BUCKEYE PARTNERS L P (Form: 10-K, Received: 03/14/2005 17:18:11)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2004

or

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

		For the transition period from to

Commission file number 1-9356

Buckeye Partners, L.P.

(Exact name of registrant as specified in its charter)


Delaware		23-2432497
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification number)

5002 Buckeye Road P.O. Box 368 Emmaus, Pennsylvania (Address of principal executive offices)		18049 (Zip Code)

Registrant’s telephone number, including area code: (484) 232-4000

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered

LP Units representing limited partnership interests		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

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 þ No o

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act 12b-2). Yes þ No o

At June 30, 2004, the aggregate market value of the registrant’s LP Units held by non-affiliates was $1.06 billion. The calculation of such market value should not be construed as an admission or conclusion by the registrant that any person is in fact an affiliate of the registrant.

LP Units outstanding as of February 22, 2005: 35,384,546

TABLE OF CONTENTS


		Page

PART I
Item 1.	Business		2
Item 2.	Properties		16
Item 3.	Legal Proceedings		17
Item 4.	Submission of Matters to a Vote of Security Holders		17

PART II
Item 5.	Market for the Registrant’s LP Units and Related Unitholder Matters		17
Item 6.	Selected Financial Data		18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		36
Item 8.	Financial Statements and Supplementary Data		37
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		72
Item 9A.	Controls and Procedures		72

PART III
Item 10.	Directors and Executive Officers of the Registrant		73
Item 11.	Executive Compensation		77
Item 12.	Security Ownership of Certain Beneficial Owners and Management		79
Item 13.	Certain Relationships and Related Transactions		80
Item 14.	Principal Accountant Fees and Services		83

PART IV
Item 15.	Exhibits and Financial Statement Schedule		84
CERTIFICATE OF AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF LIMITED PARTNERSHIP
LIMITED LIABILITY COMPANY AGREEMENT OF WOOD RIVER PIPELINES LLC, DATED AS OF SEPTEMBER 27, 2004
FIRST AMENDMENT TO CREDIT AGREEMENT, DATED AS OF DECEMBER 15, 2004
LIST OF SUBSIDIARIES OF THE PARTNERSHIP
CONSENT OF DELOITTE & TOUCHE LLP
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATION OF CHIEF FINANCIAL OFFICER
CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350
CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350

PART I


Item 1.	*Business*

Introduction

Buckeye Partners, L.P. (the “Partnership”) is a master limited partnership organized in 1986 under the laws of the state of Delaware. The Partnership’s principal line of business is the transportation, terminalling and storage of refined petroleum products for major integrated oil companies, large refined product marketing companies and major end users of petroleum products on a fee basis through facilities owned and operated by the Partnership. The Partnership also operates pipelines owned by third parties under contracts with major integrated oil and chemical companies and performs pipeline construction activities, generally for these same customers. Buckeye GP LLC, a Delaware limited liability company, is the general partner of the Partnership (the “General Partner”). See “Business — Significant Partnership Events in 2004 — GP Restructuring and Acquisition of the General Partner by Carlyle/ Riverstone” in this Item 1.

The Partnership owns and operates one of the largest independent refined petroleum products pipeline systems in the United States in terms of volumes delivered, with approximately 4,500 miles of pipeline serving 13 states, and operates another approximately 1,300 miles of pipeline under agreements with major oil and chemical companies. The Partnership also owns and operates 38 active refined petroleum products terminals with aggregate storage capacity of approximately 15.4 million barrels in Illinois, Indiana, Michigan, Missouri, New York, Ohio and Pennsylvania.

The Partnership’s pipelines service approximately 100 delivery locations, transporting refined petroleum products including gasoline, turbine fuel, diesel fuel, heating oil and kerosene from major supply sources to terminals and airports located within major end-use markets. These pipelines also transport other refined products, such as propane and butane, refinery feedstocks and blending components. The Partnership’s transportation services are typically provided on a common carrier basis under published tariffs for customers. The Partnership’s geographical diversity, connections to multiple sources of supply and extensive delivery system help create a stable base business. The Partnership is an independent transportation provider that is not affiliated with any oil company or marketer of refined petroleum products and generally does not own the petroleum products that it transports.

The Partnership currently conducts all of its operations through five operating subsidiaries, which are referred to as the Operating Subsidiaries:


	•	Buckeye Pipe Line Company, L.P. (“Buckeye”), which owns a 2,643-mile interstate common carrier refined petroleum products pipeline serving major population centers in nine states. It is the primary turbine fuel provider to John F. Kennedy International Airport, LaGuardia Airport, Newark International Airport and certain other airports within its service territory.

	•	Laurel Pipe Line Company, L.P. (“Laurel”), which owns a 345-mile intrastate common carrier refined products pipeline connecting five Philadelphia area refineries to 14 delivery points across Pennsylvania.

	•	Wood River Pipe Lines LLC (“Wood River”), which owns five refined petroleum products pipelines with aggregate mileage of approximately 900 miles located in Illinois, Indiana, Missouri and Ohio. We acquired these pipelines from Shell Oil Products, U.S. (“Shell”) on October 1, 2004. For more information regarding the acquisition of these pipelines, see “Business — Significant Partnership Events in 2004 — Acquisition of Midwest Pipelines and Terminals” in this Item 1.

	•	Everglades Pipe Line Company, L.P. (“Everglades”), which, owns a 37-mile intrastate common carrier refined petroleum products pipeline connecting Port Everglades, Florida to Ft. Lauderdale-Hollywood International Airport and Miami International Airport. It is the primary turbine fuel provider to Miami International Airport.

	•	Buckeye Pipe Line Holdings, L.P. (“BPH”), which, collectively with its subsidiaries, owns (or in certain instances leases from other Operating Subsidiaries) and operates 38 refined petroleum products

terminals, including 24 terminals recently acquired from Shell, with aggregate storage capacity of approximately 15.4 million barrels, and owns interests in 535 miles of pipelines in the Midwest, Southwest and West Coast. BPH operates pipelines in the Gulf Coast region and holds a minority stock interest in a Midwest products pipeline and in a natural gas liquids pipeline system. The acquisition of the 24 refined petroleum products terminals from Shell is more fully described in “Business — Significant Partnership Events in 2004 — Acquisition of Midwest Pipelines and Terminals” in this Item 1.

Significant Partnership Events in 2004


	*Acquisition of Midwest Pipelines and Terminals*

On October 1, 2004, the Partnership acquired five refined petroleum products pipelines and 24 petroleum products terminals located in the Midwestern United States from Shell for a purchase price of $517 million. Wood River was created to purchase the Shell pipeline assets and the terminal assets were acquired through an existing subsidiary of BPH.

The acquisition of these assets expanded the Partnership’s presence in the Midwestern U.S. markets. According to the Department of Energy’s Energy Information Administration, or EIA, demand for refined products in Petroleum Administration Defense District II (“PADD II”), which generally constitutes the upper Midwestern United States, exceeded refinery output in the region in the first nine months of 2004. This shortfall creates the need for refined petroleum products to be delivered from other regions via pipeline, barge or, to a lesser degree, truck.

The acquisition more than doubled the number of terminals the Partnership operates and provided it with connections to the ConocoPhillips Wood River refinery in Illinois, the Explorer pipeline and other common carrier pipelines throughout the Midwest. The Wood River refinery, with a capacity of 288,000 barrels per day, is ConocoPhillips’s largest refinery and the second largest refinery in PADD II. Also, there are no other refineries located within a 200-mile radius of the Wood River refinery. Wood River’s connection to the 1,400-mile Explorer pipeline also provides access to refined products produced in numerous Gulf Coast refining centers.

The Shell assets complement the Partnership’s current infrastructure. Several of the pipelines acquired from Shell connect to the Partnership’s existing pipeline system. Given the strategic importance of these assets to the Partnership and their connections to its existing pipelines and terminals, the General Partner believes that opportunities exist for several expansion projects to improve the utilization of, and integration of the acquired assets into, the Partnership’s existing operations. As of December 31, 2004, the pipelines had been substantially integrated into the Partnership’s existing Midwest field operations and the terminals had been integrated into the Partnership’s existing terminal operations.


	*GP Restructuring and Acquisition of the General Partner by Carlyle/ Riverstone*

As of December 31, 2004, the General Partner owned approximately a 1% general partnership interest in the Partnership and approximately a 1% general partnership interest in each Operating Subsidiary except Wood River, for an approximate 2% overall general partnership interest in the Partnership’s activities. The General Partner is a wholly-owned subsidiary of MainLine Sub LLC (“MainLine Sub”), which is a wholly-owned subsidiary of MainLine L.P. (“MainLine”). MainLine is a limited partnership owned by affiliates of Carlyle/ Riverstone Global Energy and Power Fund II, L.P. and certain members of senior management.

The General Partner was formed on December 15, 2004 as part of a restructuring of the Partnership’s general partner organization structure (the “GP Restructuring”) pursuant to which Buckeye Pipe Line Company LLC (the “Prior General Partner”) transferred its general partner interests, except for its right to receive incentive compensation from the Partnership, to the General Partner. The purpose of the GP Restructuring was to clarify that the Partnership and the General Partner are distinct legal entities with separate legal responsibilities from MainLine Sub and MainLine and to provide better assurance that the assets and liabilities of the Partnership, the General Partner and Buckeye Pipe Line Services Company

(“Services Company”) would be considered separate from those of MainLine Sub and MainLine. The Prior General Partner, its immediate parent Buckeye Management Company LLC (“BMC”) and BMC’s immediate parent Glenmoor, LLC (“Glenmoor”) were then merged and renamed MainLine Sub LLC, and Glenmoor’s immediate parent, BPL Acquisition L.P. then changed its name to MainLine L.P.

Until May 4, 2004, Glenmoor, which had been the indirect parent of the Prior General Partner, was owned by certain directors and members of senior management of the Prior General Partner, trusts for the benefit of their children and certain other management employees of Services Company. On May 4, 2004, each of Glenmoor, BMC and the Prior General Partner converted from a stock corporation to a limited liability company, and the membership interests in Glenmoor were sold to BPL Acquisition L.P. (now MainLine) for approximately $235 million. BPL Acquisition L.P. was formed by affiliates of Carlyle/ Riverstone Global Energy and Power Fund II, L.P. for the purpose of purchasing the Glenmoor membership interest.

At December 31, 2004, Services Company employed all of the employees that work for the Operating Subsidiaries. At December 31, 2004, Services Company had 739 employees. Prior to December 26, 2004, the 122 employees of Norco Pipe Line Company, LLC (“Norco”) Buckeye Gulf Coast Pipe Lines, L.P. (“BGC”) and Buckeye Terminals, LLC (“BT”), each a wholly-owned subsidiary of BPH, were employed directly by each respective entity. On December 26, 2004, these employees became employees of Services Company. As part of the GP Restructuring, the services agreement between the Prior General Partner and Services Company (the “Prior Services Agreement”) was terminated and a new services agreement was entered into among Services Company, the Partnership, the Operating Subsidiaries and their subsidiary companies (the “New Services Agreement”). Under the New Services Agreement, Services Company continues to employ the employees that work for the Operating Subsidiaries, and is reimbursed directly by the Operating Subsidiaries and their subsidiaries for those services. Prior to the New Services Agreement, Services Company was reimbursed by the Prior General Partner who was in turn reimbursed by the Partnership and the Operating Subsidiaries. Under both the Prior Services Agreement and the New Services Agreement, certain executive compensation costs and related benefits are not reimbursed by the Partnership or the Operating Subsidiaries, but are reimbursed by MainLine Sub LLC.

The following chart depicts the Partnership’s ownership structure as of December 31, 2004, reflecting the GP Restructuring and the creation of Wood River

Ownership of Buckeye Partners, L.P.


*	Ownership percentages are approximate.

Business Activities

The Partnership receives petroleum products from refineries, connecting pipelines and bulk and marine terminals, and transports those products to other locations. In 2004, refined petroleum products transportation accounted for approximately 77% of the Partnership’s consolidated revenues.

The Partnership transported an average of approximately 1,200,600 barrels per day of refined products in 2004. The following table shows the volume and percentage of refined petroleum products transported over the last three years.

Volume and Percentage of Refined Petroleum Products Transported(1)

(Volume in thousands of barrels per day)


	Year Ended December 31,

	2004					2003					2002

	Volume		Percent			Volume		Percent			Volume		Percent

Gasoline		609.0		50.7	%		578.8		50.9	%		556.4		50.5	%
Jet Fuels		273.1		22.8			248.5		21.9			250.9		22.8
Middle Distillates(2)		293.0		24.4			285.4		25.1			265.4		24.1
Other Products		25.5		2.1			23.7		2.1			28.7		2.6

Total		1,200.6		100.0	%		1,136.4		100.0	%		1,101.4		100.0	%


(1)	Excludes local product transfers.

(2)	Includes diesel fuel, heating oil, kerosene and other middle distillates.

The Partnership provides refined product pipeline transportation service in the following states: California, Connecticut, Florida, Illinois, Indiana, Massachusetts, Michigan, Missouri, New Jersey, Nevada, New York, Ohio and Pennsylvania.


	*Pennsylvania — New York — New Jersey*

Buckeye serves major population centers in Pennsylvania, New York and New Jersey through 928 miles of pipeline. Refined petroleum products are received at Linden, New Jersey from approximately 17 major source points, including two refineries, six connecting pipelines and nine storage and terminalling facilities. Products are then transported through two lines from Linden, New Jersey to Allentown, Pennsylvania. From Allentown, the pipeline continues west through a connection with the Laurel pipeline to Pittsburgh, Pennsylvania (serving Reading, Harrisburg, Altoona/ Johnstown and Pittsburgh) and north through eastern Pennsylvania into New York (serving Scranton/ Wilkes-Barre, Binghamton, Syracuse, Utica, Rochester and, via a connecting carrier, Buffalo). Buckeye leases capacity in one of the pipelines extending from Pennsylvania to upstate New York to a major oil pipeline company. Products received at Linden, New Jersey are also transported through one line to Newark and through two additional lines to JFK, LaGuardia and to commercial refined product terminals at Long Island City and Inwood, New York. These pipelines supply JFK, LaGuardia and Newark airports with substantially all of each airport’s turbine fuel requirements.

Laurel transports refined petroleum products through a 345-mile pipeline extending westward from five refineries and a connection to Colonial Pipeline Company in the Philadelphia area to Reading, Harrisburg, Altoona/ Johnstown and Pittsburgh, Pennsylvania.


	*Illinois — Indiana — Michigan — Missouri — Ohio*

Buckeye and Norco transport refined petroleum products through 2,025 miles of pipeline in northern Illinois, central Indiana, eastern Michigan, western and northern Ohio and western Pennsylvania. A number of receiving lines and delivery lines connect to a central corridor which runs from Lima, Ohio through Toledo, Ohio to Detroit, Michigan. Refined petroleum products are received at a refinery and other pipeline connection points near Toledo, Lima, Detroit and East Chicago. Major market areas served include Peoria, Illinois; Huntington/ Fort Wayne, Indianapolis and South Bend, Indiana; Bay City, Detroit and Flint, Michigan; Cleveland, Columbus, Lima and Toledo, Ohio and Pittsburgh, Pennsylvania.

Wood River owns five refined petroleum products pipelines with aggregate mileage of approximately 900 miles located in the Midwestern United States. Refined petroleum products are received at the

ConocoPhillips Wood River refinery in Illinois and transported to the Chicago area, to a terminal in the St. Louis area and to the Lambert-St. Louis Airport, to receiving points across Illinois and Indiana and to Buckeye’s pipeline in Lima, Ohio. At the Partnership’s tank farm located in Hartford, Illinois, one of Wood River’s pipelines also receives refined petroleum products from the Explorer pipeline, which are transported to the Partnership’s 1.3 million barrel terminal located on the Ohio River in Mt. Vernon, Indiana.


	*Other Refined Products Pipelines*

Buckeye serves Connecticut and Massachusetts through 112 miles of pipeline (the “Jet Lines System”) that carry refined products from New Haven, Connecticut to Hartford, Connecticut and Springfield, Massachusetts.

Everglades transports primarily turbine fuel on a 37-mile pipeline from Port Everglades, Florida to Ft. Lauderdale-Hollywood International Airport and Miami International Airport. Everglades supplies Miami International Airport with substantially all of its turbine fuel requirements.

WesPac Pipelines — Reno LLC owns a 3.0 mile pipeline serving the Reno/ Tahoe International Airport. WesPac Pipelines — San Diego LLC owns a 4.3 mile pipeline serving the San Diego International Airport. WesPac Pipelines — Memphis LLC is in the process of constructing an 11-mile pipeline and related terminal facilities to serve Memphis International Airport. Each of these WesPac entities is a joint venture between BPH and Kealine Partners. BPH owns a 75% ownership interest in each of WesPac Pipelines — Reno LLC and WesPac Pipelines — Memphis LLC and a 50% ownership interest in WesPac Pipelines — San Diego LLC. As of December 31, 2004, the Partnership provided $13.4 million in intercompany debt financing to these WesPac entities.

Other Business Activities


	*Terminalling and Storage*

Through BPH and its subsidiaries, the Partnership owns and operates 38 terminals located in Indiana, Illinois, Michigan, Missouri, New York, Ohio and Pennsylvania that provide bulk storage and throughput services and have the capacity to store an aggregate of approximately 15.4 million barrels of refined petroleum products. In addition, these subsidiaries own five currently idled terminals with an aggregate storage capacity of approximately 924,000 barrels. Together, the Partnership’s terminalling and storage activities provided approximately 13% of total revenue in 2004.


	*Other*

BGC is a contract operator of pipelines owned in Texas and Louisiana by major petrochemical companies. BGC currently has eight operations and maintenance contracts in place. In addition, BGC owns a 16-mile pipeline located in Texas that it leases to a third-party chemical company. Subsidiaries of BGC also own an approximate 63% interest in a crude butadiene pipeline between Deer Park, Texas and Port Arthur, Texas that was completed in March 2003. Crude butadiene transported on this pipeline, known as the Sabina pipeline, are supported by a long-term throughput agreement with Sabina Petrochemicals, LLC. BGC also provides engineering and construction management services to major chemical companies in the Gulf Coast area.

BPH owns a 24.99% equity interest in West Shore Pipe Line Company (“West Shore”). West Shore owns and operates a pipeline system that originates in the Chicago, Illinois area and extends north to Green Bay, Wisconsin and west and then north to Madison, Wisconsin. The pipeline system transports refined petroleum products to markets in northern Illinois and Wisconsin. The other equity holders of West Shore are a number of major oil companies. The pipeline is operated under contract by Citgo Pipeline Company.

BPH also owns a 20% interest in West Texas LPG Pipeline Limited Partnership (“WTP”), which it acquired on August 8, 2003 for $28.5 million. WTP owns and operates a pipeline system that delivers natural gas liquids to Mont Belvieu, Texas for fractionation. The natural gas liquids are delivered to the WTP pipeline

system from the Rocky Mountain region via connecting pipelines and from gathering fields located in West and Central Texas. The majority owners and the operators of WTP are affiliates of ChevronTexaco, Inc.

Competition and Other Business Considerations

The Operating Subsidiaries conduct business without the benefit of exclusive franchises from government entities. In addition, the Operating Subsidiaries’ pipeline operations generally operate as common carriers, providing transportation services at posted tariffs and without long-term contracts. The Operating Subsidiaries do not own the products they transport. Demand for the services provided by the Operating Subsidiaries derives from demand for petroleum products in the regions served and the ability and willingness of refiners, marketers and end-users to supply such demand by deliveries through the Operating Subsidiaries’ pipelines. Demand for refined petroleum products is primarily a function of price, prevailing general economic conditions and weather. The Operating Subsidiaries’ businesses are, therefore, subject to a variety of factors partially or entirely beyond their control. Multiple sources of pipeline entry and multiple points of delivery, however, have historically helped maintain stable total volumes even when volumes at particular source or destination points have changed.

The Partnership’s business may in the future be affected by changing oil prices or other factors affecting demand for oil and other fuels. The Partnership’s business may also be impacted by energy conservation, changing sources of supply, structural changes in the oil industry, changes in transportation and travel patterns in the areas served by the Partnership’s pipelines and new energy technologies. The General Partner is unable to predict the effect of such factors.

In 2004, the Partnership had approximately 110 customers, most of which were either major integrated oil companies or large refined product marketing companies. The largest two customers accounted for 6% each of consolidated revenues, while the 20 largest customers accounted for 56% of consolidated revenues.

Generally, pipelines are the lowest cost method for long-haul overland movement of refined petroleum products. Therefore, the Operating Subsidiaries’ most significant competitors for large volume shipments are other pipelines, many of which are owned and operated by major integrated oil companies. Although it is unlikely that a pipeline system comparable in size and scope to the Operating Subsidiaries’ pipeline system will be built in the foreseeable future, new pipelines (including pipeline segments that connect with existing pipeline systems) could be built to effectively compete with the Operating Subsidiaries in particular locations. In the Midwest, several petroleum product pipeline expansions and two new petroleum product pipeline construction projects have recently been completed. Generally, these projects have increased the capacity to bring additional refined products into the Partnership’s service area. However, because the Operating Subsidiaries own multiple pipelines throughout the Midwest, the General Partner believes that these pipeline projects may result in volumes shifting from one Operating Subsidiary pipeline segment to another, but will not, in the aggregate, have a material adverse effect on the Operating Subsidiaries’ results of operations or financial condition.

The Operating Subsidiaries compete with marine transportation in some areas. Tankers and barges on the Great Lakes account for some of the volume to certain Michigan, Ohio and upstate New York locations during the approximately eight non-winter months of the year. Barges are presently a competitive factor for deliveries to the New York City area, the Pittsburgh area, Connecticut and Ohio.

Trucks competitively deliver product in a number of areas served by the Operating Subsidiaries. While their costs may not be competitive for longer hauls or large volume shipments, trucks compete effectively for certain volumes in many areas served by the Operating Subsidiaries. The availability of truck transportation places a significant competitive constraint on the ability of the Operating Subsidiaries to increase their tariff rates.

Privately arranged exchanges of product between marketers in different locations are another form of competition. Generally, such exchanges reduce both parties’ costs by eliminating or reducing transportation charges. In addition, consolidation among refiners and marketers that has accelerated in recent years has

altered distribution patterns, reducing demand for transportation services in some markets and increasing them in other markets.

Distribution of refined petroleum products depends to a large extent upon the location and capacity of refineries. However, because the Partnership’s business is largely driven by the consumption of fuel in its delivery areas and the Operating Subsidiaries’ pipelines have numerous source points, the General Partner does not believe that the expansion or shutdown of any particular refinery is likely, in most instances, to have a material effect on the business of the Partnership. Certain of the pipelines which were acquired from Shell on October 1, 2004, emanate from a refinery owned by ConocoPhillips and located in the vicinity of Wood River, Illinois. While these pipelines are, in part, supplied by connecting pipelines, a temporary or permanent closure of the ConocoPhillips Wood River refinery in connection with maintenance activities or casualty events could have a negative impact on volumes delivered through these pipelines. The General Partner is unable to determine whether refinery expansions or shutdowns will occur or what their specific effect would be. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Information — Competition and Other Business Conditions.”

The Operating Subsidiaries’ mix of products transported tends to vary seasonally. Declines in demand for heating oil during the summer months are, to a certain extent, offset by increased demand for gasoline and jet fuel. Overall, operations have been only moderately seasonal, with somewhat lower than average volume being transported during March, April and May and somewhat higher than average volume being transported in November, December and January.

Neither the Partnership nor any of the Operating Subsidiaries has any employees. The Operating Subsidiaries are managed and operated by employees of Services Company. In addition, MainLine Sub provides certain management services to the General Partner and Services Company. At December 31, 2004, Services Company had a total of 739 full-time employees, 142 of whom were represented by two labor unions. The Operating Subsidiaries (and their predecessors) have never experienced any work stoppages or other significant labor problems.

Capital Expenditures

The Partnership incurs capital expenditures in order to maintain and enhance the safety and integrity of its pipelines and related assets, to expand the reach or capacity of its pipelines, to improve the efficiency of its operations or to pursue new business opportunities. See “Pipeline Regulation and Safety Matters” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

During 2004, the Partnership incurred approximately $72.6 million of capital expenditures, of which $32.8 million related to maintenance and integrity and $39.8 million related to expansion and cost reduction projects.

In 2005, the Partnership anticipates capital expenditures of approximately $84 million, of which approximately $28 million is projected to be sustaining capital expenditures for maintenance and integrity projects and approximately $56 million, of which $32.5 million relates to a project at the Memphis International Airport, is projected for expansion and cost reduction projects. See “Pipeline Regulation and Safety Matters” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Regulation


	*General*

Wood River, as owner of the pipelines recently acquired from Shell, Buckeye and Norco are interstate common carriers subject to the regulatory jurisdiction of the Federal Energy Regulatory Commission (“FERC”) under the Interstate Commerce Act and the Department of Energy Organization Act. FERC regulation requires that interstate oil pipeline rates be posted publicly and that these rates be “just and reasonable” and non-discriminatory. FERC regulation also enforces common carrier obligations and specifies

a uniform system of accounts. In addition, Wood River, Buckeye, Norco and the other Operating Subsidiaries are subject to the jurisdiction of certain other federal agencies with respect to environmental and pipeline safety matters.

The Operating Subsidiaries are also subject to the jurisdiction of various state and local agencies, including, in some states, public utility commissions which have jurisdiction over, among other things, intrastate tariffs, the issuance of debt and equity securities, transfers of assets and pipeline safety.


	*FERC Rate Regulation*

The generic oil pipeline regulations issued under the Energy Policy Act of 1992 rely primarily on an index methodology, whereby a pipeline is allowed to change its rates in accordance with an index (currently the Producer Price Index, or PPI) that FERC believes reflects cost changes appropriate for application to pipeline rates. The tariff rates of each of Norco and Wood River are governed by this generic FERC index methodology, and therefore are subject to change annually according to the index. If the PPI is negative, Norco and Wood River could be required to reduce their rates if they exceed the new maximum allowable rate.

In addition, in decisions involving unrelated pipeline limited partnerships, FERC has ruled that pass-through entities, like the Partnership and the Operating Subsidiaries, may not claim an income tax allowance for income attributable to non-corporate limited partners in justifying the reasonableness of their rates. The General Partner believes only a small number of the Partnership’s limited partnership units (“LP Units”) are held by corporations. Further, in a 2004 decision involving an unrelated pipeline limited partnership, the United States Court of Appeals for the District of Columbia Circuit overruled a prior FERC decision allowing a limited partnership to claim a partial income tax allowance in an opinion that suggested that in the future a limited partnership may not be able to claim any income tax allowance despite being partially owned by a corporation. On December 2, 2004, FERC issued a Notice of Inquiry that seeks comments regarding whether the 2004 Appeals Court decision applies only to the specific facts of that case, or whether it applies more broadly, and, if the latter, what effect that ruling might have on energy infrastructure investments. Comments in response to the Notice of Inquiry were due on January 21, 2005. It is not clear what action FERC will ultimately take in response to the 2004 Appeals Court decision, to what extent such action will be challenged and, if so, whether it will withstand further FERC or judicial review. A shipper or FERC could cite these decisions in a protest or complaint challenging indexed rates maintained by certain of the Partnership’s Operating Subsidiaries. If a challenge were brought and FERC were to find that some of the indexed rates exceed levels justified by the cost of service, FERC could order a reduction in the indexed rates and could require reparations. As a result, the Partnership’s results of operations could be adversely affected.

Under FERC’s regulations, as an alternative to indexed rates, a pipeline is also allowed to charge market-based rates if the pipeline establishes that it does not possess significant market power in a particular market. The final rules became effective on January 1, 1995.

Buckeye’s rates are governed by an exception to the rules discussed above, pursuant to specific FERC authorization. Buckeye’s market-based rate regulation program was initially approved by FERC in March 1991 and was subsequently extended in 1994. Under this program, in markets where Buckeye does not have significant market power, individual rate increases: (a) will not exceed a real (i.e., exclusive of inflation) increase of 15% over any two-year period (the “rate cap”), and (b) will be allowed to become effective without suspension or investigation if they do not exceed a “trigger” equal to the change in the Gross Domestic Product implicit price deflator since the date on which the individual rate was last increased, plus 2%. Individual rate decreases will be presumptively valid upon a showing that the proposed rate exceeds marginal costs. In markets where Buckeye was found to have significant market power and in certain markets where no market power finding was made: (i) individual rate increases cannot exceed the volume-weighted average rate increase in markets where Buckeye does not have significant market power since the date on which the individual rate was last increased, and (ii) any volume-weighted average rate decrease in markets where Buckeye does not have significant market power must be accompanied by a corresponding decrease in all of Buckeye’s rates in markets where it does have significant market power. Shippers retain the right to file

complaints or protests following notice of a rate increase, but are required to show that the proposed rates violate or have not been adequately justified under the market-based rate regulation program, that the proposed rates are unduly discriminatory, or that Buckeye has acquired significant market power in markets previously found to be competitive.

The Buckeye program was subject to review by FERC in 2000 when FERC reviewed the index selected in the generic oil pipeline regulations. FERC decided to continue the generic oil pipeline regulations with no material changes and did not modify or discontinue Buckeye’s program. The General Partner cannot predict the impact that any change to Buckeye’s rate program would have on Buckeye’s operations. Independent of regulatory considerations, it is expected that tariff rates will continue to be constrained by competition and other market factors.

Environmental Matters

The Operating Subsidiaries are subject to federal, state and local laws and regulations relating to the protection of the environment. Although the General Partner believes that the operations of the Operating Subsidiaries comply in all material respects with applicable environmental laws and regulations, risks of substantial liabilities are inherent in pipeline operations, and there can be no assurance that material environmental liabilities will not be incurred. Moreover, it is possible that other developments, such as increasingly rigorous environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or injuries to persons resulting from the operations of the Operating Subsidiaries, could result in substantial costs and liabilities to the Partnership. See “Legal Proceedings” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Environmental Matters.”

The Oil Pollution Act of 1990 (“OPA”) amended certain provisions of the federal Water Pollution Control Act of 1972, commonly referred to as the Clean Water Act (“CWA”), and other statutes as they pertain to the prevention of and response to petroleum product spills into navigable waters. The OPA subjects owners of facilities to strict joint and several liability for all containment and clean-up costs and certain other damages arising from a spill. The CWA provides penalties for any discharges of petroleum products in reportable quantities and imposes substantial liability for the costs of removing a spill. State laws for the control of water pollution also provide varying civil and criminal penalties and liabilities in the case of releases of petroleum or its derivatives into surface waters or into the ground.

Contamination resulting from spills or releases of refined petroleum products occurs in the petroleum pipeline industry. The Operating Subsidiaries’ pipelines cross numerous navigable rivers and streams. Although the General Partner believes that the Operating Subsidiaries comply in all material respects with the spill prevention, control and countermeasure requirements of federal laws, any spill or other release of petroleum products into navigable waters may result in material costs and liabilities to the Partnership.

The Resource Conservation and Recovery Act (“RCRA”), as amended, establishes a comprehensive program of regulation of “hazardous wastes.” Hazardous waste generators, transporters, and owners or operators of treatment, storage and disposal facilities must comply with regulations designed to ensure detailed tracking, handling and monitoring of these wastes. RCRA also regulates the disposal of certain non-hazardous wastes. As a result of these regulations, certain wastes typically generated by pipeline operations are considered “hazardous wastes” which are subject to rigorous disposal requirements.

The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), also known as “Superfund,” governs the release or threat of release of a “hazardous substance.” Releases of a hazardous substance, whether on or off-site, may subject the generator of that substance to liability under CERCLA for the costs of clean-up and other remedial action. Pipeline maintenance and other activities in the ordinary course of business generate “hazardous substances.” As a result, to the extent a hazardous substance generated by the Operating Subsidiaries or their predecessors may have been released or disposed of in the past, the Operating Subsidiaries may in the future be required to remedy contaminated property. Governmental authorities such as the Environmental Protection Agency, and in some instances third parties, are authorized under CERCLA to seek to recover remediation and other costs from responsible persons, without

regard to fault or the legality of the original disposal. In addition to its potential liability as a generator of a “hazardous substance,” the property or right-of-way of the Operating Subsidiaries may be adjacent to or in the immediate vicinity of Superfund and other hazardous waste sites. Accordingly, the Operating Subsidiaries may be responsible under CERCLA for all or part of the costs required to cleanup such sites, which costs could be material.

The Clean Air Act, amended by the Clean Air Act Amendments of 1990 (the “Amendments”), imposes controls on the emission of pollutants into the air. The Amendments required states to develop facility-wide permitting programs over the past several years to comply with new federal programs. Existing operating and air-emission requirements like those currently imposed on the Operating Subsidiaries are being reviewed by appropriate state agencies in connection with the new facility-wide permitting program. It is possible that new or more stringent controls will be imposed upon the Operating Subsidiaries through this permit review process.

The Operating Subsidiaries are also subject to environmental laws and regulations adopted by the various states in which they operate. In certain instances, the regulatory standards adopted by the states are more stringent than applicable federal laws.

