEMENTS OF INCOME

(~~in thousands~~Unaudited)

	Three Months Ended March 31,
	2005			2004
Operating revenues:
Transportation – Refined products	$	34,965		$	30,971
Transportation – LPGs	32,231			28,780
Other	9,820			13,911
Total operating revenues	77,016			73,662
Costs and expenses:
Operating, general and administrative	26,505			29,048
Operating fuel and power	7,629			8,049
Depreciation and amortization	9,298			8,638
Taxes – other than income taxes	2,908			2,843
Gains on sales of assets	(92		)	—
Total costs and expenses	46,248			48,578
Operating income	30,768			25,084
Interest expense – net	(7,959		)	(6,909		)
Equity losses	(842		)	(1,238		)
Other income – net	149			272
Net income	$	22,116		$	17,209

(in thousands)

See accompanying Notes to Consolidated Financial Statements.

	Three Months Ended
	March 31,
	2006			2005
				(as restated)
Operating revenues:
Transportation – Refined products	$	31,799		$	34,965
Transportation – LPGs	29,421			32,231
Other	11,578			9,820
Total operating revenues	72,798			77,016

Costs and expenses:
Operating, general and administrative	28,419			26,505
Operating fuel and power	9,254			7,629
Depreciation and amortization	10,029			9,298
Taxes – other than income taxes	2,592			2,908
Gains on sales of assets	(7		)	(92		)
Total costs and expenses	50,287			46,248

Operating income	22,511			30,768

Interest expense – net	(8,334		)	(7,959		)
Equity losses	(1,266		)	(1,821		)
Other income – net	779			149

Net income	$	13,690		$	21,137

2See accompanying Notes to Unaudited Consolidated Financial Statements.

~~TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP~~2

~~CONSOLIDATED~~TE ~~STATEMENTS~~PRODUCTS OFPIPELINE ~~CASH~~COMPANY, ~~FLOWS~~LIMITED PARTNERSHIP

~~(Unaudited)~~CONSOLIDATED STATEMENTS OF CASH FLOWS

(~~in thousands~~Unaudited)

	Three Months Ended March 31,
	2005			2004
Cash flows from operating activities:
Net income	$	22,116		$	17,209
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	9,298			8,638
Losses in equity investments, net of distributions	842			1,238
Non-cash portion of interest expense	68			7
Gains on sales of assets	(92		)	—
Decrease in accounts receivable	3,110			6,793
(Increase) decrease in inventories	(446		)	1,015
(Increase) decrease in other current assets	(696		)	3,700
Decrease in accounts payable and accrued expenses	(9,933		)	(13,332		)
Other	715			(8,200		)
Net cash provided by operating activities	24,982			17,068
Cash flows from investing activities:
Investment in Centennial Pipeline LLC	—			(1,000		)
Capital expenditures	(14,140		)	(7,820		)
Net cash used in investing activities	(14,140		)	(8,820		)
Cash flows from financing activities:
Proceeds from note payable, Parent Partnership	38,788			35,474
Repayments of notes payable, Parent Partnership	(19,938		)	(14,973		)
Distributions paid	(29,691		)	(28,894		)
Net cash used in financing activities	(10,841		)	(8,393		)
Net increase (decrease) in cash and cash equivalents	1			(145		)
Cash and cash equivalents at beginning of period	—			188
Cash and cash equivalents at end of period	$	1		$	43
Supplemental disclosure of cash flows:
Cash paid for interest (net of amounts capitalized)	$	15,330		$	12,610

(in thousands)

See accompanying Notes to Consolidated Financial Statements.

	Three Months Ended
	March 31,
	2006			2005
				(as restated)
Cash flows from operating activities:
Net income	$	13,690		$	21,137
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	10,029			9,298
Losses in equity investments	1,266			1,821
Distributions from equity investments	7,840			—
Non-cash portion of interest expense	138			68
Gains on sales of assets	(7		)	(92		)
Decrease in accounts receivable	8,841			1,204
Decrease in accounts receivable, related parties	928			1,906
Increase in inventories	(1,266		)	(446		)
(Increase) decrease in other current assets	644			(696		)
Decrease in accounts payable and accrued expenses	(13,818		)	(9,014		)
Decrease in accounts payable, related parties	(1,179		)	(919		)
Other	(12,533		)	715
Net cash provided by operating activities	14,573			24,982

Cash flows from investing activities:
Investment in Mont Belvieu Storage Partners, L.P.	(1,720		)	—
Capital expenditures	(11,706		)	(14,140		)
Net cash used in investing activities	(13,426		)	(14,140		)

Cash flows from financing activities:
Proceeds from note payable, Parent Partnership	38,075			38,788
Repayments of note payable, Parent Partnership	(22,499		)	(19,938		)
Distributions paid	(16,723		)	(29,691		)
Net cash used in financing activities	(1,147		)	(10,841		)
Net increase in cash and cash equivalents	—			1
Cash and cash equivalents at beginning of period	—			—
Cash and cash equivalents at end of period	$	—		$	1

Supplemental disclosure of cash flows:
Cash paid for interest (net of amounts capitalized)	$	15,603		$	15,330

3See accompanying Notes to Unaudited Consolidated Financial Statements.

~~TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP~~3

~~NOTES~~TE TOPRODUCTS ~~CONSOLIDATED~~PIPELINE ~~FINANCIAL~~COMPANY, ~~STATEMENTS~~LIMITED PARTNERSHIP

~~(Unaudited)~~CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

~~NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION~~(Unaudited)

~~TE Products Pipeline Company, Limited Partnership~~ (~~the “Partnership”), a Delaware limited partnership, was formed~~ in ~~March 1990. TEPPCO Partners, L.P. (the “Parent Partnership”~~thousands) 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.

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.

	General			Limited
	Partner’s			Partner’s
	Interest			Interest			Total
Partners’ capital at December 31, 2005	$	4		$	367,676		$	367,680
Net income allocation	1			13,689			13,690
Cash distributions	(1		)	(16,722		)	(16,723		)

Partners’ capital at March 31, 2006	$	4		$	364,643		$	364,647

AsSee ~~used~~accompanying inNotes ~~this~~to ~~Report,~~Unaudited ~~“we,”~~Consolidated ~~“us,” and~~Financial ~~“our” means TE Products Pipeline Company, Limited Partnership~~Statements.

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 March 31, 2005, and the results of our operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2005, are not necessarily indicative of results of our operations for the full year 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, 2004. We have reclassified certain amounts from prior periods to conform with the current presentation.4

WeTE ~~operate~~PRODUCTS ~~and~~PIPELINE ~~report in one business segment: transportation and storage of refined products~~COMPANY, ~~liquefied petroleum~~LIMITED 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.”PARTNERSHIP

AtNOTES ~~March 31,~~TO ~~2005, and~~CONSOLIDATED ~~December 31,~~FINANCIAL 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. Our Parent Partnership has historically made capital contributions, loans or otherwise provided liquidity to us as needed, but the Parent Partnership has no contractual obligation to do so. At March 31, 2005, our Parent Partnership had $81.5 million in available borrowing capacity under its revolving credit facility and agreed to cover any working capital needs, if required.STATEMENTS

4(Unaudited)

~~New~~NOTE 1. ORGANIZATION ~~Accounting~~AND ~~Pronouncements~~BASIS OF PRESENTATION

InTE ~~December 2004, the~~Products ~~Financial~~Pipeline ~~Accounting~~Company, ~~Standards~~Limited ~~Board~~Partnership (the “~~FASB~~Partnership”), ~~issued~~a ~~Statement~~Delaware oflimited ~~Financial Accounting~~partnership, ~~Standards~~was ~~(“SFAS”)~~formed Noin March 1990. ~~123(R),~~ ~~Share-Based~~TEPPCO ~~Payment~~Partners, L. ~~SFAS~~P. ~~123~~(R)the ~~requires compensation~~“Parent ~~costs~~Partnership”) ~~related~~owns toa ~~share-based~~99.999% ~~payment~~interest ~~transactions~~in tous beas ~~recognized~~the insole ~~the~~limited ~~financial statements~~partner. ~~With limited~~ ~~exceptions~~TEPPCO GP, ~~the~~Inc. ~~amount~~(“TEPPCO ofGP” ~~the~~or ~~compensation~~“General ~~cost~~Partner”), isa wholly toowned besubsidiary ~~measured~~of ~~based on~~ the ~~grant-date~~Parent ~~fair~~Partnership, ~~value~~holds ofa ~~the~~0.001% ~~equity~~general partner orinterest ~~liability~~in ~~instruments issued~~us. In ~~addition,~~Texas ~~liability~~Eastern ~~awards are~~Products toPipeline beCompany, ~~re-measured~~LLC ~~each~~(the ~~reporting period.~~ “Company”), ~~Compensation~~a ~~cost~~Delaware ~~will~~limited beliability ~~recognized~~company, ~~over~~serves as the ~~period~~general ~~that~~partner anof ~~employee~~our ~~provides~~Parent ~~service~~Partnership. inThrough ~~exchange~~February ~~for~~23, 2005, the ~~award.~~Company ~~SFAS~~was ~~123(R)~~an isindirect wholly aowned ~~revision~~subsidiary of ~~SFAS~~Duke ~~No. 123, Accounting~~Energy ~~for~~Field ~~Stock-Based Compensation~~Services, as ~~amended~~LLC ~~by SFAS No. 148~~(“DEFS”), ~~Accounting for~~a ~~Stock-Based Compensation – Transition and Disclosure and~~joint ~~supersedes~~venture ~~Accounting~~between ~~Principles~~Duke ~~Board~~Energy Corporation (“~~APB~~Duke Energy”) ~~Opinion~~and NoConocoPhillips. ~~25,~~ ~~Accounting~~Through February ~~for~~23, ~~Stock~~2005, ~~Issued~~Duke toEnergy ~~Employees. SFAS~~held ~~123(R)~~an isinterest ~~effective~~of ~~for~~approximately ~~public~~70% ~~companies~~in DEFS, asand ofConocoPhillips held the ~~first~~remaining ~~interim~~interest orof ~~annual~~approximately ~~reporting~~30%. ~~period~~On February of24, 2005, the ~~first~~Company ~~fiscal~~was ~~year beginning~~acquired onby orDFI ~~after~~GP ~~June 15,~~Holdings ~~2005~~L. P. (formerly AsEnterprise ~~such,~~GP weHoldings ~~will~~L.P.) ~~adopt SFAS 123~~(R“DFI”), inan ~~the~~affiliate ~~first quarter~~ of ~~2006~~EPCO, Inc. ~~Early~~ ~~adoption is permitted~~(“EPCO”), ~~but not~~a ~~required. All~~privately ~~public~~held ~~companies~~company ~~that adopted~~controlled ~~the~~by ~~fair-value-based~~Dan ~~method~~L. ofDuncan, ~~accounting~~for ~~must~~approximately ~~use~~$1.1 billion. ~~the~~As ~~modified prospective~~a ~~transition~~result ~~method~~of ~~and~~the ~~may~~transaction, ~~elect~~DFI toowns ~~use~~and controls the ~~modified~~2% ~~retrospective~~general ~~transition~~partner ~~method. We~~interest doin ~~not~~our ~~believe that~~Parent ~~the~~Partnership ~~adoption~~and ofhas ~~SFAS~~the ~~123(R)~~right ~~will~~to ~~have~~receive athe incentive ~~material~~distribution ~~effect~~rights onassociated ~~our~~with ~~financial position,~~its ~~results~~general ofpartner ~~operations~~interest orin our ~~cash~~Parent ~~flows~~Partnership.

InAs ~~November 2004, the~~used ~~Emerging~~in ~~Issues~~this ~~Task~~Report, ~~Force (~~“~~EITF~~we,”) ~~reached consensus in EITF 03-13~~“us,” ~~Applying~~and ~~the~~“our” ~~Conditions~~mean ~~in Paragraph 42 of FASB Statement No. 144,~~TE ~~Accounting~~Products ~~for~~Pipeline ~~Impairment or Disposal of Long-Lived Assets~~Company, inLimited ~~Determining~~Partnership ~~Whether to Report Discontinued Operations~~and, towhere ~~clarify whether a component of an enterprise that is either disposed of or classified as held for sale qualifies for income statement presentation as discontinued operations. The EITF ratified~~ the ~~consensus~~context ~~on November 30~~requires, ~~2004. The~~include consensus is to be applied prospectively with regard to a component of an enterprise that is either disposed of or classified as held for sale in reporting periods beginning after December 15, 2004. The consensus may be applied retrospectively for previously reported operating results related to disposal transactions initiated within an enterprise’s reporting period that included the date that this consensus was ratified. The adoption of EITF 03-13 did not have an effect on our ~~financial position, results of operations or cash flows~~subsidiaries.

InOn ~~March 2005~~May 9, ~~the~~ ~~FASB issued FASB Interpretation No. 47~~2005, ~~Accounting~~we ~~for~~formed ~~Conditional~~TEPPCO ~~Asset Retirement Obligations~~Interests, ~~an interpretation~~LLC ~~of FASB Statement No. 143~~ (“~~FIN 47~~TEPPCO Interests”)~~. FIN~~, 47a ~~clarifies~~Delaware ~~that~~limited ~~the~~liability ~~term~~company, ~~conditional asset~~of ~~retirement~~which ~~obligation~~we asown ~~used~~100% inof ~~SFAS~~the member Nointerests. ~~143,~~ ~~Accounting for~~On ~~Asset~~July ~~Retirement~~15, ~~Obligations~~2005, ~~refers~~TEPPCO toInterests aacquired ~~legal~~from ~~obligation~~Texas toGenco, ~~perform~~LLC an(i) ~~asset~~100% ~~retirement~~of ~~activity~~its inmember ~~which~~interests ~~the~~in ~~timing~~TG ~~and/or~~Pipeline ~~method~~GP, ~~of settlement~~LLC, ~~are conditional upon~~ a ~~future~~Delaware ~~event~~limited liability ~~that~~company, ~~may~~which oris ~~may not be within~~ the ~~control~~owner of ~~the~~100% ~~entity. Even~~of ~~though uncertainty about~~ the ~~timing~~general ~~and/or~~partner ~~method of settlement exists and may be~~interests ~~conditional~~in ~~upon~~TG ~~a future event~~Pipeline, ~~the~~L.P. ~~obligation~~(“Pipeline ~~to perform the asset retirement activity is unconditional. Accordingly~~LP”), an ~~entity is required to recognize~~ a ~~liability~~Texas ~~for~~limited ~~the~~partnership, ~~fair~~and ~~value of a~~(ii) ~~conditional~~100% ~~asset retirement obligation if the fair value~~ of the ~~liability~~membership ~~can be~~interests ~~reasonably~~in ~~estimated. Uncertainty about~~TG ~~the~~Pipeline ~~timing~~LP, ~~and/or~~LLC, ~~method of settlement of~~ a ~~conditional~~Delaware ~~asset retirement~~limited ~~obligation~~liability ~~should~~company, bewhich ~~factored~~is ~~into~~ the ~~measurement~~owner of ~~the~~100% ~~liability when sufficient information exists. The fair value~~ of ~~a liability for~~ the ~~conditional~~limited ~~asset~~partner ~~retirement obligation should be~~interests ~~recognized~~in ~~when~~TG ~~incurred generally upon acquisition~~Pipeline, ~~construction, or development or through the normal operation of the asset~~L. ~~SFAS~~P. ~~143~~On ~~acknowledges~~May ~~that~~18, ~~in some cases~~2005, ~~sufficient~~ ~~information~~we ~~may~~formed ~~not~~TEPPCO beTerminals, ~~available to reasonably estimate the fair value of an asset retirement obligation~~L. ~~FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation~~P. ~~FIN~~ ~~47 is effective no later than the end of~~(“TEPPCO ~~reporting~~Terminals”), ~~periods~~a ~~ending~~Delaware ~~after~~limited ~~December 15~~partnership, ~~2005.~~and ~~Retrospective application~~we ~~for~~own ~~interim~~a ~~financial information is permitted but is not required~~99. ~~Early~~999% ~~adoption~~interest ~~of FIN 47 is~~in ~~encouraged. We~~TEPPCO ~~are~~Terminals ~~currently~~as ~~evaluating what~~the ~~impact~~sole ~~FIN~~limited 47partner. ~~will~~TEPPCO ~~have~~GP onserves ~~our~~as ~~financial~~the ~~statements, but at this time, we~~general dopartner ~~not~~and ~~believe~~holds ~~that the adoption of FIN 47 will have~~ a ~~material~~0.001% ~~effect~~general onpartner ~~our financial~~interest ~~position,~~in ~~results~~TEPPCO ~~of operations or cash flows~~Terminals.

5TEPPCO GP, as our general partner, has all management powers over the business and affairs of our partnership under the terms of the Agreement of Limited Partnership of TE Products Pipeline Company, Limited Partnership (the “Partnership Agreement”). All of our management, administrative and operating functions are performed by employees of EPCO, pursuant to an administrative services agreement to which we and TEPPCO GP are parties, which was entered into as a result of the change in ownership of the Company on February 24, 2005. We reimburse EPCO for the allocated costs of its employees who perform operating, management and other administrative functions for us.

~~NOTE~~The accompanying unaudited consolidated financial statements 2reflect 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 March 31, 2006, and the results of our operations and cash flows for the periods presented. ~~INTANGIBLE~~ ~~ASSETS~~The results of operations for the three months ended March 31, 2006, are not necessarily indicative of results of our operations for the full year 2006. 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, 2005. We have reclassified certain amounts from prior periods to conform to the current presentation.

We ~~account~~restated ~~for~~ our ~~intangible~~ ~~assets~~consolidated ~~under~~financial ~~SFAS~~statements ~~No. 142, Goodwill~~ and ~~Other~~ ~~Intangible~~related ~~Assets,~~financial ~~which~~information ~~was issued~~for by the ~~FASB~~three inmonths ~~July 2001. SFAS~~ended ~~142~~March ~~prohibits~~31, ~~amortization of goodwill and intangible assets with indefinite useful lives~~2005, ~~but instead requires testing~~ for ~~impairment at least~~an ~~annually. SFAS~~accounting ~~142 requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives~~correction. If anSee ~~intangible asset~~Note ~~has~~11 for a ~~finite~~discussion ~~useful life, but the precise length~~ of ~~that life is not known, that intangible asset shall be amortized over~~ the ~~best estimate of its~~restatement ~~useful~~adjustment ~~life. At~~and ~~a minimum, we will assess~~ the ~~useful~~impact ~~lives and residual values of all intangible assets~~ on ~~an annual~~previously ~~basis~~issued tofinancial ~~determine if adjustments are required~~statements.

