PIPELINE AND TERMINAL LEASE AGREEMENT





                            DATED AS OF MAY 25, 2001,



                                 BY AND BETWEEN



                         COASTAL LIQUIDS PARTNERS, L.P.,



                                   AS LESSOR,



                                       AND



                     VALERO MARKETING AND SUPPLY COMPANY AND



                            VALERO PIPELINE COMPANY,



                                    AS LESSEE





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                  THIS PIPELINE AND TERMINAL LEASE AGREEMENT (this "Lease"),

dated as of May 25, 2001, is entered into by and between Coastal Liquids

Partners, L.P., a Delaware limited partnership (hereinafter referred to as

"Lessor"), and Valero Marketing and Supply Company, a Delaware corporation, and

Valero Pipeline Company, a Delaware corporation (collectively hereinafter

referred to as "Lessee").



                  WHEREAS, Lessor is the owner of the Leased Property, Inventory

and Equipment; and



                  WHEREAS, Lessor desires to lease the Leased Property and sell

the Inventory and Equipment to Lessee, and Lessee desires to lease the Leased

Property and purchase the Inventory and Equipment from Lessor;



                  NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF the

mutual agreements herein contained and other good and valuable consideration,

receipt of which is hereby acknowledged, the parties hereto agree as follows:





                                    ARTICLE 1

                               CERTAIN DEFINITIONS



         1.1 Certain Defined Terms. Unless the context otherwise requires, the

respective terms defined in Appendix A attached hereto and incorporated herein

shall, when used herein, have the respective meanings therein specified, with

each such definition to be equally applicable both to the singular and the

plural forms of the term so defined.



         1.2 References, Gender, Number. All references in this Lease to an

"Article," "Section," or "subsection" shall be to an Article, Section, or

subsection of this Lease, unless the context requires otherwise. Unless the

context otherwise requires, the words "this Lease," "hereof," "hereunder,"

"herein," "hereby," or words of similar import shall refer to this Lease as a

whole and not to a particular Article, Section, subsection, clause or other

subdivision hereof. Whenever the context requires, the words used herein shall

include the masculine, feminine and neuter gender, and the singular and the

plural.



                                    ARTICLE 2

                             PRE-CLOSING AGREEMENTS



         2.1 Agreement to Lease. Upon the Closing, subject to the terms and

conditions of this Lease, (i) Lessor agrees to lease the Leased Property to

Lessee, and Lessee agrees to lease the Leased Property from Lessor, and (ii) the

parties agree to execute and deliver (or cause the execution and delivery of)

the Related Agreements (other than those to be executed after the Closing

pursuant to Section 10.3) as more fully provided in Section 2.11.



                  (a) As of the Effective Time, subject to the terms and

conditions of this Lease and for the consideration specified below, Lessor shall

sell, assign, transfer, grant, bargain, deliver and convey to Lessee, free and

clear of all Liens, all of Lessor's and its Affiliates' right, title and

interest in, to and under the Inventory. In consideration of the transfer to

Lessee of the Inventory,





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Lessee shall deliver to Lessor the Estimated Inventory Sale Price set forth in

SCHEDULE 2.2, PART I BY WIRE transfer of immediately available funds at the

Closing. The Estimated Inventory Sale Price is subject to later adjustment

pursuant to Section 2.2(e).



                  (b) As of the Effective Time, subject to the terms and

conditions of this Lease and for the consideration specified below, Lessor shall

sell, assign, transfer, grant, bargain, deliver and convey to Lessee, free and

clear of all Liens, all of Lessor's and its Affiliates' right, title and

interest in, to and under the Equipment. In consideration of the transfer to

Lessee of the Equipment, Lessee shall deliver to Lessor $426,384.



                  (c) The Estimated Inventory Sale Price will be adjusted

following Closing based on a physical inventory (the "Physical Inventory")

commenced no more than two Business Days prior to the Closing. The Physical

Inventory shall be conducted in accordance with the measurement and other

procedures specified in Schedule 2.2, Part I and shall be conducted by

independent inspectors.



                  (d) Within ten Business Days of receipt of the Final Inventory

Quantity Report (as provided in Section 0 of Schedule 2.2 PART I), LESSOR shall

deliver the Statement (defined below) to Lessee. As used herein, the Statement

shall mean an invoice, based on the valuation formulae set forth in Schedule 2.2

PART II AND the Final Inventory Quantity and Final Inventory Quality set forth

in the Final Inventory Quantity Report, that indicates by product and in the

aggregate the final value for the Inventory conveyed to Lessee pursuant hereto.



                  (e) Lessee shall have ten Business Days from receipt of the

Statement to review the Statement. During this ten Business Day period, Lessee

shall be permitted to review the working papers of Lessor relating to, and shall

be given access to the employee of Lessor primarily responsible for the

preparation of, the Statement. The Statement shall become final and binding upon

the parties on the tenth Business Day following delivery thereof to Lessee,

unless Lessee gives written notice of its disagreement with the Statement

("Notice of Disagreement") to Lessor prior to such date. Any Notice of

Disagreement shall (A) specify in reasonable detail the nature of any

disagreement so asserted and (B) include only disagreements based on

mathematical or typographical errors or the amount to be paid for Inventory not

being calculated in accordance with this Section 2.2 or Schedule 2.2 If a Notice

of Disagreement is received by Lessor in a timely manner, then the Statement (as

revised in accordance with clause (A) or (B) below) shall become final and

binding upon Lessor and Lessee upon the earlier of (A) the date Lessor and

Lessee resolve in writing any differences they have with respect to the matters

specified in the Notice of Disagreement or (B) the date any disputed matters are

finally resolved in writing by the Independent Arbitrator (as defined below).

The Statement, upon becoming final and binding in accordance with this Section

2.2, and as the same may be revised in accordance with the preceding clause (A)

or (B), is hereinafter referred to as the "Final Statement".



                  (f) During the ten Business Day period following the delivery

of a Notice of Disagreement, Lessor and Lessee shall seek in good faith to

resolve in writing any differences which they may have with respect to the

matters specified in the Notice of Disagreement. During such period, Lessor

shall have access to the working papers of Lessee prepared in connection with

its certification of the Notice of Disagreement. At the end of such ten Business

Day period, Lessor and Lessee shall submit to an independent arbitrator (the

"Independent Arbitrator") for review and resolution of any and all matters which

remain in dispute and which were properly included in the





                                       2

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Notice of Disagreement, in the form of a written brief. The Independent

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