In 1986, certain predecessor companies acquired by the Partnership, namely Buckeye Pipe Line Company and its subsidiaries (“Pipe Line”), entered into an Administrative Consent Order (“ACO”) with the New Jersey Department of Environmental Protection and Energy under the New Jersey Environmental Cleanup Responsibility Act of 1983 (“ECRA”) relating to all six of Pipe Line’s facilities in New Jersey. The ACO permitted the 1986 acquisition of Pipe Line to be completed prior to full compliance with ECRA, but required Pipe Line to conduct in a timely manner a sampling plan for environmental conditions at the New Jersey facilities and to implement any required clean-up plan. Sampling continues in an effort to identify areas of contamination at the New Jersey facilities, while clean-up operations have begun and have been completed at certain of the sites. The obligations of Pipe Line were not assumed by the Partnership and the costs of compliance have been and will continue to be paid by American Financial Group, Inc.

Pipeline Regulation and Safety Matters

The Operating Subsidiaries are subject to regulation by the United States Department of Transportation (“DOT”) under the Hazardous Liquid Pipeline Safety Act of 1979 (“HLPSA”), and its subsequent re-authorizations relating to the design, installation, testing, construction, operation, replacement and management of pipeline facilities. HLPSA covers petroleum and petroleum products and requires any entity that owns or operates pipeline facilities to comply with applicable safety standards, to establish and maintain a plan of inspection and maintenance and to comply with such plans.

The Pipeline Safety Reauthorization Act of 1988 requires coordination of safety regulation between federal and state agencies, testing and certification of pipeline personnel, and authorization of safety-related feasibility studies. The Partnership has a drug and alcohol testing program that complies in all material respects with the regulations promulgated by the Office of Pipeline Safety and DOT.

HLPSA also requires, among other things, that the Secretary of Transportation consider the need for the protection of the environment in issuing federal safety standards for the transportation of hazardous liquids by pipeline. The legislation also requires the Secretary of Transportation to issue regulations concerning, among other things, the identification by pipeline operators of environmentally sensitive areas; the circumstances under which emergency flow restricting devices should be required on pipelines; training and qualification standards for personnel involved in maintenance and operation of pipelines; and the periodic integrity testing of pipelines in unusually sensitive and high-density population areas by internal inspection devices or by hydrostatic testing. Effective in August 1999, the DOT issued its Operator Qualification Rule, which required a written program by April 27, 2001, for ensuring operators are qualified to perform tasks covered by the pipeline safety rules. All persons performing covered tasks were required to be qualified under the program by October 28, 2002. The Partnership has filed its written plan and has qualified its employees and contractors as required. In addition, on March 31, 2001, DOT’s rule for Pipeline Integrity Management in High Consequence Areas (Hazardous Liquid Operators with 500 or more Miles of Pipeline) became effective. This rule sets forth regulations that require pipeline operators to assess, evaluate, repair and validate the integrity of

hazardous liquid pipeline segments that, in the event of a leak or failure, could affect populated areas, areas unusually sensitive to environmental damage or commercially navigable waterways. Under the rule, pipeline operators were required to identify line segments which could impact high consequence areas by December 31, 2001. Pipeline operators were required to develop “Baseline Assessment Plans” for evaluating the integrity of each pipeline segment by March 31, 2002 and to complete an assessment of the highest risk 50% of line segments by September 30, 2004, with full assessment of the remaining 50% by March 31, 2008. Pipeline operators will thereafter be required to re-assess each affected segment in intervals not to exceed five years. The Partnership has implemented an Integrity Management Program in compliance with the requirements of this rule.

In December 2002 the Pipeline Safety Improvement Act of 2002 (“PSIA”) became effective. The PSIA imposes additional obligations on pipeline operators, increases penalties for statutory and regulatory violations, and includes provisions prohibiting employers from taking adverse employment action against pipeline employees and contractors who raise concerns about pipeline safety within the company or with government agencies or the press. Many of the provisions of the PSIA are subject to regulations to be issued by the Department of Transportation. The PSIA also requires public education programs for residents, public officials and emergency responders and a measurement system to ensure the effectiveness of the public education program. The Partnership has commenced implementation of a public education program that complies with these requirements. While the PSIA imposes additional operating requirements on pipeline operators, the Partnership does not believe that cost of compliance with the PSIA is likely to be material.

The Partnership also has certain contractual obligations to Shell for testing and maintenance of pipelines. In 2003, Shell entered into a consent decree with the United States Environmental Protection Agency arising out of a June 1999 incident unrelated to the assets acquired. The consent decree included requirements for testing and maintenance of two of the pipelines (the “North Line” and the “East Line”) acquired from Shell, the creation of a damage prevention program, submission to independent monitoring and various reporting requirements. In the purchase agreement with Shell, the Partnership agreed to perform, at its own expense, the work required of Shell on North Line and East Line under the consent decree. The Partnership’s obligations to Shell with respect to the consent decree extend to approximately 2008, a date five years from the date of the consent decree. For more information regarding the acquisition, see “Business — Significant Partnership Events in 2004 — Acquisition of Midwest Pipelines and Terminals.”

The Partnership believes that the Operating Subsidiaries currently comply in all material respects with HLPSA and other pipeline safety laws and regulations. However, the industry, including the Partnership, will, in the future, incur additional pipeline and tank integrity expenditures and the Partnership is likely to incur increased operating costs based on these and other government regulations. During 2004, the Partnership’s integrity expenditures for these programs were approximately $22.9 million (of which $21.8 million was capital and $0.9 million was expense). The Partnership expects 2005 integrity expenditures for these programs to be approximately $19 million of which approximately $12 million will be capital and $7 million will be expense.

The Operating Subsidiaries are also subject to the requirements of the Federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes. The Partnership believes that the Operating Subsidiaries’ operations comply in all material respects with OSHA requirements, including general industry standards, record-keeping, hazard communication requirements, training and monitoring of occupational exposure to benzene, asbestos and other regulated substances.

The Partnership cannot predict whether or in what form any new legislation or regulatory requirements might be enacted or adopted or the costs of compliance. In general, any such new regulations could increase operating costs and impose additional capital expenditure requirements, but the Partnership does not presently expect that such costs or capital expenditure requirements would have a material adverse effect on its results of operations or financial condition.

Tax Treatment of Publicly Traded Partnerships under the Internal Revenue Code

The Internal Revenue Code of 1986, as amended (the “Code”), imposes certain limitations on the current deductibility of losses attributable to investments in publicly traded partnerships and treats certain publicly traded partnerships as corporations for federal income tax purposes. The following discussion briefly describes certain aspects of the Code that apply to individuals who are citizens or residents of the United States without commenting on all of the federal income tax matters affecting the Partnership or the holders of LP Units (“Unitholders”), and is qualified in its entirety by reference to the Code. UNITHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISOR ABOUT THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE PARTNERSHIP.


	*Characterization of the Partnership for Tax Purposes*

The Code treats a publicly traded partnership that existed on December 17, 1987, such as the Partnership, as a corporation for federal income tax purposes, unless, for each taxable year of the Partnership, under Section 7704(d) of the Code, 90% or more of its gross income consists of “qualifying income.” Qualifying income includes interest, dividends, real property rents, gains from the sale or disposition of real property, income and gains derived from the exploration, development, mining or production, processing, refining, transportation (including pipelines transporting gas, oil or products thereof), or the marketing of any mineral or natural resource (including fertilizer, geothermal energy and timber), and gain from the sale or disposition of capital assets that produce such income. The Partnership is engaged primarily in the refined products pipeline transportation business. In addition, the Partnership elected effective August 1, 2004 to treat BGC as a corporation for federal income tax purposes in order for distributions from BGC to be treated as dividends constituting qualifying income. Prior to this election, BGC’s operations generally did not generate qualifying income for the Partnership. The General Partner believes that 90 percent or more of the Partnership’s gross income has been qualifying income. If this continues to be true and no subsequent legislation amends this provision, the Partnership will continue to be classified as a partnership and not as a corporation for federal income tax purposes.

The Code provides that an individual, estate, trust or personal service corporation generally may not deduct losses from passive business activities, to the extent they exceed income from all such passive activities, against other (active) income. Income that may not be offset by passive activity losses includes not only salary and active business income, but also portfolio income such as interest, dividends or royalties or gain from the sale of property that produces portfolio income. Credits from passive activities are also limited to the tax attributable to any income from passive activities. The passive activity loss rules are applied after other applicable limitations on deductions, such as the at-risk rules and basis limitations. Certain closely held corporations are subject to slightly different rules that can also limit their ability to offset passive losses against certain types of income.

Under the Code, net income from publicly traded partnerships is not treated as passive income for purposes of the passive loss rule, but is treated as non-passive income. Net losses and credits attributable to an interest in a publicly traded partnership are not allowed to offset a partner’s other income. Thus, a Unitholder’s proportionate share of the Partnership’s net losses may be used to offset only Partnership net income from its trade or business in succeeding taxable years or, upon a complete disposition of a Unitholder’s interest in the Partnership to an unrelated person in a fully taxable transaction, may be used to (i) offset gain recognized upon the disposition, and (ii) then against all other income of the Unitholder. In effect, net losses are suspended and carried forward indefinitely until utilized to offset net income of the Partnership from its trade or business or allowed upon the complete disposition to an unrelated person in a fully taxable transaction of the Unitholder’s interest in the Partnership. A Unitholder’s share of Partnership net income may not be offset by passive activity losses generated by other passive activities. In addition, a Unitholder’s proportionate share of the Partnership’s portfolio income, including portfolio income arising from the investment of the Partnership’s working capital, is not treated as income from a passive activity and may not be offset by such Unitholder’s share of net losses of the Partnership.


	*Deductibility of Interest Expense*

The Code generally provides that investment interest expense is deductible only to the extent of a non-corporate taxpayer’s net investment income. In general, net investment income for purposes of this limitation includes gross income from property held for investment, gain attributable to the disposition of property held for investment (except for net capital gains for which the taxpayer has elected to be taxed at special capital gains rates) and portfolio income (determined pursuant to the passive loss rules) reduced by certain expenses (other than interest) which are directly connected with the production of such income. Property subject to the passive loss rules is not treated as property held for investment. However, the IRS has issued a Notice which provides that net income from a publicly traded partnership (not otherwise treated as a corporation) may be included in net investment income for purposes of the limitation on the deductibility of investment interest. A Unitholder’s investment income attributable to its interest in the Partnership will include both its allocable share of the Partnership’s portfolio income and trade or business income. A Unitholder’s investment interest expense will include its allocable share of the Partnership’s interest expense attributable to portfolio investments.


	*Unrelated Business Taxable Income*

Certain entities otherwise exempt from federal income taxes (such as individual retirement accounts, pension plans and charitable organizations) are nevertheless subject to federal income tax on net unrelated business taxable income and each such entity must file a tax return for each year in which it has more than $1,000 of gross income from unrelated business activities. The General Partner believes that substantially all of the Partnership’s gross income will be treated as derived from an unrelated trade or business and taxable to such entities. The tax-exempt entity’s share of the Partnership’s deductions directly connected with carrying on such unrelated trade or business are allowed in computing the entity’s taxable unrelated business income. ACCORDINGLY, INVESTMENT IN THE PARTNERSHIP BY TAX-EXEMPT ENTITIES SUCH AS INDIVIDUAL RETIREMENT ACCOUNTS, PENSION PLANS AND CHARITABLE TRUSTS MAY NOT BE ADVISABLE.


	*Regulated Investment Companies*

A regulated investment company, or “mutual fund,” is required to derive 90% or more of its gross income from specific sources including interest, dividends and gains from the sale of stocks or securities, foreign currency or specified related sources. Recent legislation adds net income derived from the ownership of an interest in a “qualified publicly traded partnership” to the categories of qualifying income for a regulated investment company. We expect that we will meet the definition of a “qualified publicly traded partnership.” The legislation is effective, however, only for taxable years beginning after October 22, 2004. For taxable years beginning prior to this time, an insignificant amount of our income will be qualifying income to a regulated investment company.


	*State Tax Treatment*

During 2004, the Partnership owned property or conducted business in the states of California, Connecticut, Florida, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Missouri, Nevada, New Jersey, New York, Ohio, Pennsylvania and Texas. A Unitholder will likely be required to file state income tax returns and to pay applicable state income taxes in many of these states and may be subject to penalties for failure to comply with such requirements. Some of the states have proposed that the Partnership withhold a percentage of income attributable to Partnership operations within the state for Unitholders who are non-residents of the state. In the event that amounts are required to be withheld (which may be greater or less than a particular Unitholder’s income tax liability to the state), such withholding would generally not relieve the non-resident Unitholder from the obligation to file a state income tax return.


	*Certain Tax Consequences to Unitholders*

Upon formation of the Partnership in 1986, the General Partner elected twelve-year straight-line depreciation for tax purposes. For this reason, starting in 1999, the amount of depreciation available to the Partnership has been reduced significantly and taxable income has increased accordingly. Unitholders, however, will continue to offset Partnership income with individual LP Unit depreciation under their IRC section 754 election. Each Unitholder’s tax situation will differ depending upon the price paid and when LP Units were purchased. Unitholders are reminded that, in spite of the additional taxable income beginning in 1999, the current level of cash distributions exceed expected tax payments. In addition, gain recognized on the sale of LP Units will, generally, result in taxable ordinary income as a consequence of depreciation recapture. UNITHOLDERS ARE ENCOURAGED TO CONSULT THEIR PROFESSIONAL TAX ADVISORS REGARDING THE TAX IMPLICATIONS TO THEIR INVESTMENT IN LP UNITS.

Available Information

The Partnership files annual, quarterly, and current reports and other documents with the SEC under the Securities Exchange Act of 1934. The public can obtain any documents that we file with the SEC at http://www.sec.gov. We also make available free of charge our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such materials with, or furnishing such materials to, the SEC, on or through our Internet website, www.buckeye.com. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.

You can also find information about the Partnership at the offices of the New York Stock Exchange (“NYSE”), 20 Broad Street, New York, New York 10005 or at the NYSE’s Internet site (www.nyse.com). The NYSE requires the chief executive officer of each listed company to certify annually that he is not aware of any violation by the company of the NYSE corporate governance listing standards as of the date of the certification, qualifying the certification to the extent necessary. The Chief Executive Officer of the General Partner provided such certification to the NYSE in 2004 without qualification. In addition, the certifications of the General Partner’s Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act have been included as exhibits to the Partnership’s Annual Report on Form 10-K.


Item 2.	*Properties*

As of December 31, 2004, the principal facilities of the Partnership included approximately 4,500 miles of 6-inch to 24-inch diameter pipeline, 100 delivery points and 38 bulk storage and terminal facilities with aggregate capacity of approximately 15.4 million barrels. The Operating Subsidiaries and their subsidiaries own substantially all of these facilities.

In general, the Partnership’s pipelines are located on land owned by others pursuant to rights granted under easements, leases, licenses and permits from railroads, utilities, governmental entities and private parties. Like other pipelines, certain of the Operating Subsidiaries’ rights are revocable at the election of the grantor or are subject to renewal at various intervals, and some require periodic payments. The Operating Subsidiaries have not experienced any revocations or lapses of such rights which were material to their business or operations, and the General Partner has no reason to expect any such revocation or lapse in the foreseeable future. Most delivery points, pumping stations and terminal facilities are located on land owned by the Operating Subsidiaries.

The General Partner believes that the Operating Subsidiaries have sufficient title to their material assets and properties, possess all material authorizations and revocable consents from state and local governmental and regulatory authorities and have all other material rights necessary to conduct their business substantially in accordance with past practice. Although in certain cases the Operating Subsidiaries’ title to assets and properties or their other rights, including their rights to occupy the land of others under easements, leases, licenses and permits, may be subject to encumbrances, restrictions and other imperfections, none of such

imperfections are expected by the General Partner to interfere materially with the conduct of the Operating Subsidiaries’ businesses.


Item 3.	*Legal Proceedings*

The Partnership, in the ordinary course of business, is involved in various claims and legal proceedings, some of which are covered in whole or in part by insurance. The General Partner is unable to predict the timing or outcome of these claims and proceedings. Although it is possible that one or more of these claims or proceedings, if adversely determined, could, depending on the relative amounts involved, have a material effect on the Partnership for a future period, the General Partner does not believe that their outcome will have a material effect on the Partnership’s consolidated financial condition or results of operations.

With respect to environmental litigation, certain Operating Subsidiaries (or their predecessors) have been named in the past as defendants in lawsuits, or have been notified by federal or state authorities that they are potentially responsible parties (“PRPs”) under federal laws or a respondent under state laws relating to the generation, disposal or release of hazardous substances into the environment. In connection with actions brought under CERCLA and similar state statutes, the Operating Subsidiary is usually one of many PRPs for a particular site and its contribution of total waste at the site is usually de minimis. However, because CERCLA and similar statutes impose liability without regard to fault and on a joint and several basis, the liability of an Operating Subsidiary in connection with such a proceeding could be material.

Although there is no material environmental litigation pending against the Partnership or the Operating Subsidiaries at this time, claims may be asserted in the future under various federal and state laws, and the amount of any potential liability associated with such claims cannot be estimated. See “Business — Environmental Matters.”


Item 4.	*Submission of Matters to a Vote of Security Holders*

No matters were submitted to a vote of the holders of LP Units during the fourth quarter of the fiscal year ended December 31, 2004.

In January 2005, the Partnership began a consent solicitation to amend certain provisions of the Partnership’s Unit Option and Distribution Equivalent Plan. The Partnership has proposed increasing the number of Units authorized for issuance under the Plan by 720,000 LP Units.

PART II


Item 5.	*Market for the Registrant’s LP Units and Related Unitholder Matters*

The LP Units of the Partnership are listed and traded principally on the New York Stock Exchange. The high and low sales prices of the LP Units in 2004 and 2003, as reported in the New York Stock Exchange Composite Transactions, were as follows:


	2004				2003

Quarter	High		Low		High		Low

First	$	46.00	$	40.00	$	39.99	$	33.60
Second		43.67		35.60		39.45		35.05
Third		44.40		40.70		40.90		36.92
Fourth		45.00		39.10		45.55		40.00

On October 19, 2004, the Partnership sold 5,500,000 LP Units in an underwritten public offering at a price of $42.50 per Unit. Proceeds to the Partnership, net of underwriters’ discount of $1.81 per unit and offering expenses, were approximately $223.3 million.

On February 7, 2005, the Partnership sold 1,100,000 LP Units in an underwritten public offering at a price of $45.00 per unit. Proceeds to the Partnership, net of underwriter’s discount of $1.46 per unit and offering expenses, were approximately $47.6 million. The principal use of proceeds was to repay, in part, amounts outstanding under the Partnership’s revolving line of credit

The Partnership has gathered tax information from its known LP Unitholders and from brokers/nominees and, based on the information collected, the Partnership estimates its number of beneficial LP Unitholders to be approximately 34,000 at December 31, 2004.

Cash distributions paid during 2003 and 2004 were as follows:


			Amount
Record Date	Payment Date		Per Unit

February 6, 2003		February 28, 2003		0.6250
May 6, 2003		May 30, 2003		0.6375
August 6, 2003		August 29, 2003		0.6375
November 5, 2003		November 28, 2003		0.6375
February 4, 2004		February 27, 2004		0.6500
May 5, 2004		May 28, 2004		0.6500
August 9, 2004		August 31, 2004		0.6625
November 8, 2004		November 30, 2004		0.6750


Item 6.	*Selected Financial Data*

The following tables set forth, for the period and at the dates indicated, the Partnership’s income statement and balance sheet data for each of the last five years. The tables should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Report.


		Year Ended December 31,

		2004		2003		2002		2001		2000

		(In thousands, except per unit amounts)
Income Statement Data:
	Revenue	$	323,543	$	272,947	$	247,345	$	232,397	$	208,632
	Depreciation and amortization(1)		25,983		22,562		20,703		20,002		17,906
	Operating income(1)		122,144		109,335		102,362		98,331		91,475
	Interest and debt expense		27,614		22,758		20,527		18,882		18,690
	Income from continuing operations(2)		82,962		30,154		71,902		69,402		64,467
	Net income(2)(3)		82,962		30,154		71,902		69,402		96,331
	Income per unit from continuing operations		2.76		1.05		2.65		2.56		2.38
	Net income per unit		2.76		1.05		2.65		2.56		3.56
	Distributions per unit		2.64		2.54		2.50		2.45		2.40


		December 31,

		2004			2003			2002			2001			2000

		(In thousands)
Balance Sheet Data:
	Total assets	$	1,534,119		$	937,896		$	856,171		$	807,560		$	712,812
	Long-term debt		797,270			448,050			405,000			373,000			283,000
	General Partner’s capital		2,549			2,514			2,870			2,834			2,831
	Limited Partners’ capital		603,409			376,158			355,475			351,057			346,551
	Receivable from exercise of options		(535	)		(912	)		(913	)		(995	)		—
	Accumulated other comprehensive income		—			(348	)		—			—			—


(1)	Depreciation and amortization includes $832,000 and $461,000 in 2001 and 2000 related to goodwill acquired in the 2000 acquisition of six petroleum products terminals. Goodwill amortization ceased effective January 1, 2002 with the adoption of Statement of Financial Accounting Standards. No. 142 — “Goodwill and Other Intangible Assets.” See Note 6 to the Partnership’s consolidated financial statements.

(2)	Income from continuing operations and net income in 2003 include a charge of $45.5 million related to a yield maintenance premium paid on the retirement of the $240 million Senior Notes of Buckeye.

(3)	Net income includes income from discontinued operations of $5,682,000 and a gain on the sale of Buckeye Refining Company, a former subsidiary of BPH, of $26,182,000 in 2000.


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

The following is a discussion of the results of operations and the liquidity and capital resources of the Partnership for the periods indicated below. This discussion should be read in conjunction with the Partnership’s consolidated financial statements and notes thereto, which are included elsewhere in this report.

Overview

The Partnership is a master limited partnership which operates through subsidiary entities (the “Operating Subsidiaries”) in the transportation, terminalling and storage of refined petroleum products on a fee basis through facilities owned and operated by the Partnership. The Partnership also operates pipelines owned by third parties under contracts with major integrated oil and chemical companies, and performs certain construction activities, generally for the owners of these third-party pipelines.

On October 1, 2004, the Partnership significantly expanded its operations in the upper Midwestern United States with the acquisition of 5 refined petroleum products pipelines with an aggregate mileage of approximately 900 miles and 24 refined products terminals with an aggregate storage capacity of 9.3 million barrels (the “Midwest Pipelines and Terminals”) from Shell Oil Products U.S., (“Shell”) for a purchase price of $517 million. See Item 1 “Business — Introduction” and Item 1 “Significant Partnership Events in 2004 — Acquisition of Midwest Pipelines and Terminals.” The Partnership entered into equity and debt financings to fund the acquisition of these assets. These financings included the issuance of $275 million of 5.300% Notes (the “5.300% Notes”) on October 12, 2004 and 5.5 million LP Units on October 19, 2004 at an offering price of $42.50 per LP Unit. See “Liquidity and Capital Resources” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. The acquisition of these assets added $17.7 million of revenue in 2004.

Results of Operations

Summary operating results for the Partnership were as follows:


	2004			2003			2002

	(In thousands, except per unit amounts)
Revenue	$	323,543		$	272,947		$	247,345
Costs and expenses		201,399			163,612			144,983

Operating income		122,144			109,335			102,362
Other income (expenses)		(39,182	)		(79,181	)		(30,460	)

Net income	$	82,962		$	30,154		$	71,902

Earnings per unit — basic	$	2.76		$	1.05		$	2.65

Earnings per unit — assuming dilution	$	2.75		$	1.05		$	2.64

In 2003, the Partnership repaid $240 million of Senior Notes of Buckeye. In conjunction with this repayment, the Partnership incurred a yield maintenance premium of $45.5 million, which has been reflected in other income (expenses) in the Partnership’s financial statements. The Partnership’s 2003 net income before the yield maintenance premium was $75.6 million, or $2.64 per unit.

To supplement its financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the Partnership’s management has used the financial measure of “net income before the yield maintenance premium.” The Partnership has presented net income before the yield maintenance premium in this discussion to enhance an investor’s overall understanding of the way that management analyzes the Partnership’s financial performance. Specifically, the Partnership’s management used the presentation of net income before the yield maintenance premium to allow for a more meaningful comparison of the Partnership’s operating results in 2004 (which were not impacted by the yield maintenance premium) to 2003 (which were impacted by the yield maintenance premium). The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

A reconciliation of 2003 net income before the yield maintenance premium to 2003 net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP, is as follows:


	(In thousands)
Net income before the yield maintenance premium	$	75,618
Yield maintenance premium		(45,464	)

Net income	$	30,154

The improvement in revenues and operating income in 2004 compared to 2003 is generally due to higher pipeline transportation and storage revenues as well as the addition of the Midwest Pipelines and Terminals. The improvement in revenues and operating income in 2003 compared to 2002 was generally due to higher pipeline transportation revenues. Earnings per unit were impacted by the issuance of 1.75 million LP Units in February 2003 and 5.5 million LP Units in October 2004.

Revenues for each of the three years ended December 31, 2004, 2003 and 2002 were as follows:


	Revenues

	2004		2003		2002

	(In thousands)
Pipeline transportation	$	249,259	$	228,743	$	214,052
Terminalling, storage and rentals		42,480		26,435		18,859
Contract operations		31,804		17,769		14,434

Total	$	323,543	$	272,947	$	247,345

Results of operations are affected by factors that include general economic conditions, weather, competitive conditions, demand for refined petroleum products, seasonal factors and regulation. See Item 1 — “Business — Competition and Other Business Considerations.”


	*2004 Compared to 2003*

Total revenues for the year ended December 31, 2004 were $323.5 million, $50.6 million or 18.5% greater than revenue of $272.9 million in 2003.

Revenue from pipeline transportation of petroleum products was $249.3 million in 2004 compared to $228.7 million in 2003. The increase of $20.6 million in transportation revenue was primarily the result of:


	•	Wood River transportation revenue of $8.4 million;

	•	a 2.8% average tariff rate increase effective May 1, 2004 and a 2.4% average tariff increase effective May 1, 2003;

	•	a 3.0% increase, net of Wood River, in gasoline transportation revenue of $3.6 million on a 0.2% decrease in gasoline volumes delivered;

	•	a 7.5% increase, net of Wood River, in jet fuel transportation revenue of $2.9 million with a 5.2% increase in jet fuel volumes delivered. Deliveries to New York City (LaGuardia, JFK and Newark) airports increased by 8.4% but were partially offset by a 16.9% decline in deliveries to the Pittsburgh Airport due to US Airways’ schedule reductions and a 55.0% decline in deliveries to Ludlow Air Force Base;

	•	a 2.0% increase, net of Wood River, in distillate transportation revenue of $1.3 million on a 0.4% increase in distillate volumes delivered; and

	•	a 25.0% increase in liquefied petroleum gas (“LPG”) transportation revenue of $0.9 million on a 10.8% increase in LPG volumes delivered.

Product deliveries for each of the three years in the period ended December 31, including Wood River product deliveries, were as follows:


	Average Barrels Per Day

Product	2004		2003		2002

	(In thousands)
Gasoline		609,000		578,800		556,400
Distillate		293,000		285,400		265,400
Turbine Fuel		273,100		248,500		250,900
LPG’s		21,100		19,100		21,900
Other		4,400		4,600		6,800

Total		1,200,600		1,136,400		1,101,400

During the three months in 2004 that the Partnership owned the Wood River pipelines, volumes on the Wood River pipelines averaged 196,000 barrels per day. Excluding the Wood River pipelines, volumes would have averaged 1,151,400 barrels per day for all of 2004.

Terminalling, storage and rental revenues of $42.5 million increased by $16.0 million from the comparable period in 2003. Of this increase, $9.2 million was generated by the terminals acquired from Shell on October 1, 2004. Additionally, 2004 revenues include $3.2 million of revenues of WesPac Pipelines – Reno LLC under a product supply arrangement recorded on a gross basis rather than the net-of-cost basis previously used. Rental revenues increased by $2.1 million while other revenues increased by $1.5 million.

Contract operations revenue of $31.8 million for the year ended December 31, 2004 increased by $14.0 million from the comparable period in 2003. Revenue from pipeline construction activities increased by $12.7 million due to a new contract but was partially offset by a decline in contract operation service revenue of $3.2 million which resulted from the loss of a contract. Additionally, in 2004 the Partnership began recording revenues from a contract operation services contract on a gross basis rather than the net-of-cost basis previously used. This reclassification resulted in additional contract operations revenue of $4.0 million in 2004.

Costs and expenses for the years ended December 31, 2004, 2003 and 2002 were as follows:


	Operating Expenses

	2004		2003		2002

	(In thousands)
Payroll and payroll benefits	$	61,094	$	54,685	$	49,613
Depreciation and amortization		25,983		22,562		20,703
Operating power		22,976		21,899		18,961
Outside services		19,896		18,806		18,481
Property and other taxes		13,316		10,437		8,546
Construction management		12,287		—		—
All other		45,847		35,223		28,679

Total	$	201,399	$	163,612	$	144,983

Payroll and payroll benefits costs were $61.1 million in 2004, an increase of $6.4 million over 2003. Of this increase, approximately $3.9 million is related to employees added as a result of the acquisition of the Midwest Pipelines and Terminals on October 1, 2004. The Partnership added approximately 104 employees, most of whom previously worked for Shell in the operation of the acquired assets. The employees were added as new employees of Services, and the Partnership did not incur liability for any benefits or other costs related to the time those employees were employed by Shell. Of the remaining increase of $2.5 million of payroll costs, approximately $1.2 million resulted from recording expenses from a contract operation services contract on a gross basis, rather than the net-of-cost basis previously used. The balance of the increase resulted principally from increases in wage rates in 2004 compared to 2003, as well as increased employee benefits (principally related to retiree medical costs), partially offset by increased salaries and wages capitalized as part of maintenance and expansion capital projects.

Depreciation and amortization expense of $26.0 million increased by $3.4 million in 2004 over 2003. Depreciation related to the Midwest Pipelines and Terminals was $2.5 million. The remaining increase of $0.9 million resulted from the Partnership’s ongoing maintenance and expansion capital program.

Operating power, consisting primarily of electricity required to operate pumping facilities was $23.0 million in 2004, an increase of $1.1 million over 2003. The Midwest Pipelines and Terminals added $0.7 million from the date of acquisition. Of the remaining increase of $0.4 million, increases at Buckeye and Laurel of $1.4 million (related to higher volumes) were partially offset by a decrease of $1.0 million at BGC related to the loss of an operating contract in 2004.

Outside services costs, consisting principally of third-party contract services for maintenance activities, were $19.9 million, an increase of $1.1 million over 2003. Outside services costs related to the Midwest

Pipelines and Terminals were $1.6 million. Pipeline and terminals operations added approximately $0.7 million related to ongoing maintenance activities, which were more than offset by reductions of $1.2 million at BGC that resulted from the loss of an operating contract.

Property and other taxes were $13.3 million in 2004, an increase of $2.8 million over 2003. Property and other taxes related to the Midwest Pipelines and Terminals were $0.6 million. Of the remaining increases of $2.2 million, the Partnership experienced higher real property tax assessments in several states.

Construction management costs were $12.3 million in 2004 as a result of a significant construction contract with a major chemical company. Construction management costs were minimal in 2003.

All other costs were $45.8 million in 2004 compared to $35.2 million in 2003, an increase of $10.6 million. Of this increase, $3.7 million resulted from recording certain expenses on a gross basis compared to the net-of-cost basis previously used, including fuel purchases by WesPac Pipelines — Reno LLC ($3.0 million) and costs related to an operation services contract ($0.7 million). Other costs related to the Midwest Pipelines and Terminals added $2.3 million. Casualty losses increased by $1.4 million primarily as a result of pipeline releases in 2004. In addition, in August 2004, BGC elected to be treated as a corporation for Federal income tax purposes. The Partnership accrued $0.5 million, included in operating expenses, related to these income taxes incurred during the period after BGC elected to be treated as a corporation. Professional fees increased by $1.2 million, principally associated with Sarbanes-Oxley compliance and the GP Restructuring. The remainder of the increases related to various other pipeline operating costs.

Other income (expense) for the years ended December 31, 2004, 2003 and 2002 were as follows:


	2004			2003			2002

	(In thousands)
Investment income	$	6,005		$	3,628		$	1,952
Interest and debt expense		(27,614	)		(22,758	)		(20,527	)
Premium paid on retirement of debt		—			(45,464	)		—
General Partner incentive compensation		(14,002	)		(11,877	)		(10,838	)
Minority interests and other		(3,571	)		(2,710	)		(1,047	)

Total	$	(39,182	)	$	(79,181	)	$	(30,460	)

Other income (expense) was a net expense of $39.2 million in 2004, a decrease of $40.0 million from 2003. In 2003, the Partnership paid a yield maintenance premium of $45.5 million on the retirement of the $240 million Senior Notes of Buckeye. No such premium was incurred in 2004. Investment income of $6.0 million increased by $2.4 million from 2003, which resulted from a full year’s investment income from West Texas LPG Pipeline, L.P. (“WTP”) compared to five months of such investment income in 2003 (the Partnership’s 20% interest in WTP was acquired in August 2003) and increased earnings from the Partnership’s ownership interest in West Shore. Interest expense was $27.6 million in 2004 compared to $22.8 million in 2003, an increase of $4.8 million. The Partnership incurred approximately $3.3 million in interest related to its 5.300% Notes due 2014 which were issued in October 2004 in connection with the acquisition of the Midwest Pipelines and Terminals. The balance of the increase in interest expense resulted from higher average balances outstanding on the Partnership’s 5-year revolving line of credit in the second half of the 2004 compared to 2003, a portion of which is related to the acquisition of the Midwest Pipelines and Terminals.