~~The following table reflects the components of intangible assets being amortized, included in other assets on the consolidated balance sheets at March 31, 2005, and December 31, 2004 (in thousands):~~5

	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	)

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 March 31, 2006 and December 31, 2005, we had a working capital surplus of $3311.49 million and a working capital deficit of ~~excess~~$4.5 million, ~~investment~~respectively. inOur ~~our~~primary ~~equity~~sources ~~investment~~of inliquidity are cash generated from ~~Centennial~~operations ~~Pipeline~~and ~~LLC,~~from ~~which~~loans ~~was~~or ~~created~~capital ~~upon~~contributions ~~formation~~from ofour ~~the~~Parent ~~company~~Partnership. ~~The~~ Working ~~excess~~capital ~~investment~~deficits isoccur ~~included~~primarily infrom ~~our equity~~the ~~investments~~timing ~~account~~of atoperating ~~March 31~~cash receipts from customers, ~~2005. This~~payment ~~excess~~of ~~investment~~cash isdistributions ~~accounted~~and ~~for~~the aspayment anof ~~intangible~~normal ~~asset~~operating ~~with~~expenses anand ~~indefinite~~capital ~~life~~expenditures. Our Parent Partnership has Wehistorically ~~assess~~made capital contributions, loans or otherwise provided liquidity to us as needed, but the ~~intangible~~Parent ~~asset~~Partnership ~~for~~has ~~impairment~~no oncontractual anobligation ~~annual~~to ~~basis~~do so. At March 31, 2006, our Parent Partnership had $253.1 million in available borrowing capacity under its revolving credit facility.

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

~~Estimated~~In ~~amortization~~December 2004, ~~expense~~the onFinancial ~~intangible~~Accounting ~~assets~~Standards ~~will~~Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123(R) (revised 2004), Share-Based Payment. SFAS 123(R) is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure and supersedes Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123(R) requires that the cost resulting from all share-based payment transactions be $0recognized in the financial statements at fair value.1 ~~million~~In April 2005, both the FASB and the Securities and Exchange Commission decided to delay the effective date for ~~each~~public companies to implement SFAS 123(R). SFAS 123(R) is now effective for public companies for annual periods beginning after June 15, 2005. Accordingly, we adopted SFAS 123(R) in the first quarter of 2006. We adopted SFAS 123(R) under the ~~years~~modified prospective ~~ending~~transition ~~December 31,~~method. Our Parent Partnership’s 2000 Long Term Incentive Plan and its 2005 ~~through~~Phantom ~~2009~~Unit Plan are liability awards under the provisions of this statement. No additional compensation expense has been recorded in connection with the adoption of SFAS 123(R) as our Parent Partnership has historically recorded the associated liabilities at fair value. The adoption of SFAS 123(R) did not have a material effect on our financial position, results of operations or cash flows.

~~NOTE~~In June 2005, the Emerging Issues Task Force (“EITF”) 3reached consensus in EITF 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, to provide guidance on how general partners in a limited partnership should determine whether they control a limited partnership and therefore should consolidate it. ~~INTEREST~~ ~~RATE~~The ~~SWAP~~EITF agreed that the presumption of general partner control would be overcome only when the limited partners have either of two types of rights. The first type, referred to as “kick-out rights,” is the right to dissolve or liquidate the partnership or otherwise remove the general partner without cause. The second type, referred to as “participating rights,” is the right to effectively participate in significant decisions made in the ordinary course of the partnership’s business. The kick-out rights and the participating rights must be substantive in order to overcome the presumption of general partner control. The consensus is effective for general partners of all new limited partnerships formed and for existing limited partnerships for which the partnership agreements are modified subsequent to the date of FASB ratification (June 29, 2005). For existing limited partnerships that have not been modified, the guidance in EITF 04-5 is effective no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005. The adoption of EITF 04-5 did not have a material effect on our financial position, results of operations or cash flows.

In ~~October~~May ~~2001~~2005, ~~we entered into an interest rate swap agreement to hedge our exposure to changes in~~ the ~~fair~~FASB ~~value~~issued ofSFAS ~~our fixed rate 7~~No.~~51%~~ ~~Senior~~154, ~~Notes~~Accounting ~~due~~Changes ~~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~~Error ~~January 2028 to match the principal and maturity of the 7~~Corrections.~~51%~~ ~~Senior~~SFAS ~~Notes. Under~~154 ~~the~~establishes ~~swap~~new ~~agreement,~~standards ~~we pay a floating rate of interest based~~ on aaccounting ~~three-month~~for ~~U.S.~~changes ~~Dollar LIBOR rate, plus 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~~accounting ~~difference between the fixed rate and the floating rate of interest on the interest rate swap~~principles. ~~During~~ ~~the~~All ~~quarter ended~~such ~~March 31,~~changes ~~2005,~~must ~~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.~~accounted

~~NOTE~~for by 4retrospective application to the financial statements of prior periods unless it is impracticable to do so. ~~INVENTORIES~~ SFAS 154 completely replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Periods. However, it carries forward the guidance in those pronouncements with respect to accounting for changes in estimates, changes in the reporting entity, and the correction of errors. SFAS 154 is effective for accounting changes and error corrections made in fiscal years beginning after December 15, 2005, with early adoption permitted for changes and corrections made in years beginning after June 1, 2005. The application of SFAS 154 does not affect the transition provisions of any existing pronouncements, including those that are in the transition phase as of the effective date of SFAS 154. The adoption of SFAS 154 did not have a material effect on our financial position, results of operations or cash flows.

~~Inventories~~In ~~are~~September ~~valued~~2005, the atEITF reached consensus in EITF 04-13, Accounting for Purchases and Sales of Inventory with the ~~lower~~Same Counterparty, to define when a purchase and a sale of ~~cost~~inventory ~~(based~~with onthe ~~weighted~~same ~~average~~party ~~cost~~that ~~method)~~operates in the same line of business should be considered a single nonmonetary transaction subject to APB Opinion No. 29, Accounting for Nonmonetary Transactions. Two or ~~market~~more inventory transactions with the same party should be combined if they are entered into in contemplation of one another. The EITF ~~costs~~also requires entities to account for exchanges of ~~inventories~~inventory ~~did~~in ~~not~~the ~~exceed~~same ~~market~~line ~~values~~of business at fair value or recorded amounts based on inventory classification. The guidance in EITF 04-13 is effective for new inventory arrangements entered into in reporting periods beginning after March 31 15, ~~2005~~2006. We are currently evaluating what impact EITF 04-13 will have on our financial statements, ~~and~~but ~~December 31~~at this time, ~~2004.~~we ~~The~~do ~~major components~~not believe that the adoption of ~~inventories~~EITF ~~were~~04-13 will ashave ~~follows~~a ~~(in~~material ~~thousands):~~effect on our financial position, results of operations or cash flows.

	March 31, 2005		December 31, 2004
Refined products	$	5,323	$	5,665
LPGs	706		—
Materials and supplies	4,510		4,428
Total	$	10,539	$	10,093

NOTE 2. INTANGIBLE ASSETS

~~NOTE~~We account for our intangible 5assets under SFAS No. ~~EQUITY~~ ~~INVESTMENTS~~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, but 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.

WeThe ~~own~~following atable ~~50%~~reflects ~~ownership~~the ~~interest~~components inof ~~Centennial~~amortized ~~Pipeline~~intangible ~~Company LLC (“Centennial”)~~assets, ~~and~~included ~~Marathon Ashland~~in ~~Petroleum~~other ~~LLC~~assets ~~(“Marathon”)~~on ~~owns~~ the ~~remaining 50% interest. Centennial~~ ~~owns~~consolidated anbalance ~~interstate refined petroleum products pipeline extending from the upper Texas Gulf Coast to central Illinois. During the three months ended March 31~~sheets, ~~2005,~~and weexcess ~~have~~investment ~~not~~included ~~invested any additional funds~~ in ~~Centennial.~~ equity ~~During~~investments, ~~the~~at ~~three months ended~~ March 31, ~~2004,~~2006 weand ~~invested~~December ~~an additional $1.0 million in Centennial, which is included in the equity investment balance at March~~ 31, 2005~~. We~~ ~~have~~(in ~~not received any distributions from Centennial since its formation.~~thousands):

On 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.

	March 31, 2006					December 31, 2005
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization

Intangible assets:
Transportation agreements	$	1,000	$	(271	)	$	1,328	$	(326	)

Excess investment:
Centennial Pipeline LLC	$	33,390	$	(13,681	)	$	33,390	$	(12,947	)

~~For~~The ~~the~~value ~~year~~assigned ~~ended~~to ~~December 31, 2005,~~our weexcess ~~will~~investment ~~receive the first $1.7 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~~ ~~ended~~Centennial ~~December 31,~~Pipeline ~~2004,~~LLC wewas ~~received~~created ~~the~~upon ~~first~~its $1formation.8 ~~million~~Approximately ~~per quarter (or~~ $730.15 0 million ~~on an annual basis) of MB Storage’s income before depreciation expense. Our share of MB Storage’s earnings~~ is ~~adjusted~~related ~~annually~~to bya ~~the~~contract ~~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~~being ~~evenly~~amortized ~~between Louis Dreyfus and us. Depreciation expense~~ on ~~assets~~a ~~each party~~unit-of-production ~~originally~~basis ~~contributed~~based toupon MBthe ~~Storage~~volumes istransported ~~allocated~~under ~~between~~the uscontract ~~and~~compared ~~Louis~~to ~~Dreyfus~~the ~~based~~guaranteed ontotal ~~the~~throughput ~~net book value~~ of the ~~assets~~contract ~~contributed. Depreciation~~over ~~expense~~a on10-year ~~assets~~life. ~~constructed~~The orremaining ~~acquired~~$3.4 bymillion MBis ~~Storage~~related ~~subsequent~~ to ~~formation~~a ispipeline ~~allocated evenly between us~~ and ~~Louis~~is ~~Dreyfus.~~being ~~For~~amortized ~~the~~on ~~three~~a ~~months ended March 31, 2005 and 2004, our~~straight-line ~~sharing~~basis ~~ratio~~over in the ~~earnings~~life of ~~MB Storage was approximately 58.1% and 66.4%, respectively. During~~ the ~~three months ended March 31~~pipeline, ~~2005~~which ~~and~~is ~~2004,~~35 ~~we received no distributions from MB Storage and made no contributions to MB Storage~~years.

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 three months ended March 31, 2005 and 2004, is presented below (in thousands): 7

Amortization expense on intangible assets was less than $0.1 million for the three months ended March 31, 2006 and 2005, respectively. Amortization expense on excess investments included in equity earnings was $0.7 million and $1.0 million for the three months ended March 31, 2006 and 2005, respectively.

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

The following table sets forth the estimated amortization expense of intangible assets and the estimated amortization expense allocated to equity earnings for the years ending December 31 (in thousands):

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

	Intangible Assets		Excess Investments
2006	$	50	$	3,999
2007	50		4,422
2008	50		4,747
2009	50		6,187
2010	50		6,351

	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 3. INTEREST RATE SWAP

~~NOTE~~In October 2001, we entered into an interest rate swap 6agreement to hedge our exposure to changes in the fair value of our fixed rate 7. ~~DEBT~~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 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 of 147 basis points, and receive a fixed rate of interest of 7.51%. During the three months ended March 31, 2006 and 2005, we recognized reductions in interest expense of $0.7 million and $1.8 million, respectively, related to the difference between the fixed rate and the floating rate of interest on the interest rate swap. During the quarters ended March 31, 2006 and 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 of approximately $7.0 million and $0.9 million at March 31, 2006, and December 31, 2005, respectively.

~~Senior Notes~~NOTE 4. INVENTORIES

OnInventories ~~January 27,~~are ~~1998, we~~valued ~~completed~~at the ~~issuance~~lower of ~~$180.0~~cost ~~million~~(based ~~principal amount of 6.45% Senior~~on ~~Notes~~weighted ~~due~~average ~~2008,~~cost ~~and~~method) ~~$210.0~~or ~~million principal amount of 7~~market.~~51%~~ ~~Senior Notes due 2028 (collectively the “Senior Notes”).~~ The ~~6.45%~~costs ~~Senior Notes were issued at a discount~~ of ~~$0.3~~inventories ~~million~~did ~~and are being accreted to their face value over the term of the notes. The 6.45% Senior Notes due 2008 are~~ not ~~subject~~exceed tomarket ~~redemption~~values ~~prior~~at toMarch ~~January 15~~31, ~~2008. The 7.51% Senior Notes due 2028~~2006, ~~issued~~and ~~at par,~~December ~~may be redeemed at any time after January 15~~31, ~~2008,~~2005. atThe ~~our option in~~major ~~whole~~components orof ininventories ~~part,~~were atas afollows ~~premium.~~(in thousands):

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 March 31, 2005, we were in compliance with the covenants of the Senior Notes.

	March 31, 2006		December 31, 2005
Refined products	$	3,801	$	4,461
LPGs	9,103		7,403
Materials and supplies	4,811		4,585
Total	$	17,715	$	16,449

WeNOTE 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).~~EQUITY INVESTMENTS

~~The~~We ~~following~~own ~~table~~a 50% ownership interest in Centennial Pipeline ~~summarizes~~LLC (“Centennial”), and Marathon Petroleum Company LLC (“Marathon”) owns the remaining ~~estimated~~50% ~~fair~~interest. ~~values~~Centennial ofowns an interstate refined petroleum products pipeline extending from the ~~Senior~~upper ~~Notes~~Texas asGulf ofCoast to central Illinois. During the three months ended March 31, ~~2005,~~ 2006 and ~~December 31~~2005, ~~2004~~we (did not invest any additional funds in ~~millions):~~Centennial. We have not received any distributions from Centennial since its formation.

			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

8We own a 50% ownership interest in Mont Belvieu Storage Partners, L.P. (“MB Storage”), and Louis Dreyfus Energy Services L.P. (“Louis Dreyfus”) owns the remaining 50% interest. MB Storage owns storage capacity at the Mont Belvieu fractionation and storage complex and a short haul transportation shuttle system that ties Mont Belvieu, Texas, to the upper Texas Gulf Coast energy marketplace. MB Storage is a service-oriented, fee-based venture serving the fractionation, refining and petrochemical industries with substantial capacity and flexibility for the transportation, terminaling and storage of NGLs, LPGs and refined products. MB Storage has no commodity trading activity. We operate the facilities for MB Storage.

~~Other~~For the years ended December 31, 2006 and 2005, we ~~Long~~receive ~~Term~~the ~~Debt~~first $1.7 million per quarter (or $6.78 million on an annual basis) of MB Storage’s income before depreciation expense, as defined in the Agreement of Limited Partnership of MB Storage. Our share of MB Storage’s earnings may be 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 is allocated evenly between Louis Dreyfus and ~~Credit~~us. ~~Facilities~~Depreciation expense on assets each party 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 three months ended March 31, 2006 and 2005, our sharing ratio in the earnings of MB Storage was approximately 57.9% and 58.1%, respectively. During the three months ended March 31, 2006, we received distributions from MB Storage of $7.8 million and contributed $1.7 million to MB Storage. During the three months ended March 31, 2005, we received no distributions from MB Storage and made no contributions to MB Storage.

We ~~currently~~use ~~utilize~~the ~~debt financing~~equity ~~available~~method ~~from~~of ~~our~~accounting ~~Parent~~to ~~Partnership~~account ~~through intercompany notes. The~~for ~~terms~~our ofinvestments ~~the~~in ~~intercompany~~Centennial ~~notes generally match the principal~~ and ~~interest payment~~MB ~~dates under the Parent Partnership’s credit agreements~~Storage. ~~The~~ ~~interest~~Summarized ~~rates~~combined ~~charged by the Parent~~financial ~~Partnership~~information ~~include~~for ~~the~~Centennial ~~stated~~and ~~interest~~MB ~~rate~~Storage offor the ~~Parent~~three ~~Partnership,~~months ~~plus~~ended ~~a premium~~March to31, ~~cover debt issuance costs.~~ 2006 ~~The interest rate is also decreased or increased to cover gains~~ and ~~losses,~~ ~~respectively~~2005, onis ~~any~~presented ~~interest~~below ~~rate swaps that the Parent Partnership may have~~ (in ~~place~~thousands): ~~on its respective credit agreements. These credit facilities of the Parent Partnership are described below.~~

On February 20, 2002, our Parent Partnership issued $500.0 million principal amount of 7.625% Senior Notes due 2012. The 7.625% Senior Notes were issued at a discount of $2.2 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 these 7.625% 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 Parent Partnership’s ability to incur additional indebtedness.

	Three Months Ended
	March 31,
	2006		2005
Revenues	$	17,072	$	18,797
Net income	292		548

OnSummarized ~~January 30,~~combined ~~2003, our~~balance ~~Parent~~sheet ~~Partnership~~data ~~issued~~for ~~$200.0 million principal amount of 6.125% Senior~~Centennial ~~Notes due 2013. The 6.125% Senior Notes were issued at a discount of $1.4 million~~ and ~~are~~MB ~~being~~Storage ~~accreted~~as ~~to their face value over the term~~ of ~~the~~March 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 covenants31, ~~including,~~ ~~but not limited to~~2006, ~~covenants limiting the creation of liens securing indebtedness~~ and ~~sale~~December ~~and~~31, ~~leaseback transactions. However~~2005, ~~the~~is ~~indenture~~presented ~~does not limit the~~below ~~Parent~~(in ~~Partnership’s ability to incur additional indebtedness.~~thousands):

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. 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%.