General Partner incentive compensation was $14.0 million in 2004 compared to $11.9 million in 2003 as a result of the issuance of 5.5 million LP Units in October 2004 as well as a higher limited partnership cash distributions paid throughout 2004 compared to 2003. Minority interests and other of $3.6 million increased by $0.9 million.


	*2003 compared to 2002*

Total revenue for the year ended December 31, 2003 was $272.9 million, $25.6 million or 10.4% greater than revenue of $247.3 million in 2002.

Revenue from pipeline transportation of petroleum products was $228.7 million in 2003 compared to $214.1 million in 2002. The increase of $14.6 million in transportation revenue was primarily the result of:


	•	a 2.4% average tariff rate increase effective May 1, 2003 and a 2.0% average tariff increase effective July 1, 2002;

	•	a 7.2% increase in gasoline transportation revenue of $8.2 million on a 4.0% decrease in gasoline volumes delivered;

	•	a 3.5% increase in jet fuel transportation revenue of $1.3 million despite a 1.0% decline in jet fuel volumes delivered. Deliveries to New York City (LaGuardia, JFK and Newark) airports decreased by 1.0% while deliveries to the Pittsburgh Airport declined by 13.8% due to US Airways’ schedule reductions;

	•	a 9.7% increase in distillate transportation revenue of $5.6 million on a 7.5% increase in distillate volumes delivered; and

	•	a 24.4% decrease in LPG transportation revenue of $1.2 million on a 12.8% decrease in LPG volumes delivered.

Terminalling, storage and rental revenue of $26.4 million increased by $7.5 million from 2002 levels. Approximately $6.9 million of this increase reflects lease revenue received with respect to a crude butadiene pipeline which is approximately 63% owned by a subsidiary of BPH (the “Sabina Pipeline”) and was completed in early 2003.

Contract operation services revenue of $17.8 million for 2003 increased by $3.4 million over contract operation services revenues for 2002. The increase in contract services revenues was due to increased operations services provided by BGC as a result of additional contracts obtained during 2002, as well as the commencement of the Sabina Pipeline operation and maintenance agreement effective January 1, 2003. Contract operations revenues typically consist of costs reimbursable under the contracts plus an operator’s fee. Accordingly, revenues from these operations carry a lower gross profit percentage than revenues from pipeline transportation or terminalling, storage and rentals.

The Partnership’s costs and expenses were $163.6 million in 2003 compared to $145.0 million in 2002.

Payroll and payroll benefits increased to $54.7 million in 2003, or $5.1 million over 2002 amounts, principally due to increases in benefits costs ($2.3 million) related to the Partnership’s defined benefit pension plan, retiree medical plan and other medical costs. In addition, payroll costs increased at BGC ($1.0 million) due to additional staff associated with expanded contract operations. Payroll costs rose in pipeline, terminalling and administrative activities due to wage increases ($1.8 million).

Depreciation and amortization expense increased to $22.6 million, or $1.9 million due to commencement of depreciation on the Sabina Pipeline ($0.6 million), depreciation related to the Partnership’s new Enterprise Asset Management (EAM) information system implemented in January 2003 ($0.5 million) and other capital additions to the Partnership’s pipeline and terminalling assets ($0.8 million).

Operating power, consisting primarily of electricity required to operate pumping facilities, increased to $21.9 million, $2.9 million over operating power costs incurred in 2002. Expanded contract operations at BGC caused $1.0 million of this increase. The remainder was due to additional pipeline volumes in the Partnership’s pipeline operations.

Outside services costs, consisting principally of third-party contract services for maintenance activities, remained relatively stable in 2003 compared to 2002.

Property and other taxes in 2003 increased to $10.4 million or $1.9 million over 2002 amounts. The Partnership recorded a favorable settlement of $1.2 million related to certain state real property tax issues in 2002 which was not repeated in 2003. Additionally, state property and other taxes increased in 2003 by $0.7 million.

All other costs increased to $35.2 million, or $6.5 million in 2003 compared to 2002. Casualty losses increased by $2.0 million related to two environmental incidents which occurred in 2003 and a reimbursement of $0.5 million from a third party in 2002 which did not recur in 2003. Insurance costs increased by $1.4 million due to higher premiums charged by insurance carriers. Professional fees increased by $1.3 million related to accounting and legal costs associated with investment, acquisition and other activities. Communications costs increased by $0.5 million as the Partnership expanded its communications infrastructure in support of the new EAM system. The remainder of the cost increases of $1.3 million relate to a number of operating cost categories principally associated with the increased volume in 2003 compared to 2002.

Liquidity and Capital Resources

The Partnership’s financial condition at December 31, 2004, 2003, and 2002 is highlighted in the following comparative summary:


	*Liquidity and Capital Indicators*


	As of December 31,

	2004		2003		2002

Current ratio(1)		1.5 to 1		1.4 to 1		1.4 to 1
Ratio of cash, cash equivalents and trade receivables to current liabilities		.8 to 1		.8 to 1		.9 to 1
Working capital (in thousands)(2)	$	27,435	$	17,720	$	13,092
Ratio of total debt to total capital(3)		.57 to 1		.54 to 1		.53 to 1
Book value (per Unit)(4)	$	17.53	$	13.03	$	13.15


(1)	current assets divided by current liabilities

(2)	current assets minus current liabilities

(3)	long-term debt divided by long-term debt plus total partners’ capital

(4)	total partners’ capital divided by total units outstanding at year-end.

During 2004, the Partnership’s principal sources of cash were cash from operations and proceeds from the 2004 financing transactions described below. During 2003, the Partnership’s principal sources of cash were cash from operations as well as the 2003 financing transactions described below. During 2002, the Partnership’s principal sources of cash were cash from operations and borrowings under its 5-year revolving line of credit. The Partnership’s principal uses of cash are capital expenditures, investments and acquisitions, distributions to Unitholders and repayments of borrowings.

On August 6, 2004, the Partnership entered into a $400 million 5-year revolving credit facility (the “Credit Facility”) with a syndicate of banks led by SunTrust Bank. The Credit Facility contains a one-time expansion feature to $550 million subject to certain conditions. The new Credit Facility replaced a $277.5 million 5-year credit facility that would have expired in September 2006 and a $100 million 364-day facility that would have expired in September 2004 (the “Prior Credit Facilities”). Borrowings under the Credit Facility are guaranteed by certain of the Partnership’s subsidiaries. The Credit Facility matures on August 6, 2009. At December 31, 2004, the Partnership had $73.0 million outstanding under the Credit Facility and the weighted average interest rate was 3.00%. At the time of the refinancing, the Partnership had $30.0 million outstanding under the Prior Credit Facilities, of which $26.5 million had been borrowed for a deposit paid June 30, 2004 on the Midwest Pipelines and Terminals.

Borrowings under the Credit Facility bear interest under one of two rate options, selected by the Partnership, equal to either (i) the greater of (a) the federal funds rate plus one half of one percent and (b) SunTrust Bank’s prime rate or (ii) the London Interbank Offered Rate (“LIBOR”) plus an applicable margin. The applicable margin is determined based upon ratings assigned by Standard and Poors and Moody’s Investor Services for the Partnership’s senior unsecured non-credit enhanced long-term debt. The applicable margin, which was 0.5% at December 31, 2004, will increase during any period in which the Partnership’s Funded Debt Ratio (described below) exceeds 5.25 to 1.0.

The Credit Facility contains covenants and provisions that:


	•	Restrict the Partnership and certain subsidiaries’ ability to incur additional indebtedness based on certain ratios described below;

	•	Prohibit the Partnership and certain subsidiaries from creating or incurring certain liens on its property;

	•	Prohibit the Partnership and certain subsidiaries from disposing of property material to its operations;

	•	Limit consolidations, mergers and asset transfers by the Partnership and certain subsidiaries.

The Credit Facility requires that the Partnership and its subsidiaries maintain a maximum “Funded Debt Ratio” and a minimum “Fixed Charge Coverage Ratio.” The Funded Debt Ratio equals the ratio of the long-term debt of the Partnership (including the current portion, if any) to “Adjusted EBITDA”, which is defined in the Credit Facility as earnings before interest, taxes, depreciation, depletion and amortization and incentive compensation payments to the General Partner, for the four preceding fiscal quarters. As of the end of any fiscal quarter, the Funded Debt Ratio may not exceed 4.75 to 1.00, subject to a provision for certain increases in connection with future acquisitions. In connection with the Partnership’s acquisition of the Midwest Pipelines and Terminals, the Credit Facility provided for an increase in the Funded Debt Ratio limit to 5.75 to 1.00 for the first two quarters following the closing of such acquisition and 5.25 to 1.00 for the third quarter following the closing of such acquisition.

The Fixed Charge Coverage Ratio is defined as the ratio of Adjusted EBITDA for the four preceding fiscal quarters to the sum of payments for interest and principal on debt plus certain capital expenditures required for the ongoing maintenance and operation of the Partnership’s assets. The Partnership is required to maintain a Fixed Charge Coverage Ratio of greater than 1.25 to 1.00. As of December 31, 2004, the Partnership’s Funded Debt Ratio was 4.35 to 1.00 (using certain pro forma amounts permitted under the Credit Facility Agreement), its Fixed Charge Coverage Ratio was 2.48 to 1.00 and the Partnership was in compliance with the remainder of its covenants under the Credit Facility.

In connection with the acquisition of the Midwest Pipelines and Terminals, the Partnership borrowed a total of $490.0 million, consisting of $300.0 million under a 364-day interim loan (the “Interim Loan”) and $190.0 million under the Credit Facility. On October 12, 2004, the Partnership sold $275.0 million aggregate principal amount of its 5.300% Notes due 2014 in an underwritten public offering. Proceeds from the note offering, after underwriter’s discount and commissions, were approximately $272.1 million. Proceeds from the note offering, together with additional borrowings under the Credit Facility, were used to repay the Interim Loan.

On October 19, 2004, the Partnership issued 5.5 million LP Units in an underwritten public offering at $42.50 per LP Unit. Proceeds from the LP unit offering were approximately $223.3 million after underwriters’ discount and expenses and were used to reduce amounts outstanding under the Credit Facility.

On July 7, 2003, the Partnership sold $300 million aggregate principal amount of its 4.625% Notes due 2013 in an underwritten public offering. Proceeds from the note offering, after underwriters’ fees and expenses, were approximately $296.4 million. On August 14, 2003, the Partnership sold $150 million aggregate principal amount of its 6 ³ / 4 % Notes due 2033 in a Rule 144A offering. The Notes were subsequently exchanged for equivalent notes which are publicly traded. Proceeds from the note offering, after underwriters’ fees and expenses, were approximately $148.1 million. Proceeds from these offerings were used in part to repay all amounts then outstanding under the Prior Credit Facilities and to repay the Buckeye $240 million Senior Notes and applicable yield maintenance premium of $45.5 million. The amounts outstanding under the 5-year

Revolving Credit Agreement were repaid on July 10, 2003 and the $240 million Senior Notes were repaid on August 19, 2003.

In connection with the repayment of the $240 million Senior Notes, Buckeye was required to pay a yield maintenance premium of $45.5 million. The yield maintenance premium has been charged to expense in 2003 in the Partnership’s consolidated financial statements.

On February 28, 2003, the Partnership issued 1,750,000 LP Units in an underwritten public offering at $36.01 per LP unit. Net proceeds from the Partnership, after underwriters’ discount of $1.62 per LP Unit and offering costs, were approximately $59.9 million.

The Partnership anticipates that cash from operations plus amounts available under the Credit Facility will be sufficient to fund its cash requirements for 2005.


	*Cash Flows from Operations*

The components of cash flows from operations for the years ended December 31, 2004, 2003 and 2002 are as follows:


	Cash Flows from Operations

	2004			2003		2002

	(In thousands)
Net income	$	82,962		$	30,154	$	71,902
Premium paid on retirement of long-term debt		—			45,464		—
Depreciation and amortization		25,983			22,562		20,703
Minority interests		3,571			2,722		1,046
Changes in current assets and liabilities		(13,405	)		6,887		600
Changes in other assets and liabilities		430			1,486		(1,156	)
Other		204			92		—

Total	$	99,745		$	109,367	$	93,095

Cash flows from operations were $99.7 million in 2004 compared to $109.4 million in 2003, a decrease of $9.6 million. The principal reason for the decrease was an increase in working capital related to current assets and liabilities of $13.4 million in 2004, compared to a decrease in working capital of $6.9 million in 2003. In 2004, trade receivables increased by $15.4 million and construction receivables increased by $4.4 million. The increase in trade receivables was related to increased outstanding billings related primarily to the terminal assets acquired as part of the Midwest Pipelines and Terminals. In connection with terminal revenue, the Partnership bills on a monthly basis, compared to the weekly basis used in pipeline billings. During 2003 trade receivables balances were essentially unchanged. Construction receivables increased in 2004 due to an increase in construction activity in the fourth quarter. In 2003 construction receivables decreased by $0.6 million. Prepaid and other current assets increased by $4.4 million in 2004, principally related to insurance receivables associated with environmental claims. Partially offsetting these reductions in cash from operations were increases in accounts payable of $0.7 million and accrued and other current liabilities of $10.3 million. The increase in accrued and other current liabilities resulted from an increase in accrued interest payable related to the timing of the semi-annual interest payments due on the Partnership’s 5.300% Notes issued in October 2004 and an increase in accrued environmental liabilities. In 2003, accounts payable increased by $6.4 million mostly due to certain insurance amounts payable at year-end. Accrued and other liabilities increased in 2003 by $11.7 million principally due to an increase in accrued interest related to the timing of the semi-annual interest payments due on the Partnership’s 4 ⁵ / 8 % and 6 ³ / 4 % Notes. These changes more than offset the increase in net income of $7.3 million in 2004 to $82.9 million compared to net

income before the yield maintenance premium of $75.6 million in 2003. Depreciation and amortization, a non-cash expense, increased by $3.4 million in 2004 compared to 2003 as a result of the addition of the Midwest Pipelines and Terminals and ongoing capital additions.

Cash flows from operations in 2003 increased by $16.3 million over $93.1 million in 2002. The increase resulted from an increase in net income before the yield maintenance premium to $75.6 million, or $3.7 million, over net income of $71.9 million in 2002, an increase in depreciation and amortization of $1.9 million to $22.6 million in 2003 compared to $20.7 million in 2002, an increase in minority interest expense of $1.7 million to $2.7 million in 2003, favorable changes in current assets and liabilities of $6.9 million, and favorable changes in noncurrent assets and liabilities of $1.5 million. In 2003, increases in accounts payable and accrued liabilities of $18.1 million more than offset an increase in prepaid and other current assets of $9.9 million.


	*Cash Flows from Investing Activities*

Net cash used in investing activities for the years ended December 31, 2004, 2003 and 2002 are as follows:


	Investing Activities

	2004			2003		2002

	(In millions)
Capital expenditures	$	72.6		$	42.2	$	71.6
Investments and acquisitions		518.8			36.0		—
Other		(3.6	)		0.8		1.2

Total	$	587.8		$	79.0	$	72.8

In 2004, investments and acquisitions consisted of the acquisition of the Midwest Pipelines and Terminals. In 2003, the Partnership invested $36.0 million for a 20% interest in WTP ($28.5 million) and an additional 7% interest in West Shore ($7.5 million). The Partnership had no investments or acquisitions in 2002.

Capital expenditures are summarized below:


		Capital Expenditures

		2004		2003		2002

		(In millions)
Sustaining capital expenditures:
	Operating infrastructure	$	11.0	$	9.5	$	7.0
	Pipeline and tank integrity		21.8		18.9		21.2

	Total sustaining		32.8		28.4		28.2
Expansion and cost reduction			39.8		11.4		6.6
Investment in the Sabina Pipeline			—		2.4		36.8

Total		$	72.6	$	42.2	$	71.6

During 2004, the Partnership’s capital expenditures of $72.6 million increased by $30.4 million from 2003. During 2004, the Partnership’s sustaining capital expenditures of $32.8 million increased by $4.4 million over 2003. In 2004 and 2003, the Partnership continued to emphasize its pipeline and tank integrity projects, including electronic internal inspections and other integrity assessments and associated repairs, as part of its comprehensive program to comply with legal requirements and to improve the reliability of the Partnership’s pipelines and terminals (see “Business — Environmental Matters” and “Business — Pipeline Regulation and Safety Matters”). Expansion and cost reduction expenditures of $39.8 million increased by $28.4 million in 2004. These expenditures related primarily to three projects. The first project, which commenced in 2003, involves the replacement of approximately 45 miles of pipeline in the Midwest between Lima, Ohio and Huntington, Indiana. The pipeline replacement project is designed to improve the reliability of the pipeline

and to expand pipeline capacity. In 2004, approximately $12.8 million was expended in connection with this project. This project is substantially complete. The second project involves a major expansion of the Laurel pipeline across Pennsylvania. This project is designed to expand the capacity of the Laurel pipeline system which has experienced steady volume growth during the last several years. The project involves the construction of two new pump stations, and the expansion of an existing pump station at Macungie, Pennsylvania, and is designed to increase the capacity of the Laurel pipeline by approximately 17%. The Laurel expansion project is scheduled to be complete in the second quarter of 2005. In 2004, approximately $11.0 million was expended in connection with this project. The third project involves the construction of an approximately 11-mile pipeline and associated terminal to serve Federal Express at the Memphis International Airport. This project is being implemented by WesPac Pipelines-Memphis, LLC, an affiliate of the Partnership. The pipeline and terminal construction project is supported by a long-term throughput and deficiency agreement entered into between WesPac Pipelines-Memphis, LLC and Federal Express. The project is expected to be complete in late 2005 or early 2006. In 2004, approximately $10.3 million was expended in connection with this project.

The Partnership expects to spend approximately $84 million in capital expenditures in 2005, of which approximately $28 million is expected to relate to sustaining capital expenditures and $56 million is expected to relate to expansion and cost reduction projects. Sustaining capital expenditures, in addition to pipeline integrity, include renewals and replacement of tank floors and roofs, upgrades to field instrumentation and cathodic protection systems. Of the planned 2005 sustaining expenditures, approximately $12 million relate to pipeline and tank integrity projects.

As discussed under Critical Accounting Policies and Estimates below, the Partnership’s initial integrity expenditures are capitalized as part of pipeline cost when such expenditures improve or extend the life of the pipeline or related assets. Subsequent integrity expenditures are expensed as incurred. Accordingly, over time, integrity expenditures will shift from capital to operating expenditures. In 2004, approximately $0.9 million of integrity costs were charged to expense. The amount of these types of integrity expenditures charged to expense is expected to increase to approximately $7 million in 2005.

Expansion and cost reduction expenditures include projects to facilitate increased pipeline volumes, extend the pipeline incrementally to new facilities, expand terminal facilities or improve the efficiency of operations. In 2005, the Partnership anticipates expenditures of approximately $4.0 million to complete the Laurel pipeline expansion project, and expenditures of approximately $32.5 million in connection with the pipeline and terminal construction project for Federal Express at the Memphis International Airport.


	*Cash Flows from Financing Activities*

During 2003 and 2004, the Partnership initiated the financing activities outlined above under “Liquidity and Capital Resources.” As a result of these transactions, approximately $223.3 million in 2004 and $59.9 million in 2003, net of offering costs, was provided by the issuance of LP Units. In 2004, the Partnership issued the $275 million 5.300% Notes, borrowed and repaid the $300 million Interim Loan and borrowed $320 million and repaid $247 million under the Credit Facility and the Prior Credit Facilities. In 2003, the Partnership issued the $300 million 4 ⁵ / 8 % Notes and the $150 million 6 ³ / 4 % Notes. In addition, the Partnership borrowed $24 million and repaid $189 million under the Prior Credit Facilities. The Partnership repaid the $240 million Senior Notes of Buckeye, and incurred a yield maintenance premium of $45.5 million associated with the retirement. In 2002, the Partnership borrowed $46.0 million under the Prior Credit Facilities and repaid $14.0 million.

The Partnership received $2.2 million and $14.2 million in 2003 and 2002, respectively, from its minority interest partners in the Sabina Pipeline project.

Distributions to Unitholders increased to $80.2 million in 2004 compared to $72.4 million in 2003 and $67.9 million in 2002. Distributions in 2004 increased over 2003 as a result of increases in the unit distribution rate and the issuance of 5,500,000 LP Units in October 2004. Distributions in 2003 increased over 2002 due to increases in the distribution rate and the issuance of 1,750,000 LP Units in February 2003.


	*Debt Obligations, Credit Facilities and Other Financing*

At December 31, 2004, the Partnership had $798.0 million in aggregate outstanding long-term debt, consisting of $275 million of the 5.300% Notes due 2014, $300 million of the 4 ⁵ / 8 % Notes due 2013, $150.0 million of the 6 ³ / 4 % Notes due 2033 and $73 million outstanding under the Credit Facility. The terms of the Credit Facility are described in “Liquidity and Capital Resources” above. At December 31, 2004, the Partnership had $326.8 million available under the Credit Facility, with $0.2 million allocated in support of certain operational letters of credit.

In order to hedge a portion of its fair value risk related to the 4 ⁵ / 8 % Notes due 2013, on October 28, 2003, the Partnership entered into an interest rate swap agreement with a financial institution. The notional amount of the swap agreement was $100 million. The swap agreement called for the Partnership to receive fixed payments from the financial institution at a rate of 4 ⁵ / 8 % of the notional amount in exchange for floating rate payments from the Partnership based on the notional amount using a rate equal to the six-month LIBOR (determined in arrears) minus 0.28%. The swap agreement was scheduled to terminate on the maturity date of the 4 ⁵ / 8 % Notes and interest amounts under the swap agreement were payable semiannually on the same date as interest payments on the 4 ⁵ / 8 % Notes. The Partnership designated the swap agreement as a fair value hedge at the inception of the agreement and elected to use the short-cut method provided for in SFAS No. 133, which assumes no ineffectiveness will result from the use of the hedge.

The Partnership terminated the interest rate swap agreement on December 8, 2004 and received proceeds of $2.0 million. The Partnership has deferred the $2.0 million gain as an adjustment to the fair value of the hedged portion of the Partnership’s debt and is amortizing the gain as a reduction of interest expense over the remaining life of the hedged debt. Interest expense in the Partnership’s income statement was reduced by $2.6 million in 2004 and by $0.6 million in 2003 as a result of the interest rate swap agreement. The fair value of the swap agreement at December 31, 2003 was a gain of $0.2 million.


	*Operating Leases*

The Operating Partnerships lease certain land and rights-of-way. Minimum future lease payments for these leases as of December 31, 2004 are approximately $4.2 million for each of the next five years. Substantially all of these lease payments may be canceled at any time should the leased property no longer be required for operations.

The General Partner leases space in an office building and certain office equipment and charges these costs to the Operating Subsidiaries. Buckeye leases certain computing equipment and automobiles. Future minimum lease payments under these noncancelable operating leases at December 31, 2004 were as follows: $1,016,000 for 2005, $888,000 for 2006, $435,000 for 2007, $305,000 for 2008 and none thereafter.

Buckeye entered into an energy services agreement for certain main line pumping equipment and the natural gas requirements to fuel this equipment at its Linden, New Jersey facility. Under the energy services agreement, which is designed to reduce power costs at the Linden facility, Buckeye is required to pay a minimum of $1,743,000 annually over the next seven years. This minimum payment is based on an annual minimum usage requirement of the natural gas engines at the rate of $0.049 per kilowatt hour equivalent. In addition to the annual usage requirement, Buckeye is subject to minimum usage requirements during peak and off-peak periods. Buckeye’s use of the natural gas engines has exceeded the minimum annual requirement in 2002, 2003, and 2004.

Rent expense under operating leases was $8,477,000, $7,824,000 and $7,285,000 for 2004, 2003 and 2002, respectively.


	*Contractual Obligations*

Contractual obligations are summarized in the following table:


	Payments Due by Period

			Less than						More than
Contractual Obligations	Total		1 Year		1-3 Years		3-5 Years		5 Years

	(In thousands)
Long-term debt	$	798,000	$	—	$	—	$	73,000	$	725,000
Interest payable on fixed long-term debt obligations		548,526		38,575		77,150		77,150		355,651
Capital (finance) lease obligations		—		—		—		—		—
Operating leases		2,644		1,016		1,323		305		—
Other long-term obligations		12,201		1,743		3,486		3,486		3,486
Rights-of-way payments		20,930		4,186		8,372		8,372		—
Purchase obligations		30,526		30,526		—		—		—

Total contractual cash obligations	$	1,412,827	$	76,046	$	90,331	$	162,313	$	1,084,137

Other long-term obligations represent the minimum payments due under the energy services agreement for the purchase of natural gas to fuel the main line pumping equipment at Linden, New Jersey discussed above.

Purchase obligations generally represent commitments for recurring operating expenses or capital projects. At December 31, 2004, $22.3 million related to the construction activity at Memphis International Airport.

Interest payable on fixed long-term debt obligations include semi-annual payments required for the Partnership’s 4 ⁵ / 8 % Notes, its 6 ³ / 4 % Notes and its 5.300% Notes.

The Partnership’s obligations related to its pension and postretirement benefit plans are discussed in Footnote 13 in the Partnership’s accompanying consolidated financial statements.


	*Environmental Matters*

The Operating Subsidiaries are subject to federal, state and local laws and regulations relating to the protection of the environment. These laws and regulations, as well as the Partnership’s own standards relating to protection of the environment, cause the Operating Subsidiaries to incur current and ongoing operating and capital expenditures. Environmental expenses are incurred in connection with emergency response activities associated with the release of petroleum products to the environment from the Partnership’s pipelines and terminals, and in connection with longer term environmental remediation efforts which may involve groundwater monitoring and treatment. The Partnership regularly incurs expenses in connection with these environmental remediation activities. In 2004, the Operating Subsidiaries incurred operating expenses of $6.2 million and, at December 31, 2004, had $16.8 million accrued for environmental matters. Of the amount accrued at December 31, 2004, $4.9 million was established in connection with the acquisition of the Midwest Pipelines and Terminals where the Partnership agreed to perform monitoring activities at its own expense related to certain active or potential remediation sites for those assets At December 31, 2004, the Partnership estimates that approximately $11.2 million of environmental expenditures will be covered by insurance. These amounts have not been included in expense in the Partnership’s financial statements. Expenditures, both capital and operating, relating to environmental matters are expected to continue due to the Partnership’s commitment to maintaining high environmental standards and to increasingly rigorous environmental laws.

predecessors have been in material compliance with applicable environmental and regulatory requirements. The total potential remediation costs to be borne by the Operating Subsidiaries relating to these clean-up sites cannot be reasonably estimated and could be material. With respect to certain sites, however, the Operating Subsidiary involved is one of several or as many as several hundred PRPs that would share in the total costs of clean-up under the principle of joint and several liability. Although the Partnership has made a provision for certain legal expenses relating to these and other environmental matters, the General Partner is unable to determine the timing or outcome of any pending proceedings or future claims or proceedings. See “Business — Environmental Matters” and “Legal Proceedings.”


	*Competition and Other Business Conditions*

Several major refiners and marketers of petroleum products announced strategic alliances or mergers in recent years. These alliances or mergers have the potential to alter refined product supply and distribution patterns within the Operating Subsidiaries’ market area resulting in both gains and losses of volume and revenue. While the General Partner believes that individual delivery locations within its market area may have significant gains or losses, it is not possible to predict the overall impact these alliances or mergers may have on the Operating Subsidiaries’ business. However, the General Partner does not believe that these alliances or mergers will have a material adverse effect on the Partnership’s results of operations or financial condition.

Certain changes in refined petroleum product specifications are likely to impact the transportation of refined petroleum products over the next several years. Methyl-Tertiary-Butyl-Ether (“MTBE”), a gasoline component frequently used to meet gasoline oxygenate requirements for air pollution control purposes, has been banned for use in certain states. To the extent that ethanol or other similar oxygenates not shipped by pipeline are substituted for MTBE, this may result in a reduction in gasoline volumes delivered in the Partnership’s service area. The Partnership is unable to quantify the amount by which its transportation volumes might be affected by the discontinuance of MTBE. In addition, new requirements for the use of ultra low-sulfur diesel (“ULSD”) fuel, which will be phased in commencing in 2006 through 2010, could require significant capital expenditures at certain locations in order to permit the Partnership to handle this new product grade. The Partnership is finalizing plans to make the necessary modifications to its facilities to be able to transport ULSD efficiently. It is not expected that these expenditures will have a materially adverse effect on the Partnership’s results of operations and financial condition.

In September 2004, the Partnership completed its annual negotiation of its insurance program and included the Midwest Pipelines and Terminals in the group of assets covered by the Partnership’s property and environmental insurance policies. As part of this negotiation, the Partnership increased the per occurrence deductible payable by the Partnership from $0.5 million to $2.5 million. As a result of this increase in deductible amounts under these insurance policies, environmental or property losses which previously were covered under the partnership’s insurance program could now be funded to a greater extent by the Partnership’s internal resources.

Employee Stock Ownership Plan

Services Company provides an employee stock ownership plan (the “ESOP”) to the majority of its regular full-time employees hired before September 16, 2004. Effective September 16, 2004, new employees do not participate in the ESOP. Those employees who were transferred into Services Company from BGC, BT and Norco on December 26, 2004, along with the employees added as a result of the acquisition of the Midwest Pipelines and Terminals and certain employees covered by a union multiemployer pension plan do not participate in the ESOP. The ESOP owns all of the outstanding common stock of Services Company. Services Company owns 2,395,173 LP Units of the Partnership. At December 31, 2004, the ESOP was directly obligated to a third-party lender for $39.7 million of 3.60% Notes due 2011 (the “ESOP Notes”). The ESOP Notes were issued on May 4, 2004 to refinance Services Company’s 7.24% Notes which were originally issued to purchase Services Company common stock. The ESOP Notes are secured by 2,395,173 shares of Services Company’s common stock. The Partnership has committed that, in the event that the value of the 2,395,173 LP Units owned by Services Company falls to less than 125% of the balance payable under the ESOP Notes, the Partnership will fund an escrow account with sufficient assets to bring the value of the total

collateral (the value of the Services Company LP Units and the escrow account) up to the 125% minimum. Amounts deposited in the escrow account are returned to the Partnership when the value of the Services Company LP Units returns to an amount which exceeds the 125% minimum. At December 31, 2004, the value of the LP Units was approximately $101 million, which exceeded the 125% minimum requirement.

The proceeds from the issuance of the ESOP Notes on May 4, 2004 were used to refinance Services Company’s 7.24% Notes which were originally issued to purchase Services Company common stock. Services Company common stock is released to employee accounts in the proportion that current payments of principal and interest on the ESOP Notes bear to the total of all principal and interest payments due under the ESOP Notes. Individual employees are allocated shares based on the ratio of their eligible compensation to total eligible compensation. Eligible compensation generally includes base salary, overtime payments and certain bonuses. Except for the period March 1, 2003 through November 1, 2004, Services Company stock held in employee accounts received stock dividends in lieu of cash. The ESOP was amended to eliminate the payment of stock dividends on allocations made after February 28, 2003. Based upon provisions contained in the American Jobs Creation Act of 2004, the plan was amended further to reinstate this feature on allocations made after November 1, 2004.

The Partnership contributed 2,573,146 LP Units to Services Company in August 1997 in exchange for the elimination of the Partnership’s obligation to reimburse the Prior General Partner and its parent for certain executive compensation costs, a reduction of the incentive compensation paid by the Partnership to the Prior General Partner, and other changes that made the ESOP a less expensive fringe benefit for the Partnership. Funding for the ESOP Notes is provided by distributions that Services Company receives on the LP Units that it owns and from cash payments from the Partnership, which are required to cover any shortfall between the distributions that Services Company receives on the LP Units that it owns and amounts currently due under the ESOP Notes (the “top-up reserve”), except that the Partnership has no obligation to fund the accelerated portion of the ESOP Notes upon a default. The Partnership will also incur ESOP-related costs for routine administrative costs and taxes associated with annual taxable income or the sale of LP Units, if any. Total ESOP related costs charged to earnings were $0.6 million in 2004, $1.1 million in 2003 and $1.2 million in 2002.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to select appropriate accounting principles from those available, to apply those principles consistently and to make reasonable estimates and assumptions that affect revenues and associated costs as well as reported amounts of assets and liabilities.

Approximately 86% of the Partnership’s consolidated assets consist of property, plant and equipment. Property, plant and equipment consists of pipeline and related transportation facilities and equipment, including land, rights-of-way, buildings and leasehold improvements and machinery and equipment. Pipeline assets are generally self-constructed, using either contractors or the Partnership’s own employees. Additions and improvement to the pipeline are capitalized based on the cost of the improvement while repairs and maintenance are expensed. Pipeline integrity expenditures are capitalized the first time such expenditures are incurred, when such expenditures improve or extend the life of the pipeline or related assets. Subsequent integrity expenditures are expensed as incurred. During 2004, 2003 and 2002, the Partnership capitalized $21.8 million, $18.9 million and $21.2 million, respectively, of integrity expenditures. In 2004, the Partnership also charged approximately $0.9 million of similar integrity expenditures to expense, which was the first year that significant subsequent integrity expenditures were incurred. Over the next several years, the Partnership expects integrity expenditures, both capital and operating, to range between $15 million and $20 million per year. During this time, the portion of expenditures capitalized is expected to decrease and the portion recorded as expense is expected to increase, including approximately $7 million which is expected to be expensed in 2005.

As discussed under “Environmental Matters” above, the Operating Partnerships are subject to federal, state and local laws and regulations relating to the protection of the environment. Environmental expenditures

that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable, and the costs can be reasonably estimated. Generally, the timing of these accruals coincides with the Partnership’s commitment to a formal plan of action. Accrued environmental remediation related expenses include estimates of direct costs of remediation and indirect costs related to the remediation effort, such as compensation and benefits for employees directly involved in the remediation activities and fees paid to outside engineering, consulting and law firms. The Partnership maintains insurance which may cover certain environmental expenditures. During 2004, the Operating Partnerships incurred operating expenses, net of insurance recoveries, of $6.2 million and, at December 31, 2004, had $16.8 million accrued for environmental matters. Of the amount accrued at December 31, 2004, approximately $4.9 million was established in connection with the acquisition of the Midwest Pipelines and Terminals where the Partnership agreed to perform monitoring activities at its own expense related to certain active or potential remediation sites for those assets. The environmental accruals are revised as new matters arise, or as new facts in connection with environmental remediation projects require a revision of estimates previously made with respect to the probable cost of such remediation projects.

In the event a known environmental liability results in expenditures that exceed the amount that has been accrued in connection with the matter, the additional expenditures would result in an increase in expenses and a reduction in income, in the period when the additional expense is incurred. Based on its experience, however, the Partnership believes that the amounts it has accrued for the future costs related to environmental liabilities is reasonable.

In connection with the acquisition of the Midwest Pipelines and Terminals, the Partnership determined that the transaction represented the acquisition of various assets, and not the acquisition of a business, as that term is defined in Statement of Financial Accounting Standards No. 141 — “Business Combinations”. Accordingly, the Partnership allocated the cost of the assets acquired, which consisted principally of the purchase price of $517 million, the direct costs of acquisition and the environmental monitoring liabilities assumed with the purchase, to the assets acquired using appraised values established in consultation with a qualified appraiser. In conjunction with the appraisal, the Partnership determined that substantially all of the value of the purchase related to the physical assets acquired, which are generally depreciated over 50 years. Allocations of value to other assets or differently among the various physical assets could have resulted in different depreciation charges in future years for the assets acquired. Additionally, adjustments to the environmental monitoring liability established in conjunction with the purchase will result in increases or decreases in net income by the amount of any such adjustment. Management continues to evaluate on an ongoing basis the amounts required for environmental monitoring activities.

Related Party Transactions

With respect to related party transactions see Note 17 to the consolidated financial statements and Item 13 “Certain Relationships and Related Transactions.”

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46 Consolidation of Variable Interest Entities (“FIN 46”), which was subsequently modified and reissued in December 2003. FIN 46 establishes accounting and disclosure requirements for ownership interests in entities that have certain financial or ownership characteristics. FIN 46, as revised, is generally applicable for the first fiscal year or interim accounting period ending after March 15, 2004. The adoption of the provisions of FIN 46 has not had a material effect on the Partnership’s consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. SFAS No. 150 affects how an entity measures and reports financial instruments that have characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first

interim period beginning after June 15, 2003. The FASB continues to address certain implementation issues associated with the application of SFAS No. 150, including those related to mandatory redeemable financial instruments representing non-controlling interests in subsidiaries’ consolidated financial statements. The Partnership will continue to monitor the actions of the FASB and assess the impact, if any, on its consolidated financial statements. The effective provisions of SFAS No. 150 did not have a material impact on the Partnership’s consolidated financial statements.

In May 2004, the staff of the FASB issued FASB Staff Position No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which superseded FASB Staff Position 106-1 issued in January 2004. FASB Staff Position No. 106-2, which is effective for the first period beginning after June 15, 2004, provides guidance on how recent Federal legislation which provides certain prescription drug benefits and subsidies to sponsors of certain medical plans which substitute benefits for Medicare Part D is to be incorporated into a plan sponsor’s calculation of retiree medical liabilities. FASB Staff Position 106-2 generally requires plan sponsors, like the Partnership, to determine the effects of the recent Federal legislation and, if significant, to record those effects as an actuarial experience gain in the retiree medical benefits cost included in its financial statements. The Partnership measured the effects of the Act in the third quarter of 2004 and recorded an actuarial experience gain of $0.3 million.

In December 2004, the FASB issued Statement No. 123 (Revised 2004) “Share-Based Payment” which requires that compensation costs related to share-based payment transactions be recognized in the Partnership’s financial statements and effectively eliminates the intrinsic value method permitted by APB 25. SFAS No. 123R is effective for interim or annual periods beginning after June 15, 2005 for any new awards granted, modified, repurchased or cancelled after that date. The Partnership is currently evaluating the impact that SFAS No. 123R will have on its financial statements.

Forward-Looking Information

The information contained above in this Management’s Discussion and Analysis and elsewhere in this Report on Form 10-K includes “forward-looking, statements,” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements use forward-looking words such as “anticipate,” “continue,” “estimate,” “expect,” “may,” “will,” or other similar words, although some forward-looking statements are expressed differently. These statements discuss future expectations or contain projections. Specific factors which could cause actual results to differ from those in the forward-looking statements include: (1) price trends and overall demand for refined petroleum products in the United States in general and in our service areas in particular (economic activity, weather, alternative energy sources, conservation and technological advances may affect price trends and demands); (2) changes, if any, in laws and regulations, including, among others, safety, tax and accounting matters or Federal Energy Regulatory Commission regulation of our tariff rates; (3) liability for environmental claims; (4) security issues affecting our assets, including, among others, potential damage to our assets caused by acts of war or terrorism; (5) unanticipated capital expenditures and operating expenses to repair or replace our assets; (6) availability and cost of insurance on our assets and operations; (7) our ability to successfully identify and complete strategic acquisitions and make cost saving changes in operations; (8) expansion in the operations of our competitors; (9) our ability to integrate any acquired operations into our existing operations; (10) shut-downs or cutbacks at major refineries that use our services; (11) deterioration in our labor relations; (12) changes in real property tax assessments; (13) disruptions to the air travel system; and (14) interest rate fluctuations and other capital market conditions.

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. Although the expectations in the forward-looking statements are based on our current beliefs and expectations, we do not assume responsibility for the accuracy and completeness of such statements. Further, we undertake no obligation to update publicly any forward-looking statement whether as a result of new information or future events.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk


	*Market Risk — Trading Instruments*

Currently the Partnership has no derivative instruments and does not engage in hedging activity with respect to trading instruments.


	*Market Risk — Other than Trading Instruments*

The Partnership is exposed to risk resulting from changes in interest rates. The Partnership does not have significant commodity or foreign exchange risk. The Partnership is exposed to fair value risk with respect to the fixed portion of its financing arrangements (the 5.300% Notes, the 4 ⁵ / 8 % Notes and the 6 ³ / 4 % Notes) and to cash flow risk with respect to its variable rate obligations (the Credit Facility). Fair value risk represents the risk that the value of the fixed portion of its financing arrangements will rise or fall depending on changes in interest rates. Cash flow risk represents the risk that interest costs related to the Credit Facility will rise or fall depending on changes in interest rates.

The Partnership’s practice with respect to derivative transactions has been to have each transaction authorized by the Board of Directors of the General Partner.

At December 31, 2004, the Partnership had total fixed debt obligations at face value of $725 million, consisting of $275 million of the 5.300% Notes, $300 million of the 4 ⁵ / 8 % Notes and $150 million of the 6 ³ / 4 % Notes. The fair value of these obligations at December 31, 2004 was approximately $736 million. The Partnership estimates that a 1% decrease in rates for obligations of similar maturities would increase the fair value of these obligations by $66.7 million. The Partnership’s variable debt obligation under the Credit Facility was $73 million. Based on the balance outstanding at December 31, 2004, a 1% increase or decrease in interest rates would increase or decrease annual interest expense by $0.7 million.

On October 28, 2003, the Partnership entered into an interest rate swap agreement with a financial institution in order to hedge a portion of its fair value risk associated with its 4 ⁵ / 8 % Notes. The notional amount of the swap agreement was $100 million. The swap agreement called for the Partnership to receive fixed payments from the financial institution at a rate of 4 ⁵ / 8 % of the notional amount in exchange for floating rate payments from the Partnership based on the notional amount using a rate equal to the six-month LIBOR (determined in arrears) minus 0.28%. The swap agreement was scheduled to settle on the maturity date of the 4 ⁵ / 8 % Notes and interest amounts under the swap agreement were payable semiannually on the same date as interest payments on the 4 ⁵ / 8 % Notes. The Partnership designated the swap agreement as a fair value hedge at the inception of the agreement and elected to use the short-cut method provided for in SFAS No. 133, which assumes no ineffectiveness will result from the use of the hedge.


Item 8.	*Financial Statements and Supplementary Data*

BUCKEYE PARTNERS, L.P.

INDEX TO FINANCIAL STATEMENTS


		Page
		Number

Financial Statements and Reports of Independent Registered Public Accounting Firm:
	Management’s Report On Internal Control Over Financial Reporting		38
	Reports of Independent Registered Public Accounting Firm		39
	Consolidated Statements of Income — For the years ended December 31, 2004, 2003 and 2002		42
	Consolidated Balance Sheets — December 31, 2004 and 2003		43
	Consolidated Statements of Cash Flows — For the years ended December 31, 2004, 2003 and 2002		44
	Notes to Consolidated Financial Statements		45

Schedules are omitted because they are either not applicable or not required or the information required is included in the consolidated financial statements or notes thereto.

MANAGEMENT’S REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING

Management of Buckeye GP LLC, as general partner of Buckeye Partners, L.P. (the “General Partner”), is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. A company’s internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management evaluated the General Partner’s internal control over financial reporting as of December 31, 2004. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (COSO). As a result of this assessment and based on the criteria in the COSO framework, management has concluded that, as of December 31, 2004, the General Partner’s internal control over financial reporting was effective.

The Partnership’s independent registered public accounting firm, Deloitte & Touche LLP, has audited management’s assessment of the General Partner’s internal control over financial reporting. Their opinion on management’s assessment and their opinion on the effectiveness of the General Partner’s internal control over financial reporting appears herein.



/s/ William H. Shea, Jr.		/s/ Robert B. Wallace

Chief Executive Officer		Senior Vice President, Finance and Chief Financial Officer

March 14, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of Buckeye Partners, L.P.

We have audited the accompanying consolidated balance sheets of Buckeye Partners, L.P. and subsidiaries (the “Partnership”) as of December 31, 2004 and 2003, and the related consolidated statements of income, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 14, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Partnership’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Partnership’s internal control over financial reporting.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

March 14, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of Buckeye Partners, L.P.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Buckeye Partners, L.P. and subsidiaries (the “Partnership”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Partnership’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Partnership maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2004 of the Partnership and our report dated March 14, 2005 expressed an unqualified opinion on those financial statements.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

March 14, 2005

BUCKEYE PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME


					Year Ended December 31,

			Notes		2004			2003			2002

			(In thousands, except per unit amounts)
Revenue				2,4	$	323,543		$	272,947		$	247,345

Costs and expenses:
	Operating expenses			5,17		158,272			126,152			110,670
	Depreciation and amortization			2,6,8,9		25,983			22,562			20,703
	General and administrative expenses			17		17,144			14,898			13,610

						201,399			163,612			144,983

Operating income						122,144			109,335			102,362

Other income (expenses):
	Investment income					6,005			3,628			1,952
	Interest and debt expense					(27,614	)		(22,758	)		(20,527	)
	Premium paid on retirement of debt					—			(45,464	)		—
	General Partner incentive compensation			17		(14,002	)		(11,877	)		(10,838	)
	Minority interests and other					(3,571	)		(2,710	)		(1,047	)

		Total other income (expenses)				(39,182	)		(79,181	)		(30,460	)

Net income					$	82,962		$	30,154		$	71,902

Net income allocated to General Partner				18	$	678		$	263		$	646
Net income allocated to Limited Partners				18	$	82,284		$	29,891		$	71,256
Weighted average units outstanding:
	Basic					30,103			28,673			27,173

	Assuming dilution					30,151			28,748			27,228

Earnings per Partnership Unit — basic:
Net income allocated to General and Limited Partners per Partnership Unit					$	2.76		$	1.05		$	2.65

Earnings Per Partnership Unit — assuming dilution:
Net income allocated to General and Limited Partners per Partnership Unit					$	2.75		$	1.05		$	2.64

See Notes to consolidated financial statements.

BUCKEYE PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS


					December 31,

			Notes		2004			2003

			(In thousands)
ASSETS
Current assets:
	Cash and cash equivalents			2	$	19,017		$	22,723
	Trade receivables			2		32,498			17,112
	Construction and pipeline relocation receivables					9,362			4,963
	Inventories			2		10,451			9,212
	Prepaid and other current assets			7		16,923			12,571

		Total current assets				88,251			66,581
	Property, plant and equipment, net			2,4,8		1,323,588			752,818
	Goodwill			6		11,355			11,355
	Other non-current assets			9,15		110,925			107,142

		Total assets			$	1,534,119		$	937,896


LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
	Accounts payable				$	15,172		$	14,478
	Accrued and other current liabilities			5,10,17		45,644			34,383

		Total current liabilities				60,816			48,861
	Long-term debt			11		797,270			448,050
Minority interests						18,425			17,796
Other non-current liabilities				12,13,17		52,185			45,777

						928,696			560,484

Commitments and contingent liabilities				5,16		—			—
Partners’ capital				18
	General Partner					2,549			2,514
	Limited Partner					603,409			376,158
	Receivable from exercise of options					(535	)		(912	)
	Accumulated other comprehensive income					—			(348	)

		Total partners’ capital				605,423			377,412

		Total liabilities and partners’ capital			$	1,534,119		$	937,896

See Notes to consolidated financial statements.

BUCKEYE PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


							Year Ended December 31,

					Notes		2004			2003			2002

					(In thousands)
Cash flows from operating activities:
	Net income						$	82,962		$	30,154		$	71,902

	Adjustments to reconcile income to net cash provided by operating activities:
		Premium paid on retirement of long-term debt						—			45,464			—
		Depreciation and amortization				6,8,9		25,983			22,562			20,703
		Minority interests						3,571			2,722			1,046
		Amortization of debt discount						204			92			—
		Changes in assets and liabilities:
			Trade receivables					(15,386	)		91			(3,450	)
			Constructions and pipeline relocation receivables					(4,399	)		(630	)		3,334
			Inventories					(225	)		(788	)		(833	)
			Prepaid and other current assets					(4,352	)		(9,897	)		3,100
			Accounts payable					694			6,416			646
			Accrued and other current liabilities					10,263			11,695			(2,197	)
			Other non-current assets					(2,434	)		1,391			(434	)
			Other non-current liabilities					2,864			95			(722	)

				Total adjustments from operating activities				16,783			79,213			21,193

				Net cash provided by operations				99,745			109,367			93,095

Cash flows from investing activities:
	Capital expenditures					8		(72,631	)		(42,145	)		(71,608	)
	Acquisition expenditures for Midwest pipelines and terminals							(518,790	)		—			—
	Investment in West Texas LPG Pipeline, Limited Partnership							—			(28,500	)		—
	Investment in West Shore Pipe Line Company							—			(7,488	)		—
	Net proceeds from (expenditures for) disposal of property, plant and equipment							3,583			(840	)		(1,161	)

				Net cash used in investing activities				(587,838	)		(78,973	)		(72,769	)

Cash flows from financing activities:
	Debt issuance costs					11		(6,588	)		(3,765	)		—
	Net proceeds from issuance of Partnership units							223,296			59,923			—
	Proceeds from exercise of unit options							1,577			890			566
	Distributions to minority interests							(2,942	)		(3,077	)		(855	)
	Advances related to pipeline project					8		—			2,232			14,157
	Proceeds from issuance of long-term debt					11		894,216			471,757			46,000
	Payment of long-term debt					11		(547,000	)		(429,000	)		(14,000	)
	Settlement of hedge of long-term debt							2,000			—			—
	Premium paid on retirement of long-term debt							—			(45,464	)		—
	Distributions to unitholders					18,19		(80,172	)		(72,375	)		(67,932	)

				Net cash provided by (used in) financing activities				484,387			(18,879	)		(22,064	)

Net (decrease) increase in cash and cash equivalents								(3,706	)		11,515			(1,738	)
Cash and cash equivalents at beginning of year								22,723			11,208			12,946

Cash and cash equivalents at end of year							$	19,017		$	22,723		$	11,208

Supplemental cash flow information:
	Cash paid during the year for interest (net of amount capitalized)						$	21,784		$	13,649		$	20,628
	Capitalized interest						$	844		$	464		$	2,083
	Non-cash changes in assets and liabilities
			Minimum pension liability				$	348		$	(348	)		—
			Change in fair value of long-term debt associated with a fair value hedge				$	(200	)	$	200			—
			Environmental liability related to acquisitions of Midwest pipelines and terminals				$	4,890			—			—

See Notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002


1.	Organization

Buckeye Partners, L.P. (the “Partnership”) is a master limited partnership organized in 1986 under the laws of the state of Delaware. The Partnership’s principal line of business is the transportation, terminalling and storage of refined petroleum products in the United States for major integrated oil companies, large refined product marketing companies and major end users of petroleum products on a fee basis through facilities owned and operated by the Partnership. The Partnership also operates pipelines owned by third parties under contracts with major integrated oil and chemical companies, and performs certain construction activities, generally for the owners of these third-party pipelines.

The Partnership conducts all of its operations through subsidiary entities. These operating subsidiaries are Buckeye Pipe Line Company, L.P. (“Buckeye”), Laurel Pipe Line Company, L.P. (“Laurel”), Everglades Pipe Line Company, L.P. (“Everglades”), Buckeye Pipe Line Holdings, L.P. (“BPH”) and Wood River Pipe Lines LLC (“Wood River”). These entities are hereinafter referred to as the “Operating Subsidiaries.” The Partnership owns an approximate 99% ownership interest in each Operating Subsidiary except Wood River, in which it owns a 100% interest. BPH owns directly, or indirectly, a 100% interest in each of Buckeye Terminals, LLC (“BT”), Norco Pipe Line Company, LLC (“Norco”) and Buckeye Gulf Coast Pipe Lines, L.P. (“BGC”). BPH also owns a 75% interest in WesPac Pipelines — Reno LLC and WesPac Pipelines — Memphis LLC, and a 50% interest in WesPac Pipelines — San Diego LLC (collectively known as “WesPac”), an approximate 25% interest in West Shore Pipe Line Company (“West Shore”) and a 20% interest in West Texas LPG Pipeline Limited Partnership (“WTP”). Subsidiaries of BGC also own approximately 63% of a crude butadiene pipeline between Deer Park, Texas and Port Arthur, Texas that was completed in March 2003 (the “Sabina Pipeline”).

Buckeye is one of the largest independent pipeline common carriers of refined petroleum products in the United States, with 2,643 miles of pipeline serving 9 states. Laurel owns a 345-mile common carrier refined products pipeline located principally in Pennsylvania. Norco owns a 422-mile refined products pipeline system located primarily in Illinois, Indiana and Ohio. Everglades owns a 37-mile refined products pipeline in Florida. Wood River owns five refined petroleum products pipelines with aggregate mileage of approximately 900 miles located in the Midwestern United States. BPH and its subsidiaries provide bulk storage service through facilities with an aggregate capacity of 15.4 million barrels of refined petroleum products. WesPac provides pipeline transportation service to Reno/ Tahoe International and San Diego International airports and is constructing an 11-mile pipeline and related terminalling and storage facilities at Memphis International Airport.

The assets owned by Wood River and certain terminal assets owned by BPH were acquired from Shell Oil Products, U.S. (“Shell”) on October 1, 2004 for approximately $517 million. See Note 3 — Acquisitions.

BGC is an owner and contract operator of pipelines owned by major chemical companies in the Gulf Coast area. BGC leases its 16-mile pipeline to a chemical company. In March 2003, BGC completed construction of the Sabina Pipeline. The Sabina Pipeline originates at a Shell Chemicals, L.P. facility in Deer Park, Texas and terminates at a chemical plant owned by Sabina Petrochemicals, LLC in Port Arthur, Texas. Subsidiaries of BGC hold an approximate 63% interest in the Sabina Pipeline. Two petrochemical companies own the remaining 37% minority interest. The Sabina Pipeline has entered into a long-term agreement with Sabina Petrochemicals LCC to provide pipeline transportation throughput services. Revenues under the throughput services agreement commenced January 2003, although the pipeline did not commence shipping product until February 2004. Separately, BGC entered into an agreement to operate and maintain the Sabina Pipeline.

Buckeye GP LLC serves as the general partner of the Partnership. As of December 31, 2004, the General Partner owned approximately a 1% general partnership interest in the Partnership and approximately a 1% general partnership interest in each Operating Subsidiary except Wood River, for an approximate 2% overall

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

general partnership interest in the Partnership’s activities. The General Partner is a wholly-owned subsidiary of MainLine Sub LLC (“MainLine Sub”), which is a wholly-owned subsidiary of MainLine L.P. (“MainLine”). MainLine is a limited partnership owned by affiliates of Carlyle/ Riverstone Global Energy and Power Fund II, L.P. and certain members of senior management.

The General Partner was formed on December 15, 2004 as part of a restructuring of the Partnership’s general partner organization structure (the “GP Restructuring”), pursuant to which Buckeye Pipe Line Company LLC (the “Prior General Partner”) transferred its general partner interests, except for its right to receive incentive compensation from the Partnership, to the General Partner. The Prior General Partner, its immediate parent Buckeye Management Company LLC (“BMC”) and BMC’s immediate parent Glenmoor, LLC (“Glenmoor”) were then merged and renamed MainLine Sub LLC. Glenmoor’s immediate parent, BPL Acquisition L.P. then changed its name to MainLine L.P. The purpose of the GP Restructuring was to clarify that the Partnership and the General Partner are distinct legal entities with separate legal responsibilities from MainLine Sub and MainLine and to provide better assurance that the assets and liabilities of the Partnership, the General Partner and Buckeye Pipe Line Services Company (“Services Company”) would be considered separate from those of MainLine Sub and MainLine.

At December 31, 2004, Services Company employed all of the employees that work for the Operating Subsidiaries. At December 31, 2004, Services Company had 739 employees. Prior to December 26, 2004, the 122 employees of Norco, BGC and Buckeye Terminals, LLC, each a wholly-owned subsidiary of BPH, were employed directly by each respective entity. On December 26, 2004, these employees became employees of Services Company. As part of the GP Restructuring, the services agreement between the Prior General Partner and Services Company (the “Prior Services Agreement”) was terminated and a new services agreement was entered into among Services Company, the Partnership, the Operating Subsidiaries and their subsidiary companies (the “New Services Agreement”). Under the New Services Agreement, Services Company continues to employ the employees that work for the Operating Subsidiaries, and is reimbursed directly by the Operating Subsidiaries and their subsidiaries for those services. Prior to the New Services Agreement, Services Company was reimbursed by the Prior General Partner which was in turn reimbursed by the Partnership and the Operating Subsidiaries. Under both the Prior Services Agreement and the New Services Agreement, certain executive compensation costs and related benefits are not reimbursed by the Partnership or the Operating Subsidiaries, but are reimbursed by MainLine Sub LLC.

The Partnership maintains its accounts in accordance with the Uniform System of Accounts for Pipeline Companies, as prescribed by the Federal Energy Regulatory Commission (“FERC”). Wood River, Buckeye and Norco are subject to rate regulation as promulgated by FERC. Reports to FERC differ from the accompanying consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”), generally in that such reports calculate depreciation over estimated useful lives of the assets as prescribed by FERC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)


2.	Summary of Significant Accounting Policies


	*Basis of Presentation*

The financial statements include the accounts of the Partnership and its Operating Subsidiaries on a consolidated basis. All significant intercompany transactions have been eliminated in consolidation. The financial statements do not include the accounts of the General Partner, MainLine Sub, MainLine or Services, Company which are independent entities from the Partnership.


	*Use of Estimates*

The preparation of the Partnership’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America necessarily requires management to make estimates and assumptions. These estimates and assumptions, which may differ from actual results, will affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expense during the reporting period.


	*Fair Value and Hedging Activities*

The fair values of financial instruments are determined by reference to various market data and other valuation techniques as appropriate. Unless otherwise disclosed, the fair values of financial instruments approximate their carrying values (see Note 11).

The Partnership accounts for hedging activities in accordance with SFAS No. 133 “Accounting for Financial Instruments and Hedging Activities” and SFAS No. 138 “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133.” These statements establish accounting and reporting standards requiring that derivative instruments (including certain derivative instruments embedded in other contracts) be recorded on the balance sheet at fair value as either assets or liabilities.

The Partnership adopted SFAS No. 133 effective January 1, 2001, with no effect on the Partnership’s financial statements because the Partnership had no derivative instruments outstanding at that time.

The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and its resulting designation, which is established at the inception of the derivative instrument. SFAS No. 133 provides for a short-cut method which permits gains and losses on certain derivatives qualifying as fair value hedges to directly offset the changes in value of the hedged item in the Partnership’s income statement, and for the Partnership to assume no hedge ineffectiveness with respect to the hedged financial instrument.

The Partnership had no derivative instruments during 2002. On October 28, 2003, the Partnership entered into an interest rate swap contract with a financial institution in order to hedge the fair value risk associated with a portion of its 4 ⁵ / 8 % Notes due 2013 (the “4 ⁵ / 8 % Notes”). The Partnership designated the swap as a fair value hedge at the inception of the contract and utilized the short-cut method provided for in SFAS No. 133. The interest rate swap was terminated on December 8, 2004 (see Note 11).

By entering into interest rate swap transactions, the Partnership becomes exposed to both credit risk and market risk. Credit risk occurs when the value of the swap transaction is positive, and the Partnership is subject to the risk that the counterparty will fail to perform under the terms of the contract. The Partnership is subject to market risk with respect to changes in value of the swap. The Partnership manages its credit risk by only entering into swap transactions with major financial institutions with investment-grade credit ratings. The Partnership manages its market risk by associating each swap transaction with an existing debt obligation. The Partnership’s practice is to have the Board of Directors of the General Partner approve each swap transaction.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)


	*Cash and Cash Equivalents*

All highly liquid debt instruments purchased with a maturity of three months or less are classified as cash equivalents.


	*Revenue Recognition*

Revenue from the transportation of refined petroleum products is recognized as products are delivered. Revenues from terminalling, storage and rental operations are recognized as the services are performed. Customers for transportation and ancillary terminalling, storage and rental services include major integrated oil companies, major petroleum refiners, major petrochemical companies, large regional marketing companies and large commercial airlines. The consolidated Partnership’s customer base was approximately 110 in 2004. No customer contributed more than 10% of total revenue during 2004. The largest two customers accounted for 6% each of consolidated revenues, while the 20 largest customers accounted for 56% of consolidated revenues. The Partnership does not maintain an allowance for doubtful accounts due to its favorable collections experience.

Revenues for contract operation and construction services of facilities and pipelines not directly owned by the Partnership are recognized as the services are performed. Contract and construction services revenue typically includes costs to be reimbursed by the customer plus an operator fee.

In 2004, the Partnership reclassified revenues related to a jet fuel supply arrangement and an operating services contract to a gross basis, rather than the net-of-cost basis previously used. This reclassification, which had no effect on operating income or net income, increased both revenues and operating expenses by $3.0 million with respect to the jet fuel supply arrangement and $4.0 million with respect to the operating services contract. Amounts for 2003 and 2002 were not reclassified.


	*Inventories*

Inventories, consisting of materials and supplies such as: pipe, valves, pumps, electrical/electronic components, drag reducing agent and other miscellaneous items are carried at the lower of cost or market based on the first-in, first-out method.


	*Property, Plant and Equipment*

Property, plant and equipment consist primarily of pipeline and related transportation facilities and equipment. For financial reporting purposes, depreciation on pipe assets is calculated using the straight-line method over the estimated useful life of 50 years. Other plant and equipment is depreciated on a straight-line basis over an estimated life of 5 to 50 years. Additions and betterments are capitalized and maintenance and repairs are charged to income as incurred. Generally, upon normal retirement or replacement, the cost of property (less salvage) is charged to the depreciation reserve, which has no effect on income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

The following table represents the depreciation life for the major components of the Partnership’s assets:


	Life in Years

Right of way		50
Line pipe and fittings		50
Buildings		50
Pumping equipment		50
Oil tanks		50
Office furniture and equipment		18
Vehicles and other work equipment		11
Servers and software		5


	*Goodwill*

Effective January 1, 2002, the Partnership no longer amortizes goodwill. The Partnership assesses its goodwill annually for potential impairment based on the market value of its business compared to its book value.


	*Long-Lived Assets*

The Partnership regularly assesses the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Partnership assesses recoverability based on estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposal. The measurement of an impairment loss is based on the difference between the carrying amount and fair value of the assets.


	*Income Taxes*

For federal and state income tax purposes, the Partnership and the Operating Subsidiaries, except for BGC, are not taxable entities. Accordingly, the taxable income or loss of the Partnership and the Operating Subsidiaries other than BGC, which may vary substantially from income or loss reported for financial reporting purposes, is generally includable in the federal and state income tax returns of the individual partners. As of December 31, 2004 and 2003, the Partnership’s reported amount of net assets for financial reporting purposes exceeded its tax basis by approximately $352 million and $348 million, respectively.

Effective August 1, 2004, BGC elected to be treated as a taxable corporation for Federal income tax purposes. Accordingly, BGC has recognized deferred tax assets and liabilities for temporary differences between the amounts of assets and liabilities measured for financial reporting purposes and the amounts measured for Federal income tax purposes. Changes in tax legislation are included in the relevant computations in the period in which such changes are effective. Deferred tax assets are reduced by a valuation allowance when the amount of any tax benefit is not expected to be realized.

Total income tax expense for the period August 1, 2004 to December 31, 2004 was $0.5 million and is included in operating expenses in 2004.


	*Environmental Expenditures*

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable, and the costs can be reasonably estimated. Generally, the timing of these accruals

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

coincides with the Partnership’s commitment to a formal plan of action. Accrued environmental remediation related expenses include direct costs of remediation and indirect costs related to the remediation effort, such as compensation and benefits for employees directly involved in the remediation activities and fees paid to outside engineering, consulting and law firms. The Partnership maintains insurance which may cover certain environmental expenditures.


	*Pensions*

Services Company maintains a defined contribution plan (see Note 13), defined benefit plans (see Note 13) and an employee stock ownership plan (see Note 15) which provide retirement benefits to certain regular full-time employees. Certain hourly employees of Services Company are covered by a defined contribution plan under a union agreement (see Note 13).


	*Postretirement Benefits Other Than Pensions*

Services Company provides postretirement health care and life insurance benefits for certain of its retirees. Certain other retired employees are covered by a health and welfare plan under a union agreement (see Note 13).


	*Unit Option and Distribution Equivalent Plan*

The Partnership has adopted Statement of Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation,” (“SFAS No. 123”), which requires expanded disclosures of stock-based compensation arrangements with employees. SFAS No. 123 encourages, but does not require, compensation cost to be measured based on the fair value of the equity instrument awarded. It allows the Partnership to continue to measure compensation cost for these plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). The Partnership has elected to continue to recognize compensation cost based on the intrinsic value of the equity instrument awarded as promulgated in APB No. 25.

If compensation cost had been determined based on the fair value at the time of the grant dates for awards consistent with SFAS No. 123, the Partnership’s net income and earnings per Unit would have been as indicated by the pro forma amounts below:


		2004			2003			2002

		(In thousands, except per
		Unit amounts)
Net income as reported		$	82,962		$	30,154		$	71,902
Stock-based employee compensation cost included in net income			—			—			1
Stock-based employee compensation cost that would have been included in net income under the fair value method			(267	)		(252	)		(179	)

Pro forma net income as if the fair value method had been applied to all awards		$	82,695		$	29,902		$	71,724

Earnings per unit — basic	As reported	$	2.76		$	1.05		$	2.65
	Pro forma	$	2.75		$	1.04		$	2.64
Earnings per unit — assuming dilution	As reported	$	2.75		$	1.05		$	2.64
	Pro forma	$	2.74		$	1.04		$	2.63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)


	*Comprehensive Income*

The Partnership accounts for comprehensive income in accordance with Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income” (“SFAS No. 130”). SFAS No. 130 requires certain items such as foreign currency translation adjustments, minimum pension liability adjustments and unrealized gains and losses on certain investments to be reported in a financial statement. Comprehensive income consisted of the following:


	2004		2003			2002

	(In thousands, except per
	Unit amounts)
Net income as reported	$	82,962	$	30,154		$	71,902
Minimum pension liability		348		(348	)		—

Comprehensive income	$	83,310	$	29,806		$	71,902

Adjustment to Partners’ Capital related to minimum pension liability	$	—	$	(348	)	$	—


	*Reclassifications*

Certain prior year amounts have been reclassified to conform to current year presentation.


	*Asset Retirement Obligations*

The Partnership adopted Statement of Financial Accounting Standards No. 143 “Accounting for Asset Retirement Obligations” (“SFAS No. 143”) effective January 1, 2003. SFAS No. 143 requires that the fair value of a liability related to the retirement of long-lived assets be recorded at the time a legal obligation is incurred. A corresponding asset is recorded at that time which is then depreciated over the remaining useful life of the asset. After the initial measurement, the obligation is periodically adjusted to reflect changes in the asset retirement obligation’s fair value. If and when it is determined that a legal obligation has been incurred, the fair value of any liability is determined based on estimates and assumptions related to retirement costs, future inflation rates and credit-adjusted risk-free interest rates.