	March 31,		December 31,
	2006		2005
Current assets	$	21,814	$	36,647
Noncurrent assets	366,679		369,679
Current liabilities	17,397		23,621
Long-term debt	150,000		150,000
Noncurrent liabilities	14,162		13,522
Partners’ capital	206,934		219,183

AsNOTE of March 31, 2005, and December 31, 2004, we had intercompany notes payable to our Parent Partnership of $320.5 million and $301.7 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 March 31, 2005, was 4.5%. At March 31, 2005, accrued interest includes $1.7 million due to our Parent Partnership. For the three months ended March 31, 2005 and 2004, interest costs incurred on the note payable to our Parent Partnership totaled $3.4 million and $2.9 million, respectively.DEBT

9Senior Notes

~~NOTE~~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. ~~QUARTERLY~~51% ~~DISTRIBUTONS~~Senior OFNotes ~~AVAILABLE~~due 2028 (collectively the “Senior ~~CASH~~Notes”).

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.9

~~During~~The 6.45% Senior Notes were issued at a discount of $0.3 million and are being accreted to their face value over the ~~three~~term ~~months~~of the ~~ended~~notes. ~~March 31,~~The ~~2005~~6.45% ~~and~~Senior ~~2004,~~Notes wedue ~~paid~~2008 ~~cash~~may ~~distributions~~not tobe ~~our~~redeemed ~~Parent~~prior to their ~~Partnership~~maturity ~~totaling~~on ~~$29~~January 15, 2008. The 7.51% ~~million~~Senior ~~and~~Notes ~~$28.9~~due ~~million~~2028, ~~respectively. On~~issued ~~May 6~~at par, may ~~2005~~be redeemed at any time after January 15, we2008, ~~will~~at ~~pay~~our aoption, ~~cash~~in whole or ~~distribution~~in topart, ~~our~~at ~~Parent~~the ~~Partnership~~following redemption prices (expressed in percentages of ~~$29.7~~the principal ~~million~~amount) ~~for~~during the ~~quarter~~twelve ~~ended~~months ~~March 31,~~beginning January 15 of the years ~~2005.~~indicated:

NOTE 8. EMPLOYEE BENEFIT PLANS

	Redemption
Year	Price

2008	103.755	%
2009	103.380	%
2010	103.004	%
2011	102.629	%
2012	102.253	%
2013	101.878	%
2014	101.502	%
2015	101.127	%
2016	100.751	%
2017	100.376	%

~~Retirement~~and ~~Plans~~thereafter at 100% of the principal amount, together in each case with accrued interest at the redemption date.

The ~~Parent~~Senior ~~Partnership has~~Notes ~~adopted~~do ~~the~~not ~~TEPPCO~~have ~~Retirement~~sinking ~~Cash~~fund ~~Balance~~requirements. Interest ~~Plan~~on ~~(“TEPPCO~~the ~~RCBP”),~~Senior ~~which~~Notes is ~~a non-contributory,~~payable ~~trustee-administered~~semiannually ~~pension~~in ~~plan. In~~arrears ~~addition,~~on ~~certain~~January ~~executive officers~~15 ~~participate~~and inJuly ~~the~~15 ~~TEPPCO~~of ~~Supplemental~~each ~~Benefit~~year. ~~Plan~~The ~~(“TEPPCO~~Senior ~~SBP”),~~Notes ~~which~~are isunsecured ~~a non-contributory,~~obligations ~~nonqualified,~~and ~~defined~~rank ~~benefit~~pari passu ~~retirement~~with ~~plan. The~~all ~~TEPPCO~~of ~~SBP~~our ~~was~~other ~~established~~unsecured toand ~~restore benefit~~unsubordinated ~~reductions~~indebtedness. ~~caused~~The indenture bygoverning the ~~maximum~~Senior ~~benefit~~Notes ~~limitations~~contains ~~that~~covenants, ~~apply~~including, ~~to qualified~~but ~~plans. The benefit formula for~~not ~~all~~limited ~~eligible~~to, ~~employees~~covenants islimiting athe ~~cash~~creation ~~balance~~of ~~formula. Under~~liens asecuring ~~cash~~indebtedness ~~balance formula, a plan~~and ~~participant~~sale ~~accumulates~~and aleaseback ~~retirement~~transactions. ~~benefit~~However, ~~based~~the ~~upon~~indenture ~~pay~~does ~~credits~~not ~~and~~limit ~~current~~our ~~interest~~ability ~~credits. The~~to ~~pay~~incur ~~credits~~additional ~~are based~~indebtedness. onAs aof ~~participant’s~~March ~~salary~~31, ~~age~~2006, ~~and~~we ~~service. The~~were ~~Parent~~in compliance ~~Partnership~~with ~~uses~~the acovenants ~~December 31 measurement~~of ~~date~~the ~~for~~Senior ~~these plans~~Notes.

~~The~~We ~~components~~have ofentered ~~net~~into an interest rate swap agreement ~~pension~~to ~~benefits~~hedge ~~costs~~our ~~allocated~~exposure to uschanges ~~for~~in the ~~TEPPCO~~fair ~~RCBP~~value ~~and~~on a portion of the ~~TEPPCO~~Senior Notes ~~SBP~~discussed above. The fair value of this interest rate swap was a loss of ~~for~~approximately ~~the~~$7.0 ~~three~~million ~~months~~and ~~ended~~$0.9 million at March 31, ~~2005~~2006, and ~~2004~~December 31, 2005, ~~were~~respectively as(see ~~follows~~Note ~~(in thousands~~3):.

	Three Months Ended March 31,
	2005			2004
Service cost benefit earned during the period	$	656		$	596
Interest cost on projected benefit obligation	152			123
Expected return on plan assets	(209		)	(155		)
Amortization of prior service cost	2			1
Recognized net actuarial loss	7			10
Net pension benefits costs	$	608		$	575

The following table summarizes the estimated fair values of the Senior Notes as of March 31, 2006, and December 31, 2005 (in millions):

itParent 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.Partnership

OnWe ~~March 26,~~do ~~2004, an~~not ~~initial~~have ~~decision~~any ~~in ARCO Products Co~~employees., Our etParent ~~al. v.~~Partnership ~~SFPP,~~is ~~Docket~~managed ~~OR96-2-000, et al. was issued~~ by the ~~FERC~~Company, which ~~made~~prior ~~several significant determinations with respect~~ to ~~finding “changed circumstances” under the Energy Policy Act of 1992 (“EP Act”). The decision largely clarifies~~February 23, ~~but does not fully quantify~~2005, ~~the~~was ~~standard required for a complainant to demonstrate that~~ an ~~oil~~ ~~pipeline’s~~indirect ~~rates~~wholly ~~are no longer subject to the rate protection of the EP Act~~owned bysubsidiary ~~demonstrating that a substantial change in circumstances has occurred since 1992 with respect to the basis~~ of ~~the rates being challenged~~DEFS. InAccording ~~the~~to ~~decision, the FERC found that a~~our ~~limited~~Partnership ~~number~~Agreement ~~of rate elements will significantly affect the economic basis for a pipeline company’s rates. The elements identified in the decision are volume changes, allowed total return~~ and ~~total~~an ~~cost-of-service~~administrative ~~(including~~services ~~major~~agreement ~~cost~~with ~~elements~~EPCO ~~of rate base such as tax rates~~ and ~~tax allowances, among others).~~ ~~The~~certain ~~FERC~~of ~~did~~its ~~reject~~affiliates, ~~however,~~we ~~the~~reimburse ~~use~~TEPPCO ofGP ~~changes in tax rate~~ and ~~income tax~~the ~~allowances~~Company asfor ~~standalone factors. It~~all ~~appears~~direct ~~likely~~and ~~that~~indirect ~~the~~expenses ~~decision~~related ~~will~~to beour ~~appealed~~business activities. We ~~have~~reimburse ~~not~~EPCO ~~yet~~for ~~determined~~ the ~~impact,~~allocated ifcosts of ~~any,~~its ~~that~~employees ~~the~~who ~~decision,~~perform ~~if it is ultimately upheld~~operating, ~~would~~management ~~have~~and onother ~~our rates if~~administrative ~~they~~functions ~~were~~for ~~reviewed~~us ~~under~~(see ~~the~~Note ~~criteria of this decision~~1).

OnOur ~~July 20,~~Parent ~~2004, the~~Partnership ~~Court~~allocates ofoperating, ~~Appeals~~general and ~~for~~administrative ~~the~~expenses ~~District~~to ofus ~~Columbia~~for ~~Circuit~~legal, ~~issued an opinion in BP West Coast Producers LLC v. FERC. In reviewing a series of orders involving SFPP~~insurance, ~~L.P.~~financial, communication ~~the~~and ~~court~~other ~~held~~administrative ~~among~~services ~~other~~based ~~things~~upon ~~that~~ the ~~FERC~~estimated ~~had not adequately~~level ~~justified its policy~~ of ~~providing~~effort andevoted ~~oil pipeline limited partnership with an income tax allowance equal~~ to ~~the~~our ~~proportion~~various ~~of its limited partnership interests owned by corporate partners~~operations. ~~Under~~ ~~the~~In ~~FERC’s initial ruling~~addition, ~~SFPP,~~we ~~L.P.~~make ~~was~~cash ~~permitted an income tax~~payments ~~allowance~~ on ~~its~~behalf ~~cost-~~of~~-service~~ ~~filing for 42.7% of~~ the ~~net~~Parent ~~operating (pre-tax)~~Partnership ~~income~~for ~~expected~~various ~~from operations and was denied an income tax allowance equal to 57~~expenses.3% ofAt ~~its~~March ~~limited~~31, ~~partnership interests that were held by~~2006, ~~non-corporate~~and ~~partners. The~~December ~~court remanded the case back to the FERC for further review. As a result of the court’s remand~~31, ~~on December 2~~2005, ~~2004,~~ ~~the~~we ~~FERC~~had ~~issued~~ a ~~Request~~net ~~for~~payable ~~Comments seeking comments on whether the court’s ruling applies only to the specific facts~~ of ~~the SFPP, L~~$9.P.8 ~~proceeding or~~million ~~also extends to other capital structures involving partnerships~~ and ~~other forms of ownership~~$18. ~~The~~5 ~~ultimate outcome~~million, ~~of the FERC’s inquiry on income tax allowance should not affect our current rates and rate structure because our rates are not based on cost-of-service methodology. However~~respectively, ~~the outcome of the income tax allowance would become relevant~~ to ~~us should we (i) elect in the future to use cost-of-service to support~~ our ~~rates,~~Parent orPartnership ~~(ii) be required~~related to ~~use~~these ~~such~~affiliated ~~methodology to defend our indexed rates~~activities.

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 March 31, 2005, we have an accrued liability of $0.2 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.12

~~On March 17,~~EPCO 2003, we experienced a release of 511 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~~Affiliates ~~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~~Duke ~~not expect that compliance with the settlement will have a future material adverse effect on our financial position~~Energy, ~~results~~DEFS ~~of operations or cash flows.~~and Affiliates

13The following table summarizes the related party transactions with EPCO and affiliates and DEFS and affiliates for the three months ended March 31, 2006 and 2005 (in millions):

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.

	Three Months Ended
	March 31,
	2006		2005
Revenues from EPCO and affiliates: (1)
Transportation – LPGs	$	1.7	$	0.8

Costs and Expenses from EPCO and affiliates: (1)
Payroll and administrative (2)	12.7		—

Revenues from DEFS and affiliates: (3)
Transportation – LPGs	—		0.7
Other operating revenues	—		1.1

Costs and Expenses from DEFS and affiliates: (3)
Payroll and administrative (2)	—		7.8

~~On July 27,~~(1) Operating ~~2004,~~revenues weearned ~~received~~and ~~notice~~expenses incurred from ~~the~~activities ~~United~~with ~~States~~EPCO ~~Department~~and ~~of Justice (“DOJ”) of~~ its ~~intent~~affiliates toare ~~seek~~considered ~~a civil penalty against us~~ related ~~to our~~ ~~November 21,~~party ~~2001,~~transactions ~~release~~beginning ofFebruary ~~approximately 2~~24,~~575~~ ~~barrels of jet fuel from our 14-inch diameter pipeline located in Orange County~~2005, ~~Texas. The~~as ~~DOJ, at the request of the Environmental Protection Agency, is seeking~~ a ~~civil~~result ~~penalty against us for alleged violations~~ of the ~~Clean~~change ~~Water Act (“CWA”) arising out of this release. The maximum statutory penalty calculated for~~in ~~this~~ownership ~~alleged violation~~ of the ~~CWA is $2~~Company.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(2) Substantially ~~March 31,~~all ~~2005, we have an accrued liability~~ of ~~$1.5~~these ~~million~~costs ~~related~~were related to ~~sites~~payroll, ~~requiring environmental~~payroll ~~remediation~~related ~~activities. We do~~expenses ~~not~~and ~~expect~~administrative ~~that~~expenses ~~the~~incurred ~~completion of remediation programs associated these~~in ~~activities~~managing ~~will~~us ~~have~~and ~~a future material adverse effect on~~ our ~~financial position, results of operations or cash flows~~subsidiaries.

~~Centennial~~(3) Operating ~~entered~~revenues ~~into credit~~earned ~~facilities totaling $150.0 million,~~ and ~~as of March 31, 2005,~~expenses ~~$150.0~~incurred ~~million~~from ~~was~~activities ~~outstanding~~with ~~under~~DEFS ~~those credit facilities. The proceeds were used to fund construction~~ and ~~conversion~~its ~~costs~~affiliates ofare ~~its~~considered ~~pipeline system.~~ related Weparty ~~and~~transactions ~~Marathon~~prior ~~have~~to ~~each~~February ~~guaranteed~~23, ~~one-half~~2005, ofat ~~Centennial’s~~which ~~debt,~~time ~~up to~~ a ~~maximum~~change ~~amount~~in ownership of ~~$75.0~~the ~~million~~Company ~~each~~occurred.

OnAt ~~February 24~~March 31, ~~2005,~~ ~~the~~2006 ~~Company~~and ~~was~~December ~~acquired~~31, ~~from~~2005, ~~DEFS~~we byhad ~~DFI. The Company owns~~ a ~~2% general partner~~ ~~interest~~receivable infrom ~~our~~EPCO ~~Parent Partnership~~ and isaffiliates ~~the~~of ~~general~~$0.7 ~~partner~~million ofand ~~the Parent Partnership~~$1. On3 ~~March 11~~million, ~~2005~~ respectively, ~~the Bureau~~related ofto ~~Competition~~transportation ofservices ~~the~~provided ~~Federal~~to ~~Trade~~EPCO ~~Commission (“FTC”) delivered written~~and ~~notice~~affiliates. toAt ~~DFI’s~~March ~~legal~~31, ~~advisor~~2006, ~~that~~we ithad ~~was conducting~~ a ~~non-public~~payable ~~investigation~~ to ~~determine~~EPCO ~~whether~~and ~~DFI’s~~affiliates ~~acquisition~~ of ~~the Company may substantially lessen competition~~$0. ~~The FTC has contacted the~~2 ~~Company~~million, ~~requesting~~related ~~data. The Company intends~~ to ~~cooperate~~direct ~~fully~~operational ~~with~~related ~~any such investigations and inquiries requested by the FTC or any other regulatory authorities~~costs.

14Beginning February 24, 2005, the majority of our insurance coverage, including property, liability, business interruption, auto and directors and officers’ liability insurance, was obtained by our Parent Partnership through EPCO. For the three months ended March 31, 2006, we incurred insurance expense related to premiums paid by EPCO of $1.1 million. At March 31, 2006 and December 31, 2005, we had insurance reimbursement receivables due from EPCO of $1.3 million.

~~Item~~NOTE 29. ~~Management’s~~ ~~Discussion~~EMPLOYEE ~~and~~BENEFIT ~~Analysis of Financial Condition and Results of Operations~~PLANS

~~General~~Retirement Plans

~~You~~The ~~should~~Parent ~~read~~Partnership’s ~~the following~~TEPPCO ~~review~~Retirement ofCash Balance ~~our~~Plan ~~financial~~(“TEPPCO ~~position~~RCBP”) ~~and~~was ~~results~~a ofnon-contributory, ~~operations in~~trustee-administered ~~conjunction~~pension ~~with our Consolidated Financial Statements~~plan. ~~Material~~ ~~period-to-period~~In ~~variances~~addition, in the ~~consolidated~~ ~~statements~~Parent ofPartnership’s ~~income~~TEPPCO ~~are~~Supplemental ~~discussed~~Benefit Plan ~~under~~ (“~~Results~~TEPPCO ~~of Operations.~~SBP” ~~The~~) ~~“Financial~~was ~~Condition~~a ~~and~~non-contributory, ~~Liquidity”~~nonqualified, ~~section analyzes~~defined benefit ~~our~~retirement ~~cash~~plan, ~~flows~~in ~~and~~which ~~financial~~certain ~~position~~executive officers participated. ~~“Other~~ The TEPPCO ~~Considerations”~~SBP ~~addresses~~was ~~trends,~~established ~~future~~to ~~plans~~restore ~~and~~benefit ~~contingencies~~reductions ~~that~~caused ~~are reasonably~~by ~~likely~~the tomaximum ~~materially~~benefit limitations ~~affect~~that ~~future~~apply ~~liquidity~~to orqualified ~~earnings~~plans. The ~~Consolidated~~benefit ~~Financial~~formula ~~Statements~~for ~~should~~all eligible beemployees ~~read~~was ina ~~conjunction~~cash ~~with~~balance ~~the~~formula. ~~financial~~Under ~~statements~~a ~~and~~cash ~~related~~balance ~~notes~~formula, a plan ~~together~~participant ~~with~~accumulated ~~our~~a ~~discussion~~retirement ~~and~~benefit ~~analysis~~based ofupon ~~financial~~pay ~~position~~credits and ~~results of~~current ~~operations~~interest ~~included~~credits. inThe ~~our~~pay ~~Annual~~credits ~~Report~~were based on ~~Form 10-K~~a ~~for~~participant’s ~~the~~salary, ~~year~~age and ~~ended~~service. The Parent Partnership used a December 31, ~~2004~~measurement date for these plans.