The Operating Subsidiaries’ assets generally consist of underground refined products pipelines installed along rights-of-way acquired from land owners and related above-ground facilities that are owned by the Operating Subsidiaries. The Partnership is unable to predict if and when its pipelines, which generally serve high-population and high-demand markets, would become completely obsolete and require decommissioning. Further, the Operating Subsidiaries’ rights-of-way agreements typically do not require the dismantling and removal of the pipelines and reclamation of the rights-of-way upon permanent removal of the pipelines from service. Accordingly, the Partnership has recorded no liability, or corresponding asset, in conjunction with the adoption of SFAS No. 143 because the future dismantlement and removal dates of the Partnership’s assets, and the amount of any associated costs are indeterminable.


	*Recent Accounting Pronouncements*

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46 “Consolidation of Variable Interest Entities” (“FIN 46”), which was subsequently modified and reissued in December 2003. FIN 46 establishes accounting and disclosure requirements for ownership interests in entities that have certain financial or ownership characteristics. FIN 46, as revised, is generally applicable for the first fiscal year or interim accounting period ending after March 15, 2004. The adoption of the provisions of FIN 46 has not had a material effect on the Partnership’s consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“SFAS No. 150”). SFAS No. 150 affects how an entity measures and reports financial instruments that have characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The FASB continues to address certain implementation issues associated with the application of SFAS No. 150 , including those related to mandatory redeemable financial instruments representing non-controlling interests in subsidiaries’ consolidated financial statements. The Partnership will continue to monitor the actions of the FASB and assess the impact, if any, on its consolidated financial statements. The effective provisions of SFAS No. 150 did not have a material impact on the Partnership’s consolidated financial statements.

In December 2004, the FASB issued Statement No. 123 (Revised 2004) “Share-Based Payment” (“SFAS No. 123R”) which requires that compensation costs related to share-based payment transactions be recognized in the Partnership’s financial statements and effectively eliminates the intrinsic value method permitted by APB 25. SFAS No. 123R is effective for interim or annual periods beginning after June 15, 2005 for any new awards granted, modified, repurchased or cancelled after that date. The Partnership is currently evaluating the impact that SFAS No. 123R will have on its financial statements.


3.	Acquisitions

On October 1, 2004, the Partnership acquired from Shell five refined petroleum products pipelines with aggregate mileage of approximately 900 miles and 24 petroleum products terminals with aggregate storage capacity of approximately 9.3 million barrels located in the Midwestern United States for a purchase price of approximately $517 million (the “Midwest Pipelines and Terminals”). All five of the refined petroleum products pipelines are interstate common carriers regulated by the FERC. Tariff rates on these five newly acquired pipelines use the FERC’s price indexing methodology. Historically, these assets were not operated as a separate division or subsidiary of Shell, but as part of its more extensive transportation, terminalling, crude oil and refined products operations. As a result, Shell did not maintain complete and separate financial statements for these assets as an independent business unit.

In 2003, Shell entered into a consent decree with the United States Environmental Protection Agency arising out of a June 1999 incident unrelated to the assets acquired by the Partnership. The consent decree includes requirements for testing and maintenance of two of the pipelines acquired by the Partnership, the creation of a damage prevention program, submission to independent monitoring and various reporting requirements. In the purchase agreement with Shell, the Partnership agreed to perform, at its own expense, the work required of Shell under the consent decree on the pipelines acquired by the Partnership. The Partnership’s obligations to Shell with respect to the consent decree extend to approximately 2008, a date five years from the date of the consent decree.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

In connection with the acquisition, the Partnership entered into a terminalling agreement and a transportation agreement with Shell, each with an initial term of three years. The terminalling and transportation agreements provide for a combined minimum revenue commitment from Shell averaging approximately $35.7 million per year for the initial three-year term following the closing of the acquisition. The terminalling agreement may be extended, at the option of Shell, for four, two-year periods with the committed revenues for subsequent years based upon the revenues produced by Shell’s use of the terminals in the prior year, not to exceed $17.68 million. Both of these agreements provide that if an event occurs beyond the control of either the Partnership or Shell, Shell has the right to reduce its revenue commitments during the period of interruption.

As part of the acquisition of these assets, Shell agreed to retain liabilities and expenses related to active environmental remediation projects, other than those relating to the consent decree. In addition, Shell agreed to indemnify the Partnership for certain environmental liabilities arising from pre-closing conditions relating to the operation of the acquired pipelines, tank farms or terminals, so long as the Partnership provides notice of those conditions within two years of the closing of the acquisition. Shell’s indemnification obligation is subject to a $250,000 per-claim deductible and a $29.3 million aggregate liability. The Partnership agreed to perform certain monitoring activities at its own expense associated with certain sites which are or could become subject to environmental remediation. The Partnership accrued as part of its purchase price approximately $4.9 million related to its obligation to monitor these sites. The Partnership did not accrue costs related to its obligations to Shell related to the consent decree because these obligations are incidental to the Partnership’s ongoing operating expenses related to the assets.

The Partnership’s total cost of the assets acquired totaled $523.7 million, which consisted of the purchase price of $517 million, the accrued environmental monitoring costs of $4.9 million discussed above, plus direct acquisition costs of $1.8 million. The allocated fair value of assets acquired is summarized as follows (in thousands):


Material and supplies inventory		$	1,014
Land			28,989
Rights-of-way			29,491
Buildings and leasehold improvements			13,586
Machinery, equipment and office furnishings			450,601

	Total	$	523,681

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)


4.	Segment Information

The Partnership has one segment, the transportation segment. The transportation segment derives its revenues primarily from the transportation of refined petroleum products that it receives from refineries, connecting pipelines and marine terminals. Terminalling and storage operations are ancillary to the Partnership’s pipeline operations. Contract and construction operations of third-party pipelines are similar to the operations of the Partnership’s pipelines except that generally the Partnership does not own the facilities being operated.


5.	Contingencies

The Partnership and the Operating Subsidiaries in the ordinary course of business are involved in various claims and legal proceedings, some of which are covered by insurance. The General Partner is unable to predict the timing or outcome of these claims and proceedings. Although it is possible that one or more of these claims or proceedings, if adversely determined, could, depending on the relative amounts involved, have a material effect on the Partnership for a future period, the General Partner does not believe that their outcome will have a material effect on the Partnership’s consolidated financial condition or annual results of operations.


	*Environmental*

In accordance with its accounting policy on environmental expenditures, the Partnership recorded operating expenses, net of insurance recoveries, of $6.2 million, $4.9 million and $1.9 million for 2004, 2003 and 2002, respectively, which were related to environmental expenditures. Expenditures, both capital and operating, relating to environmental matters are expected to continue due to the Partnership’s commitment to maintaining high environmental standards and to increasingly strict environmental laws and government enforcement policies.

Various claims for the cost of cleaning up releases of hazardous substances and for damage to the environment resulting from the activities of the Operating Subsidiaries or their predecessors have been asserted and may be asserted in the future under various federal and state laws. The General Partner believes that the generation, handling and disposal of hazardous substances by the Operating Subsidiaries and their predecessors have been in material compliance with applicable environmental and regulatory requirements. The total potential remediation costs to be borne by the Operating Subsidiaries relating to these clean-up sites cannot be reasonably estimated and could be material. Although the Partnership has made a provision for certain legal and remediation expenses relating to these matters, the General Partner is unable to determine the timing or outcome of current environmental remediation activities, or any pending proceedings or of any future claims and proceedings.


6.	Goodwill and Intangible Assets

Effective January 1, 2002, the Partnership adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets (“SFAS No. 142”),” which establishes financial accounting and reporting guidance for acquired goodwill and other intangible assets. Under SFAS No. 142, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed at least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives.

SFAS No. 142 requires that goodwill be tested for impairment at least annually utilizing a two-step methodology. The initial step requires the Partnership to determine the fair value of each of its reporting units and compare it to the carrying value, including goodwill, of such reporting unit. If the fair value exceeds the carrying value, no impairment loss is recognized. However, a carrying value that exceeds its fair value may be

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

an indication of impaired goodwill. The amount, if any, of the impairment would then be measured and an impairment loss would be recognized.

The Partnership has completed the transitional impairment test required upon adoption of SFAS No. 142. The transitional test, which involved the use of estimates related to the fair market value of the business operations associated with the goodwill, did not result in an impairment loss. The Partnership continues to evaluate its goodwill, at least annually, and has determined that no impairment was required in 2003 or 2004.

The Partnership’s amortizable intangible assets consist of pipeline rights-of-way, contracts and leasehold improvements. The contracts were acquired in connection with the acquisition of BGC in March 1999.

At December 31, 2004, the gross carrying amount of the pipeline rights-of-way was $70,688,000 and accumulated amortization was $5,715,000. At December 31, 2003, the gross carrying amount of the pipeline rights-of-way was $40,674,000 and accumulated amortization was $5,107,000. Pipeline rights-of-way are included in property, plant and equipment in the accompanying balance sheet.

At December 31, 2004, the gross carrying amount of the contracts was $3,600,000 and accumulated amortization was $1,380,000. At December 31, 2003 the gross carrying amount of the contracts was $3,600,000 and the accumulated amortization was $1,140,000.

For the years 2004, 2003 and 2002, amortization expense related to amortizable intangible assets was $1,329,000, and $1,053,000 and $749,000, respectively. Aggregate amortization expense related to amortizable intangible assets is estimated to be $1,654,000 per year for each of the next five years.

The Partnership’s only intangible asset not subject to amortization is goodwill that was recorded in connection with the acquisition of Buckeye Terminals, LLC in June 2000. The carrying amount of the goodwill was $11,355,000 at December 31, 2004 and 2003.


7.	Prepaid and Other Current Assets

Prepaid and other current assets consisted of the following:


		December 31,

		2004		2003

		(In thousands)
Prepaid insurance		$	5,875	$	5,028
Insurance receivables			4,247		796
Other			6,801		6,747

	Total	$	16,923	$	12,571

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)


8.	Property, Plant and Equipment

Property, plant and equipment consist of the following:


		December 31,

		2004		2003

		(In thousands)
Land		$	37,695	$	17,041
Rights-of-way			70,688		40,674
Buildings and leasehold improvements			60,011		36,332
Machinery, equipment and office furnishings			1,172,826		704,283
Construction in progress			84,597		43,267

			1,425,817		841,597
Less accumulated depreciation			102,229		88,779

	Total	$	1,323,588	$	752,818

Depreciation expense was $21,045,000, $17,624,000 and $15,765,000 for the years 2004, 2003 and 2002, respectively.


9.	Other Non-current Assets

Other non-current assets consist of the following:


		December 31,

		2004		2003

		(In thousands)
Deferred charge (see Note 15)		$	29,511	$	34,209
Contracts acquired from acquisitions			2,220		2,460
Investment in West Shore			30,503		30,756
Investment in WTP			29,244		28,500
Cost of issuing debt			9,672		4,395
Other			9,775		6,822

	Total	$	110,925	$	107,142

The $64.2 million market value of limited partnership units (“LP Units”) issued in connection with the restructuring of the ESOP in August 1997 (the “ESOP Restructuring”) was recorded as a deferred charge and is being amortized on the straight-line basis over 164 months (see Note 15). Amortization of the deferred charge related to the ESOP Restructuring was $4,698,000 in 2004, 2003 and 2002. Amortization expense related to the contracts acquired from acquisitions was $240,000 in each of 2004, 2003 and 2002.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)


10.	Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following:


		December 31,

		2004		2003

		(In thousands)
Taxes — other than income		$	5,928	$	2,701
Accrued charges due General Partner			5,240		4,780
Environmental liabilities			6,538		2,696
Interest			14,731		10,416
Contribution due Retirement Income Guaranty Plan			—		1,905
Accrued top-up reserve (see Note 15)			1,059		1,295
Retainage			576		214
Other			11,572		10,376

	Total	$	45,644	$	34,383


11.	Long-term Debt and Credit Facilities

Long-term debt consists of the following:


		December 31,

		2004			2003

		(In thousands)
4.625% Notes due July 15, 2013		$	300,000		$	300,000
6.75% Notes due August 15, 2033			150,000			150,000
5.300% Notes due October 15, 2014			275,000			—
Borrowings under Revolving Credit Facility			73,000			—
Less: Unamortized discount			(2,730	)		(2,150	)
Adjustment to fair value associated with hedge of fair value			2,000			200

	Total	$	797,270		$	448,050

At December 31, 2004, $73.0 million of debt was scheduled to mature August 6, 2009, $300.0 million was scheduled to mature on June 15, 2013, $275.0 million was scheduled to mature October 15, 2014 and $150.0 million was scheduled to mature on August 15, 2033.

The fair value of the Partnership’s debt was estimated to be $809 million and $450 million at December 31, 2004 and 2003, respectively. The values at December 31, 2004 and December 31, 2003 were based on approximate market value on the respective dates.

In connection with the Midwest pipelines and terminals acquired from Shell on October 1, 2004, the Partnership borrowed a total of $490.0 million, consisting of $300.0 million under a 364-day interim loan (the “Interim Loan”) and $190.0 million under the Partnership’s $400.0 million five-year revolving credit facility (the “Credit Facility”). On October 12, 2004, the Partnership sold $275.0 million aggregate principal of its 5.300% Notes due 2014 in an underwritten public offering (the “5.300% Note Offering”). Proceeds from the 5.300% Note Offering, net of underwriter’s discount and commissions, were approximately $272.1 million. Proceeds from the 5.300% Note Offering, together with additional borrowings under the Credit Facility, were used to repay the Interim Loan. On October 19, 2004, the Partnership issued 5.5 million LP units in an underwritten public offering (the “LP Unit Offering”). Proceeds from the LP Unit Offering were approxi-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

mately $223.3 million, after underwriters’ discount and expenses, and were used to reduce amounts outstanding under the Credit Facility.

On July 7, 2003, the Partnership sold $300 million aggregate principal of its 4.625% Notes due 2013 in an underwritten public offering. Proceeds from this offering, after underwriters’ fees and expenses, were approximately $296.4 million. On August 14, 2003, the Partnership sold $150 million aggregate principal of its 6.75% Notes due 2033 in a Rule 144A offering. The Notes were subsequently exchanged for equivalent notes which are publicly traded. Proceeds from this note offering, after underwriters’ fees and expenses, were approximately $148.1 million. Proceeds from these offerings were used in part to repay all amounts outstanding under the Partnership’s prior 5-year Revolving Credit Agreement and to repay the Buckeye Pipe Line Company, L.P. $240 million Senior Notes, which were scheduled to mature in 2024, and the applicable yield maintenance premium. The amounts outstanding under the 5-year Revolving Credit Agreement were repaid on July 10, 2003 and the $240 million Senior Notes were repaid on August 19, 2003.

In connection with the repayment of the $240 million Senior Notes, Buckeye Pipe Line Company, L.P. was required to pay a yield maintenance premium of $45.5 million to the holders of the Senior Notes. The yield maintenance premium has been charged to expense in 2003 in the accompanying consolidated financial statements.

On August 6, 2004, the Partnership entered into the Credit Facility with a syndicate of banks led by SunTrust Bank. The Credit Facility contains a one-time expansion feature to $550 million subject to certain conditions. The Credit Facility replaced a $277.5 million 5-year credit facility that would have expired in September 2006 and a $100 million 364-day credit facility that would have expired in September 2004. Borrowings under the Credit Facility are guaranteed by certain of the Partnership’s subsidiaries. The Credit Facility matures on August 6, 2009.

Borrowings under the Credit Facility bear interest under one of two rate options, selected by the Partnership, equal to either (i) the greater of (a) the federal funds rate plus one half of one percent and (b) SunTrust Bank’s prime rate or (ii) the London Interbank Offered Rate (“LIBOR”) plus an applicable margin. The applicable margin is determined based upon ratings assigned by Standard and Poors and Moody’s Investor Services for the Partnership’s senior unsecured non-credit enhanced long-term debt. The applicable margin, which was 0.5% at December 31, 2004, will increase during any period in which our Funded Debt Ratio (described below) exceeds 5.25 to 1.0. At December 31, 2004, the weighted average interest rate of borrowings under the Credit Facility was 3.0%.

The Credit Facility contains covenants and provisions which affect the Partnership including covenants and provisions that:


	•	Restrict the Partnership and certain of its subsidiaries’ ability to incur additional indebtedness based on certain ratios described below;

	•	Prohibit the Partnership and certain of its subsidiaries from creating or incurring certain liens on its property;

	•	Prohibit the Partnership and certain of its subsidiaries from disposing of property material to its operations;

	•	Limit consolidations, mergers and asset transfers by the Partnership and certain of its subsidiaries.

The Credit Facility requires that the Partnership and its subsidiaries maintain a maximum “Funded Debt Ratio” and a minimum “Fixed Charge Coverage Ratio”. The Funded Debt Ratio equals the ratio of the long-term debt of the Partnership (including the current portion, if any) to “Adjusted EBITDA”, which is defined in the Credit Facility as earnings before interest, taxes, depreciation, depletion and amortization and incentive compensation payments to the General Partner, for the four preceding fiscal quarters. As of the end of any

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

fiscal quarter, the Funded Debt Ratio may not exceed 4.75 to 1.00, subject to a provision for increases to 5.25 to 1.00 in connection with future acquisitions. In connection with the Partnership’s acquisition of the Midwest Pipelines and Terminals from Shell, the Credit Facility provided for a one-time increase in the Funded Debt Ratio limit to 5.75 to 1.00 for the first two quarters following the closing of the acquisition and 5.25 to 1.00 for the third quarter following the closing of the acquisition.

As of December 31, 2004, the Partnership’s Funded Debt Ratio was 4.35 to 1.00 (using certain pro forma amounts permitted under the Credit Facility Agreement), its Fixed Charge Coverage Ratio was 2.48 to 1.00 and the Partnership was in compliance with all of the covenants under the Credit Facility.

The Partnership terminated the interest rate swap agreement on December 8, 2004 and received proceeds of $2.0 million. In accordance with SFAS No. 133, the Partnership has deferred the $2.0 million gain as an adjustment to the fair value of the hedged portion of the Partnership’s debt and is amortizing the gain as a reduction of interest expense over the remaining term of the hedged debt. Interest expense in the Partnership’s income statement was reduced by $2.6 million in 2004 and by $0.6 million in 2003 as a result of the interest rate swap agreement.

The fair value of the swap agreement at December 31, 2003 was a gain of $0.2 million, which has been reflected in other long-term assets in the accompanying consolidated balance sheet of the Partnership at that date. The change in the fair value of the hedged debt at December 31, 2003 was a loss of $0.2 million, which has been reflected as an increase in the carrying value of the hedged debt in the accompanying consolidated balance sheet of the Partnership.


12.	Other Non-current Liabilities

Other non-current liabilities consist of the following:


		December 31,

		2004		2003

		(In thousands)
Accrued employee benefit liabilities (see Note 13)		$	39,160	$	37,541
Accrued environmental liabilities			10,275		4,657
Accrued top-up reserve (see Note 15)			2,601		2,961
Other			149		618

	Total	$	52,185	$	45,777

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)


13.	Pensions and Other Postretirement Benefits

Services Company sponsors a retirement income guarantee plan (a defined benefit plan) which generally guarantees employees hired before January 1, 1986, a retirement benefit at least equal to the benefit they would have received under a previously terminated defined benefit plan. Services Company’s policy is to fund amounts necessary to at least meet the minimum funding requirements of ERISA.

Services Company also provides postretirement health care and life insurance benefits to certain of its retirees. To be eligible for these benefits an employee had to be hired prior to January 1, 1991 and meet certain service requirements. Services Company does not pre-fund this postretirement benefit obligation.

A reconciliation of the beginning and ending balances of the benefit obligations under the retirement income guarantee plan and the postretirement health care and life insurance plan is as follows:


								Postretirement
		Pension Benefits						Benefits

		2004			2003			2004			2003

		(In thousands)
Change in benefit obligation
	Benefit obligation at beginning of year	$	18,770		$	16,470		$	42,882		$	39,073
	Service cost		816			821			743			719
	Interest cost		900			1,078			2,510			2,480
	Actuarial (gain) loss(1)		(1,754	)		(722	)		2,384			2,180
	Change in assumptions		570			1,640			—			—
	Amendment(2)(3)		—			525			(2,576	)		—
	Benefit payments		(1,357	)		(1,042	)		(1,764	)		(1,570	)

	Benefit obligation at end of year	$	17,945		$	18,770		$	44,179		$	42,882


(1)	The accumulated benefit obligation of the Postretirement Plan decreased by $3,690,000 due to the recognition of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Medicare Prescription Drug Law”).

(2)	During 2001, the retirement income guaranty plan was amended to (i) exclude bonus payments, beginning with bonuses payable in 2003 and thereafter, from the definition of compensation used to calculate benefits under the plan, and (ii) provide that the annuity equivalent of the 5% company contribution, used as an offset to benefits payable under the plan, will be calculated using a 7.5% discount rate in lieu of the 30-year Treasury Bond rate. The 7.5% discount rate in lieu of the 30-year Treasury Bond rate was lowered to 7.25% in 2002.

(3)	During 2004, the postretirement health care and life insurance plan was amended to increase retiree contributions, deductibles, coinsurance, and co-pays for retail drugs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

A reconciliation of the beginning and ending balances of the fair value of plan assets under the retirement income guarantee plan and the postretirement health care and life insurance plan is as follows:


								Postretirement
		Pension Benefits						Benefits

		2004			2003			2004			2003

		(In thousands)
Change in plan assets
	Fair value of plan assets at beginning of year	$	7,184		$	6,447		$	—		$	—
	Actuarial return on plan assets		334			779			—			—
	Employer contribution		3,442			1,000			1,764			1,570
	Benefits paid		(1,357	)		(1,042	)		(1,764	)		(1,570	)

	Fair value of plan assets at end of year	$	9,603		$	7,184		$	—		$	—

	Funded status	$	(8,342	)	$	(11,586	)	$	(44,179	)	$	(42,882	)
	Unrecognized prior service benefit		(2,345	)		(2,910	)		(2,261	)		—
	Unrecognized actuarial loss		6,679			8,506			11,288			9,426

	Net amount recognized	$	(4,008	)	$	(5,990	)	$	(35,152	)	$	(33,456	)

Amounts recognized in the Partnership’s consolidated balance sheets consist of:


							Postretirement
	Pension Benefits						Benefits

	2004			2003			2004			2003

	(In thousands)
Accrued benefit costs	$	(4,008	)	$	(6,338	)	$	(35,152	)	$	(33,456	)
Accumulated other comprehensive income		—			348			—			—

Net amount recognized	$	(4,008	)	$	(5,990	)	$	(35,152	)	$	(33,456	)

Information for the Partnership’s plan with an accumulated benefit obligation in excess of plan assets is as follows:


	Pension Benefits

	2004		2003

	(In thousands)
Projected benefit obligation	$	17,945	$	18,770
Accumulated benefit obligation		11,556		10,130
Fair value of plan assets		9,603		7,184

During 2003, the minimum liability included in other comprehensive income of $348,000 related to the Partnership’s pension plans.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

The weighted average assumptions used in accounting for the retirement income guarantee plan and the postretirement health care and life insurance plan were as follows:


		Pension Benefits									Postretirement Benefits

		2004			2003			2002			2004			2003			2002

Weighted average expense assumptions for the years ended December 31
	Discount rate		5.50	%		6.50	%		7.25	%		6.25	%		6.50	%		7.25	%
	Expected return on plan assets		8.50	%		8.50	%		8.50	%		N/A			N/A			N/A
	Rate of compensation increase		4.00	%		4.00	%		4.00	%		N/A			N/A			N/A


		Pension						Postretirement
		Benefits						Benefits

		2004			2003			2004			2003

Weighted-average balance sheet assumptions as of December 31
	Discount rate		5.30	%		5.50	%		6.0	%		6.25	%
	Rate of compensation increase		4.00	%		4.00	%		N/A			N/A

The assumed rate of cost increase in the postretirement health care and life insurance plan in 2004 was 10% for both non-Medicare eligible and Medicare eligible retirees. The assumed annual rates of cost increases decline each year through 2011 to a rate of 4.50%, and remain at 4.50% thereafter for both non-Medicare eligible and Medicare eligible retirees.

Assumed healthcare cost trend rates have a significant effect on the amounts reported for the healthcare plans. The effect of a 1% change in the health care cost trend rate for each future year would have had the following effects on 2004 results:


	1-Percentage		1-Percentage
	Point Increase		Point Decrease

	(In thousands)
Effect on total service cost and interest cost components	$	364	$	(318	)
Effect on postretirement benefit obligation	$	3,260	$	(3,029	)

The components of the net periodic benefit cost recognized for the retirement income guarantee plan and the postretirement health care and life insurance plan were as follows:


		Pension Benefits									Postretirement Benefits

		2004			2003			2002			2004			2003			2002

		(In thousands)
Components of net periodic benefit cost
	Service cost	$	816		$	821		$	539		$	743		$	719		$	654
	Interest cost		900			1,078			838			2,510			2,480			2,358
	Expected return on plan assets		(569	)		(475	)		(558	)		—			—			—
	Amortization of unrecognized transition asset		—			(140	)		(163	)		—			—			—
	Amortization of prior service benefit		(467	)		(472	)		(572	)		(315	)		(579	)		(580	)
	Amortization of unrecognized losses		654			850			382			524			303			37

	Net periodic benefit cost	$	1,334		$	1,662		$	466		$	3,462		$	2,923		$	2,469

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

During the year, the recognition of the Medicare Prescription Drug Law resulted in decreases in service cost of $27,000, interest cost of $97,900, and amortization of unrecognized loss of $161,900.

The Partnership estimates the following benefit payments, which reflect expected future service, as appropriate, will be paid:


	Pension		Postretirement
	Benefits		Benefits

	(In thousands)
2005	$	1,578	$	1,902
2006		1,760		2,069
2007		2,074		2,227
2008		2,160		2,407
2009		2,502		2,579
2010-2014		13,882		15,399

The Partnership expects to receive Medicare prescription subsidies of $307,000 in 2006, $304,000 in 2007, $299,000 in 2008, $294,000 in 2009, and $1,394,000 from 2010 through 2014.

A minimum funding contribution is not required to be made during 2005.

The Partnership does not fund the postretirement health care and life insurance plan and, accordingly, no assets are invested in the plan. A summary of investments of the retirement income guarantee plan are as follows at December 31, 2004 and 2003:


		2004			2003

Mutual funds — equity securities			52	%		57	%
Mutual funds — money market			17			—
Coal lease			31			43

	Total		100	%		100	%

The plan’s investment policy does not target specific asset classes, but seeks to balance the preservation and growth of capital in the plan’s mutual fund investment with the income derived with proceeds from the coal lease.

Services Company sponsors a retirement and savings plan (the “Retirement Plan”) through which it provides retirement benefits for substantially all of its regular full-time employees, except those covered by certain labor contracts. The Retirement Plan consists of two components. Under the first component, Services Company contributes 5% of each eligible employee’s covered salary to an employee’s separate account maintained in the Retirement Plan. Under the second component, for all employees not participating in the ESOP, Services Company makes a matching contribution into the employee’s separate account for 100% of an employee’s contribution to the Retirement Plan up to 6% of an employee’s eligible covered salary. For Services Company employees who participate in the ESOP, Services Company does not make a matching contribution. Total costs of the Retirement Plan were approximately $2,860,000 in 2004, $2,488,000 in 2003 and $2,222,000 in 2002.

Services Company also participates in a multi-employer retirement income plan that provides benefits to employees covered by certain labor contracts. Pension expense for the plan was $190,000, $167,000 and $146,000 for 2004, 2003 and 2002, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

In addition, Services Company contributes to a multi-employer postretirement benefit plan that provides health care and life insurance benefits to employees covered by certain labor contracts. The cost of providing these benefits was approximately $131,000, $116,000 and $101,000 for 2004, 2003 and 2002, respectively.


14.	Unit Option and Distribution Equivalent Plan

The Partnership has a Unit Option and Distribution Equivalent Plan (the “Option Plan”), which was approved by the Board of Directors of the General Partner on April 25, 1991 and by holders of the LP Units on October 22, 1991. The Option Plan was amended and restated on July 14, 1998. On April 24, 2002, the Board approved an Amended and Restated Unit Option and Distribution Equivalent Plan to extend the term thereof for an additional ten years and to make certain administrative changes in the Plan, the Unit Option Loan Program of the General Partner and related documents. The Option Plan authorizes the granting of options (the “Options”) to acquire LP Units to selected key employees (the “Optionees”) not to exceed 720,000 LP Units in the aggregate. The price at which each LP Unit may be purchased pursuant to the Options granted under the Option Plan is generally equal to the market value on the date of the grant. There are no options outstanding that were granted prior to 1998. Options granted after 1997 contain a “Distribution Equivalent” feature. Distribution Equivalents are an amount equal to (i) the Partnership’s per LP Unit regular quarterly distribution, multiplied by (ii) the number of LP Units subject to such Options that have not vested. The Distribution Equivalents are paid as independent cash bonuses on the date the Options vest and are dependent upon the percentage attainment of 3-year cash distribution targets.

Generally, the Options vest three years after the date of grant and are exercisable for up to 7 years following the date on which they vest.

The fair value of each the Options is estimated on the date of grant using the Black-Scholes option-pricing model. The Partnership does not record any compensation expense based upon the fair value of the Options. Compensation and benefit costs of executive officers were not charged to the Partnership after August 12, 1997 (see Note 17). The assumptions used for the Options granted in 2004, 2003 and 2002 are indicated below.


						Risk-free Interest Rate		Expected Life (Years)
Year of		Dividend				Vesting Period		Vesting Period
Option Grant		Yield		Volatility		3 Years		3 Years

	2004		6.2%		16.5%		3.0%		4.0
	2003		6.6%		32.6%		2.1%		4.0
	2002		6.8%		31.8%		3.6%		3.5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

A summary of the changes in the LP Unit options outstanding under the Option Plan as of December 31, 2004, 2003 and 2002 is as follows:


	2004					2003					2002

	Units			Weighted		Units			Weighted		Units			Weighted
	Under			Average		Under			Average		Under			Average
	Option			Exercise Price		Option			Exercise Price		Option			Exercise Price

Outstanding at beginning of year		215,000		$	31.15		189,200		$	28.10		163,100		$	25.17
Granted		66,400			41.76		59,100			38.12		47,400			36.56
Exercised		(59,100	)		20.31		(33,300	)		26.16		(18,300	)		23.28
Forfeitures		—			—		—			—		(3,000	)		29.38

Outstanding at end of year		222,300		$	37.14		215,000		$	31.15		189,200		$	28.10

Options exercisable at year-end		52,400					68,400					65,300
Weighted average fair value of options granted during the year	$	2.79				$	5.77				$	5.65

The following table summarizes information relating to LP Unit options outstanding under the Option Plan at December 31, 2004:


		Options Outstanding						Options Exercisable

		Options		Weighted Average		Weighted		Options		Weighted
Range of		Outstanding		Remaining		Average		Exercisable		Average
Exercise Prices		at 12/31/04		Contractual Life		Exercise Price		at 12/31/04		Exercise Price

$25.00 to $30.00			25,700		4.6 Years	$	27.40		25,700	$	27.40
$30.01 to $35.00			26,700		6.1 Years		33.90		26,700		33.90
$35.01 to $40.00			108,000		7.7 Years		37.41		—		—
$40.01 to $45.00			61,900		9.2 Years		42.10		—		—

	Total		222,300		7.6 Years		37.14		52,400	$	30.71

At December 31, 2004, there were 39,600 LP Units available for future grants under the Option Plan. In January 2005, the Partnership began a consent solicitation to amend certain provisions of the Option Plan. The Partnership has proposed increasing the number of LP Units authorized for issuance under the Option Plan by 720,000 LP Units.

Until April 29, 2004, the Partnership offered a unit option loan program whereby Optionees could borrow, at market rates, up to 95% of the purchase price of the LP Units and up to 100% of the applicable income tax withholding obligation in connection with such exercise. At December 31, 2004, 5 employees had outstanding loans under the unit option loan program. The aggregate borrowings outstanding at December 31, 2004 and 2003 were $666,000 and $1,357,000, respectively, of which $535,000 and $912,000, respectively, were related to the purchase price of the LP Units.


15.	Employee Stock Ownership Plan

Services Company provides an employee stock ownership plan (the “ESOP”) to the majority of its employees hired before September 15, 2004. Effective September 16, 2004, new employees do not participate

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

in the ESOP. Employees transferred into Services from BGC, BT and Norco on December 26, 2004, the employees added as a result of the acquisition of the Midwest Pipelines and Terminals and certain employees covered by a union multiemployer pension plan do not participate in the ESOP. The ESOP owns all of the outstanding common stock of Services Company.

At December 31, 2004, the ESOP was directly obligated to a third-party lender for $39.7 million of 3.60% notes due 2011 ( the “ESOP Notes”). The ESOP Notes were issued on May 4, 2004 to refinance Services Company’s 7.24% Notes which were originally issued to purchase Services Company common stock. The ESOP Notes are collateralized by Services Company common stock and are guaranteed by Services Company. The Partnership has committed that, in the event that the value of the LP Units owned by Services Company falls to less than 125% of the balance payable under the ESOP Notes, the Partnership will fund an escrow account with sufficient assets to bring the value of the total collateral (the value of the Services Company LP Units and the escrow account) up to the 125% minimum. Amounts deposited in the escrow account are returned to the Partnership when the value of Services Company’s LP Units returns to an amount which exceeds the 125% minimum. At December 31, 2004, the value of the LP Units was approximately $101 million, which exceeded the 125% requirement.

Services Company stock is released to employee accounts in the proportion that current payments of principal and interest on the ESOP Notes bear to the total of all principal and interest payments due under the ESOP Notes. Individual employees are allocated shares based upon the ratio of their eligible compensation to total eligible compensation. Eligible compensation generally includes base salary, overtime payments and certain bonuses. Except for the period March 1, 2003 through November 1, 2004, Services Company stock held in employee accounts received stock dividends in lieu of cash. The ESOP was amended to eliminate the payment of stock dividends on allocations made after February 28, 2003. Based upon provisions contained in the American Jobs Creation Act of 2004, the plan was amended further to reinstate this feature on allocations made after November 1, 2004.

The Partnership contributed 2,573,146 LP Units to Services Company in August 1997 in exchange for the elimination of the Partnership’s obligation to reimburse the Prior General Partner and its parent for certain executive compensation costs, a reduction of the incentive compensation paid by the Partnership to the General Partner under the incentive compensation agreement, and other changes that made the ESOP a less expensive fringe benefit for the Partnership. Funding for the ESOP Notes is provided by distributions that Services Company receives on the LP Units that it owns and from cash payments from the Partnership, as required, to cover any shortfall between the distributions that Services Company receives on the LP Units that it owns and amounts currently due under the ESOP Notes (the “accrued top-up reserve”). The Partnership will also incur ESOP-related costs for taxes associated with the sale and annual taxable income of the LP Units and for routine administrative costs. Total ESOP related costs charged to earnings were $643,000 in 2004, $1,100,000 in 2003 and $1,162,000 in 2002 .


16.	Leases and Commitments

The Operating Subsidiaries lease certain land and rights-of-way. Minimum future lease payments for these leases as of December 31, 2004 are approximately $4.2 million for each of the next five years. Substantially all of these lease payments can be canceled at any time should they not be required for operations.

The General Partner leases space in an office building and certain copying equipment and charges these costs to the Operating Subsidiaries. Buckeye leases certain computing equipment and automobiles. Future minimum lease payments under these noncancelable operating leases at December 31, 2004 were as follows: $1,016,000 for 2005, $888,000 for 2006, $435,000 for 2007, $305,000 for 2008 and none thereafter.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

Rent expense under operating leases was $8,477,000, $7,824,000 and $7,285,000 for 2004, 2003 and 2002, respectively.


17.	Related Party Transactions

The Partnership and the Operating Subsidiaries are managed by the General Partner. Under certain partnership agreements, management agreements and a services agreement, Services Company and the General Partner are entitled to reimbursement of substantially all direct and indirect costs related to the business activities of the Partnership and the Operating Subsidiaries except for certain executive compensation and related benefits costs incurred by MainLine Sub LLC. As described in Note 1, on December 15, 2004 the General Partner, the Prior General Partner, MainLine Sub and MainLine effected the GP Restructuring. The GP Restructuring did not significantly affect the type or amount of costs incurred by Services Company, the General Partner or the Partnership.

Costs reimbursed to the General Partner and the Prior General Partner and subsequent to the GP Restructuring, Services Company, by the Partnership and the Operating Subsidiaries totaled $70.3 million, $65.4 million, and $60.5 million in 2004, 2003 and 2002, respectively. The reimbursable costs include insurance, general and administrative costs, compensation and benefits payable to employees of Services Company, tax information and reporting costs, legal and audit fees and an allocable portion of overhead expenses.

Services Company, which is beneficially owned by the ESOP, owned 2,395,173 LP Units (approximately 7.0% of the LP Units outstanding) as of December 31, 2004. Distributions received by Services Company on such LP Units are used to fund obligations of the ESOP. Distributions paid to Services Company totaled $6,365,000, $6,226,000 and $6,188,000 in 2004, 2003 and 2002, respectively. In addition, the Partnership recorded ESOP-related costs of $643,000, $1,100,000 and $1,162,000 in 2004, 2003 and 2002, respectively (see Note 15).

MainLine Sub (the Prior General Partner prior to the GP Restructuring) receives incentive compensation payments from the Partnership pursuant to an incentive compensation agreement based upon the level of quarterly cash distributions paid per LP Unit. Incentive compensation payments totaled $14.0 million,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)

$11.9 million and $10.8 million in 2004, 2003 and 2002, respectively. The incentive compensation payments are included in “General Partner incentive compensation” expense on the Consolidated Statements of Income.


18.	Partners’ Capital

Changes in partners’ capital for the years ended December 31, 2002, 2003, and 2004 were as follows:


										Accumulated
							Receivable			Other
	General			Limited			from Exercise			Comprehensive
	Partner			Partners			of Options			Income			Total

	(In thousands)
Partners’ capital at January 1, 2002	$	2,834		$	351,057		$	(995	)	$	—		$	352,896
Net income		646			71,256			—			—			71,902
Distributions		(610	)		(67,322	)		—			—			(67,932	)
Exercise of Unit options		—			484			—			—			484
Net change in receivable from exercise of options		—			—			82			—			82

Partners’ capital December 31, 2002		2,870			355,475			(913	)		—			357,432
Net income		263			29,891			—			—			30,154
Distributions		(619	)		(71,756	)		—			—			(72,375	)
Net proceeds from issuance of 1,750,000 Limited Partnership Units		—			59,923			—			—			59,923
Paid in capital related to pipeline project		—			1,736			—			—			1,736
Exercise of Unit options		—			889			—			—			889
Net change in receivable from exercise of options		—			—			1			—			1
Minimum pension liability		—			—			—			(348	)		(348	)

Partners’ capital December 31, 2003		2,514			376,158			(912	)		(348	)		377,412
Net income		678			82,284			—			—			82,962
Distributions		(643	)		(79,529	)		—			—			(80,172	)
Net proceeds from issuance of 5,500,000 Limited Partnership Units		—			223,296			—			—			223,296
Exercise of Unit options		—			1,200			—			—			1,200
Net change in receivable from exercise of options		—			—			377			—			377
Minimum pension liability		—			—			—			348			348

Partners’ capital December 31, 2004	$	2,549		$	603,409		$	(535	)	$	—		$	605,423

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)


	General		Limited
	Partner		Partners		Total

Units outstanding at January 1, 2002		243,914		26,920,546		27,164,460
Units issued pursuant to the Unit Option and Distribution Equivalent Plan		—		18,300		18,300

Units outstanding at December 31, 2002		243,914		26,938,846		27,182,760
Units issued pursuant to the Unit Option and Distribution Equivalent Plan		—		33,300		33,300
Units issued in an underwritten public offering		—		1,750,000		1,750,000

Units outstanding at December 31, 2003		243,914		28,722,146		28,966,060
Units issued pursuant to the Unit Option and Distribution Equivalent Plan		—		59,100		59,100
Units issued in an underwritten public offering		—		5,500,000		5,500,000

Units outstanding at December 31, 2004		243,914		34,281,246		34,525,160

The Partnership Agreement provides that without prior approval of limited partners of the Partnership holding an aggregate of at least two-thirds of the outstanding LP Units, the Partnership cannot issue any additional LP Units of a class or series having preferences or other special or senior rights over the LP Units.

The receivable from the exercise of options is due from Services Company for notes issued under the unit option loan program (see Note 14). The notes are full recourse promissory notes due from Optionees, bearing market rates of interest.

On February 28, 2003, the Partnership sold 1,750,000 LP Units in an underwritten public offering at a price of $36.01 per LP Unit. Proceeds to the Partnership, net of underwriters’ discount of $1.62 per LP Unit and offering expenses, were approximately $59.9 million. On October 19, 2004, the Partnership sold 5,500,000 LP Units in an underwritten public offering at a price of $42.50 per LP Unit. Proceeds to the Partnership, net of underwriters’ discount of $1.806 per LP Unit and offering expenses, were approximately $223.3 million.

On February 7, 2005, the Partnership sold 1,100,000 units in an underwritten public offering at a price of $45.00 per LP unit. Proceeds to the Partnership, net of underwriters’ discount of $1.46 per LP Unit and estimated offering expenses, were approximately $47.6 million. The principal use of proceeds was to repay, in part, amounts outstanding under the Partnership’s revolving line of credit.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)


19.	Cash Distributions

The Partnership makes quarterly cash distributions to Unitholders of substantially all of its available cash, generally defined as consolidated cash receipts less consolidated cash expenditures and such retentions for working capital, anticipated cash expenditures and contingencies as the General Partner deems appropriate. All such distributions were paid on the then outstanding GP and LP Units. Cash distributions aggregated $80,172,000 in 2004, $72,375,000 in 2003 and $67,932,000 in 2002.


			Amount
Record Date	Payment Date		Per Unit

February 6, 2002		February 28, 2002	$	0.6250
May 5, 2002		May 31, 2002		0.6250
August 6, 2002		August 30, 2002		0.6250
November 6, 2002		November 29, 2002		0.6250
February 6, 2003		February 28, 2003		0.6250
May 6, 2003		May 30, 2003		0.6375
August 6, 2003		August 29, 2003		0.6375
November 5, 2003		November 28, 2003		0.6375
February 4, 2004		February 27, 2004		0.6500
May 5, 2004		May 28, 2004		0.6500
August 9, 2004		August 31, 2004		0.6625
November 8, 2004		November 30, 2004		0.6750

On January 28, 2005, the Partnership announced a quarterly distribution of $0.6875 per unit payable on February 28, 2005 to Unitholders of record on February 7, 2005.


20.	Quarterly Financial Data (Unaudited)

Summarized quarterly financial data for 2004 and 2003 are set forth below. Quarterly results were influenced by seasonal and other factors inherent in the Partnership’s business.


		1st Quarter				2nd Quarter				3rd Quarter					4th Quarter				Total

		2004		2003		2004		2003		2004		2003			2004		2003		2004		2003

		(In thousands, except per unit amounts)
Transportation revenue		$	71,761	$	65,827	$	70,540	$	66,997	$	82,011	$	69,990		$	99,231	$	70,133	$	323,543	$	272,947
Operating income			28,098		24,804		27,645		25,464		29,879		28,969			36,522		30,098		122,144		109,335
Net income			20,101		16,727		19,944		17,558		20,632		(25,863	)		22,285		21,732		82,962		30,154
Earnings per Partnership Unit — basic:
	Net income per Unit		0.69		0.60		0.69		0.61		0.71		(0.89	)		0.67		0.75		2.76		1.05
Earnings per Partnership Unit — assuming dilution:
	Net income per Unit		0.69		0.60		0.69		0.61		0.71		(0.89	)		0.66		0.75		2.75		1.05

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2004 AND 2003 AND

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 — (Continued)


21.	Earnings Per Unit

The following is a reconciliation of basic and dilutive income from continuing operations per LP Unit for the years ended December 31, 2004, 2003 and 2002:


	2004						2003						2002

	Income		Units		Per		Income		Units		Per		Income		Units		Per
	(Numer-		(Denom-		Unit		(Numer-		(Denom-		Unit		(Numer-		(Denom-		Unit
	ator)		inator)		Amt.		ator)		inator)		Amt.		ator)		inator)		Amt.

Income from continuing operations	$	82,962					$	30,154					$	71,902

Earnings per Partnership Unit — basic		82,962		30,103	$	2.76		30,154		28,673	$	1.05		71,902		27,173	$	2.65

Effect of dilutive securities — options		—		48				—		75				—		55

Earnings per Partnership Unit — assuming dilution	$	82,962		30,151	$	2.75	$	30,154		28,748	$	1.05	$	71,902		27,228	$	2.64

Options reported as dilutive securities are related to unexercised options outstanding under the Option Plan (see Note 14).


22.	Subsequent Event

On January 21, 2005, the Partnership announced that it had entered into a definitive agreement to purchase a major refined petroleum products pipeline system, along with interests in five associated petroleum products terminals, from affiliates of ExxonMobil Corporation (the “ExxonMobil Asset Purchase”) for $180 million. The assets consist of five pipelines, totaling approximately 478 miles, four terminals, and a 50% interest in a terminal located in the Syracuse, New York area.

The ExxonMobil Asset Purchase is subject to customary regulatory approvals and closing conditions. The transaction is scheduled to close in the first half of 2005. The Partnership intends to fund the transaction initially through existing credit facilities.


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure*

None.


Item 9A.	*Controls and Procedures*

(a) Evaluation of Disclosure Controls and Procedures.

The management of the General Partner with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the General Partner’s disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by the General Partner in reports filed 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 (ii) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Management’s Report on Internal Control Over Financial Reporting

Management’s report on internal control over financial reporting is set forth in Item 8 of this annual report on Form 10-K and is incorporated by reference herein.

No change in the General Partner’s internal control over financial reporting occurred during the Partnership’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the General Partner’s internal control over financial reporting.

PART III


Item 10.	*Directors and Executive Officers of the Registrant*

The Partnership does not have directors or officers. The executive officers of the General Partner perform all management functions for the Partnership and the Operating Partnerships in their capacities as officers and directors of the General Partner and Services Company. Directors and officers of the General Partner are selected by MainLine Sub, as sole member of the General Partner. See “Certain Relationships and Related Transactions.”

Directors of the General Partner

Set forth below is certain information concerning the directors of the General Partner.


Name, Age and Present		Business Experience During
Position with General Partner		Past Five Years

William H. Shea, Jr., 50 Chairman of the Board, President and Chief Executive Officer and Director*		Mr. Shea was named Chairman of the Board on May 12, 2004 and President and Chief Executive Officer and a director of the Prior General Partner on September 27, 2000, and serves the General Partner in the same capacity. He has served as President and Chief Executive Officer of the general partner of MainLine since May 4, 2004. He served as President and Chief Operating Officer of the prior General Partner from July 1998 to September 2000. Mr. Shea serves on the Board of Trustees of The Franklin Institute.
Brian F. Billings, 66 n Director		Mr. Billings became a director of the Prior General Partner on December 31, 1998, and serves the General Partner in the same capacity. Mr. Billings was a director of BMC (the predecessor of the Prior General Partner) from October 1986 to December 1998.
Michael B. Hoffman, 54 Director		Mr. Hoffman became a director of the Prior General Partner on May 4, 2004, and serves the General Partner in the same capacity. He has served as a Managing Director at Riverstone Holdings, LLC since January 2003. He also has served as a Vice President of the general partner of MainLine since May 4, 2004. He currently serves as a member of the board of directors of Belden and Blake Corporation, Topaz Power Group, LLC, Microban International, and Onconova Therapeutics, and he serves on the Board of Trustees of Lenox Hill Hospital and Manhattan Eye, Ear and Throat Hospital. Prior to joining Riverstone Holdings, LLC, Mr. Hoffman was a Senior Managing Director and Co-Head of M&A Advisory at The Blackstone Group, where he was also a member of Blackstone’s Principal Group Investment Committee.


Name, Age and Present		Business Experience During
Position with General Partner		Past Five Years

Edward F. Kosnik, 60 n Director		Mr. Kosnik became a director of the Prior General Partner on December 31, 1998, and serves the General Partner in the same capacity. He was a director of BMC (the predecessor of the Prior General Partner) from October 1986 to December 1998. Mr. Kosnik was President and Chief Executive Officer of Berwind Corporation, a diversified industrial real estate and financial services company, from December 1999 until February 2001 and was President and Chief Operating Officer of Berwind Corporation from June 1997 to December 1999. Since November 2004, He has served on the Board of Directors of Premcor, Inc. and is a member of Premcor, Inc.’s audit committee.
Joseph A. LaSala, Jr., 50 n Director*		Mr. LaSala became a director of the Prior General Partner on April 23, 2001, and serves the General Partner in the same capacity. He has served as Vice President, General Counsel and Secretary of Novell, Inc. since July 11, 2001. Mr. LaSala served as Vice President, General Counsel and Secretary of Cambridge Technology Partners from March 2000 to July 2001. He had been Vice President, General Counsel and Secretary of Union Pacific Resources, Inc. from January 1997 to February 2000.
David M. Leuschen, 53 Director		Mr. Leuschen became a director of the Prior General Partner on May 4, 2004, and serves the General Partner in the same capacity. He is a founder of Riverstone Holdings, LLC where he has served as a Managing Director since May 2000. He has served as a Vice President of the general partner of MainLine since May 4, 2004. He currently serves as a member of the board of directors of Belden and Blake Corporation, Mariner Energy Inc., Seabulk International Inc., Frontier Drilling ASA, Legend Natural Gas, L.P. and Mega Energy LLC. Previously, he served as a director of Cambridge Energy Research Associates, Cross Timbers Oil Company and Magellan GP LLC. He is also the owner and President of Switchback Ranch LLC, an integrated cattle ranching operation in the western United States. Prior to joining Riverstone Holdings, LLC, Mr. Leuschen spent 22 years with Goldman, Sachs & Co., where he founded the firm’s Global Energy and Power Group in 1982.
Jonathan O’Herron, 75 n Director		Mr. O’Herron became a director of the Prior General Partner on December 31, 1998, and serves the General Partner in the same capacity. He was a director of BMC from September 1997 to December 1998. He has been Managing Director of Lazard Freres & Company, LLC for more than five years.


Name, Age and Present		Business Experience During
Position with General Partner		Past Five Years

Frank S. Sowinski, 48 n Director		Mr. Sowinski became a director of the Prior General Partner on February 22, 2001, and serves the General Partner in the same capacity. He served as Executive Vice President of Liz Claiborne, Inc. from January 2004 until October 2004. Mr. Sowinski served as Executive Vice President and Chief Financial Officer of PWC Consulting, a systems integrator company, from May 2002 to October 2002. He was a Senior Vice President and Chief Financial Officer of the Dun & Bradstreet Corporation from October 2000 to April 2001. Mr. Sowinski served as President of the Dun & Bradstreet operating company from September 1999 to October 2000. He had been Senior Vice President and Chief Financial Officer of the Dun & Bradstreet Corporation from November 1996 to September 1999.
Andrew W. Ward, 37 Director		Mr. Ward became a director of the Prior General Partner on May 4, 2004, and serves the General Partner in the same capacity. He has served as a Principal at Riverstone Holdings, LLC since March 2002. He has served as Vice President and Chief Financial Officer of the general partner of MainLine. since May 4, 2004. Prior to joining Riverstone Holdings, LLC, Mr. Ward was a Limited Partner and Managing Director with Hyperion Partners/ Ranieri & Co., a private equity fund that specialized in investments in the financial services and real estate sectors.


*	Also a director of Services Company.
n	Is a non-employee director of our General Partner and is not otherwise affiliated with our General Partner or its parent companies.

Executive Officers of the General Partner

Set forth below is certain information concerning the executive officers of the General Partner who also serve in similar positions in MainLine Sub and Services Company.


Name, Age and		Business Experience During
Present Position		Past Five Years

Stephen C. Muther, 55 Senior Vice President — Administration, General Counsel and Secretary		Mr. Muther was the Senior Vice President — Administration, General Counsel and Secretary of the Prior General Partner for more than five years and serves the General Partner in the same capacity. He has also served in the same capacity for MainLine since May 4, 2004.
Robert B. Wallace, 43 Senior Vice President — Finance and Chief Financial Officer		Mr. Wallace became the Senior Vice President — Finance and Chief Financial Officer of the Prior General Partner on September 1, 2004, and serves the General Partner in the same capacity. He was an executive director in the UBS Energy Group from September 1997 to February 2004.

Section 16(a) Beneficial Ownership Reporting Compliance

Pursuant to Section 16(a) of the Exchange Act, the General Partner’s executive officers and directors, and persons beneficially owning more than 10% of the Partnership’s LP Units, are required to file with the Commission reports of their initial ownership and changes in ownership of common shares. One report on

Form 4 with respect to the purchase of 6,000 LP Units by a director of the General Partner was filed approximately one week late. The General Partner believes that for 2004, all other executive officers and directors who were required to file reports under Section 16 (a) complied with such requirements in all material respects.

The Board of Directors


	*Director Independence*

Although the NYSE listing standards requiring a majority of directors to be independent do not apply to publicly traded limited partnerships like the Partnership, a majority of the General Partner’s board of directors is “independent” as that term is defined in the applicable NYSE rules and Rule 10A-3 of the Exchange Act. In determining the independence of each director, the General Partner has adopted certain categorical standards. The General Partner’s independent directors as determined in accordance with those standards are: Brian F. Billings, Edward F. Kosnik, Joseph A. LaSala, Jonathan O’Herron and Frank S. Sowinski. Pursuant to such categorical standards, a director will not be deemed independent if:


	•	the director is, or has been within the last three years, an employee of the Partnership, or an immediate family member is, or has been within the last three years, an executive officer, of the Partnership;

	•	the director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $100,000 in direct compensation from the Partnership, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);

	•	(i) the director or an immediate family member is a current partner of a firm that is the Partnership’s internal or external auditor; (ii) the director is a current employee of such a firm; (iii) the director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (iv) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on the Partnership’s audit within that time;

	•	the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Partnership’s present executive officers at the same time serve or served on that company’s compensation committee;

	•	the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Partnership for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues; or

	•	the director serves as an executive officer of a charitable organization and, during any of the past three fiscal years, the Partnership made charitable contributions to the charitable organization in any single fiscal year that exceeded $1 million or two percent, whichever is greater, of the charitable organization’s consolidated gross revenues.

For the purposes of these categorical standards, the term “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home.


	*Meetings of Non-Management Directors*

The Partnership’s non-management directors meet in executive session at least two times per year outside of the presence of any management directors and any other members of the Partnership’s management who may otherwise be present. During at least one session per year, only independent directors are present. The directors present at each executive session select a presiding director for that session.


	*Communication with the Board of Directors*

A Unitholder or other interested party who wishes to communicate with the non-management directors of the General Partner may do so by contacting Stephen C. Muther, Senior Vice President — Administration, General Counsel and Secretary, at the address or phone number appearing on the front page of this Annual Report on Form 10-K. Communications will be relayed to the intended Board recipient except in instances where it is deemed unnecessary or inappropriate to do so pursuant to the procedures established by the Audit Committee. Any communications withheld will nonetheless be recorded and available for any director who wishes to review it.


	*Audit Committee*

The General Partner has an audit committee (the “Audit Committee”) comprised of Brian F. Billings (Chairman), Edward F. Kosnik, Joseph A. LaSala and Jonathan O’Herron. The members of the Audit Committee are non-employee directors of the General Partner and are not officers, directors or otherwise affiliated with the General Partner or its parent companies. The General Partner’s Board of Directors has determined that no Audit Committee member has a material relationship with the General Partner. Our Board of Directors has also determined that each of Messrs. Billings, Kosnik and O’Herron qualify as an audit committee financial expert as defined in Item 401(h) of Regulation S-K.

The Audit Committee provides independent oversight with respect to our internal controls, accounting policies, financial reporting, internal audit function and the independent auditors. The Audit Committee also reviews the scope and quality, including the independence and objectivity of the independent and internal auditors. The Audit Committee has sole authority as to the retention, evaluation, compensation and oversight of the work of the independent auditors. The independent auditors report directly to the Audit Committee. The Audit Committee also has sole authority to approve all audit and non-audit services provided by the independent auditors. The charter of the Audit Committee is available at our website at www.buckeye.com.

The Audit Committee has established procedures for the receipt, retention and treatment of complaints we receive regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. These procedures are part of the Business Code of Conduct and are available at our website at www.buckeye.com.


	*Finance Committee*

The General Partner has a Finance Committee, which currently consists of three directors: Edward F. Kosnik, Jonathan O’Herron and Andrew W. Ward (Chairman). The Finance Committee provides oversight and advice with respect to the capital structure of the Partnership.


	*Corporate Governance Matters*

The Partnership has adopted a Code of Ethics for Directors, Executive Officers and Senior Financial Officers that applies to, among others, the Chairman, President, Chief Financial Officer and Controller of the General Partner, as required by Section 406 of the Sarbanes Oxley Act of 2002. Furthermore, the Partnership has adopted Corporate Governance Guidelines and a charter for its Audit Committee. Each of the foregoing is available on the Partnership’s website at www.buckeye.com. The Partnership will provide copies of any of the foregoing upon receipt of a written request.


Item 11.	*Executive Compensation*

Director Compensation

Directors of the General Partner receive an annual fee of $35,000 plus $1,000 for each Board of Directors and committee meeting attendance. Additionally, the Chairman of the Audit Committee receives an annual fee of $10,000. Messrs. Hoffman, Leuschen, Shea and Ward do not receive any fees for service as a director. Directors’ fees paid by the General Partner in 2004 to its directors amounted to $330,000. The directors’ fees

were reimbursed by the Partnership. Members of the Board of Directors of Services Company are not separately compensated for their services as directors.

Director Recognition Program

The General Partner has adopted the Director Recognition Program (the “Recognition Program”) that had been instituted by BMC in September 1997. The Recognition Program provides that, upon retirement or death and subject to certain conditions, directors receive a recognition benefit of up to three times their annual director’s fees (excluding attendance and committee fees) based upon their years of service as a member of the Board of Directors of the General Partner, the Prior General Partner or BMC. A minimum of three full years of service as a member of the Board of Directors is required for eligibility under the Recognition Program. Members of the Board of Directors who are concurrently serving as an officer or employee of the General Partner or its affiliates are not eligible for the Recognition Program. The Partnership recorded $120,000 of expense under this program in 2004. No expenses were recorded under this program during 2003 and 2002.

Executive Compensation

As part of a restructuring of the ESOP in 1997, the Partnership and certain of the Operating Subsidiaries entered into an Exchange Agreement with the Prior General Partner (as amended, the “Exchange Agreement”), pursuant to which the Partnership and the Operating Subsidiaries were permanently released from their obligations to reimburse the Prior General Partner for certain compensation and fringe benefit costs for executive level duties performed by the Prior General Partner with respect to operations, finance, legal, marketing and business development, and treasury, as well as the President of the Prior General Partner. In connection with the GP Restructuring, the Prior General Partner, the General Partner, the Partnership and the Operating Partnerships amended the exchange agreement to provide that such release included the compensation and fringe benefit costs for the four highest salaried officers of the General Partner. This amendment was embodied in the Third Amended and Restated Exchange Agreement. For more information on the compensation and benefits of the General Partner’s officers that are not reimbursed by the Partnership, see Item 13 “Certain Relationships and Related Transactions — Executive Officer Employment, Severance and Benefits Continuation Agreements.” For more information on the GP Restructuring, see Item 1 “Business — Significant Partnership Events in 2004 — GP Restructuring and Acquisition of the General Partner by Carlyle/ Riverstone.”

Executive Officer Severance Agreements

Steven C. Ramsey, the former Senior Vice President — Finance and Chief Financial Officer of the Prior General Partner was a party with Services Company, BMC and Glenmoor (the predecessors to MainLine Sub) to a Severance Agreement, dated as of December 8, 1997, and several amendments and supplements thereto (collectively, the “Ramsey Severance Agreement”). Mr. Ramsey resigned from his positions with the Prior General Partner and its affiliates effective as of August 31, 2004 (Ramsey’s “Termination Date”), and was subsequently paid severance pursuant to the Ramsey Severance Agreement. Of the payments made to Mr. Ramsey under the Ramsey Severance Agreement, $647,015 was reimbursed by the Partnership. In addition, the Ramsey Severance Agreement entitles Mr. Ramsey to continued coverage by MainLine Sub for up to 36 months from the Termination Date under the medical and dental benefits and disability insurance plans and policies at the same level of coverage that Mr. Ramsey enjoyed prior to such termination, subject to certain limitations. The cost of these benefits will also be borne by the Partnership.

Mr. Muther and MainLine Sub are parties to an Amended and Restated Employment and Severance Agreement, dated as of May 4, 2004 (the “Muther Employment Agreement”), which provides for, among other things, the payment of severance and the continuation of certain benefits following a termination of Mr. Muther’s employment by MainLine Sub (and its affiliates). Although the Partnership is not obligated for Mr. Muther’s compensation and benefits generally pursuant to the Exchange Agreement, the Partnership would be required to reimburse MainLine Sub for certain severance costs incurred under the Muther Employment Agreement. The Muther Employment Agreement supersedes certain prior severance agree-

ments between Mr. Muther and the predecessor to MainLine Sub (and its affiliates) for which the Partnership had similar reimbursement obligations. For more information on the compensation and benefits of the General Partner’s officers that are not reimbursed by the Partnership, see Item 13 “Certain Relationships and Related Transactions — Executive Officer Employment, Severance and Benefits Continuation Agreements.”


Item 12.	*Security Ownership of Certain Beneficial Owners and Management*

Services Company owns approximately 7% of the outstanding LP Units as of February 22, 2005. No other person or group is known to be the beneficial owner of more than 5% of the LP Units as of February 22, 2005.

The following table sets forth certain information, as of February 22, 2005, concerning the beneficial ownership of LP Units by each director of the General Partner, the Chief Executive Officer of the General Partner, the four most highly compensated officers of the General Partner and by all directors and executive officers of the General Partner as a group. Such information is based on data furnished by the persons named. Based on information furnished to the General Partner by such persons, no director or executive officer of the General Partner owned beneficially, as of such date, more than 1% of any class of equity securities of the Partnership or any of its subsidiaries outstanding at that date.


Name	Number of LP Units (1)

Brian F. Billings		17,500
Eric A. Gustafson		11,200
Michael B. Hoffman		80,000	(2)
Edward F. Kosnik		14,000
Joseph A. LaSala, Jr.		0
David M. Leuschen		80,000	(2)
Stephen C. Muther		23,100
Jonathan O’Herron		20,800
William H. Shea, Jr.		100,200	(2)(4)
Frank S. Sowinski		5,500
Robert B. Wallace		0
Andrew W. Ward		80,000	(2)
All directors and executive officers as a group (consisting of 12 persons)		192,300	(3)


(1)	Unless otherwise indicated, the persons named above have sole voting and investment power over the LP Units reported.

(2)	Includes the 80,000 Units owned by MainLine Sub, over which the indicated persons share voting and investment power by virtue of their membership on the Board of Managers of MainLine Management LLC, which is the general partner of the sole member of MainLine Sub. Such individuals expressly disclaim beneficial ownership of such Units.

(3)	The 80,000 Units owned by MainLine Sub are included in the total only once.

(4)	Includes 18,800 LP Units for which the person indicated shares voting and investment power with his spouse.

Equity Compensation Plan Information

The following table sets forth information as of December 31, 2004 with respect to compensation plans under which equity securities of the Partnership are authorized for issuance.

Number of Securities

Remaining Available

for Future Issuance

Number of

Under Equity

Securities to be

Weighted-Average

Compensation Plans

Issued upon Exercise

Exercise Price of

(Excluding

of Outstanding Options,

Outstanding Options,

Securities Reflected

Warrants and Rights

in Column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved by security holders(1)

222,300

37.14

39,600

Equity compensation plans not approved by security holders

—

Total

222,300

37.14

39,600


(1)	This plan is the Amended and Restated Unit Option and Distribution Equivalent Plan of the Partnership.

Changes of Control

MainLine is party to a secured credit and guaranty agreement (the “MainLine Credit Agreement”), entered into by MainLine, Goldman Sachs Credit Partners L.P., as administrative agent (“GSCP”), and the various lenders party thereto. The Partnership is not a party to the MainLine Credit Agreement. The MainLine Credit Agreement is secured by pledges of substantially all of the assets of MainLine and MainLine Sub, including all of the outstanding limited liability company interests of each of MainLine Sub and the General Partner. If MainLine and MainLine Sub default on their obligations under the MainLine Credit Agreement, the lenders could exercise their rights under these pledges, which could result in a future change of control of the Partnership.


Item 13.	*Certain Relationships and Related Transactions*

General Partner Reimbursement and Compensation


	*Reimbursement of General Partner Costs and Expenses*

The Partnership and the Operating Subsidiaries are managed by the General Partner pursuant to the Amended and Restated Agreement of Limited Partnership of the Partnership (the “Partnership Agreement”), the several Amended and Restated Agreements of Limited Partnership of the Operating Subsidiaries that are limited partnerships (the “Subsidiary Partnership Agreements”), and the several Management Agreements between the General Partner and the Operating Subsidiaries that are limited partnerships (the “Management Agreements”). MainLine Sub, whose predecessors-in-interest, BMC and the Prior General Partner, had each been general partner of the Partnership, contributed its general partnership interest and certain other assets to the General Partner effective December 15, 2004 in connection with the GP Restructuring. The General Partner is a wholly-owned subsidiary of MainLine Sub. Certain aspects of the GP Restructuring were reviewed by and granted “Special Approval” by the Audit Committee pursuant to Section 7.9 of the Partnership Agreement. As a condition to the Audit Committee’s Special Approval of the GP Restructuring, the General Partner agreed to pay one-third of the professional fees and expenses and other costs associated with the GP Restructuring, exclusive of fees and expenses of counsel to the Audit Committee, which were paid solely by the Partnership. For more information on the GP Restructuring, see “Significant Partnership Events in 2004 — GP Restructuring and Acquisition of the General Partner by Carlyle/ Riverstone” in Part I.