~~Critical Accounting Policies and Estimates~~13

AOn ~~summary~~May of27, 2005, the ~~significant~~TEPPCO RCBP and the TEPPCO SBP ~~accounting~~were ~~policies~~amended. weEffective ~~have~~May ~~adopted~~31, ~~and~~2005, ~~followed~~participation in the ~~preparation~~TEPPCO ofRCBP ~~our~~was ~~consolidated~~frozen, ~~financial~~and ~~statements~~no isnew ~~detailed~~participants inwere ~~our~~eligible ~~consolidated~~to ~~financial statements~~be ~~for~~covered by the ~~year~~plan ~~ended~~after that date. Effective December 31, ~~2004~~2005, ~~included~~all inplan ~~our~~benefits ~~Annual~~accrued were frozen, ~~Report~~participants onreceived ~~Form 10-K.~~no ~~Certain~~additional ofpay ~~these~~credits ~~accounting~~after ~~policies~~that ~~require~~date, and all plan ~~the~~participants ~~use~~were 100% vested regardless of ~~estimates~~their years of service. The ~~following~~TEPPCO ~~estimates,~~RCBP inplan ~~our~~was ~~opinion~~terminated effective December 31, ~~are~~2005 ~~subjective~~and inplan ~~nature,~~participants ~~require~~will have the ~~exercise~~option ~~of judgment~~to ~~and~~receive ~~involve~~their ~~complex~~benefits ~~analysis:~~either ~~revenue~~through ~~and~~a ~~expense~~lump ~~accruals,~~sum ~~including~~payment in ~~power~~2006 ~~costs,~~or ~~property~~through ~~taxes,~~an ~~environmental~~annuity. ~~costs~~In ~~and~~April ~~property~~2006, ~~plant~~our ~~and~~Parent Partnership received a ~~equipment. These~~determination ~~estimates~~letter ~~are~~from ~~based~~the ~~on our~~IRS ~~knowledge~~providing ~~and~~IRS ~~understanding~~approval of ~~current~~the ~~conditions~~plan termination. ~~and~~For ~~actions~~those weplan ~~may~~participants ~~take in~~who ~~the~~elect ~~future. Changes~~to inreceive ~~these~~an annuity, our ~~estimates~~Parent Partnership will ~~occur~~purchase asan aannuity ~~result~~contract offrom ~~the~~an ~~passage~~insurance ofcompany in ~~time~~which ~~and~~the plan participant owns the ~~occurrence~~annuity, ofabsolving our Parent Partnership of any future ~~events~~obligation to the participant. ~~Subsequent~~ ~~changes~~Participants in the ~~these~~TEPPCO ~~estimates~~SBP ~~may~~received ~~have~~pay acredits ~~significant~~through ~~impact~~November on30, ~~our~~2005, ~~financial~~and ~~condition~~received lump sum benefit payments in December 2005. Both the RCBP and SBP benefit payments ~~results~~are ofdiscussed ~~operations~~below.

~~Management~~In June 2005, the Parent Partnership recorded a ~~Overview~~curtailment charge of $0.1 million in accordance with SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, as a result of the ~~Three~~TEPPCO ~~Months~~RCBP ~~Ended~~and ~~March~~ TEPPCO SBP amendments. A portion of the charge was allocated to us. As of May 31, 2005, the following assumptions were changed for purposes of determining the net periodic benefit costs for the remainder of 2005: the discount rate, the long-term rate of return on plan assets, and the assumed mortality table. The discount rate was decreased from 5.75% to 5.00% to reflect rates of returns on bonds currently available to settle the liability. The expected long-term rate of return on plan assets was changed from 8% to 2% due to the movement of plan funds from equity investments into short-term money market funds. The mortality table was changed to reflect overall improvements in mortality experienced by the general population. The curtailment charge arose due to the accelerated recognition of the unrecognized prior service costs. The Parent Partnership recorded additional settlement charges of approximately $0.2 million in the fourth quarter of 2005 relating to the TEPPCO SBP. The Parent Partnership expects to record additional settlement charges of approximately $4.0 million in 2006 relating to the TEPPCO RCBP for any existing unrecognized losses upon the plan termination and final distribution of the assets to the plan participants. We expect to be allocated a share of these charges.

WeThe ~~reported~~components of net ~~income~~pension ofbenefits ~~$22.1~~costs ~~million for~~allocated ~~the~~to ~~three~~us ~~months~~for ~~ended~~the ~~March 31,~~TEPPCO ~~2005,~~RCBP ~~compared~~and ~~with~~the ~~net~~TEPPCO ~~income~~SBP ~~of $17.2 million~~ for the three months ended March 31, ~~2004. Our~~2006 ~~results were impacted by increased refined products~~ and ~~LPG~~2005, ~~transportation revenues and volumes delivered. These increases~~ were ~~partially~~as ~~offset~~follows ~~by lower propane inventory fee revenues, increased environmental expenses and increased rental expense from our Centennial Pipeline LLC~~ (~~“Centennial”)~~in capacity lease agreement. Additionally, pipeline integrity expenses decreased $4.4 million compared to our first quarter 2004 costs. We anticipate that our pipeline integrity expenses for 2005 will be approximately $17.6 million lower than our 2004 expenses due to the completion of projects.thousands):

Certain factors are inherent in our business. These include the safe, reliable and 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 operations. We remain confident that our current strategy and focus will provide continued growth in earnings and cash distributions. These opportunities include continued growth, resulting from our recent capacity expansion and grass roots facility investments and growing demand for Gulf Coast sourced products.

	Three Months Ended March 31,
	2006			2005
Service cost benefit earned during the period	$	—		$	656
Interest cost on projected benefit obligation	166			152
Expected return on plan assets	(45		)	(209		)
Amortization of prior service cost	—			2
Recognized net actuarial loss	21			7
Net pension benefits costs	$	142		$	608

WeOther ~~are~~Postretirement subject to economic and other factors that affect our industry. The demand for refined products is dependent upon the price, prevailing economic conditions and demographic changes in the markets served, trucking and railroad freight, agricultural usage and military usage; the demand for propane is sensitive to the weather and prevailing economic conditions; and the demand for petrochemicals is dependent upon prices for products produced from petrochemicals. We are also subject to regulatory factors such as the amounts we are allowed to charge our customers for the services we provide on our regulated pipeline systems.Benefits

~~Consistent~~The ~~with~~Parent ~~our~~Partnership provided certain health care ~~business~~and ~~strategy,~~life weinsurance ~~continuously~~benefits ~~evaluate~~for ~~possible~~retired ~~acquisitions~~employees ofon ~~assets that~~a ~~would~~contributory ~~complement~~and non-contributory ~~our~~basis ~~current~~(“TEPPCO ~~operations~~OPB”). Employees became eligible for these ~~Such~~benefits ~~acquisition~~if ~~efforts~~they ~~involve~~met ~~participation~~certain byage usand inservice ~~processes~~requirements ~~that~~at retirement, as ~~have~~defined ~~been~~in ~~made~~the ~~public~~plans. ~~and~~The ~~involve~~Parent Partnership provided a ~~number~~fixed ofdollar contribution, ~~potential~~which ~~buyers~~did not increase from year to year, astowards ~~well~~retired employee asmedical costs. The retiree paid all health care cost increases due to ~~situations~~medical ininflation. ~~which~~The weParent ~~believe~~Partnership weused ~~are~~a ~~the~~December ~~only~~31 measurement date for this plan.

1514

~~party~~In orMay ~~one~~2005, ofbenefits aprovided to employees under the ~~very~~TEPPCO ~~limited~~OPB ~~number~~were changed. Employees eligible for these benefits received them through December 31, 2005, however, effective December 31, 2005, these benefits were terminated. As a result of ~~potential~~this ~~buyers~~change in ~~negotiations~~benefits and in accordance with SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, the ~~potential~~Parent Partnership recorded a ~~seller~~curtailment credit of approximately $1. ~~These~~7 ~~acquisition~~million ~~efforts~~in ~~often~~its accumulated ~~involve~~postretirement ~~assets~~obligation, which, ifreduced ~~acquired~~the Parent Partnership’s accumulated postretirement obligation to the total of the expected remaining 2005 payments under the TEPPCO OPB. The employees participating in this plan at that time were transferred to DEFS, ~~would~~who ~~have~~is expected to provide postretirement benefits to these retirees. Our Parent Partnership recorded a ~~material~~one-time ~~effect~~settlement onto ~~our~~DEFS ~~financial~~in ~~position,~~the ~~results~~third quarter of ~~operations~~2005 orof ~~cash~~$0.4 ~~flows~~million for the remaining postretirement benefits. A portion of these charges was allocated to us.

~~Our~~The ~~Business~~components of net postretirement benefits cost allocated to us for the TEPPCO OPB for the three months ended March 31, 2006 and 2005, were as follows (in thousands):

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 Ended March 31,
	2006		2005

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

TEPPCOEstimated GP,Future asBenefit 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.Contributions

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~~Parent ~~largest~~Partnership ~~operating~~does ~~expense~~not ~~items~~expect ~~are labor~~to ~~and~~make ~~electric power. We generally~~further ~~realize~~contributions higher revenues during the first and fourth quarters of each year since 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~~its ~~demand~~retirement inplans ~~the Northeast for propane, a major fuel for residential heating. Our results also include our equity investments in Centennial~~ and ~~Mont~~other ~~Belvieu~~postretirement ~~Storage~~benefit ~~Partners, L~~plans.~~P. (“MB Storage”) (see Note 5. Equity Investments).~~

WeNOTE ~~are one of three operating subsidiaries of our Parent Partnership~~10. ~~Our~~ ~~Parent Partnership is managed by its~~COMMITMENTS ~~general~~AND 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 methods for allocating corporate operating, general and administrative expenses to us are reasonable.CONTINGENCIES

16Litigation

~~Results~~In the fall of 1999 and on December 1, 2000, we and the Company were named as defendants in two separate lawsuits in Jackson County Circuit Court, Jackson County, Indiana, styled Ryan E. McCleery and Marcia S. McCleery, et al. v. Texas Eastern Corporation, et al. (including the Company and us) and Gilbert Richards and Jean Richards v. Texas Eastern Corporation, et al. (including the Company and us). In both cases, the plaintiffs contend, among other things, that we and other defendants stored and disposed of ~~Operations~~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, 2005, we entered into Release and Settlement Agreements with the McCleery plaintiffs and the Richards plaintiffs dismissing all of these plaintiffs’ claims on terms that did not have a material adverse effect on our financial position, results of operations or cash flows. Although we did not settle with all plaintiffs and we therefore remain named parties in the Ryan E. McCleery and Marcia S. McCleery, et al. v. Texas Eastern Corporation, et al. action, a co-defendant has agreed to indemnify us for all remaining claims asserted against us. Consequently, we do not believe that the outcome of these remaining claims will have a material adverse effect on our financial position, results of operations or cash flows.

~~The 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):~~15

	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	)%

On December 21, 2001, we were named as a defendant in a lawsuit in the 10th Judicial District, Natchitoches Parish, Louisiana, styled Rebecca L. Grisham et al. v. TE Products Pipeline Company, Limited Partnership. In this case, the plaintiffs contend that our pipeline, which crosses the plaintiffs’ property, leaked toxic products onto their property and, consequently caused damages to them. We have filed an answer to the plaintiffs’ petition denying the allegations, and we are defending ourselves vigorously against the lawsuit. The plaintiffs have not stipulated the amount of damages they are seeking in the suit; however, this case is covered by insurance, subject to applicable policy limits. 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.

~~Three~~In ~~Months~~May ~~Ended~~2003, ~~March 31~~the Company was named as a defendant in a lawsuit styled John R. James, ~~2005~~et ~~Compared~~al. v. J Graves Insulation Company, et al. as filed in the first Judicial District Court, Caddo Parish, Louisiana. There are numerous plaintiffs identified in the action that are alleged to have suffered damages as the result of alleged exposure to asbestos-containing products and materials. According to the petition and as a result of a preliminary investigation, the Company believes that the only claim asserted against it results from one individual for the period from July 1971 through June 1972, who is alleged to have worked on a facility owned by the Company’s predecessor. This period represents a small portion of the total alleged exposure period from January 1964 through December 2001 for this individual. The individual’s claims involve numerous employers and alleged job sites. The Company has been unable to confirm involvement by the Company or its predecessors with ~~Three~~the alleged location, and it is uncertain at this time ~~Months~~whether ~~Ended~~this ~~March 31~~case is covered by insurance. Discovery is planned, ~~2004~~and the Company intends to defend itself vigorously against this lawsuit. The plaintiffs have not stipulated the amount of damages that they are seeking in this suit. We anticipate reimbursing the Company for any costs it incurs related to this lawsuit. We cannot estimate the loss, if any, associated with this pending lawsuit. 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.

~~Revenues~~In ~~from~~1991, ~~refined~~the ~~products~~Company ~~transportation increased~~and ~~$4.0 million for~~ the ~~three~~Parent ~~months~~Partnership ~~ended March 31, 2005, compared~~were ~~with~~named ~~the~~as ~~three~~a ~~months~~defendant ~~ended March 31, 2004, due to an overall increase of 19%~~ in ~~the~~a ~~refined~~matter ~~products~~styled ~~volumes~~Jimmy ~~delivered~~R. ~~This~~Green, ~~increase~~et ~~was~~al. ~~primarily due~~v. toCities ~~deliveries~~Service ofRefinery, ~~products~~et ~~moved on Centennial~~al. ~~Centennial~~ ~~has~~as ~~provided~~filed ~~our~~in ~~system~~the ~~with~~26th Judicial ~~additional~~District ~~pipeline~~Court ~~capacity for movement~~ of ~~products~~Bossier ~~originating~~Parish, ~~in the U~~Louisiana.S. ~~Gulf~~The ~~Coast~~plaintiffs ~~area. Prior~~in tothis matter ~~the~~reside ~~construction~~or offormerly ~~Centennial, deliveries~~resided on ~~our~~land ~~pipeline~~that ~~system~~was ~~were~~once ~~limited~~the bysite ~~our~~of ~~pipeline~~a ~~capacity, and~~refinery ~~transportation~~owned ~~services~~by ~~for~~one of our ~~customers~~co-defendants. ~~were~~The ~~allocated~~former inrefinery ~~accordance~~is ~~with~~located ~~a proration~~near ~~policy. With this incremental~~our ~~pipeline~~Bossier ~~capacity,~~City ~~our~~facility. ~~previously~~Plaintiffs ~~constrained~~have ~~system~~claimed ~~has~~personal ~~expanded~~injuries ~~deliveries~~and inproperty ~~markets~~damage ~~both~~arising ~~south~~from ~~and~~alleged ~~north~~contamination of ~~Creal~~the ~~Springs~~refinery property. The Inplaintiffs ~~February 2003,~~have werecently ~~entered~~pursued ~~into~~certification as a ~~lease~~class ~~agreement~~and ~~with Centennial~~have ~~that~~significantly increased ~~our~~their ~~flexibility~~demand to ~~deliver~~approximately ~~refined~~$175.0 ~~products to our market areas~~million. ~~Volume~~ ~~increases were due to~~This ~~increased~~revised demand ~~and~~includes ~~market~~amounts ~~share~~ for ~~products~~environmental ~~supplied~~restoration ~~from~~not ~~the U.S. Gulf~~previously ~~Coast~~claimed ~~into~~by ~~Midwest~~the ~~markets~~plaintiffs. The ~~refined~~Company ~~products~~and ~~average~~the ~~rate~~Parent ~~per~~Partnership ~~barrel~~have never ~~decreased~~owned 4%any ~~from~~interest in the ~~prior~~refinery ~~year~~property ~~period~~made ~~primarily due to~~ the ~~impact~~basis of ~~greater~~this action, and ~~growth~~we indo ~~the~~not ~~volume~~believe ofthat ~~products~~we ~~delivered~~contributed ~~under~~to aany ~~Centennial~~alleged ~~tariff~~contamination ~~compared~~of this toproperty. ~~the~~While ~~growth~~we incannot ~~deliveries~~predict ~~under~~the ~~our~~ultimate ~~tariff~~outcome, ~~which~~we ~~resulted~~do innot anbelieve ~~increased~~that ~~proportion~~the outcome of ~~lower~~this ~~tariff~~lawsuit ~~barrels~~will ~~transported~~have a material adverse effect on our ~~system~~financial position, results of operations or cash flows.

~~Revenues~~In ~~from~~addition ~~LPGs transportation~~to ~~increased $3.5 million for~~ the ~~three~~litigation ~~months~~discussed ~~ended March 31~~above, we have ~~2005~~been, ~~compared~~in ~~with~~ the ~~three~~ordinary ~~months~~course ~~ended~~of ~~March 31~~business, ~~2004,~~a ~~due~~defendant toin ~~higher~~various lawsuits and a ~~deliveries~~party ofto ~~propane~~various inother ~~the~~legal ~~upper~~proceedings, ~~Midwest~~some ~~and~~of ~~Northeast~~which ~~market~~are ~~areas~~covered ~~and increased~~in ~~short-haul~~whole ~~propane~~or in ~~deliveries~~part toby Uinsurance.S. ~~Gulf~~We ~~Coast~~believe ~~petrochemical customers~~that in the ~~first~~outcome ~~quarter~~ of ~~2005.~~these ~~Prior~~lawsuits ~~year~~and ~~LPG transportation revenues~~other ~~were~~proceedings ~~negatively~~will ~~impacted~~not byindividually aor ~~price spike~~ in the ~~Mont~~aggregate ~~Belvieu~~have ~~propane~~a ~~price~~future inmaterial ~~late~~adverse ~~February 2004,~~effect ~~which~~on ~~resulted in~~ our ~~sourced~~consolidated ~~propane~~financial ~~being~~position, ~~less competitive~~results ~~than~~of ~~propane~~operations ~~from~~or cash ~~other source points~~flows.