Under the Partnership Agreement, the Subsidiary Partnership Agreements and the Wood River LLC Agreement, as well as the Management Agreements, the General Partner and certain related parties are

entitled to reimbursement of all direct and indirect costs and expenses related to the business activities of the Partnership and the Operating Subsidiaries, except as otherwise provided by the Exchange Agreement (as discussed below). These costs and expenses include insurance fees, consulting fees, general and administrative costs, compensation and benefits payable to employees of the General Partner (other than certain executive officers), tax information and reporting costs, legal and audit fees and an allocable portion of overhead expenses. Such reimbursed amounts constitute a substantial portion of the revenues of the General Partner.


	*Management Fee*

MainLine Sub is entitled to receive an annual management fee for certain management functions it provides to the General Partner pursuant to a Management Agreement between MainLine Sub and the General Partner. The management fee includes a “Senior Administrative Charge” of not less than $975,000 and reimbursement for certain costs and expenses. The disinterested directors of the General Partner approve the amount of the management fee on an annual basis. Amounts paid to MainLine Sub (or its predecessors-in-interest, Glenmoor and BMC) in 2004 amounted to $1,835,000, including $975,000 for the Senior Administrative Charge and $860,000 of reimbursed expenses. Amounts paid to Glenmoor and BMC in the years 2003 and 2002 for management fees equaled $1,929,000 and $1,906,000 respectively, including $975,000 for the Senior Administrative Charge in each year. The management fee also included $954,000 and $931,000, respectively, of reimbursed expenses in years 2003 and 2002. The Senior Administrative Charge and reimbursed expenses are charged to the Partnership. In recognition of increased services from MainLine Sub in the form of assistance with business development opportunities, financing strategies, insurance, investment banking and corporate development advice, the disinterested directors of the General Partner have approved a Senior Administrative Charge for 2005 of $1.9 million, and the MainLine Sub agreed not to request an additional increase in the Senior Administrative Charge for two years (other than adjustments for inflation capped at the Consumer Price Index) unless there is a material change in the nature of the services rendered to the General Partner by MainLine Sub.


	*Incentive Compensation*

In connection with the GP Restructuring, MainLine Sub, in its capacity as the Prior General Partner, did not assign the incentive compensation agreement to the General Partner, but amended and restated that agreement in the Fourth Amended and Restated Incentive Compensation Agreement between MainLine Sub and the Partnership (the “Incentive Compensation Agreement”). The Incentive Compensation Agreement provides that, subject to certain limitations and adjustments, if a quarterly cash distribution exceeds a target of $0.325 per LP Unit, the Partnership will pay MainLine Sub, in respect of each outstanding LP Unit, incentive compensation equal to (i) 15% of that portion of the distribution per LP Unit which exceeds the target quarterly amount of $0.325 but is not more than $0.35, plus (ii) 25% of the amount, if any, by which the quarterly distribution per LP Unit exceeds $0.35 but is not more than $0.375, plus (iii) 30% of the amount, if any, by which the quarterly distribution per LP Unit exceeds $0.375 but is not more than $0.40, plus (iv) 35% of the amount, if any, by which the quarterly distribution per LP Unit exceeds $0.40 but is not more than $0.425, plus (v) 40% of the amount, if any, by which the quarterly distribution per LP Unit exceeds $0.425 but is not more than $0.525, plus (vi) 45% of the amount, if any, by which the quarterly distribution per LP Unit exceeds $0.525. MainLine Sub is also entitled to incentive compensation, under a comparable formula, in respect of special cash distributions exceeding a target special distribution amount per LP Unit. The target special distribution amount generally means the amount which, together with all amounts distributed per LP Unit prior to the special distribution compounded quarterly at 13% per annum, would equal $10.00 (the initial public offering price of the LP Units split two-for-one) compounded quarterly at 13% per annum from the date of the closing of the initial public offering in December 1986. Neither formula was amended in connection with the GP Restructuring. Incentive compensation paid by the Partnership for quarterly cash distributions totaled $14,002,000, $11,877,000 and $10,838,000 in 2004, 2003 and 2002, respectively. No special cash distributions have ever been paid by the Partnership.

Executive Officer Employment, Severance and Benefits Continuation Agreements


	*Executive Officer Compensation*

Pursuant to the terms of the Third Amended and Restated Exchange Agreement, the General Partner has permanently released the Partnership and its subsidiaries from certain compensation and fringe benefit costs for the four highest salaried officers of the General Partner with respect to operations, finance, legal, marketing and business development, and treasury, or performing the duties of President of the General Partner. All such compensation and fringe benefit costs, including those incurred pursuant to the employment, severance and benefits continuation agreements described below, are borne by the General Partner (except for a portion of potential severance payments to Mr. Muther upon the termination of his employment as described in Item 11 “Executive Compensation — Executive Officer Severance Agreement”). The executives are paid through Services Company, but MainLine Sub and the General Partner are obligated to reimburse Services Company through the Executive Employment Agreement, dated as of December 15, 2004, among Services Company, MainLine Sub and the General Partner.

MainLine Sub and Mr. Shea are parties to an Employment Agreement (the “Shea Employment Agreement”), dated as of May 4, 2004, and a Benefits Continuation Agreement (the “Benefits Continuation Agreement”) dated as of January 1, 2004. Mr. Shea’s base salary under the Shea Employment Agreement is not less than $400,000 per year (less applicable taxes and withholdings). The Shea Employment Agreement is terminable at any time for any reason by MainLine Sub or Mr. Shea. Pursuant to the Benefits Continuation Agreement, upon the termination of Mr. Shea’s employment for any reason within two years following a change in control of the Partnership, Mr. Shea will be entitled to continued coverage by MainLine Sub for 36 months after the effective date of such termination under the medical and dental benefits and disability insurance plans and policies at the same level of coverage that Mr. Shea enjoyed prior to such termination, subject to certain limitations. For purposes of the Benefits Continuation Agreement, a “change of control” is defined as the acquisition (other than by the General Partner and its affiliates) of 80 percent or more of the LP Units of the Partnership, 51 percent or more of the general partnership interests owned by the General Partner or 50 percent or more of the voting equity interest of the Partnership and the General Partner on a combined basis. The sale of MainLine Sub to affiliates of Carlyle/ Riverstone Global Energy and Power Fund II, L.P. on May 4, 2004, constituted a “change of control” under the Benefits Continuation Agreement. For more information on the sale of Glenmoor, see Item 1 “Business — Significant Partnership Events in 2004 — GP Restructuring and Acquisition of the General Partner by Carlyle/ Riverstone.”

MainLine Sub and Mr. Muther are parties to the Muther Employment Agreement discussed in Item 11 “Executive Compensation — Executive Officer Severance Agreement.” Mr. Muther’s base salary under the Muther Employment Agreement is not less than $300,000 per year (less applicable taxes and withholdings). The Muther Employment Agreement also provides for, among other things, the payment of severance and the continuation of certain benefits following (a) an involuntary termination of Mr. Muther’s employment for any reason other than for “cause” or (b) a voluntary termination of employment by Mr. Muther for “good reason,” which includes, in certain circumstances, a termination in connection with a “change of control” of the Partnership. The Muther Employment Agreement provides for a severance payment of 3.0 times Mr. Muther’s annualized base salary at the time of termination in the circumstances described in clauses (a) and (b) above. In addition, the Partnership will provide certain benefits to Mr. Muther for a period of 18 months (36 months if the triggering event is a “change of control”) following his termination. For purposes of the Muther Employment Agreement, “change of control” is defined similarly to such term in the Benefits Continuation Agreement discussed above.

Mr. Wallace’s base salary is $300,000 per year. MainLine Sub and Mr. Wallace are parties to a Severance Agreement, dated as of September 1, 2004 (the “Wallace Severance Agreement”). The Wallace Severance Agreement generally provides for, among other things, the payment of severance and the continuation of certain benefits following (a) an involuntary termination prior to September 1, 2005 of Mr. Wallace’s employment for any reason other than for “cause” or (b) a voluntary termination of employment by Mr. Wallace after a “change of control” has occurred and upon the occurrence of certain specified adverse changes in Mr. Wallace’s employment conditions. The Wallace Severance Agreement

provides for a severance payment of 1.0 times Mr. Wallace’s annualized base salary at the time of termination in the circumstances described in clause (a) above and 2.0 times Mr. Wallace’s annualized base salary at the time of termination in the circumstances described in clause (b) above. In addition, MainLine Sub will provide certain continued benefits to Mr. Wallace for a period of 12 months following his termination, subject to certain limitations. For purposes of the Wallace Severance Agreement, “change of control” is defined similarly to such term in the Benefits Continuation Agreement discussed above.

In connection with the GP Restructuring, the General Partner became obligated for the compensation and benefits of Eric A. Gustafson retroactive to May 4, 2004. Effective as of January 1, 2005, Mr. Gustafson was appointed the Senior Vice President — Operations and Technology of the General Partner. Mr. Gustafson’s base salary is $300,000 per year.


	*Ownership of MainLine L.P.*

MainLine L.P., the sole member of MainLine Sub, is owned by affiliates of Carlyle/ Riverstone Global Energy and Power Fund II, L.P., certain directors and members of senior management of the General Partner or trusts for the benefit of their families and certain director-level employees of Services Company.


Item 14.	*Principal Accountant Fees and Services*

The following table summarizes the aggregate fees billed to the Partnership by Deloitte & Touche, LLP, the member firm of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, the “Deloitte Entities”).


	2004		2003

Audit fees(1)	$	1,265,775	$	507,568
Audit related fees(2)		110,700		121,737
Tax fees(3)		304,237		426,722
All other fees		—		—

Total	$	1,680,712	$	1,056,027


(1)	Audit fees include fees for the audit of the Partnership’s consolidated financial statements as well as the audit of the internal control over financial reporting, reviews of the Partnership’s quarterly consolidated financial statements, and comfort letters, consents and other services related to Securities and Exchange Commission (“SEC”) matters.

(2)	Audit-related fees consist principally of fees for audits of financial statements of certain employee benefits plans and the General Partner and its parent entities.

(3)	Tax fees consist of fees for tax consultation and tax compliance services.

Procedures for Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor

As outlined in its charter, the Audit Committee of the Board of Directors is responsible for reviewing and approving, in advance, any audit and any permissible non-audit engagement or relationship between us and our independent auditors. The Deloitte Entities’ engagement to conduct our audit was pre-approved by the Audit Committee. Additionally, all permissible non-audit services by the Deloitte Entities have been reviewed and pre-approved by the Audit Committee, as outlined in the pre-approval policies and procedures established by the Audit Committee.

PART IV


Item 15.	*Exhibits and Financial Statement Schedules*

(a) The following documents are filed as a part of this Report:


	(1) and (2) Financial Statements and Financial Statement Schedule — see Index to Financial Statements and Financial Statement Schedule appearing on page 33.

	(3) Exhibits, including those incorporated by reference. The following is a list of exhibits filed as part of this Annual Report on Form 10-K. Where so indicated by footnote, exhibits which were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated in parentheses.


Exhibit Number
(Referenced to
Item 601 of
Regulation S-K)

	2.1	—	Revised and Restated Purchase and Sale Agreement, dated October 1, 2004, among Shell Pipeline Company LP, Equilon Enterprises LLC d/b/a Shell Oil Products US and the Partnership. (11) (Exhibit 2.1)
	3.1	—	Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of December 15, 2004.(3) (Exhibit 3.1)

	3.2	—	Amended and Restated Certificate of Limited Partnership of the Partnership, dated as of February 4, 1998.(4) (Exhibit 3.2)

	3.3	—	Certificate of Amendment to Amended and Restated Certificate of Limited Partnership of the Partnership, dated as of April 26, 2002.(1) (Exhibit 3.2)

	3.4	—	Certificate of Amendment to Amended and Restated Certificate of Limited Partnership of the Partnership, dated as of June 1, 2004, effective as of June 3, 2004.(2) (Exhibit 3.3)

	3.5	—	Certificate of Amendment to Amended and Restated Certificate of Limited Partnership of the Partnership, dated as of December 15, 2004.*

	4.2	—	Indenture, dated as of July 10, 2003, between Buckeye Partners, L.P. and SunTrust Bank, as Trustee.(5) (Exhibit 4.1)

	4.3	—	First Supplemental Indenture, dated as of July 10, 2003, between Buckeye Partners, L.P. and SunTrust Bank, as Trustee.(5) (Exhibit 4.2)

	4.4	—	Second Supplemental Indenture, dated as of August 19, 2003, between Buckeye Partners, L.P. and SunTrust Bank, as Trustee.(5) (Exhibit 4.3)

	4.5	—	Third Supplemental Indenture, dated as of October 12, 2004, between Buckeye Partners, L.P. and SunTrust Bank, as Trustee. (12) (Exhibit 4.1)

	10.1	—	Amended and Restated Agreement of Limited Partnership of Buckeye Pipe Line Company, L.P., dated as of December 15, 2004.(3) (Exhibit 10.5)(6)

	10.2	—	Amended and Restated Management Agreement, dated as of December 15, 2004, between the General Partner and Buckeye.(3) (Exhibit 10.6)(7)

	10.3	—	Limited Liability Company Agreement of Wood River Pipe Lines LLC, dated as of September 27, 2004.*

	10.4	—	Services Agreement, dated as of December 15, 2004, among the Partnership, the Operating Subsidiaries and Services Company.(3) (Exhibit 10.3)

	10.5	—	Third Amended and Restated Exchange Agreement, dated as of December 15, 2004, among MainLine Sub, the Partnership, the Operating Partnerships, and the General Partner(3) (Exhibit 10.4)

	10.6	—	Acknowledgement and Agreement, dated as of May 6, 2002, between the Partnership and Glenmoor, Ltd.(1) (Exhibit 10.5)


Exhibit Number
(Referenced to
Item 601 of
Regulation S-K)


	10.7	—	Description of Severance Arrangements for Stephen C. Muther contained in the Amended and Restated Employment and Severance Agreement, dated as of May 4, 2004, by and among Stephen C. Muther and Glenmoor LLC. (15) (Exhibit 10.2)

	10.8	—	Contribution, Assignment and Assumption Agreement, dated as of December 31, 1998, between Buckeye Management Company and Buckeye Pipe Line Company.(9) (Exhibit 10.14)

	10.9	—	Contribution, Assignment and Assumption Agreement, dated as of December 15, 2004, between the Prior General Partner and the General Partner.(3) (Exhibit 10.1)

	10.10	—	Director Recognition Program of the General Partner.(9) (Exhibit 10.15) (10)

	10.11	—	Amended and Restated Management Agreement, dated as of December 15, 2004, among the General Partner and MainLine Sub.(3) (Exhibit 10.9)

	10.12	—	Amended and Restated Unit Option and Distribution Equivalent Plan of the Partnership, dated as of April 24, 2002.(1) (Exhibit 10.11) (10)

	10.13	—	Amended and Restated Unit Option Loan Program of Buckeye Pipe Line Company dated as of April 24, 2002.(1) (Exhibit 10.12) (10)

	10.14	—	Fourth Amended and Restated Incentive Compensation Agreement, dated December 15, 2004, between the Partnership and MainLine Sub.(3) (Exhibit 10.2)

	10.15	—	Credit Agreement, dated as of August 6, 2004, among the Partnership, SunTrust Bank and the other signatories thereto. (11) (Exhibit 10.2)

	10.16	—	First Amendment to Credit Agreement, dated as of December 15, 2004, among the Partnership, SunTrust Bank and the other signatories thereto.*

	10.17	—	Credit Agreement, dated as of September 3, 2003, among the Partnership, SunTrust Bank and the other signatories thereto. (13) (Exhibit 10.2)

	10.18	—	Master Agreement and Schedule to Master Agreement, dated as of October 24, 2003, between UBS AG and Buckeye Partners, L.P. related to the $100 million notional amount interest rate swap agreement. (14) (Exhibit 10.18)

	10.19	—	Bridge Loan Agreement, dated October 1, 2004, among the Partnership, SunTrust Bank, as administrative agent and lender, and Wachovia Bank, National Association, as a lender. (11) (Exhibit 10.1)

	21.1	—	List of subsidiaries of the Partnership.*

	23.1	—	Consent of Deloitte & Touche LLP.*

	31.1	—	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.*

	31.2	—	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.*

	32.1	—	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.*

	32.2	—	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*


	*	filed herewith


	(1)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.

	(2)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Form S-3 filed on June 16, 2004.


	(3)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Current Report on Form 8-K filed on December 20, 2004.

	(4)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Annual Report on Form 10-K for the year 1997.

	(5)	Previously filed as an exhibit to the registrant’s Registration Statement on Form S-4 (Registration No. 333-108969) filed on September 19, 2003.

	(6)	The Amended and Restated Agreements of Limited Partnership of the other Operating Partnerships are not filed because they are identical to Exhibit 10.1 except for the identity of the partnership.

	(7)	The Management Agreements of the other Operating Partnerships are not filed because they are identical to Exhibit 10.2 except for the identity of the partnership.

	(8)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Annual Report on Form 10-K for the year 1999.

	(9)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Annual Report on Form 10-K for the year 1998.


(10)	Represents management contract or compensatory plan or arrangement.

(11)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Current Report on Form 8-K filed October 5, 2004.

(12)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Current Report on Form 8-K filed October 14, 2004.

(13)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

(14)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Annual Report on Form 10-K for the year 2003.

(15)	Previously filed with the Securities and Exchange Commission as the Exhibit to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.

SIGNATURES

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


	Buckeye Partners, L.P.
	(Registrant)

	By: Buckeye GP LLC,
	as General Partner



Dated: March 14, 2005		By: /s/ William H. Shea, Jr. William H. Shea, Jr. (Principal Executive Officer)

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



Dated: March 14, 2005		By: /s/ Brian F. Billings Brian F. Billings Director

Dated: March 14, 2005		By: /s/ Michael B. Hoffman ------------------------------------------------ Michael B. Hoffman Director

Dated: March 14, 2005		By: /s/ Edward F. Kosnik ------------------------------------------------ Edward F. Kosnik Director

Dated: March 14, 2005		By: /s/ Joseph A. LaSala, Jr. ------------------------------------------------ Joseph A. LaSala, Jr. Director

Dated: March 14, 2005		By: /s/ David M. Leuschen ------------------------------------------------ David M. Leuschen Director

Dated: March 14, 2005		By: /s/ Jonathan O’Herron ------------------------------------------------ Jonathan O’Herron Director

Dated: March 14, 2005		By: /s/ William H. Shea, Jr. ------------------------------------------------ William H. Shea, Jr. Director

Dated: March 14, 2005		By: /s/ Frank S. Sowinski ------------------------------------------------ Frank S. Sowinski Director

Dated: March 14, 2005		By: /s/ Robert B. Wallace ------------------------------------------------ Robert B. Wallace (Principal Financial Officer and Principal Accounting Officer)

Dated: March 14, 2005		By: /s/ Andrew W. Ward ------------------------------------------------ Andrew W. Ward Director

EXHIBIT 3.5

CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED CERTIFICATE OF LIMITED PARTNERSHIP
OF
BUCKEYE PARTNERS, L.P.

The undersigned, desiring to amend the Amended and Restated Certificate of Limited Partnership of Buckeye Partners, L.P. pursuant to the provisions of
Section 17-202 of the Revised Uniform Limited Partnership Act of the State of Delaware, does hereby certify as follows:

FIRST: The name of the Limited Partnership is Buckeye Partners, L.P.

SECOND: Article 4 of the Amended and Restated Certificate of Limited Partnership shall be amended to read in its entirety as follows:

"General Partner. The name and the business address of the sole general partner of the Partnership is Buckeye GP LLC, a Delaware limited liability company, 5002 Buckeye Road, P.O.

Box 368, Emmaus, PA 18049."

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment to Amended and Restated Certificate of Limited Partnership on this 15th day of December, 2004.

BUCKEYE GP LLC
a Delaware limited liability company, as
sole general partner

By: /s/ Stephen C. Muther
    ------------------------------------
Name: Stephen C. Muther
Title: Senior Vice President -
       Administration, General Counsel

       and Secretary

EXHIBIT 10.3

LIMITED LIABILITY COMPANY AGREEMENT

WOOD RIVER PIPE LINES LLC

This LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") of Wood River Pipe Lines LLC (the "Company"), dated as of September 27, 2004, is adopted, executed and agreed to by Buckeye Partners, L.P., a Delaware limited partnership ("BPL"), as a sole member.

RECITALS

WHEREAS, this Agreement is made and entered into for the purpose of setting forth various terms and provisions regarding the management, ownership and governance of Wood River Pipe Lines LLC, a limited liability company organized under the laws of the State of Delaware (the "Company");

WHEREAS, Wood River Pipe Lines, L.P., a Delaware limited partnership ("Wood River LP"), was formed on August 12, 2004, under the Delaware Revised Uniform Limited Partnership Act (the "DRULPA");

WHEREAS, on the date hereof, Wood River LP converted (the "Conversion") into a limited liability company pursuant to and in accordance with Section 17-219 of the DRULPA and Section 18-214 of the Delaware Limited Liability Company Act, as amended from time to time (the "Act"); and

WHEREAS, BPL, the sole limited partner of Wood River LP prior to the Conversion shall be the sole owner of Membership Interests in the Company (the "Initial Member") upon the effectiveness of the Conversion.

1. DEFINITIONS

1.1. Definitions.

(a) As used in this Agreement, the following terms have the respective meanings set forth below or set forth in the Sections referred to below:

"Act" has the meaning given such term in the Recitals.

"Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments:

(i) Credit to such Capital Account any amounts which such Member is obligated to restore pursuant to any provision of this Agreement or pursuant to Treasury

Regulation Section 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

(ii) Debit to such Capital Account the items described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

"Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

"Agreement" has the meaning given such term in the Recitals, as the same may be amended from time to time.

"Applicable Law" means any United States Federal, state or local law, statute, rule, regulation, order, writ, injunction, judgment, decree or permit of any Governmental Authority.

"Assignee" means any Person that acquires a Member's share of the income, gain, loss, deduction and credits of, and the right to receive distributions from, the Company or any portion thereof through a Disposition; provided, however, that an Assignee shall have no right to be admitted to the Company as a Member except in accordance with Article 4. The Assignee of a dissolved Member is the shareholder, partner, member or other equity owner or owners of the dissolved Member to whom such Member's Membership Interest is assigned by the Person conducting the liquidation or winding up of such Member.

"Bankruptcy" or "Bankrupt" means, with respect to any Person, that (a) such Person (i) makes a general assignment for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceedings; (iv) files a petition or answer seeking for such Person a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Applicable Law; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in a proceeding of the type described in subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person's properties; or (b) a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Applicable Law has been commenced against such Person and 120 Days have expired without dismissal thereof or with respect to which, without such Person's consent or acquiescence, a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person's properties has been appointed and 90 Days have expired without the appointment's having been vacated or stayed, or

90 Days have expired after the date of expiration of a stay, if the appointment has not previously been vacated. The foregoing definition of "Bankruptcy" is intended to replace and shall supercede and replace the definition of "Bankruptcy" set forth in the Act.

"Board" has the meaning given such term in Section 7.1.

"BPL" has the meaning given such term in the Preamble.

"Business Day" means any day other than a Saturday, a Sunday, or a day when banks in New York, New York are authorized or required by Applicable Law to be closed.

"Capital Account" means, with respect to any Member, the Capital Account maintained for such Member in accordance with the following provisions:

(i) To each Member's Capital Account there shall be credited such Member's Capital Contributions, such Member's distributive share of Profits and any items in the nature of income or gain which are specially allocated pursuant to Section 6.3 hereof, and the amount of any Company liabilities assumed by such Member or which are secured by any property (other than money) distributed to such Member.

(ii) To each Member's Capital Account there shall be debited the amount of cash and the Gross Asset Value of any property (other than money) distributed to such Member pursuant to any provision of this Agreement, such Member's distributive share of Losses and any items in the nature of expenses or losses which are specially allocated pursuant to
Section 6.3 hereof, and the amount of any liabilities of such Member assumed by the Company or which are secured by any property (other than money) contributed by such Member to the Company.

(iii) In the event all or a portion of a Membership Interest is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Membership Interest so transferred.

(iv) In determining the amount of any liability for purposes of the foregoing subparagraphs (i) and (ii) of this definition of "Capital Account," there shall be taken into account Section 752(c) of the Code and any other applicable provisions of the Code and Treasury Regulations.

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations.

"Capital Contribution" means, with respect to any Member, the amount of money and the net agreed value of any property (other than money) contributed to the Company by such Member. Any reference in this Agreement to the Capital Contribution of a Member shall include a Capital Contribution of its predecessors in interest.

"Certified Public Accountants" means a firm of independent public accountants selected from time to time by the Board.

"Claim" means any and all judgments, claims, causes of action, demands, lawsuits, suits, proceedings, Governmental investigations or audits, losses, assessments, fines, penalties, administrative orders, obligations, costs, expenses, liabilities and damages (whether actual, consequential or punitive), including interest, penalties, reasonable attorneys' fees, disbursements and costs of investigations, deficiencies, levies, duties and imposts.

"Code" means the Internal Revenue Code of 1986, as amended from time to time.

"Company" has the meaning given such term in the Preamble.

"Conversion" has the meaning given such term in the Recitals.

"Day" means a calendar day; provided, however, that if any period of Days referred to in this Agreement shall end on a Day that is not a Business Day, then the expiration of such period shall be automatically extended until the end of the next succeeding Business Day.

"Depreciation" means, for each fiscal year or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for Federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the Federal income tax depreciation, amortization, or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the Federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Tax Matters Officer.

"DRULPA" has the meaning given such term in the Recitals.

"Dispose," "Disposing" or "Disposition" means with respect to any asset (including a Membership Interest or any portion thereof), a sale, assignment, transfer, conveyance, gift, exchange or other disposition of such asset, whether such disposition be voluntary, involuntary or by operation of Applicable Law.

"Disposing Member" has the meaning given such term in Section 4.2.

"Dissolution Event" has the meaning given such term in Section 12.1(a).

"Encumber," "Encumbering," or "Encumbrance" means the creation of a security interest, lien, pledge, mortgage or other encumbrance, whether such encumbrance be voluntary, involuntary or by operation of Applicable Law.

"GAAP" means generally accepted accounting principles.

"Governmental Authority" or "Governmental" means any Federal, state or local court or governmental or regulatory agency or authority or any arbitration board, tribunal or mediator having jurisdiction over the Company or its assets or Members.

"Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for Federal income tax purposes, except as follows:

(i) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of said asset, as determined by the contributing Member and the Board, in a manner that is consistent with Section 7701(g) of the Code;

(ii) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Board, in a manner that is consistent with Section 7701(g) of the Code, as of the following times: (a) the acquisition of an additional Membership Interest by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Company to a Member of more than a de minimis amount of property other than money as consideration for an Membership Interest; and (c) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (a) and (b) above shall be made only if the Tax Matters Officer reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company;

(iii) The Gross Asset Value of any Company asset distributed to any Member shall be the gross fair market value (taking Section 7701(g) of the Code into account) of such asset on the date of distribution; and

(iv) The Gross Asset Values of any Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Section 734(b) of the Code or Section 743(b) of the Code, but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations Section 1.704-1 (b)(2)(iv)(m) and the definition of Capital Account hereof; provided, however, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to the extent the Tax Matter Officer determines that an adjustment pursuant to the foregoing subparagraph (ii) of this definition is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv).

If the Gross Asset Value of an asset has been determined or adjusted pursuant to the foregoing subparagraphs (i), (ii) or (iv), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.

"Incentive Plan" means any plan or arrangement pursuant to which the Company may compensate its employees, consultants, managers and/or service providers.

"Indemnitee" means (a) any Person who is or was an Affiliate of the Company, (b) any Person who is or was a member, partner, officer, manager, employee, agent or trustee of the Company or any Affiliate of the Company and
(c) any Person who is or was serving at the request of the Company or any Affiliate of the Company as an officer, manager, employee, member, partner, agent, fiduciary or trustee of another Person; provided, however, that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services.

"Initial Member" has the meaning given such term in the Recitals.

"Majority Interest" means greater than 50% of the Sharing Ratios.

"Manager" or "Managers" has the meaning given such term in Section 7.2.

"Member" means any Person executing this Agreement as of the date of this Agreement as a member of the Company or hereafter admitted to the Company as a member as provided in this Agreement, but such term does not include any Person who has ceased to be a member in the Company.

"Membership Interest" means, with respect to any Member, (a) that Member's status as a Member; (b) that Member's share of the income, gain, loss, deduction and credits of, and the right to receive distributions from, the Company; (c) all other rights, benefits and privileges enjoyed by that Member (under the Act, this Agreement, or otherwise) in its capacity as a Member, including that Member's rights to vote, consent and approve and otherwise to participate in the management of the Company, including through the Board; and (d) all obligations, duties and liabilities imposed on that Member (under the Act, this Agreement or otherwise) in its capacity as a Member, including any obligations to make Capital Contributions.

"Notices" has the meaning given such term in Section 13.2.

"Person" means any individual, firm, partnership, corporation, limited liability company, association, joint-stock company, unincorporated organization, joint venture, trust, court, governmental agency or any political subdivision thereof, or any other entity.

"Profits" and "Losses" means, for each fiscal year or other period, an amount equal to the Company's taxable income or loss for such year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:

(i) Any income of the Company that is exempt from Federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be added to such taxable income or loss;

(ii) Any expenditures of the Company described in Section 705(a)(2)(B) of the Code, and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be subtracted from such taxable income or loss;

(iii) In the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) or (iv) of the definition of Gross Asset Value hereof, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses;

(iv) Gain or loss resulting from any disposition of property (other than money) with respect to which gain or loss is recognized for Federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

(v) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year or other period, computed in accordance with the definition of Depreciation hereof; and

(vi) Notwithstanding any other provision of this definition of "Profits and Losses," any items which are specially allocated pursuant to
Section 6.3(d) and Section 6.3(e) hereof shall not be taken into account in computing Profits or Losses.

"Proper Officer" or "Proper Officers" means those officers authorized by the Board to act on behalf of the Company.

"Sharing Ratio" means, subject in each case to adjustments in accordance with this Agreement or in connection with Dispositions of Membership Interests,
(a) in the case of a Member executing this Agreement as of the date of this Agreement or a Person acquiring such Member's Membership Interest, the percentage specified for that Member as its Sharing Ratio on Exhibit A, and (b) in the case of Membership Interests issued pursuant to Section 3.1, the Sharing Ratio established pursuant thereto; provided, however, that the total of all Sharing Ratios shall always equal 100%.

"Subsidiary" means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of managers or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the managers or other governing body of such Person.

"Target Capital Account Amount" means, with respect to a Member, the distribution the Member would receive pursuant to Section 6.2 if the amount to be distributed to the Member equaled the product of (i) the amount described in
Section 12.2(a)(iii)(C) multiplied by (ii) the Member's Sharing Ratio.

"Tax Matters Officer" has the meaning given such term in Section 10.3(a).

"Term" has the meaning given such term in Section 2.6.

"Treasury Regulations" means the regulations (including temporary regulations) promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code. All references herein to sections of the Treasury Regulations shall include any corresponding provision or provisions of succeeding, similar or substitute, temporary or final Treasury Regulations.

"Units" has the meaning given such term in Section 3.1(a).

"Withdraw," "Withdrawing" or "Withdrawal" means the withdrawal, resignation or retirement of a Member from the Company as a Member. Such terms shall not include any Dispositions of Membership Interest (which are governed by Article 4), even though the Member making a Disposition may cease to be a Member as a result of such Disposition.

(b) Other terms defined herein have the meanings so given them.

"Wood River LP" has the meaning given such term in the Recitals.

1.2. Construction. Whenever the context requires, (a) the gender of all words used in this Agreement includes the masculine, feminine and neuter, (b) the singular forms of nouns, pronouns and verbs shall include the plural and vice versa, (c) all references to Articles and Sections refer to articles and sections in this Agreement, each of which is made a part for all purposes and
(d) the term "include" or "includes" means includes, without limitation, and "including" means including, without limitation.

2. ORGANIZATION

2.1. Formation. By execution of this Agreement and upon the filing of the Certificate of Formation (the "Delaware Certificate"), the Certificate of Conversion with the Secretary of State of the State of Delaware, the Initial Member hereby forms the Company in connection with the Conversion pursuant to the Act for the purposes set forth in this Agreement. The parties intend that the Company shall be taxed as a partnership. Promptly following the execution hereof, the Members shall execute or cause to be executed all necessary certificates and documents, and shall make all such filings and recordings, and shall do all other acts as may be necessary or appropriate from time to time to comply with all requirements for the formation, continued existence and operation of a limited liability company in the State of Delaware. This Agreement is intended to serve as a "limited liability company agreement" as such term is defined in Section 18-101(7) of the Act.

2.2. Name. The name of the Company is "Wood River Pipe Lines LLC" and all Company business must be conducted in that name or such other names that comply with Applicable Law as the Board may select.

2.3. Registered Office; Registered Agent; Principal Office. The initial registered agent for the Company shall be The Corporation Trust Company. The initial registered office of the Company in the State of Delaware shall be Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The registered office and the registered agent may be changed from time to time by action of the Managers by filing notice of such change with the Secretary of State of the State of Delaware. The Managers shall promptly notify the Members of any change of the registered office or registered agent. The Company may also have offices in such other places within or outside of the State of Delaware as the Managers may from time to time determine.

2.4. Purposes.

(a) The Company may carry on any lawful business or activity permitted by the Act.