~~Other~~Regulatory operating revenues decreased $4.1 million for the three months ended March 31, 2005, compared with the three months ended March 31, 2004, primarily due to lower propane inventory fees in 2005 and lower volume of product inventory sales, partially offset by higher refined products tender deduction and loading revenues.Matters

~~Costs~~Our pipelines and ~~expenses decreased~~associated ~~$2.3~~facilities ~~million~~are ~~for~~subject ~~the three months ended March 31, 2005, compared~~to ~~with~~multiple ~~the~~environmental ~~three~~obligations ~~months~~and ~~ended~~potential ~~March 31,~~liabilities ~~2004,~~under ~~due~~a tovariety ~~decreased operating,~~of ~~general~~federal, state and ~~administrative~~local ~~expenses~~laws and ~~decreased~~regulations. ~~operating~~These ~~fuel and power~~include, ~~partially~~ ~~offset by increased depreciation and amortization expense and~~without ~~increased~~limitation: ~~taxes~~the –Comprehensive ~~other~~Environmental ~~than~~Response, ~~income taxes. Operating~~Compensation, ~~general~~ and ~~administrative expenses decreased primarily due~~ toLiability aAct; ~~$4.4~~the ~~million~~Resource ~~decrease~~Conservation inand ~~pipeline~~Recovery ~~inspection~~Act; ~~and~~the ~~repair~~Clean ~~costs~~Air ~~associated~~Act; ~~with~~the ~~our~~Federal ~~integrity~~Water ~~management~~Pollution ~~program,~~Control ~~partially~~Act ~~offset~~or bythe aClean ~~$0.6~~Water ~~million increase~~Act; ~~in rental expense from~~ the ~~Centennial pipeline capacity lease agreement,~~Oil aPollution ~~$0.8~~Act; ~~million~~and ~~increase~~analogous instate ~~labor~~ and ~~benefits~~local ~~expense~~laws ~~primarily associated with vesting provisions in certain of our compensation plans as a result of changes in control of the Company~~ and ~~a $0~~regulations.6 ~~million~~Such ~~increase in environmental~~laws ~~remediation~~ and ~~assessment~~regulations ~~costs. Depreciation expense~~affect ~~increased~~many ~~$0.7~~aspects ~~million~~of ~~primarily~~our ~~due~~present toand ~~assets~~future ~~retired~~operations, ~~to depreciation expense in 2005. Operating fuel~~ and ~~power~~generally ~~decreased~~require ~~$0.4~~us ~~million primarily due~~ to ~~adjustments~~obtain toand ~~power~~comply ~~accruals. Taxes~~with –a ~~other~~wide ~~than~~variety ~~income~~of ~~taxes increased due to increases in property tax accruals.~~environmental

1716

~~Interest expense~~registrations, ~~increased~~licenses, ~~$1.0~~permits, ~~million~~inspections ~~for~~and ~~the~~other ~~three~~approvals, ~~months~~with ~~ended~~respect ~~March 31~~to air emissions, ~~2005~~water quality, ~~compared~~wastewater discharges, and solid and hazardous waste management. Failure to comply with ~~the~~these ~~three~~requirements ~~months~~may ~~ended~~expose ~~March 31~~us to fines, penalties ~~2004~~and/or interruptions in our operations that could influence our results of operations. If an accidental leak, asspill aor ~~result~~release of ~~higher~~hazardous ~~outstanding~~substances ~~debt~~occurs ~~balances~~at ~~under~~any ~~the~~facilities ~~note~~that ~~payable~~we ~~with~~own, ~~our~~operate ~~Parent~~or ~~Partnership~~otherwise use, or ~~and~~where anwe ~~increased~~send ~~percentage~~materials offor ~~fixed-rate~~treatment ~~debt~~or ~~in 2005~~disposal, ~~compared~~we ~~with 2004. Interest~~could ~~capitalized~~be ~~decreased~~held jointly and ~~$0.1~~severally ~~million~~liable for ~~the~~all ~~three~~resulting ~~months~~liabilities, ~~ended~~including ~~March 31~~investigation, remedial ~~2005~~and clean-up costs. Likewise, ~~compared~~we ~~with~~could ~~the~~be required to remove or ~~three~~remediate ~~months~~previously ~~ended~~disposed ~~March 31,~~wastes ~~2004~~or property contamination, asincluding groundwater acontamination. ~~result~~Any or all of ~~decreased~~this ~~construction~~could materially affect our ~~work-in-progress~~results ~~balances~~of operations and cash flows.

~~Net~~We ~~losses~~believe ~~from~~that ~~equity~~our operations and facilities are in ~~investments~~substantial ~~decreased~~compliance ~~for~~with applicable environmental laws and regulations, and that the ~~three~~cost ~~months~~of ~~ended~~compliance ~~March 31~~with such laws and regulations will not have a material adverse effect on our results of operations or financial position. We cannot ensure, ~~2005~~however, ~~compared~~that existing environmental regulations will not be ~~with~~revised or that new regulations will not be adopted or become applicable to us. The clear trend in environmental regulation is to place more restrictions and limitations on activities that may be perceived to affect the ~~three~~environment, ~~months~~and thus ~~ended~~there can be no assurance as to the amount or timing of future expenditures for environmental regulation compliance or remediation, and actual future expenditures may be different from the amounts we currently anticipate. Revised or additional regulations that result in increased compliance costs or additional operating restrictions, particularly if those costs are not fully recoverable from our customers, could have material adverse effect on our business, financial position, results of operations and cash flow. At March 31, 2006, ~~2004~~and December 31, as2005, ~~shown~~we ~~below~~have ~~(in~~an ~~thousands):~~accrued liability of $1.1 million and $1.2 million, respectively, related to sites requiring environmental remediation activities.

	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

On March 26, 2004, a decision in ARCO Products Co., et al. v. SFPP, Docket Nos. OR96-2-000 et al., was issued by the FERC, which made several significant determinations with respect to finding “changed circumstances” under the Energy Policy Act of 1992 (“EP Act”). The decision largely clarifies, but does not fully quantify, the standard required for a complainant to demonstrate that an oil pipeline’s rates are no longer subject 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 of the rates being challenged. In the decision, the FERC found that a limited number of rate elements will significantly affect the economic basis for a pipeline company’s rates. The elements identified in the decision are volume changes, allowed total return and total cost-of-service (including major cost elements such as rate base, tax rates and tax allowances, among others). The FERC did reject, however, the use of changes in tax rates and income tax allowances as stand-alone factors. Judicial review of that decision, which has been sought by a number of parties to the case, is currently pending before the U.S. Court of Appeals for the District of Columbia Circuit. We have not yet determined the impact, if any, that the decision, if it is ultimately upheld, would have on our rates if they were reviewed under the criteria of this decision.

~~Equity~~On ~~losses~~July 20, 2004, the District of Columbia Circuit issued an opinion in BP West Coast Products LLC ~~Centennial~~v. ~~decreased~~FERC. $0In reviewing a series of orders involving SFPP, L.4P., ~~million~~the court ~~for~~held among other things that the ~~three~~FERC ~~months~~had ~~ended~~not ~~March 31,~~adequately justified its ~~2005,~~policy ~~compared~~of providing an oil pipeline limited partnership with an income tax allowance equal to the ~~three~~proportion ~~months~~of ~~ended~~its ~~March 31~~income attributable to partnership interests owned by corporate partners. Under the FERC’s initial ruling, ~~2004~~SFPP, L.P. ~~primarily~~was ~~due~~permitted an income tax allowance on its cost-of-service filing for tothe ~~higher~~percentage ~~transportation~~of ~~revenues~~its ~~and~~net ~~volumes,~~operating ~~partially~~(pre-tax) ~~offset~~income byattributable ~~higher~~to ~~transmix~~partnership ~~related~~units ~~product~~held ~~replacement~~by ~~costs~~corporations, and ~~product~~was ~~measurement~~denied ~~losses~~an income tax allowance ~~during~~equal to the ~~2005~~percentage ~~period. Equity~~attributable ~~earnings~~to partnership units held by non-corporate inpartners. MBThe ~~Storage~~court ~~remained~~remanded ~~virtually~~the ~~unchanged~~case back to the FERC for further review. Following the ~~three~~court’s ~~months~~remand, ~~ended~~on ~~March 31~~May 4, 2005, ~~compared~~the ~~with~~FERC ~~the~~issued ~~three~~its ~~months~~Policy Statement ~~ended~~on ~~March 31,~~Income ~~2004. In~~Tax ~~April 2004~~Allowances, MBwhich ~~Storage~~permits ~~acquired storage~~regulated ~~and~~partnerships, ~~pipeline~~limited liability ~~assets~~companies and ~~contracts~~other ~~for~~pass-through ~~approximately~~entities ~~$34.0~~an ~~million,~~income oftax allowance on ~~which~~their weincome ~~contributed~~attributable ~~$16.5~~to ~~million. Equity~~any ~~earnings~~owner ~~increased~~that ~~due~~has toan ~~increased~~actual ~~storage~~or ~~revenue,~~potential ~~shuttle~~income ~~revenue~~tax ~~and~~liability ~~rental~~on ~~revenue~~that ~~primarily~~income, ~~from~~regardless whether the ~~acquired~~owner ~~contracts,~~is ~~lower~~an ~~pipeline~~individual or ~~rehabilitation~~corporation. ~~expenses~~If onthere is more than one level of pass-through entities, the regulated MBcompany ~~Storage~~income ~~system~~must ~~and~~be ~~lower~~traced ~~general~~to ~~and~~where the ultimate tax liability ~~administrative~~lies. ~~expenses~~The ~~offset~~Policy byStatement ~~increased~~is ~~depreciation~~to be applied in individual cases, and ~~amortization~~the ~~expense~~regulated onentity ~~storage~~bears ~~assets~~the ~~and~~burden ~~contracts~~of ~~acquired~~proof to establish the tax status of its owners. On December 16, 2005, the

~~Financial Condition and Liquidity~~17

~~Cash~~FERC ~~flows~~issued the first of those decisions, in an order involving SFPP (the “SFPP Order”). The SFPP Order confirmed that a master limited partnership such as our Parent Partnership is entitled to a tax allowance with respect to partnership income for which there is an “actual or potential income tax liability” and determined that a unitholder that is required to file a Form 1040 or Form 1120 tax return that includes partnership income or loss is presumed to have an actual or potential income tax liability sufficient to support a tax allowance on that partnership income. The FERC also established certain other presumptions, including that corporate unitholders are presumed to be taxed at the ~~three~~maximum corporate tax rate of 35% while ~~months~~individual ~~ended~~unitholders (and certain other types of unitholders taxed like individuals) are presumed to be taxed at a 28% tax rate. The SFPP Order remains subject to further administrative proceedings, including review by the FERC of compliance filings made by SFPP on March 31 7, ~~2005~~2006, as well as judicial review. The ultimate outcome of the FERC’s inquiry on income tax allowance should not affect our current rates and ~~2004~~rate structure because our rates are not based on cost-of-service methodology. However, ~~were~~the asoutcome ~~follows~~of the income tax allowance would become relevant to us should we (i) elect in ~~thousands~~the future to use cost-of-service to support our rates, or (ii): be required to use such methodology to defend our indexed rates.

	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		)

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. Effective 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. At March 31, 2006, we have an accrued liability of $0.2 million for remediation costs at our Arcadia facility. 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.

~~Operating~~On July 27, 2004, we ~~Activities~~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, as well as three smaller spills at other locations in 2004 and 2005. We are in discussions with the DOJ regarding these matters. The settlement proposed by the DOJ for these alleged violations of the CWA is a $3.0 million penalty, along with our commitment to implement additional spill prevention measures. We do not expect this settlement to have a material adverse effect on our financial position, results of operations or cash flows.

~~Net~~On ~~cash~~September ~~from~~18, ~~operating~~2005, a propane release and fire ~~activities~~occurred ~~for~~at our Todhunter facility, near Middletown, Ohio. The incident resulted in the ~~three~~death ~~months~~of ~~ended~~one of our employees; there were no other injuries. Repairs to the impacted facilities have been completed. On March 31 17, ~~2005~~2006, we received a citation from the Occupational Safety and ~~2004,~~Health ~~were~~Administration ~~comprised~~(“OSHA”) arising out of ~~the~~this ~~following~~incident (with a proposed penalty of less than $0.2 million. We are in ~~thousands):~~settlement negotiations with OSHA representatives regarding this matter. We do not expect any settlement, fine or penalty to have a material adverse effect on our financial position, results of operations or cash flows.

	Three Months Ended March 31,
	2005			2004
Net income	$	22,116		$	17,209
Depreciation and amortization	9,298			8,638
Losses in equity investments	842			1,238
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

Other

18Centennial entered into credit facilities totaling $150.0 million, and as of March 31, 2006, $150.0 million was outstanding under those credit facilities, of which $140.0 million expires in 2024, and $10.0 million expires in April 2007. We and Marathon have each guaranteed one-half of the repayment of Centennial’s outstanding debt balance (plus interest) under these credit facilities. The guarantees arose in order for Centennial to obtain adequate financing, and the proceeds of the credit facilities were used to fund construction and conversion costs of its pipeline system. Prior to the expiration of the long-term credit facility, we could be relinquished from responsibility under the guarantee should Centennial meet certain financial tests. If Centennial defaults on its outstanding balance, the

For a discussion of changes in net income, depreciation and amortization and equity earnings, see Results of Operations in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cash provided by operating activities increased $7.9 million for the three months ended March 31, 2005, compared with the three months ended March 31, 2004, primarily due to the timing of cash disbursements and cash receipts for working capital components and higher net income partially offset by higher depreciation and amortization in the 2005 period.18

Weestimated ~~believe~~maximum ~~that~~potential weamount ~~will continue~~of ~~to have adequate liquidity to fund~~ future recurring operating and investing activities. Our primary cash requirements consist of normal operating expenses, capital expenditures to sustain existing operations and revenue generating expenditures, interest payments ~~on our Senior Notes and on borrowings under our Parent Partnership’s~~ credit facilities and distributions to our Parent Partnership. Short-term cash requirements, such as operating expenses, capital expenditures to sustain existing operations and quarterly distributions to our Parent Partnership, are expected to be funded through operating cash flows. Long-term cash requirements for ~~expansion projects~~Marathon ~~are expected to be funded by several sources, including cash flows from operating activities, borrowings under our Parent Partnership’s credit facilities~~ and ~~the~~us ~~issuance~~is ~~by our Parent Partnership of additional equity and debt securities~~$75. ~~The~~0 ~~timing~~million ofeach ~~any~~at ~~debt or~~March ~~offerings by our Parent Partnership will depend on various factors~~31, ~~including~~ ~~prevailing market conditions, interest rates and our Parent Partnership’s financial condition and credit rating at the time~~2006.

~~At March 31~~We, ~~2005,~~ Marathon and ~~December 31,~~Centennial ~~2004~~have weentered ~~had~~into ~~working~~a limited ~~capital~~cash ~~deficits~~call ofagreement, ~~$55.6~~which ~~million~~allows ~~and $61.9~~each ~~million,~~member ~~respectively. Cash generated~~to ~~from~~contribute ~~operations~~cash ~~and~~in lieu ~~from~~of ~~our~~Centennial ~~Parent~~procuring ~~Partnership’s~~separate ~~credit~~insurance ~~facilities and~~in ~~debt~~the ~~and~~event ~~equity~~of ~~offerings~~a ~~are~~third-party liability ~~our~~arising ~~primary~~from ~~sources~~a ofcatastrophic ~~liquidity~~event. ~~Working~~ ~~capital~~There ~~deficits~~is ~~can~~an ~~occur~~indefinite ~~primarily~~term for ~~due~~the toagreement ~~the~~and ~~timing~~each ofmember ~~operating~~is ~~cash~~to ~~receipts~~contribute ~~from~~cash ~~customers,~~in ~~payment~~proportion ofto ~~cash~~its ~~distributions~~ownership ~~and~~interest, ~~the~~up ~~payment~~to ofa ~~normal~~maximum ~~operating~~of ~~expenses~~$50.0 ~~and~~million ~~capital expenditures~~each. We ~~are~~As a ~~wholly~~result ~~owned subsidiary~~ of the ~~Parent Partnership. We~~ ~~expect~~catastrophic ~~that~~event ~~our Parent Partnership will make capital contributions~~guarantee, ~~loans~~we ~~or otherwise~~have ~~provide~~recorded ~~liquidity~~a to$4.6 usmillion ~~as needed~~obligation, ~~but~~which represents the ~~Parent~~present ~~Partnership~~value ~~has~~of ~~no contractual~~the ~~obligation~~estimated toamount ~~do so. We anticipate~~ that ~~the~~we ~~Parent~~would ~~Partnership~~have ~~will provide the necessary liquidity~~ to ~~protect~~ ~~its investment in us. At March 31,~~pay ~~2005,~~under ~~our~~the ~~Parent Partnership had $81~~guarantee.5 ~~million~~If ina ~~available~~catastrophic ~~borrowing~~event ~~capacity under~~were ~~its revolving credit facility~~ to ~~cover~~occur ~~any~~and ~~working~~we ~~capital~~were ~~needs, and~~required ~~expects~~to ~~that~~contribute cash ~~flows~~to ~~from operating activities~~Centennial, ~~the~~contributions ~~sale~~exceeding ofour ~~additional~~deductible ~~debt~~might orbe ~~equity~~covered ~~offerings~~by ~~will~~our ~~provide necessary liquidity to us~~insurance.

~~Investing~~On February 24, 2005, the Company was acquired from ~~Activities~~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 Company is cooperating fully with this investigation.

~~Cash~~NOTE ~~flows used in investing activities totaled $14~~11.1 ~~million~~RESTATEMENT ~~for the three months ended March 31,~~OF ~~2005,~~CONSOLIDATED ~~and~~FINANCIAL 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.STATEMENTS

~~Financing~~In the fourth quarter of ~~Activities~~2005, we determined that our method of accounting for the $33.4 million excess investment in Centennial, previously described as an intangible asset with an indefinite life, was incorrect. Through our accounting for this excess investment in Centennial as an intangible asset with an indefinite life, we had been testing the amount for impairment on an annual basis as opposed to amortizing it over a determinable life. We determined that it would be more appropriate to account for this excess investment as an intangible asset with a determinable life. As a result, we made a non-cash adjustment that reduced the net value of the excess investment in Centennial, and increased amortization expense allocated to our equity earnings. We restated previously reported consolidated financial statements for the fiscal year ended December 31, 2003 and 2004 in our Annual Report on Form 10-K for the year ended December 31, 2005. The effect of this restatement caused a $1.0 million reduction to net income as previously reported for the three months ended March 31, 2005. As a result, we are restating our previously reported consolidated financial statements for the three months ended March 31, 2005.

~~Cash~~While ~~flows~~we ~~used~~believe inthe ~~financing~~impact ~~activities~~of ~~totaled~~this ~~$10.8~~non-cash ~~million~~adjustment ~~for~~is ~~the~~not ~~three~~material ~~months~~to ~~ended~~any ~~March 31,~~previously issued ~~2005~~financial statements, ~~and~~we ~~were~~determined ~~comprised~~that ofthe ~~$29.7~~cumulative ~~million~~adjustment offor ~~distributions~~this non-cash ~~paid~~item towas ~~our~~too ~~Parent Partnership~~material ~~and~~to ~~$19.9~~record ~~million~~in ofthe ~~repayments~~fourth onquarter ~~our~~of ~~term loan~~2005, ~~partially offset~~and bytherefore ~~$38.8~~it ~~million~~was ofmost ~~proceeds~~appropriate ~~from~~to ~~our~~restate ~~term~~prior ~~loan~~periods’ results. ~~Cash flows used in financing~~This ~~activities~~non-cash ~~totaled~~adjustment ~~$8.4~~had ~~million~~no ~~for~~effect ~~the~~on ~~three~~our ~~months~~operating ~~ended March 31~~income, ~~2004,~~compensation ~~and~~expense, ~~were~~debt ~~comprised~~balances ofor ~~$28.9~~ability ~~million~~to ofmeet ~~distributions~~all ~~paid~~requirements related to our ~~Parent~~debt ~~Partnership~~instruments. ~~and~~The ~~$15.0~~restatement ~~million~~had ofno ~~repayments~~impact on ~~our~~total ~~term~~cash ~~loan,~~flows ~~partially~~from ~~offset~~operating byactivities, ~~$35~~investing activities or financing activities.5 ~~million~~All ofamounts ~~proceeds~~in ~~from~~the accompanying ~~our~~consolidated ~~term~~financial ~~loan~~statements have been adjusted for this restatement.

~~Centennial~~We ~~entered~~will ~~into~~continue ~~credit facilities~~to ~~totaling~~amortize the $~~150~~30.0 million ~~and,~~excess investment asin ofCentennial ~~March 31,~~related ~~2005,~~to ~~$150.0 million~~a ~~was~~contract ~~outstanding~~using ~~under~~units-of-production methodology ~~those~~over ~~credit~~a ~~facilities~~10-year life. The ~~proceeds~~remaining ~~were~~$3.4 ~~used~~million related to ~~fund construction~~a ~~and conversion costs of Centennial’s~~ pipeline ~~system. We~~will ~~and~~continue ~~Marathon~~to ~~Ashland~~be ~~Petroleum~~amortized ~~LLC~~on ~~have each~~a ~~guaranteed one~~straight-~~half~~line ofbasis ~~Centennial’s~~over ~~debt,~~35 ~~up to a maximum of $75~~years.~~0 million each.~~

~~Parent~~The following tables ~~Partnership~~summarize ~~Credit~~the ~~Facilities~~impact of the restatement adjustment on previously reported income statement amounts and cash flow amounts for the three months ended March 31, 2005 (in thousands):

~~We currently utilize debt~~Income ~~financing~~Statement 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.Amounts:

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 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, the Parent Partnership amended its 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. At March 31, 2005, $432.0 million was outstanding under the Revolving Credit Facility at a weighted average interest rate of 3.4%.

	Three Months Ended March 31, 2005
	As Previously Reported			Adjustment			As Restated

Equity losses	$	(842	)	$	(979	)	$	(1,821	)
Net income	22,116			(979		)	21,137

OnCash ~~January 30, 2003,~~Flow 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.Amounts:

As of March 31, 2005, and December 31, 2004, we had intercompany notes payable to our Parent Partnership of $320.5 million and $301.7 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 March 31, 2005, was 4.5%. At March 31, 2005, accrued interest includes $1.7 million due to our Parent Partnership. For the three months ended March 31, 2005 and 2004, interest costs incurred on the note payable to our Parent Partnership totaled $3.4 million and $2.9 million, respectively.

	Three Months Ended March 31, 2005
	As Previously Reported		Adjustment			As Restated

Cash flows from operating activities:
Net income	$	22,116	$	(979	)	$	21,137
Losses in equity investments	842		979			1,821

~~Cash Distributions~~20

~~During~~Item ~~the~~2. ~~three~~Management’s ~~months ended~~Discussion ~~March 31, 2005~~ and ~~2004,~~Analysis weof ~~paid~~Financial ~~cash~~Condition ~~distributions to our Parent Partnership totaling $29.7 million~~ and ~~$28.9~~Results ~~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.~~Operations

~~Future~~You ~~Capital~~should ~~Needs~~read the following review of our financial position and ~~Commitments~~results of operations in conjunction with our Consolidated Financial Statements and the notes thereto. 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 included in our Annual Report on Form 10-K for the year ended December 31, 2005. Our discussion and analysis includes the following:

We• Cautionary ~~estimate~~Note ~~that capital~~Regarding expenditures, excluding acquisitions, for 2005 will be approximately $59.6 million (which includes $2.3 million of capitalized interest). We expect to spend approximately $22.7 million for revenue generating projects and facility improvements. We expect to spend approximately $20.0 million to sustain existing operations, including lifeForward-~~cycle~~Looking ~~replacements for equipment at various facilities and pipeline and tank replacements and $14~~Statements.6 million for various system upgrade projects. We continually review and evaluate potential capital improvements and expansions that would be complementary to our present system. These expenditures can vary

20• Overview of Critical Accounting Policies and Estimates.

~~greatly~~• Overview ~~depending on the magnitude~~ of ~~our transactions~~Business. ~~We may finance capital expenditures through internally generated funds, debt or capital contributions from our Parent Partnership or any combination thereof.~~

~~Our~~• Restatement ~~debt repayment obligations consist~~ of ~~payments~~Consolidated ~~for principal and interest on (i) our~~Financial ~~$320~~Statements.5 million principal amount due to the Parent Partnership related to our share of the Parent Partnership’s Revolving Credit Facility due in October 2009, 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.

We• Results ~~are also contingently liable as guarantor for the lesser~~ of ~~one~~Operations ~~half~~– ~~or $75.0 million principal~~Discusses ~~amount~~material ~~(plus interest) of the borrowings of Centennial. In January 2003, we entered into a pipeline capacity lease agreement with Centennial for a~~ period-to-period ofvariances ~~five~~in ~~years that contains a minimum throughput requirement. For~~ the ~~year~~consolidated ~~ended~~statements ~~December 31, 2004, we exceeded the minimum throughput requirements on the lease agreement. We are also contingently liable as guarantor for $500.0 million principal amount~~ of 7income.~~625% Senior Notes due 2012 issued in February 2002 and for $200.0 million principal amount of 6.125% Senior Notes due 2013 issued in January 2003 by our Parent Partnership.~~

~~During~~• Financial ~~the~~Condition ~~three months ended March 31, 2004, we contributed $1.0 million to Centennial to cover operating needs~~ and ~~capital~~Liquidity ~~expenditures.~~ – NoAnalyzes ~~amounts were contributed to either Centennial or MB Storage during the three months ended March 31, 2005. During 2005, we may be required to contribute~~ cash toflows ~~Centennial to cover capital expenditures, acquisitions or other operating needs~~ and tofinancial ~~MB Storage to cover significant capital expenditures or additional acquisitions~~position.

~~Off-Balance~~• Other ~~Sheet~~Considerations ~~Arrangements~~– Addresses available sources of liquidity, trends, future plans and contingencies that are reasonably likely to materially affect future liquidity or earnings.

We• Recent doAccounting ~~not rely on off-balance sheet borrowings to fund our acquisitions~~Pronouncements. 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.

~~Contractual~~Cautionary Note ~~Obligations~~Regarding Forward-Looking Statements

The ~~following~~matters ~~table~~discussed in this Quarterly Report on Form ~~summarizes~~10-Q ~~our~~(this ~~debt~~“Report”) ~~repayment~~include ~~obligations~~“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and ~~material~~Section ~~contractual~~21E ~~commitments~~of the Securities Exchange Act of 1934. All statements that express belief, expectation, estimates or intentions, as well as those that are not statements of ~~March 31~~historical facts are forward-looking statements. The words “proposed”, ~~2005~~“anticipate”, “potential”, “may”, “will”, “could”, “should”, “expect”, “estimate”, “believe”, “intend”, “plan”, “seek” and similar expressions are intended to identify forward-looking statements. Without limiting the broader description of forward-looking statements above, we specifically note that statements included in this document that address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as estimated future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success, references to intentions as to future matters and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by us in ~~millions~~light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. While we believe our expectations reflected in these forward-looking statements are reasonable, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including general economic, market or business conditions, the opportunities (or lack thereof): that may be presented to and pursued by us, competitive actions by other pipeline companies, changes in laws or regulations and other factors, many of which are beyond our control. For example, the demand for refined products is dependent upon the price, prevailing economic conditions and demographic changes in the markets served, trucking and railroad freight, agricultural usage and military usage and the demand for propane is sensitive to the weather and prevailing economic conditions. We are also subject to regulatory factors such as the amounts we are allowed to charge our customers for the services we provide on our regulated pipeline systems. Consequently, all of the forward-looking statements made in this document are qualified by these cautionary statements, and we cannot assure you that actual results or developments that we anticipate will

	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

~~(1) We~~be ~~entered~~realized ~~into~~or, aneven ~~interest~~if ~~rate~~substantially ~~swap~~realized, will ~~agreement~~have tothe ~~hedge~~expected ~~our~~consequences ~~exposure~~ to ~~changes~~or ineffect ~~the~~on ~~fair~~us ~~value~~or of our ~~7.51%~~business or ~~Senior~~operations. ~~Notes~~Also ~~due~~note ~~2028. At~~that ~~March 31, 2005,~~we ~~the~~provide ~~7.51%~~a ~~Senior~~cautionary ~~Notes~~discussion ~~include~~of anrisks ~~adjustment~~and uncertainties tounder ~~increase~~ the ~~fair~~captions ~~value~~ “Management’s Discussion and Analysis of Financial ~~the~~Condition ~~debt~~and byResults ~~$0.5~~of ~~million~~Operations” ~~related~~and toelsewhere in this ~~interest~~Form ~~rate~~10-Q, as ~~swap~~well ~~agreement. At~~as ~~March 31,~~under ~~2005,~~the ~~our~~captions ~~6.45%~~“Risk ~~Senior Notes~~Factors”, ~~include~~“Management’s ~~$0.1~~Discussion ~~million~~and Analysis of ~~unamortized~~Financial ~~debt~~Condition ~~discount. The~~and ~~fair~~Results ~~value~~of ~~adjustment~~Operations” and ~~unamortized~~elsewhere in our ~~debt~~Annual ~~discount~~Report ~~are~~on ~~excluded~~Form ~~from~~10-K ~~this~~for ~~table~~the year ended December 31, 2005.

The forward-looking statements contained in this Report speak only as of the date hereof. Except as required by the federal and state securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason. All forward-looking statements attributable to TE Products Pipeline Company, Limited Partnership or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q and in our future periodic reports filed with the Securities and Exchange Commission (2“SEC”) ~~Includes accruals~~. In light of ~~cost~~these ~~incurred~~risks, ~~but~~uncertainties and assumptions, the forward-looking events discussed in this Report may not ~~yet~~occur. ~~paid~~For ~~relating~~additional discussion toof ~~capital~~such ~~projects~~risks and uncertainties, see our Annual Report on Form 10-K for the year ended December 31, 2005, and other filings we have made with the SEC.

21Overview of Critical Accounting Policies and Estimates

~~(3) Excludes~~A ~~approximately~~summary ~~$9.1~~of ~~million~~the significant accounting policies we have adopted and followed in the preparation of ~~long~~our consolidated financial statements is included in our Annual Report on Form 10-~~term~~K ~~deferred~~for ~~revenue~~the ~~payments~~year ended December 31, ~~which~~2005. ~~are~~Certain of ~~being~~these ~~transferred~~accounting topolicies ~~income~~require ~~over~~ the ~~term~~use of estimates. As more fully described therein, the ~~respective~~following estimates, in our opinion, are subjective in nature, require the exercise of judgment and involve complex analysis: revenue and ~~contracts. The~~expense ~~amount~~accruals, including accruals of ~~commitment~~power bycosts, property taxes, ~~year~~environmental iscosts and property, plant and equipment. These estimates are based on our ~~best~~knowledge ~~estimate~~and understanding of ~~projected~~current ~~payments~~conditions and actions we may take in the future. Changes in these estimates will occur as a result of the passage of time and the occurrence of future events. Subsequent changes in these ~~long-term~~estimates ~~liabilities~~may have a significant impact on our financial position and results of operations.

WeOverview 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, and contributions from our Parent Partnership or any combination of the above items.Business

~~Sources~~We are one of ~~Future~~the ~~Capital~~largest pipeline common carriers of refined petroleum products and LPGs in the United States. Over the past few years, we have continued to pursue growth opportunities and acquisitions to expand our market share and deliveries into existing and new markets. The key elements of our strategy are to focus on internal growth prospects in order to increase the pipeline system and terminal throughput, to expand and upgrade existing assets and services and construct new pipelines, terminals and facilities, to target accretive and complementary acquisitions and expansion opportunities that provide attractive growth potential and to operate in a safe, efficient and environmentally responsible manner.

WeCertain ~~expect~~factors ~~that~~are key to our ~~cash~~operations. These ~~flow~~include ~~from~~the ~~operating~~safe, ~~activities~~reliable ~~will~~and beefficient ~~adequate~~operation toof ~~fund~~the ~~cash~~pipelines ~~distributions~~ and ~~capital~~facilities ~~additions~~that ~~necessary~~we toown ~~sustain~~or ~~existing~~operate ~~operations. However,~~while ~~expansionary~~meeting ~~capital~~increased ~~projects~~regulations ~~and~~that ~~acquisitions~~govern ~~may~~the ~~require~~operation ~~additional~~of ~~capital~~our ~~contributions~~assets ~~from~~and ~~our~~the ~~Parent Partnership. The~~costs ~~Parent~~associated ~~Partnership~~with ~~has~~such ~~funded~~regulations. ~~its~~We ~~capital~~are ~~commitments~~also ~~from~~focused ~~operating~~on ~~cash~~our ~~flow,~~continued ~~borrowings~~growth ~~under~~through ~~bank credit~~expansion ~~facilities,~~ of the ~~issuance~~assets ofthat ~~long~~we ~~term~~own ~~debt in capital markets~~ and through the ~~public~~ ~~offering~~acquisition of ~~Limited~~assets ~~Partner~~that ~~Units.~~ complement Weour ~~expect~~current ~~future capital needs will be similarly funded~~operations.

~~Our~~We ~~Parent~~operate ~~Partnership has~~and ~~filed~~report ~~with~~in ~~the~~one ~~SEC~~business asegment: transportation ~~universal~~and ~~shelf~~storage ~~registration~~of ~~statement~~refined products, ~~that~~LPGs and petrochemicals. We own, ~~subject~~operate or have investments in toproperties ~~agreement~~located onin ~~terms~~14 atstates, ~~the~~and ~~time~~our revenues are earned from transportation and storage of ~~use~~refined products and ~~appropriate~~LPGs, ~~supplementation~~intrastate transportation of petrochemicals, sale of product inventory and other ancillary ~~allows~~services. itOur totwo ~~issue,~~largest inoperating ~~one~~expense oritems ~~more~~are ~~offerings,~~labor upand toelectric anpower. We ~~aggregate~~generally realize higher revenues during the first and fourth quarters of each $2year since our operations are somewhat seasonal.0 Refined products volumes ~~billion~~are generally higher during the second and third quarters because of ~~equity~~greater demand ~~securities,~~for ~~debt~~gasolines ~~securities~~during orthe aspring ~~combination~~and ~~thereof. At~~summer ~~December 31,~~driving ~~2004,~~seasons. ~~our~~LPGs ~~Parent~~volumes ~~Partnership~~are ~~had~~generally ~~$2.0~~higher ~~billion~~from ~~available~~November ~~under~~through ~~this~~March ~~shelf~~due ~~registration,~~to ~~subject~~higher demand for topropane, ~~customary~~a ~~marketing~~major ~~terms~~fuel ~~and~~for ~~conditions~~residential heating. Our results

Our 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.22

also include our equity investments in Centennial and MB Storage (see Note 6 in the Notes to the Consolidated Financial Statements).

We continue to build a base for long-term growth by pursuing new business opportunities, increasing throughput on our pipeline systems, constructing new pipeline systems, and expanding and upgrading our existing infrastructure. We remain confident that our business strategy will provide continued growth in earnings and cash distributions. This growth potential is based on, among other things:

• Expanding our gathering capacity of refined products along the upper Texas Gulf Coast.

• Utilizing available system capacity of Centennial to move refined products to Midwest market areas.

• Expanding our system delivery capability of gasoline and diesel fuel in the Indianapolis and Chicago market areas.

• Pursuing acquisitions or organic growth projects that would complement our current operations.

For a discussion of important factors that could affect our growth, please read “-Cautionary Note Regarding Forward-Looking Statements” in this Report and “Risk Factors” in this Report and our Annual Report on Form 10-K for the year ended December 31, 2005.

Consistent with our business strategy, we continuously evaluate possible acquisitions of assets that would complement our current operations, including assets which, if acquired, would have a material effect on our financial position, results of operations or cash flows.

Changes in Leadership

On April 5, 2006, the Board of Directors of the Company elected Jerry E. Thompson as President, Chief Executive Officer and a director of the Company and of TEPPCO GP, effective April 11, 2006. Mr. Thompson, age 56, was previously chief operating officer of CITGO Petroleum Corporation (“CITGO”) from 2003 to March 2006, when he retired. Mr. Thompson joined CITGO in 1971 and advanced from a process engineer to positions of increasing responsibilities in the operations, supply and logistics, business development, planning and financial aspects of CITGO. He was elected vice president of CITGO’s refining business in 1987 and as its senior vice president in 1998. Mr. Thompson will serve as the principal executive officer of the Company.

Restatement of Consolidated Financial Statements

In the fourth quarter of 2005, we determined that our method of accounting for the $33.4 million excess investment in Centennial, previously described as an intangible asset with an indefinite life, was incorrect. Through our accounting for this excess investment in Centennial as an intangible asset with an indefinite life, we had been testing the amount for impairment on an annual basis as opposed to amortizing it over a determinable life. We determined that it would be more appropriate to account for this excess investment as an intangible asset with a determinable life. As a result, we made a non-cash adjustment that reduced the net value of the excess investment in Centennial, and increased amortization expense allocated to our equity earnings. We restated previously reported consolidated financial statements for the fiscal year ended December 31, 2003 and 2004 in our Annual Report on Form 10-K for the year ended December 31, 2005. The effect of this restatement caused a $1.0 million reduction to net income as previously reported for the three months ended March 31, 2005. As a result, we are restating our previously reported consolidated financial statements for the three months ended March 31, 2005 (see Note 11 in the Notes to the Consolidated Financial Statements).

While we believe the impact of this non-cash adjustment is not material to any previously issued financial statements, we determined that the cumulative adjustment for this non-cash item was too material to record in the fourth quarter of 2005, and therefore it was most appropriate to restate prior periods’ results. This non-cash adjustment had no effect on our operating income, compensation expense, debt balances or ability to meet all requirements related to our debt instruments. The restatement had no impact on total cash flows from operating activities, investing activities or financing activities. All amounts in the accompanying consolidated financial statements have been adjusted for this restatement.

We will continue to amortize the $30.0 million excess investment in Centennial related to a contract using units-of-production methodology over a 10-year life. The remaining $3.4 million related to a pipeline will continue to be amortized on a straight-line basis over 35 years.

Results of Operations

The following table presents volumes delivered in barrels and average tariff per barrel for the three months ended March 31, 2006 and 2005 (in thousands, except tariff information):

	Three Months Ended				Percentage
	March 31,				Increase
	2006		2005		(Decrease)
Volumes Delivered:
Refined products	35,808		38,595		(7	)%
LPGs	12,840		14,801		(13	)%
Total	48,648		53,396		(9	)%

Average Tariff per Barrel:
Refined products	$	0.89	$	0.91	(2	)%
LPGs	2.29		2.18		(5	)%
Average system tariff per barrel	1.26		1.26		—

Three Months Ended March 31, 2006 Compared with Three Months Ended March 31, 2005

Revenues from refined products transportation decreased $3.2 million for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, due to an overall decrease of 7% in the refined products volumes delivered. Volume decreases were due to decreased demand for products supplied from the U.S. Gulf Coast into Midwest markets compared with unusually high demand in the first quarter of 2005 due to refinery downtime in Chicago, Illinois. Refined products volumes were impacted by unfavorable differentials for motor fuels lower jet fuel demand during the three months ended March 31, 2006, compared with the three months ended March 31, 2005. The decrease in demand for U.S. Gulf Coast source products also resulted in lower deliveries of products on Centennial. In February 2003, we entered into a lease agreement with Centennial that increased our flexibility to deliver refined products to our market areas. As a result, 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 and our supporting lease of pipeline capacity, our previously constrained system has expanded deliveries in markets both south and north of Creal Springs, Illinois. Movement of our product via the Centennial lease to the north end of our system permits expanded supply capability on our system for delivery to the south end of our system. Increased movements of refined products on Centennial has resulted in a decrease in the refined products average rate per barrel; however, utilizing Centennial for refined products movements allows us to increase movements of long-haul propane volumes.

Revenues from LPGs transportation decreased $2.8 million for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, due to lower deliveries of propane in the upper Midwest and Northeast market areas as a result of warmer than normal winter weather and decreased short-haul propane deliveries to U.S. Gulf Coast petrochemical customers in the first quarter of 2006.

Other operating revenues increased $1.8 million for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, primarily due to increased rental revenues from leasing storage capacity on pipeline assets acquired in July 2005, and higher refined products excess inventory fees, partially offset by lower volumes of product inventory sales.

Costs and expenses increased $3.9 million for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, due to increased operating, general and administrative expenses, increased operating fuel and power, increased depreciation and amortization expense and lower gains on the sales of assets in the current period, partially offset by decreased taxes – other than income taxes. Operating, general and

administrative expenses increased primarily due to a $1.4 million increase in pipeline operating costs primarily as a result of asset acquisitions in 2005, a $1.2 million increase related to the retirement of an executive in February 2006, as well as higher insurance premiums, product measurement and settlement losses and transition costs. These increases were partially offset by a $1.9 million decrease in pipeline inspection and repair costs associated with our integrity management program and a $0.5 million decrease in rental expense from the Centennial pipeline capacity lease agreement. Operating fuel and power increased $1.6 million primarily due to adjustments to power accruals and higher power rates. Depreciation and amortization expense increased $0.7 million primarily due to a higher asset base in the 2006 period. Taxes – other than income taxes decreased due to decreases in property tax accruals.

Net losses from equity investments decreased for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, as shown below (in thousands):

	Three Months Ended
	March 31,						Increase
	2006			2005			(Decrease)
				(as restated)

Centennial	$	(3,913	)	$	(4,450	)	$	537
MB Storage	2,651			2,634			17
Other	(4		)	(5		)	1
Total equity losses	$	(1,266	)	$	(1,821	)	$	555

Equity losses in Centennial decreased $0.5 million for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, primarily due to lower amortization expense on the portion of our excess investment in Centennial resulting from lower transportation volumes in the current period, partially offset by lower transportation revenues and volumes primarily due to warmer than normal winter weather in the Northeast. Equity earnings in MB Storage were virtually unchanged for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, with higher revenues offset by higher operating costs.

Interest expense increased $1.2 million for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, primarily due to higher outstanding debt balances and higher average interest rates under the note payable with our Parent Partnership. Interest capitalized increased $0.8 million for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, primarily due to higher construction work-in-progress balances in 2006 as compared to the 2005 period.

Other income – net increased $0.6 million for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, primarily due to higher interest income earned on a capital lease.

Financial Condition and Liquidity

Cash generated from operations and loans or capital contributions from our Parent Partnership are our primary sources of liquidity. At March 31, 2006 and December 31, 2005, we had a working capital surplus of $11.9 million and a working capital deficit of $4.5 million, respectively. Working capital deficits can occur primarily due to the timing of operating cash receipts from customers, payments 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, 2006, our Parent Partnership had approximately $253.1 million in available borrowing capacity under its revolving credit facility to cover any working capital needs, and we expect that our Parent Partnership’s cash flows from operating activities, the sale of additional debt or equity in the capital markets and capacity under its Revolving Credit Facility will provide sufficient funds to it to provide necessary liquidity to us in the form of contributions or loans. For further discussion regarding our Parent Partnership’s sources of liquidity, please see Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations –

Financial Condition and Liquidity in our Parent Partnership’s Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2006 and its Annual Report on Form 10-K for the year ended December 31, 2005. Cash flows for the three months ended March 31, 2006 and 2005, were as follows (in thousands):

	Three Months Ended
	March 31,
	2006			2005
				(as restated)
Cash provided by (used in):
Operating activities	$	14,573		$	24,982
Investing activities	(13,426		)	(14,140		)
Financing activities	(1,147		)	(10,841		)

Operating Activities

Net cash from operating activities for the three months ended March 31, 2006 and 2005, was comprised of the following (in thousands):

	Three Months Ended
	March 31,
	2006			2005
				(as restated)
Net income	$	13,690		$	21,137
Depreciation and amortization	10,029			9,298
Losses in equity investments	1,266			1,821
Distributions from equity investments	7,840			—
Non-cash portion of interest expense	138			68
Cash used in working capital and other	(18,390		)	(7,342		)
Net cash from operating activities	$	14,573		$	24,982

Net cash from operating activities decreased $10.4 million for the three months ended March 31, 2006, compared with the three months ended March 31, 2005, primarily due to the timing of cash disbursements and cash receipts for working capital components and lower net income partially offset by increased distributions received from our equity investments and higher depreciation and amortization in the 2006 period. For a discussion of changes in net income, depreciation and amortization and losses in equity investments, see Results of Operations above.

Net cash from operating activities for the three months ended March 31, 2006 and 2005, included interest payments, net of amounts capitalized, of $15.6 million and $15.3 million, respectively. Excluding the effects of hedging activities and interest capitalized, during the year ended December 31, 2006, we expect interest payments on our Senior Notes to be approximately $27.4 million. We expect to pay our interest payments with cash flows from operating activities.

Investing Activities

Cash flows used in investing activities totaled $13.4 million for the three months ended March 31, 2006, and were comprised of $11.7 million of capital expenditures and $1.7 million of investments in MB Storage for capital expenditures. 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.

Financing Activities

Cash flows used in financing activities totaled $1.1 million for the three months ended March 31, 2006, and were comprised of $16.7 million of distributions paid to our Parent Partnership, partially offset by $15.6 million of net proceeds under our Note Payable to our Parent Partnership. Cash flows used in 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, partially offset by $18.9 million of net proceeds from our Note Payable to our Parent Partnership.

During the three months ended March 31, 2006 and 2005, we paid cash distributions to our Parent Partnership totaling $16.7 million and $29.7 million, respectively. On May 5, 2006, we will pay a cash distribution to our Parent Partnership of $13.4 million for the quarter ended March 31, 2006.

Other Considerations

~~Our~~Universal 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.Shelf

InOur ~~1994,~~Parent ~~the~~Partnership ~~Louisiana Department~~has offiled ~~Environmental~~with ~~Quality~~the ~~(“LDEQ”)~~SEC ~~issued~~ a ~~compliance order for~~universal ~~environmental~~shelf ~~contamination~~registration atstatement ~~our Arcadia~~that, ~~Louisiana,~~subject ~~facility. In~~to ~~1999,~~agreement ~~our~~on ~~Arcadia~~terms ~~facility~~at ~~and adjacent terminals were directed by~~ the ~~Remediation~~time ~~Services~~of use ~~Division~~and ofappropriate ~~the~~supplementation, ~~LDEQ~~allows it to ~~pursue~~ ~~remediation~~issue, ofin ~~this~~one ~~contamination. At~~or ~~March 31~~more offerings, ~~2005,~~up weto ~~have~~ an ~~accrued~~aggregate ~~liability~~ of $0.2.0 ~~million~~billion ~~for remediation~~of ~~costs~~equity ~~at our Arcadia facility. Effective in March 2004~~securities, ~~we executed an access agreement with an~~debt ~~adjacent~~securities ~~industrial~~or ~~landowner~~a ~~who~~combination ~~is located upgradient of the Arcadia facility~~thereof. ~~This~~ ~~agreement~~In ~~enables~~ the ~~landowner~~ toMay ~~proceed~~2005, ~~with remediation activities at~~ our ~~Arcadia~~Parent ~~facility for~~Partnership ~~which~~issued ~~it has accepted shared responsibility~~$279. We2 domillion ~~not~~of ~~expect~~equity ~~that~~securities, ~~the~~leaving ~~completion~~$1.7 ofbillion ~~the remediation program proposed~~available tounder ~~the~~this ~~LDEQ~~shelf ~~will~~registration ~~have~~at aMarch ~~future~~31, ~~material~~2006, ~~adverse~~subject ~~effect~~to oncustomary ~~our financial~~marketing ~~position,~~terms ~~results~~and ~~of operations or cash flows~~conditions.

22Credit Facilities

~~On March 17,~~We ~~2003,~~currently weutilize ~~experienced~~debt afinancing ~~release~~available ~~of 511 barrels of jet fuel~~ from aour ~~storage~~Parent ~~tank~~Partnership atthrough ~~our~~intercompany ~~Blue Island terminal located in Cook County, Illinois~~notes. As aThe ~~result~~terms of the ~~release,~~intercompany notes wegenerally ~~have~~match ~~entered into~~the anprincipal ~~Agreed~~and ~~Order~~interest ~~with~~payment dates under the ~~State~~Parent Partnership’s ofcredit ~~Illinois,~~facility ~~which~~and ~~required~~senior usnotes. toThe ~~conduct an~~interest ~~environmental~~rates ~~investigation. At~~charged ~~this~~by ~~time,~~the weParent ~~have~~Partnership ~~complied~~include ~~with~~ the ~~terms~~stated ofinterest ~~the~~rate ~~Agreed~~paid ~~Order,~~by ~~and~~ the ~~results of~~Parent ~~the~~Partnership ~~environmental~~on ~~investigation~~its ~~indicated~~debt ~~there~~obligations, ~~were~~plus noa ~~soil~~premium orto ~~groundwater impacts~~cover ~~from~~debt ~~the release~~issuance costs. We ~~are~~The ininterest ~~the process~~rate ofis ~~negotiating~~also adecreased ~~final~~or ~~settlement~~increased ~~with~~to ~~the~~cover ~~State~~gains ofand losses, ~~Illinois~~respectively, ~~and~~on ~~we do~~any ~~not~~interest ~~expect~~rate swaps that ~~compliance with~~ the ~~settlement~~Parent ~~will~~Partnership may have ain ~~future~~place ~~material adverse~~on ~~effect~~its oncredit ~~our~~facility ~~financial~~and ~~position,~~senior ~~results~~notes. ofThe ~~operations~~Parent Partnership’s orrevolving ~~cash~~credit ~~flows~~facility is described below.

~~On July 22,~~Our ~~2004,~~Parent wePartnership ~~experienced~~has ain ~~release~~place ofan ~~approximately~~unsecured revolving 12credit ~~barrels~~facility offor ~~jet~~up to $700.0 million (“Revolving Credit ~~fuel~~Facility”), ~~from~~which may be increased up to a ~~sump~~maximum atof $850.0 million upon our Parent ~~Lebanon,~~Partnership’s ~~Ohio~~request, ~~terminal. The~~subject ~~released~~to ~~jet~~lender ~~fuel~~approval ~~was~~and ~~contained~~the ~~within a~~satisfaction ~~storm~~of ~~water~~certain ~~retention~~other ~~pond~~conditions. ~~located~~The onRevolving ~~the~~Credit ~~terminal~~Facility ~~property~~expires on December 13, 2010. ~~Six~~ ~~migratory~~Interest ~~waterfowl~~is ~~were~~payable ~~affected~~at byan ~~the jet~~applicable ~~fuel~~margin ~~and~~above ~~were~~either ~~subsequently~~the ~~euthanized~~lender’s base byrate or atLIBOR. ~~the~~At ~~request~~March of31, ~~the~~2006, ~~United~~$435.0 ~~States~~million was outstanding under the ~~Fish~~facility, and ~~Wildlife~~our ~~Service~~Parent ~~(“USFWS”). On~~Partnership ~~October~~ had $253.1, million of available borrowing ~~2004~~capacity, ~~the~~which ~~USFWS~~includes ~~served~~$11.9 usmillion ~~with~~of aoutstanding ~~Notice~~letters of ~~Violation,~~credit. Financial ~~alleging~~covenants in the Revolving Credit Facility require that weour ~~violated~~Parent 16Partnership ~~USC~~maintain ~~703~~a ratio of ~~the~~Consolidated ~~Migratory~~Funded ~~Bird~~Debt ~~Treaty~~to ~~Act~~Pro ~~for~~Forma EBITDA (as defined and calculated in the ~~“take[ing]~~facility) of ~~migratory birds~~less bythan ~~illegal~~4.75 ~~methods~~to 1.~~” On~~00 ~~February 7,~~(subject ~~2005,~~to weadjustment ~~entered~~for ~~into~~specified acquisitions) and a ~~Memorandum~~ratio of ~~Understanding~~EBITDA ~~with~~to Interest Expense (as defined and calculated in the ~~USFWS,~~facility) ~~settling~~of at least 3.00 to 1.00, ~~all~~in ~~aspects~~each ofcase ~~this~~with ~~matter~~respect to specified twelve month periods. ~~The~~ ~~terms~~Other ofrestrictive ~~this~~covenants ~~settlement~~in ~~did~~the ~~not~~credit ~~have~~agreement alimit ~~material~~the ~~adverse~~Parent ~~effect~~Partnership’s onand ~~our~~its subsidiaries’ ~~financial~~ability to, among other things, incur additional indebtedness, ~~position~~make certain distributions, ~~results~~incur liens, engage in specified transactions with affiliates and complete mergers, acquisitions and sales of ~~operations~~assets. orOur ~~cash~~Parent Partnership ~~flows~~was in compliance with the covenants of its Revolving Credit Facility at March 31, 2006.

~~On July 27,~~At ~~2004~~March 31, we2006 ~~received~~and ~~notice~~December ~~from~~31, ~~the~~2005, ~~United~~we ~~States Department of~~had ~~Justice~~intercompany ~~(“DOJ”)~~notes ofpayable ~~its intent~~ to ~~seek~~our aParent ~~civil~~Partnership ~~penalty~~of ~~against~~$222.3 usmillion ~~related to our~~and ~~November 21~~$206.9 million, ~~2001~~respectively, ~~release~~which ofrelated ~~approximately~~to ~~2,575~~borrowings ~~barrels~~under ofthe ~~jet fuel from~~Parent ~~our~~Partnership’s ~~14-inch~~Revolving ~~diameter~~Credit ~~pipeline located in Orange County~~Facility, ~~Texas~~7. ~~The~~625% ~~DOJ,~~Senior atNotes ~~the~~and ~~request~~6.125% ~~of the Environmental~~Senior ~~Protection~~Notes. ~~Agency,~~The isweighted ~~seeking~~average ~~a civil~~interest ~~penalty~~rate ~~against~~on usthe ~~for~~note ~~alleged~~payable ~~violations~~to of the ~~Clean~~Parent Partnership ~~Water~~at ~~Act~~March ~~(“CWA”) arising~~31, ~~out~~2006, ofwas ~~this release~~6. ~~The~~6%. ~~maximum statutory~~At ~~penalty~~March ~~calculated~~31, ~~for~~2006, ~~this~~accrued ~~alleged~~interest includes ~~violation of the CWA is~~ $21.8 million~~. We~~ ~~are~~due ~~in discussions with the DOJ regarding this matter and have responded~~ to ~~its~~our ~~request~~Parent ~~for additional information~~Partnership. We doFor ~~not~~the ~~expect~~three amonths ~~civil~~ended ~~penalty~~March 31, if2006 ~~any~~and 2005, tointerest ~~have~~costs aincurred ~~material~~on ~~adverse~~the ~~effect~~note onpayable to our Parent ~~financial~~Partnership ~~position, results~~totaled of$3.5 ~~operations~~million orand ~~cash~~$3.4 ~~flows~~million, respectively.

At2006 March 31,Capital 2005, we have an accrued liability of $1.5 million related to various sites requiring environmental remediation activities. We 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.Expenditures

~~Recent~~We ~~Accounting~~estimate that capital expenditures, excluding ~~Pronouncements~~acquisitions, for 2006 will be approximately $115.3 million (including $3.4 million of capitalized interest). We expect to spend approximately $74.9 million for revenue generating projects and facility improvements. We expect to spend approximately $18.0 million to sustain existing

~~See discussion of new accounting pronouncements in Note 1. Organization and Basis of Presentation - New Accounting Pronouncements in the accompanying consolidated financial statements.~~27

~~Forward~~operations, including life-~~Looking~~cycle replacements for ~~Statements~~equipment at various facilities and pipeline and tank replacements and $19.0 million for various system upgrade projects. During the remainder of 2006, we may be required to contribute cash to Centennial to cover capital expenditures, acquisitions or other operating needs and to MB Storage to cover significant capital expenditures or additional acquisitions. 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 or capital contributions from our Parent Partnership or any combination thereof.

~~The~~Liquidity matters discussed herein include “forward-looking statements” within the meaning of various provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this document that address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as estimated future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success, references to intentions as to future matters and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including general economic, market or business conditions, the opportunities (or lack thereof) that may be presented to and pursued by us, competitive actions by other pipeline companies, changes in laws or regulations, and other factors, many of which are beyond our control. Consequently, all of the forward-looking statements made in this document are qualified by these cautionary statements and we cannot assure you that actual results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences to or effect on us or our business orOutlook

23We believe that we will continue to have adequate liquidity to fund future recurring operating and investing activities. Our primary cash requirements consist of normal operating expenses, capital expenditures to sustain existing operations and revenue generating expenditures, interest payments on our Senior Notes, interest payments on intercompany notes payable to our Parent Partnership and distributions to our Parent Partnership. Our cash requirements for 2006, such as operating expenses, capital expenditures to sustain existing operations and quarterly distributions to our Parent Partnership, are expected to be funded through operating cash flows. Long-term cash requirements for expansion projects, acquisitions and repayment of intercompany notes are expected to be funded by several sources, including cash flows from operating activities and loans or capital contributions from our Parent Partnership. Our Parent Partnership may fund such loans or capital contributions with borrowings under its credit facility and possibly the issuance of additional equity and debt securities. The timing of any 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.

operations. For additional discussion of such risks and uncertainties, see our Annual Report on Form 10Off-KBalance forSheet the year ended December 31, 2004, and other filings we have made with the Securities and Exchange Commission.Arrangements

~~Item~~We 3do not rely on off-balance sheet borrowings to fund our acquisitions. ~~Quantitative~~ We have no material off-balance sheet commitments for indebtedness other than the limited guaranty of Centennial debt and the limited ~~Qualitative~~guarantee ~~Disclosures~~of ~~About~~Centennial ~~Market~~catastrophic ~~Risk~~events as discussed below. In addition, we have entered into various leases covering assets utilized in several areas of our operations.

We ~~may~~are bea ~~exposed~~guarantor ~~to market~~with ~~risk~~respect ~~through~~to ~~changes~~$500.0 inmillion principal ~~commodity~~amount ~~prices~~of ~~and interest rates~~7. We625% doSenior ~~not~~Notes ~~have~~due ~~foreign~~2012 ~~exchange~~issued ~~risks. Our~~in ~~Risk~~February ~~Management~~2002 ~~Committee has established~~and ~~policies~~for to$200.0 ~~monitor~~million ~~and~~principal ~~control~~amount ~~these~~of ~~market risks~~6.125% ~~The~~Senior ~~Risk~~Notes ~~Management Committee~~due is2013 ~~comprised,~~issued in January ~~part,~~2003 ofby ~~senior~~our ~~executives~~Parent ~~of the Company~~Partnership.

WeCentennial ~~have~~entered ~~utilized~~into ~~and~~credit facilities totaling ~~expect~~$150.0 tomillion, ~~continue~~and toas ~~utilize~~of ~~interest~~March ~~rate~~31, ~~swap~~2006, ~~agreements~~$150.0 tomillion ~~hedge~~was aoutstanding ~~portion~~under ofthose ~~our~~credit ~~fair~~facilities, ~~value~~of ~~risks~~which $140. ~~Interest~~0 ~~rate~~million expires in 2024, and $10.0 ~~swap~~million ~~agreements~~expires ~~are~~in ~~used~~April to2007. ~~manage~~We ~~the~~and ~~fixed~~Marathon ~~interest~~have ~~rate~~each ~~mix~~guaranteed one-half of the ~~our~~repayment ~~debt~~of ~~portfolio and~~Centennial’s ~~overall~~outstanding ~~cost~~debt ofbalance ~~borrowing. The~~ (plus interest) ~~rate~~under these ~~swap~~credit ~~related~~facilities. toThe ~~our~~guarantees ~~fair~~arose ~~value~~in ~~risk~~order isfor ~~intended~~Centennial to ~~reduce our~~obtain ~~exposure~~adequate tofinancing, ~~changes~~and inthe proceeds of the ~~fair~~credit ~~value~~facilities ofwere ~~our~~used ~~fixed~~to ~~rate~~fund construction ~~Senior~~and ~~Notes. The~~conversion ~~interest~~costs ~~rate~~of ~~swap~~its ~~agreement~~pipeline ~~involves~~system. Prior to the ~~periodic~~expiration ~~exchange~~ of ~~payments~~the ~~without~~long-term ~~the~~credit ~~exchange~~facility, ofwe ~~the~~could ~~notional~~be ~~amount~~relinquished ~~upon~~from ~~which~~responsibility under the ~~payments~~guarantee ~~are~~should ~~based~~Centennial meet certain financial tests. ~~The~~If ~~related~~Centennial ~~amount~~defaults ~~payable~~on toits oroutstanding ~~receivable~~balance, ~~from~~the estimated maximum ~~counterparties~~potential isamount ~~included~~of asfuture anpayments ~~adjustment~~for tous ~~accrued~~and ~~interest~~Marathon is $75.0 million each at March 31, 2006.

AtWe, ~~March 31~~Marathon, ~~2005~~and Centennial have entered into a limited cash call agreement, which allows each member to contribute cash in welieu ~~had~~of ~~outstanding~~Centennial ~~$180.0~~procuring ~~million~~separate ~~principal~~insurance ~~amount~~in the event of 6a third-party liability arising from a catastrophic event.~~45%~~ ~~Senior~~There ~~Notes~~is ~~due~~an indefinite term for ~~2008~~the agreement and each member is to contribute cash in proportion to its ownership interest, up to a maximum of $~~210~~50.0 million ~~principal~~each. ~~amount~~As a result of ~~7.51%~~the catastrophic ~~Senior~~event ~~Notes~~guarantee, ~~due~~we ~~2028~~have recorded a $4. At6 ~~March 31,~~million ~~2005~~obligation, which represents the ~~estimated~~present ~~fair~~ value of the ~~6.45%~~estimated ~~Senior~~amount ~~Notes~~that ~~and~~we 7would have to pay under the guarantee.~~51%~~ ~~Senior~~If ~~Notes~~a catastrophic event were ~~approximately $186.2~~to ~~million~~occur and ~~$223.2~~we ~~million~~were required to contribute cash to Centennial, ~~respectively~~contributions exceeding our deductible might be covered by our insurance.

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-month U.S. Dollar LIBOR rate, plus 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.28

AsContractual of March 31, 2005, and December 31, 2004, we had intercompany notes payable to our Parent Partnership of $320.5 million and $301.7 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 March 31, 2005, was 4.5%. At March 31, 2005, accrued interest includes $1.7 million due to our Parent Partnership. For the three months ended March 31, 2005 and 2004, interest costs incurred on the note payable to our Parent Partnership totaled $3.4 million and $2.9 million, respectively.Obligations

~~Item~~The following table summarizes our debt repayment ~~4. Controls~~obligations and ~~Procedures~~material contractual commitments as of March 31, 2006 (in millions):

The principal executive officer and principal financial officer of our General Partner, 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 March 31, 2005, have concluded that, as of such date, our disclosure controls and procedures are adequate and effective to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.

	Amount of Commitment Expiration Per Period
	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years

Note payable, Parent Partnership	$	222.3	$	—	$	—	$	222.3	$	—
6.45% Senior Notes due 2008 (1)	180.0		—		180.0		—		—
7.51% Senior Notes due 2028 (1)	210.0		—		—		—		210.0
Interest payments (2)	451.0		41.4		71.2		58.3		280.1
Debt and interest subtotal	1,063.3		41.4		251.2		280.62		490.1

Operating leases (3)	62.5		13.0		19.8		10.3		19.4
Capital expenditure obligations (4)	0.2		0.2		—		—		—
Other liabilities and deferred credits (5)	7.4		—		7.3		0.1		—
Total	$	1,133.4	$	54.6	$	278.3	$	291.02	$	509.5

24(1) We entered into an interest rate swap agreement to hedge our exposure to changes in the fair value of our 7.51% Senior Notes due 2028. At March 31, 2006, the 7.51% Senior Notes include an adjustment to decrease the fair value of the debt by $7.0 million related to this interest rate swap agreement. At March 31, 2006, our 6.45% Senior Notes include less than $0.1 million of unamortized debt discount. The fair value adjustment and unamortized debt discount are excluded from this table.

~~Changes~~(2) Includes ininterest ~~Internal~~payments ~~Control~~due ~~over~~on ~~Financial~~our Senior ~~Reporting~~Notes and interest payments and commitment fees due on our Note Payable to our Parent Partnership. The interest amount calculated on the Note Payable to our Parent Partnership is based on the assumption that the amount outstanding and the interest rate charged both remain at their current levels.

~~There~~(3) Includes a ~~has~~pipeline ~~been~~capacity nolease ~~change in~~with ~~our~~Centennial. ~~internal~~In ~~control~~January ~~over~~2003, ~~financial~~we ~~reporting~~entered ~~during~~into ~~the~~a pipeline ~~first~~capacity ~~quarter~~lease ~~of 2005~~agreement ~~that~~with ~~has~~Centennial ~~materially~~for ~~affected,~~a orperiod isof ~~reasonably~~five ~~likely~~years that tocontains ~~materially affect,~~a ~~our~~minimum ~~internal~~throughput ~~control~~requirement. ~~over~~For ~~financial~~the ~~reporting. As~~three amonths ~~result~~ended March 31, no2006, ~~corrective~~we ~~actions~~exceeded ~~were required~~the orminimum ~~undertaken~~throughput requirements on the lease agreement.

~~PART~~(4) Includes ~~II. OTHER~~accruals ~~INFORMATION~~for costs incurred but not yet paid relating to capital projects.

~~Item~~(5) Excludes approximately $8.6 million of 1long-term deferred revenue payments, which are being transferred to income over the term of the respective revenue contracts and $4. ~~Legal~~3 ~~Proceedings~~million related to our estimated amount of obligation under a catastrophic event guarantee for Centennial. The amount of commitment by year is our best estimate of projected payments of these long-term liabilities.

We ~~have~~expect ~~been,~~to inrepay the ~~ordinary~~ ~~course of business~~long-term, asenior ~~defendant~~unsecured obligations ~~in various lawsuits~~ and anote ~~party~~payable to ~~various~~ ~~other~~our ~~legal~~Parent ~~proceedings,~~Partnership ~~some~~through ofthe ~~which~~issuance ~~are~~of additional ~~covered~~long-term insenior ~~whole~~unsecured ordebt inat ~~part by~~the ~~insurance. We~~time ~~believe that~~ the ~~outcome~~ of2008 ~~these lawsuits~~ and ~~other~~2028 ~~proceedings~~debts mature, ~~will~~with ~~not~~proceeds ~~individually~~from ~~or in~~ the ~~aggregate~~ ~~have~~dispositions aof ~~material adverse effect on our consolidated financial position~~assets, ~~results of operations or~~ cash flows. from ~~See~~operations, ~~discussion~~and ofcontributions ~~legal~~from ~~proceedings~~our inParent ~~Note~~Partnership ~~9. Commitments~~or ~~and~~any ~~Contingencies~~combination ~~in the~~of ~~accompanying~~the ~~consolidated~~above ~~financial statements~~items.

~~Item~~Our 6Parent Partnership’s senior unsecured debt is rated BBB- by Standard and Poors (“S&P”) and Baa3 by Moody’s Investors Service (“Moody’s”). S&P assigned this rating on June 14, 2005, following ~~Exhibits~~its review of the ownership structure, corporate governance issues, and proposed funding after the acquisition of the Company by DFI. Both ratings are with a stable outlook. 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 and should be evaluated independently of any other rating. Our senior unsecured debt is also rated BBB- by S&P and Baa3 by Moody’s. Both ratings are with a stable outlook and were reaffirmed during the first quarter of 2006.

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,

25Recent Accounting Pronouncements

		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.

See discussion of new accounting pronouncements in Note 1 in the Notes to the Consolidated Financial Statements.

* FiledItem ~~herewith~~3. Quantitative and Qualitative Disclosures About Market Risk

** FurnishedFor ~~herewith~~additional discussion of our exposure to market ~~pursuant~~risks, please refer to “Item ~~601(b)-(32)~~7A. ofQuantitative ~~Regulation~~and SQualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2005.

~~+ A~~Commodity ~~management contract or compensation plan or arrangement.~~Risk

26We may be exposed to market risk through changes in commodity prices and interest rates. We do not have foreign exchange risks. Our Risk Management Committee has established policies to monitor and control these market risks. The Risk Management Committee is comprised, in part, of senior executives of the Company.

~~SIGNATURES~~Interest Rate Risk

~~Pursuant~~We have utilized and expect 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 ~~requirements~~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 ~~Securities~~fair ~~Exchange~~value ~~Act~~of our fixed rate Senior Notes. The interest rate swap agreement involves the periodic exchange of ~~1934,~~payments without the ~~Registrant~~exchange ~~has~~of ~~duly~~the notional ~~caused~~amount ~~this~~upon ~~report~~which the payments are based. The related amount payable to beor receivable ~~signed~~from oncounterparties ~~its~~is ~~behalf~~included byas ~~the~~an ~~undersigned~~adjustment ~~thereunto~~to ~~duly~~accrued ~~authorized~~interest.

	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: April 28, 2005

The following table summarizes the estimated fair values of the Senior Notes as of March 31, 2006 and December 31, 2005 (in millions):

			Fair Value
	Face Value		March 31, 2006		December 31, 2005

6.45% TE Products Senior Notes, due January 2008	$	180.0	$	182.6	$	183.7
7.51% TE Products Senior Notes, due January 2028	210.0		223.4		224.1

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-month U.S. Dollar LIBOR rate, plus a spread of 147 basis points, and receive a fixed rate of interest of 7.51%. During the three months ended March 31, 2006 and 2005, we recognized reductions in interest expense of $0.7 million and $1.8 million, respectively, related to the difference between the fixed rate and the floating rate of interest on the interest rate swap. During the quarters ended March 31, 2006 and 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 of approximately $7.0 million and $0.9 million at March 31, 2006, and December 31, 2005, respectively. Utilizing the balance of the 7.51% Senior Notes outstanding at March 31, 2006, and including the effects of hedging activities, if market interest rates increased 100 basis points, the annual increase in interest expense would be $2.1 million.

At March 31, 2006, and December 31, 2005, we had intercompany notes payable to our Parent Partnership of $222.3 million and $206.9 million, respectively, which related to 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 March 31, 2006, was 6.6%. At March 31, 2006, accrued interest includes

$1.8 million due to our Parent Partnership. For the three months ended March 31, 2006 and 2005, interest costs incurred on the note payable to our Parent Partnership totaled $3.5 million and $3.4 million, respectively. Utilizing the balance of the note payable to our Parent Partnership outstanding at March 31, 2006, if market interest rates increased 100 basis points, the annual increase in interest expense would be $2.2 million.

Item 4. Controls and Procedures

As of the end of the period covered by this report, our management carried out an evaluation, with the participation of our principal executive officer (the “CEO”) and our principal financial officer (the “CFO”), of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based on those evaluations, as of March 31, 2006, the CEO and CFO concluded:

(i) that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure; and

(ii) that our disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during the first quarter of 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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 10 in the Notes to the Consolidated Financial Statements, which is incorporated into this item by reference.

Item 1A. Risk Factors

Investors and potential investors should carefully consider our risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2005, and below, in addition to other information in such Annual Report and this Report. We are identifying these risk factors as important factors that could cause our actual results to differ materially from those contained in any written or oral forward-looking statements made by or on behalf of us. We are relying upon the safe-harbor for forward-looking statements, and any such statements made by or on behalf of us are qualified by reference to the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2005, and the following cautionary statements, as well as to those set forth elsewhere in such Annual Report and this Report.

We depend on the leadership and involvement of our General Partner’s key personnel for the success of our business.

We depend on the leadership and involvement of key personnel of our General Partner to identify and develop business opportunities and make strategic decisions. Our General Partner’s president and chief executive officer was elected in April 2006, our General Partner’s chief financial officer was elected in January 2006, and its general

counsel was elected in March 2006. Our General Partner’s president and chief executive officer has over 35 years of relevant experience and its chief financial officer and general counsel each have approximately 20 years of relevant experience. While retention plans are in place for certain senior executives, any future unplanned departures could have a material adverse effect on our business, financial conditions and results of operations. Legacy senior executives have compensation agreements in place; new officers may not be party to any compensation agreements.

Item 6. Exhibits

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, 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		Agreement and Release between James C. Ruth and Texas Eastern Products Pipeline Company, LLC dated as of January 25, 2006 (Filed as Exhibit 10.53 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 31, 2005 and incorporated herein by reference).

10.2		Waiver of Provisions of the Conflicts Policies and Procedures of the Third Amended and Restated Administrative Services Agreement (Filed as Exhibit 10.56 to Form 10-K of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year ended December 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.

* Filed herewith.

** Furnished herewith pursuant to Item 601(b)-(32) of Regulation S-K.

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

Date: May 3, 2006		By:	/s/ JERRY E. THOMPSON
		Jerry E. Thompson, President and Chief Executive Officer of TEPPCO GP, Inc., General Partner

Date: May 3, 2006		By:	/s/ WILLIAM G. MANIAS
		William G. Manias, Vice President and Chief Financial Officer of TEPPCO GP, Inc., General Partner

Filing Compare · TE PRODUCTS PIPELINE CO LLC