(b) Subject to the limitations expressly set forth in this Agreement, the Company shall have the power and authority to do any and all acts and things deemed necessary or desirable by the Board to further the Company's purposes and carry on its business, including, without limitation, the following:

(i) entering into any kind of activity and performing contracts of any kind necessary or desirable for the accomplishment of its business;

(ii) acquiring any property, real or personal, in fee or under lease or license, or any rights therein or appurtenant thereto, necessary or desirable for the accomplishment of its business;

(iii) borrowing money, issuing evidences of indebtedness, issuing guarantees of indebtedness and securing any such indebtedness by mortgage or pledge of, or other lien on, the assets of the Company;

(iv) entering into any such instruments and agreements as the Board may deem necessary or desirable for the ownership, management, operation, leasing and sale of the Company's property and for the accomplishment of its business; and

(v) negotiating and concluding agreements for the sale, exchange or other disposition of all or substantially all of the properties of the Company, or for the refinancing of any loan or payment obtained by the Company.

2.5. Foreign Qualification. Prior to the Company's conducting business in any jurisdiction other than Delaware, the Proper Officers shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of such officers, with all requirements necessary to qualify the Company as a foreign limited liability company in that jurisdiction. At the request of the Proper Officers, the Members shall execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate to qualify, continue, and, if applicable, terminate the Company as a foreign limited liability company in all such jurisdictions in which the Company may conduct business or in which it has ceased to conduct business.

2.6. Term. The period of existence of the Company (the "Term") commenced upon effectiveness of the Conversion and shall end at such time as a certificate of cancellation is filed with the Secretary of State of Delaware in accordance with Section 12.4.

2.7. No State Law Partnership. The Members intend that the Company not be a partnership (including a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member, for any purposes other than (if the Company has more than one Member) Federal and state income tax purposes, and this Agreement may not be construed to suggest otherwise.

2.8. Outside Activities. Subject to the terms of any applicable employment contract or other agreement, each Member, Manager and officer of the Company may engage in any capacity (as owner, employee, consultant, or otherwise) in any activity, whether or not such activity competes with or is benefited by the business of the Company, without being liable to the Company or the other Members or Managers for any income or profit derived from such activity. Subject to the terms of any applicable employment contract or other agreement, no Member, Manager or officer of the Company shall be obligated to make available to the Company or any other Member, Manager or officer of the Company any business opportunity of which such Member, Manager or officer of the Company is or becomes aware.

2.9. Membership Interests Uncertificated. All Membership Interests shall be uncertificated.

3. MEMBERSHIP

3.1. Membership Interests; Additional Members.

(a) The Members own Membership Interests in the Company as reflected in Exhibit A attached hereto. The Company shall issue to each holder of record from time to time of a Membership Interest a certificate denominated in units representing such Membership Interest ("Units"). As used herein, references to "Membership Interests" in a context that implies divisibility of a Membership Interest into equal units shall be deemed references to Units.

(b) Persons may be admitted to the Company as Members, on such terms and conditions as the Members, without any approval of the Board, determine at the time of admission. The terms of admission or issuance must specify the Sharing Ratios applicable thereto and may provide for the creation of different classes or groups of Members having

different rights, powers, and duties. The Members may reflect the creation of any new class or group in an amendment to this Agreement indicating the different rights, powers, and duties, and such an amendment shall be approved and executed by the Members. Any such admission is effective only after such new Member has executed and delivered to the Members and the Company an instrument containing the notice address of the new Member, the new Member's ratification of this Agreement and agreement to be bound by it.

3.2. Access to Information. Each Member shall be entitled to receive any information that it may request concerning the Company; provided, however, that this Section 3.2 shall not obligate the Company to create any information that does not already exist at the time of such request (other than to convert existing information from one medium to another, such as providing a printout of information that is stored in a computer database). Each Member shall also have the right, upon reasonable notice, and at all reasonable times during usual business hours to inspect the properties of the Company and to audit, examine and make copies of the books of account and other records of the Company. Such right may be exercised through any agent or employee of such Member designated in writing by it or by an independent public accountant, engineer, attorney or other consultant so designated. All costs and expenses incurred in any inspection, examination or audit made on such Member's behalf shall be borne by such Member.

3.3. Liability.

(a) No Member shall be liable for the debts, obligations or liabilities of the Company solely by reason of being a member of the Company.

(b) The Company and the Members agree that the rights, duties and obligations of the Members in their capacities as members of the Company are only as set forth in this Agreement and as otherwise arise under the Act. Furthermore, the Members agree that the existence of any rights of a Member, or the exercise or forbearance from exercise of any such rights shall not create any duties or obligations of the Member in their capacities as members of the Company, nor shall such rights be construed to enlarge or otherwise alter in any manner the duties and obligations of the Members.

3.4. Withdrawal. A Member does not have the right or power to Withdraw.

3.5. Actions by Members. Except as provided herein to the contrary, any approval, election or other action to be taken or decision or exercise of authority to be made by the Members pursuant to this Agreement shall be made at the discretion of a Majority Interest of the Members.

3.6. Relationship of Members. Without limiting the generality of Section 2.8, nothing contained herein shall be deemed to restrict or limit in any way the carrying on of separate businesses or activities by any Member now or in the future, even if such businesses or activities are competitive with the Company.

4. DISPOSITION OF MEMBERSHIP INTERESTS

4.1. General Restriction. A Member may not Dispose of all or any portion of its Membership Interests except in strict accordance with this Article 4. References in this Article 4 to Dispositions of a Membership Interest shall also refer to Dispositions of a portion of a Membership Interest. Any attempted Disposition of a Membership Interest, other than in strict accordance with this Article 4, shall be, and is hereby declared, null and void ab initio. The Members agree that a breach of the provisions of this Article 4 may cause irreparable injury to the Company and to the other Members for which monetary damages (or other remedy at law) are inadequate in view of (a) the complexities and uncertainties in measuring the actual damages that would be sustained by reason of the failure of a Member to comply with such provision and (b) the uniqueness of the business of the Company and the relationship among the Members. Accordingly, the Members agree that the provisions of this Article 4 may be enforced by specific performance.

4.2. Admission of Assignee as a Member. An Assignee has the right to be admitted to the Company as a Member, with the Membership Interests (and attendant Sharing Ratio) so transferred to such Assignee, only if (a) the Member making the Disposition (a "Disposing Member") has granted the Assignee either
(i) all, but not less than all, of such Disposing Member's Membership Interests or (ii) the express right to be so admitted; and (b) such Disposition is effected in strict compliance with this Article 4.

4.3. Requirements Applicable to All Dispositions and Admissions. Any Disposition of Membership Interests and any admission of an Assignee as a Member shall also be subject to the following requirements, and such Disposition (and admission, if applicable) shall not be effective unless such requirements are complied with:

(a) The Disposing Member and its Assignee shall pay, or reimburse the Company for, all reasonable costs and expenses incurred by the Company in connection with the Disposition and admission of the Assignee as a Member.

(b) No Disposition of Membership Interests shall effect a release of the Disposing Member from any liabilities to the Company or the other Members arising from events occurring prior to the Disposition, except as otherwise may be provided in any instrument or agreement pursuant to which a Disposition of Membership Interests is effected.

5. CAPITAL CONTRIBUTIONS

5.1. Initial Capital Contributions. At the time of the effectiveness of the Conversion or contemporaneously with the adoption by the Members of this Agreement, as appropriate, each Member shall be deemed to have made Capital Contributions as set forth next to the Member's name on Exhibit A.

5.2. Loans. If the Company does not have sufficient cash to pay its obligations, any Member(s) that may agree to do so with the consent of the Board may advance all or part of the needed funds to or on behalf of the Company. An advance described in this Section 5.2 constitutes a loan from the Member to the Company, bears interest at a rate determined by the Board from the date of the advance until the date of payment, and is not a Capital Contribution.

5.3. Return of Contributions. Except as expressly provided herein, no Member is entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or its Capital Contributions. An unrepaid Capital Contribution is not a liability of the Company or of any Member. A Member is not required to contribute or to lend any cash or property to the Company to enable the Company to return any Member's Capital Contributions.

5.4. Capital Accounts. An individual Capital Account shall be established and maintained for each Member. A Member that has more than one class or series of Membership Interest shall have a single Capital Account that reflects all such classes or series of Membership Interests, regardless of the classes or series of Membership Interests owned by such Member and regardless of the time or manner in which such Membership Interests were acquired. Upon the Disposition of all or a portion of a Membership Interest, the Capital Account of the Disposing Member that is attributable to such Membership Interest shall carry over to the Assignee in accordance with the provisions of Treasury Regulation
Section 1.704-1(b)(2)(iv)(l).

6. DISTRIBUTIONS AND ALLOCATIONS

6.1. Distributions. Except as otherwise provided in Section 6.2 and
Section 6.5, distributions to the Members shall be made only to all Members simultaneously in proportion to their respective Sharing Ratios (at the time the amounts of such distributions are determined) and in such aggregate amounts and at such times as shall be determined by the Members representing a Majority Interest (at the time the amounts of such distributions are determined); provided, however, that, if requested a Member, any loans from such Member pursuant to Section 5.2 shall be repaid prior to any distributions to Members pursuant to this Section 6.1.

6.2. Distributions on Dissolution and Winding Up. Upon the dissolution and winding up of the Company, after adjusting the Capital Accounts, if any, for all distributions made under Section 6.1 and all allocations under Article 6, all available proceeds distributable to the Members as determined under Section 12.2 shall be distributed (i) to all of the Members in amounts equal to the Members' positive Capital Account balances, or (ii) if the obligation to maintain Capital Accounts has been suspended under Section 13.13 of this Agreement, to the sole Member.

6.3. Allocations. Subject to the allocation rules of Section 6.3(c), (d) and (e) hereof, Profits and Losses of the Company for any fiscal year shall be allocated as follows:

(a) Profits for any fiscal year shall be allocated in the following order of priority:

(i) First, to all Members, in proportion to the deficit balances (if any) in their Capital Accounts, in an amount necessary to eliminate any deficits in the Members' Capital Accounts and restore such Capital Accounts balances to zero;

(ii) Second, to the Members until each Member has been allocated an amount equal to the amount distributed to such Member pursuant to Section 6.1 in the

current and in all previous fiscal years in excess of amounts previously allocated to such Members pursuant to this Section 6.3(a)(ii);

(iii) Third, to the Members, to the greatest extent possible, an amount required to cause the positive Capital Account balances of each of the Members to be in the same proportion as the Member's respective Sharing Ratios; and

(iv) Thereafter, to the Members in proportion their respective Sharing Ratios.

(b) Losses for any fiscal year shall be allocated in the following order of priority:

(i) First, to the Members, to the greatest extent possible, an amount required to cause the positive Capital Account balances of each of the Members to be in the same proportion as the Member's respective Sharing Ratios;

(ii) Next, to the Members in proportion to their respective Sharing Ratios until the Capital Account balances of such Members have been reduced to zero;

(iii) Next, to any Member that has a positive Capital Account balance until the Capital Account balances of all of the Members have been reduced to zero; and

(iv) Thereafter, to the Members in proportion to their respective Sharing Ratios.

(c) Notwithstanding the allocation provisions of Section 6.3(a) and (b), if the allocation of Profits or Losses to a Member pursuant to Sections 6.3(a) and (b) in the current fiscal year would cause a Member to have a positive Capital Account balance that is greater than or less than the amount that has been distributed to such Member in the current fiscal year pursuant to
Section 6.1, then the allocations of Profits and Losses in the current fiscal year shall be adjusted, to the greatest extent possible, to cause the positive Capital Account balances of each Member to equal the amount of distributions made to such Member in the current fiscal year. In addition, in the event of the dissolution of the Company pursuant to Section 12.1 hereof, if the allocation of Profits or Losses to a Member pursuant to Sections 6.3(a) and (b) would cause a Member to have a Capital Account balance in an amount that is greater than or less than the Member's Target Capital Account Amount, then the allocations of Profits and Losses shall be adjusted, to the greatest extent possible, to cause the positive Capital Account balances of each Member to equal such an amount.

(d) The following special allocations shall be made in the following order:

(i) Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to restore, to the extent required by the Treasury Regulations, the Member's Adjusted Capital Account Deficit of such Member as quickly

as possible, provided that an allocation pursuant to this Section 6.3(d)(i) shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article 6 have been tentatively made as if this
Section 6.3(d)(i) was not in this Agreement.

(ii) Gross Income Allocation. In the event any Member has a deficit Capital Account at the end of any Company fiscal year which is in excess of the sum of (x) the amount such Member is obligated to restore pursuant to any provision of this Agreement and (y) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentence of Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 6.3(d)(ii) shall be made only if and to the extent that such Member would have a deficit Capital Account balance in excess of such sum after all other allocations provided for in this Article 6 have been made as if Section 6.3(d)(i) hereof and this
Section 6.3(d)(ii) were not in this Agreement.

(iii) Section 754 Adjustments. To the extent an adjustment of the adjusted tax basis of any Company asset pursuant to Section 734(b) of the Code or Section 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such section of the Treasury Regulations.

(e) In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value (computed in accordance with the definition of same under this Agreement). In the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) of the definition of Gross Asset Value hereof, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Section 704(c) of the Code and the Treasury Regulations thereunder. Any elections or other decisions relating to such allocations shall be made by the Tax Matters Officer in any manner that reasonably reflects the purpose and intention of this Agreement, provided that the Company shall use the remedial allocation method set forth in Treasury Regulation Section 1.704-3(d). Allocations pursuant to this Section 6.3(e) are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Profits, Losses, other items, or distributions pursuant to any provision of this Agreement.

6.4. Varying Interests. All items of income, gain, loss, deduction or credit shall be allocated, and all distributions shall be made, to the Persons shown on the records of the

Company to have been Members as of the last calendar day of the period for which the allocation or distribution is to be made. Notwithstanding the foregoing, if during any taxable year there is a change in any Member's Sharing Ratio, the Members agree that their allocable shares of such items for the taxable year shall be determined on any method determined by the Board to be permissible under Code Section 706 and the related Treasury Regulations to take account of the Members' varying Sharing Ratios.

6.5. Tax Distributions. To the extent the Board, in good faith, determines the Company has sufficient funds, the Company shall make distributions on a quarterly basis after the end of each fiscal quarter of the Company, beginning with the third quarter for the fiscal year ending December 31, 2004, to each Member in an amount equal to (i) the total amount of taxable income allocated to such Member for such fiscal year which exceeds the aggregate allocation of Losses pursuant to Sections 6.3(b) and (c) for the succeeding fiscal years multiplied by (ii) a tax rate reasonably selected by the Board; provided, however, that subsequent distributions to the Members made during such fiscal year and subsequent fiscal years shall be adjusted as necessary to ensure that, over the entire Term of the Company, the aggregate cash distributed to a Member shall be equal to the amount to which such Member would have been entitled had there been no distributions made pursuant to this Section 6.5.

6.6. Withheld Taxes. All amounts withheld pursuant to the Code or any provision of any state or local tax law with respect to any payment, distribution or allocation to the Company or the Members shall be treated as amounts distributed to the Members pursuant to this Article 6 for all purposes of this Agreement. The Board is authorized to withhold from distributions, or with respect to allocations, to the Members and to pay over to any federal, state or local government any amounts required to be so withheld pursuant to the Code or any provision of any other federal, state or local law and shall allocate such amounts to those Members with respect to which such amounts were withheld.

6.7. Limitations on Distributions. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to any Member on account of its interest in the Company if such distribution would violate Section 18-607 of the Act or other Applicable Law.

7. MANAGEMENT

7.1. Management by Board of Managers and Executive Officers. The business and affairs of the Company shall be fully vested in, and managed by, the Board and any executive officers elected pursuant to Article 8 hereof. The Managers and executive officers shall collectively constitute "managers" of the Company within the meaning of the Act. Except as otherwise specifically provided in this Agreement, the authority and functions of the Board, on the one hand, and the executive officers, on the other hand, shall be identical to the authority and functions of the board of directors and officers, respectively, of a corporation organized under the General Corporation Law of the State of Delaware. The executive officers shall be vested with such powers and duties as are set forth in Article 8 hereof and as are specified by the Board. Accordingly, except as otherwise specifically provided in this Agreement, the business and affairs of the Company shall be managed under the direction of the Board, and the day-to-day

activities of the Company shall be conducted on the Company's behalf by the executive officers who shall be agents of the Company.

In addition to the powers and authorities expressly conferred on the Board by this Agreement, the Board may exercise all such powers of the Company and do all such acts and things as are not restricted by this Agreement, the Act or Applicable Law.

7.2. Constitution of Board of Managers. The number of managers constituting the Board shall be no less than two and no more than six (each a "Manager" and collectively, the "Managers"), unless otherwise fixed from time to time pursuant to a resolution adopted by a majority of the Managers. The initial Managers of the Company shall be William H. Shea, Jr., Stephen C. Muther and Robert B. Wallace. A Manager need not be a Member. The Managers shall be elected or approved by the Members at an annual meeting of the Members and shall serve as Managers of the Company until their death or removal from office or until their successors are elected and qualified.

7.3. Regular Meetings. The Board shall meet at least annually. The Board may, by resolution, provide the time and place for the holding of additional regular meetings without other notice than such resolution.

7.4. Special Meetings. A special meeting of the Board may be called at any time at the request of (a) the Chairman of the Board or (b) a majority of the Managers then in office.

7.5. Notice. Written notice of all regular meetings of the Board must be given to all Managers at least five Days prior to the regular meeting of the Board and one Business Day prior to any special meeting of the Board. All notices and other communications to be given to Managers shall be sufficiently given for all purposes hereunder if in writing and delivered by hand, courier or overnight delivery service or three Days after being mailed by certified or registered mail, return receipt requested, with appropriate postage prepaid, or when received in the form of a telegram or facsimile, and shall be directed to the address or facsimile number as such Manager shall designate by notice to the Company. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice of such meeting, except for amendments to this Agreement, as provided herein. A meeting may be held at any time without notice if all the Managers are present or if those not present waive notice of the meeting either before or after such meeting.

7.6. Action by Consent of Board. Except as otherwise required by Applicable Law, all decisions of the Board shall require the affirmative vote of a majority of the Managers present at a meeting at which a quorum, as described in Section 7.8, is present. To the extent permitted by Applicable Law, the Board may act without a meeting so long as the number of Managers who would be required to take such action at a duly held meeting at which all Managers were present and voted shall have executed a written consent with respect to any Board action taken in lieu of a meeting.

7.7. Conference Telephone Meetings. Managers or members of any committee of the Board may participate in a meeting of the Board or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in

the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

7.8. Quorum. A majority of Managers, present in person or participating in accordance with Section 7.7, shall constitute a quorum for the transaction of business, but if at any meeting of the Board there shall be less than a quorum present, a majority of the Managers present may adjourn the meeting from time to time without further notice. Any act of the majority of the Managers present at a meeting at which a quorum is present shall be the act of the Board. The Managers present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough Managers to leave less than a quorum.

7.9. Vacancies; Increases in the Number of Managers. Unless otherwise provided in this Agreement, vacancies and newly created Board seats resulting from any increase in the authorized number of Managers may be filled by a majority of the Managers then in office, although less than a quorum, or a sole remaining Manager; and any Manager so chosen shall hold office until the next annual election and until his successor shall be duly elected and shall qualify, unless sooner displaced.

7.10. Committees.

(a) The Board may establish committees of the Board and may delegate certain of its responsibilities to such committees.

(b) A majority of any committee may determine its action and fix the time and place of its meetings unless the Board shall otherwise provide. Notice of such meetings shall be given to each member of the committee in the manner provided for in Section 7.5. The Board shall have power at any time to fill vacancies in, or to change the membership of, any committee, or to dissolve any such committee. Nothing herein shall be deemed to prevent the Board from appointing one or more committees consisting in whole or in part of persons who are not Managers; provided, however, that no such committee shall have or may exercise any authority of the Board.

7.11. Removal. Any Manager or the entire Board may be removed, with or without cause, by the holders of a Majority Interest then entitled to vote at an election of Managers.

8. OFFICERS

8.1. Elected Officers. The executive officers of the Company shall serve at the pleasure of the Board. Such officers shall have the authority and duties delegated to each of them, respectively, by the Board from time to time. The elected officers of the Company shall be a Chairman of the Board, a President, a Secretary, a Treasurer, and such other officers (including, without limitation, Executive Vice Presidents, Senior Vice Presidents and Vice Presidents) as the Board from time to time may deem proper. The Chairman of the Board shall be chosen from among the Managers. All officers elected by the Board shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article 8. The Board or any committee thereof may from time to time elect such other officers (including one or more Vice Presidents, Controllers, Assistant Secretaries and Assistant Treasurers) as may be necessary or desirable for the conduct of the business of the Company. Such other officers and agents shall have such duties and shall hold their offices for such terms as shall be provided in this Agreement or as may be prescribed by the Board or such committee, as the case may be.

8.2. Election and Term of Office. The initial officers of the Company shall be elected by the Board in connection with the execution hereof. Hereafter, the officers of the Company shall be elected annually by the Board at the first meeting during each calendar year. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until such person's successor shall have been duly elected and shall have qualified or until such person's death or until he shall resign or be removed pursuant to Section 8.8.

8.3. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Members and the Board and shall perform all duties incidental to such person's office which may be required by law and all such other duties as are properly required of him by the Board. He shall make reports to the Board and the Members as directed by the Board. The Managers also may elect a Vice-Chairman to act in the place of the Chairman upon his or her absence or inability to act.

8.4. President; Chief Executive Officer. The President shall act as the Chief Executive Officer of the Company and shall be responsible for the administration and operation of the Company's business and general supervision of its policies and affairs and shall see that all orders and resolutions of the Board and of any committee thereof are carried into effect. The President, if he is also a Manager, shall, in the absence of or because of the inability to act of the Chairman of the Board, perform all duties of the Chairman of the Board and preside at all meetings of the Members and the Board.

8.5. Vice Presidents. Each Executive Vice President and Senior Vice President and any Vice President shall have such powers and shall perform such duties as shall be assigned to him by the Board.

8.6. Treasurer.

(a) The Treasurer shall exercise general supervision over the receipt, custody and disbursement of corporate funds. The Treasurer shall cause the funds of the Company to be deposited in such banks as may be authorized by the Board, or in such banks as may be designated as depositories in the manner provided by resolution of the Board. The Treasurer shall, in general, perform all duties incident to the office of the Treasurer and shall have such further powers and duties and shall be subject to such directions as may be granted or imposed from time to time by the Board.

(b) Assistant Treasurers shall have such of the authority and perform such of the duties of the Treasurer as may be provided in this Agreement or assigned to them by the Board or the Treasurer. Assistant Treasurers shall assist the Treasurer in the performance of the duties assigned to the Treasurer, and in assisting the Treasurer, each Assistant Treasurer shall for such purpose have the powers of the Treasurer. During the Treasurer's absence or inability, the Secretary's authority and duties shall be possessed by such Assistant Treasurer or Assistant Treasurers as the Board may designate.

8.7. Secretary.

(a) The Secretary shall keep or cause to be kept, in one or more books provided for that purpose, the minutes of all meetings of the Board, the committees of the Board and the Members pursuant to Article 7. The Secretary shall see that all notices are duly given in accordance with the provisions of this Agreement and as required by law; shall be custodian of the records and the seal of the Company and affix and attest the seal to all documents to be executed on behalf of the Company under its seal; and shall see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and in general, shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to the Secretary by the Board.

(b) Assistant Secretaries shall have such of the authority and perform such of the duties of the Secretary as may be provided in this Agreement or assigned to them by the Board or the Secretary. Assistant Secretaries shall assist the Secretary in the performance of the duties assigned to the Secretary, and in assisting the Secretary, each Assistant Secretary shall for such purpose have the powers of the Secretary. During the Secretary's absence or inability, the Secretary's authority and duties shall be possessed by such Assistant Secretary or Assistant Secretaries as the Board may designate.

8.8. Removal. Any officer elected, or agent appointed, by the Board may be removed by the affirmative vote of a majority of the Board whenever, in their judgment, the best interests of the Company would be served thereby. No elected officer shall have any contractual rights against the Company for compensation by virtue of such election beyond the date of the election of such person's successor, such person's death, such person's resignation or such person's removal, whichever event shall first occur, except as otherwise provided in an employment contract or under an employee deferred compensation plan.

8.9. Vacancies. A newly created elected office and a vacancy in any elected office because of death, resignation or removal may be filled by the Board for the unexpired portion of the term at any meeting of the Board.

9. INDEMNIFICATION OF MANAGERS, OFFICERS, EMPLOYEES AND AGENTS

9.1. Indemnification.

(a) To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, all Indemnitees shall be indemnified and held harmless by the Company from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee; provided, that in each case the Indemnitee acted in good faith and in a manner that such Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe its conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that the Indemnitee acted in a manner contrary to that specified above. Any indemnification pursuant to this Section 9.1 shall be made only out of the assets of the Company.

(b) To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant to Section 9.1(a) in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of any undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Section 9.1.

(c) The indemnification provided by this Section 9.1 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, as a matter of law or otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and as to actions in any other capacity, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee.

(d) The Company may purchase and maintain insurance on behalf of the Company, its Affiliates and such other Persons as the Company shall determine, against any liability that may be asserted against or expense that may be incurred by such Person in connection with the Company's activities or such Person's activities on behalf of the Company, regardless of whether the Company would have the power to indemnify such Person against such liability under the provisions of this Agreement.

(e) For purposes of this Section 9.1, the Company shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Company also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to Applicable Law shall constitute "fines" within the meaning of Section 9.1(a); and action taken or omitted by the Indemnitee with respect to any employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is in, or not opposed to, the best interests of the Company.

(f) An Indemnitee shall not be denied indemnification in whole or in part under this Section 9.1 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

(g) The provisions of this Section 9.1 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

(h) No amendment, modification or repeal of this Section 9.1 or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Company, nor the obligations of the Company to indemnify any such Indemnitee under and in accordance with the provisions of this Section 9.1 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

9.2. Liability of Indemnitees.

(a) Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Company or any other Persons who have acquired membership interests in the Company, for losses sustained or liabilities incurred as a result of any act or omission if such Indemnitee acted in good faith.

(b) To the extent that, at law or in equity, an Indemnitee has duties (including fiduciary duties) and liabilities relating thereto to the Company, such Indemnitee acting in connection with the Company's business or affairs shall not be liable to the Company or to any Member for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict or otherwise modify the duties and liabilities of an Indemnitee otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of such Indemnitee.

(c) Any amendment, modification or repeal of this Section 9.2 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability to the Company, and the Company's managers, officers and employees under this Section 9.2 as in effect immediately prior to such amendment, modification or repeal with

respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

10. TAXES

10.1. Tax Returns. The Tax Matters Officer (as defined below) of the Company shall prepare and timely file (on behalf of the Company) all federal, state and local tax returns required to be filed by the Company. Each Member shall furnish to the Company all pertinent information in its possession relating to the Company's operations that is necessary to enable the Company's tax returns to be timely prepared and filed. The Company shall bear the costs of the preparation and filing of its returns.

10.2. Tax Elections.

(a) The Company shall make the following elections on the appropriate tax returns:

(i) to adopt as the Company's fiscal year the calendar year;

(ii) to adopt the accrual method of accounting;

(iii) if a distribution of the Company's property as described in Section 734 of the Code occurs or upon a transfer of Membership Interest as described in Section 743 of the Code occurs, on request by notice from any Member, to elect, pursuant to Section 754 of the Code, to adjust the basis of the Company's properties;

(iv) to elect to amortize the organizational expenses of the Company ratably over a period of 60 months as permitted by Section 709(b) of the Code; and

(v) any other election the Board may deem appropriate.

(b) Neither the Company nor any Member shall make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law and no provision of this Agreement (including Section 2.7) shall be construed to sanction or approve such an election.

10.3. Tax Matters Officer.

(a) The Board shall select the President or the Chief Financial Officer (or, if there are no officers serving under such titles, such other officer in a comparable position), of the Company to act as the "tax matters partner" of the Company pursuant to Section 6231(a)(7) of the Code (the "Tax Matters Officer"). The Tax Matters Officer shall take such action as may be necessary to cause to the extent possible each Member to become a "notice partner" within the meaning of Section 6223 of the Code. The Tax Matters Officer shall inform each Member of all significant matters that may come to its attention in its capacity as Tax Matters Officer by giving notice thereof on or before the fifth Business Day after becoming aware thereof and, within that time, shall forward to each Member copies of all significant written communications it may receive in that capacity.

(b) The Tax Matters Officer shall take no action without the authorization of the Board, other than such action as may be required by Applicable Law. Any cost or expense incurred by the Tax Matters Officer in connection with its duties, including the preparation for or pursuance of administrative or judicial proceedings, shall be paid by the Company.

(c) The Tax Matters Officer shall not enter into any extension of the period of limitations for making assessments on behalf of the Members without first obtaining the consent of the Board. The Tax Matters Officer shall not bind any Member to a settlement agreement without obtaining the consent of such Member. Any Member that enters into a settlement agreement with respect to any Company item (as described in Section 6231(a)(3) of the Code) shall notify the other Members of such settlement agreement and its terms within 90 Days from the date of the settlement.

(d) No Member shall file a request pursuant to Section 6227 of the Code for an administrative adjustment of Company items for any taxable year without first notifying the other Members. If the Board consents to the requested adjustment, the Tax Matters Officer shall file the request for the administrative adjustment on behalf of the Members. If such consent is not obtained within 30 Days from such notice, or within the period required to timely file the request for administrative adjustment, if shorter, any Member may file a request for administrative adjustment on its own behalf. Any Member intending to file a petition under Sections 6226, 6228 or other Section of the Code with respect to any item involving the Company shall notify the other Members of such intention and the nature of the contemplated proceeding. In the case where the Tax Matters Officer is intending to file such petition on behalf of the Company, such notice shall be given within a reasonable period of time to allow the Members to participate in the choosing of the forum in which such petition will be filed.

(e) If any Member intends to file a notice of inconsistent treatment under Section 6222(b) of the Code, such Member shall give reasonable notice under the circumstances to the other Members of such intent and the manner in which the Member's intended treatment of an item is (or may be) inconsistent with the treatment of that item by the other Members.

11. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS

11.1. Maintenance of Books.

(a) The Board shall cause to be kept a record containing the minutes of the proceedings of the meetings of the Board and of the Members pursuant to Article 7, appropriate registers and such books of records and accounts as may be necessary for the proper conduct of the business of the Company.

(b) The books of account of the Company shall be (i) maintained on the basis of a fiscal year that is the calendar year, (ii) maintained on an accrual basis in accordance with GAAP, consistently applied and (iii) audited by the Certified Public Accountants at the end of each calendar year.

11.2. Reports. With respect to each calendar year, the Board shall prepare, or cause to be prepared, and deliver, or cause to be delivered, to each Member:

(a) Within 120 Days after the end of such calendar year, a profit and loss statement and a statement of cash flows for such year, a balance sheet and a statement of each Member's Capital Account as of the end of such year, together with a report thereon of the Certified Public Accountants; and

(b) Such federal, state and local income tax returns and such other accounting, tax information and schedules as shall be necessary for the preparation by each Member on or before June 15 following the end of each calendar year of its income tax return with respect to such year.

11.3. Bank Accounts. Funds of the Company shall be deposited in such banks or other depositories as shall be designated from time to time by the Board. All withdrawals from any such depository shall be made only as authorized by the Board and shall be made only by check, wire transfer, debit memorandum or other written instruction.

12. DISSOLUTION, WINDING-UP, TERMINATION AND CONVERSION

12.1. Dissolution.

(a) The Company shall dissolve and its affairs shall be wound up on the first to occur of the following events (each a "Dissolution Event"):

(i) the unanimous consent of the Members;

(ii) entry of a decree of judicial dissolution of the Company under Section 18-802 of the Act; or

(iii) at any time there are no Members of the Company, unless the Company is continued in accordance with the Act or this Agreement.

(b) No other event shall cause a dissolution of the Company.

(c) Upon the occurrence of any event that causes there to be no Members of the Company, to the fullest extent permitted by law, the personal representative of the last remaining Member is hereby authorized to, and shall, within 90 Days after the occurrence of the event that terminated the continued membership of such Member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute Member of the Company, effective as of the occurrence of the event that terminated the continued membership of such Member in the Company.

(d) Notwithstanding any other provision of this Agreement, the Bankruptcy of a Member shall not cause such Member to cease to be a member of the Company and, upon the occurrence of such an event, the Company shall continue without dissolution.

12.2. Winding-Up and Termination.

(a) On the occurrence of a Dissolution Event, the Board shall act as liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Act. The costs of winding up shall be borne as a Company expense. Until final distribution, the liquidator shall continue to operate the Company properties with all of the power and authority of the Members. The steps to be accomplished by the liquidator are as follows:

(i) as promptly as possible after dissolution and again after final winding up, the liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company's assets, liabilities, and operations through the last Day of the month in which the dissolution occurs or the final winding up is completed, as applicable;

(ii) the liquidator shall discharge from Company funds all of the debts, liabilities and obligations of the Company (including all expenses incurred in winding up or otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash escrow fund for contingent, conditional and unmatured liabilities in such amount and for such term as the liquidator may reasonably determine); and

(iii) all remaining assets of the Company shall be distributed to the Members as follows:

(A) the liquidator may sell any or all Company property, including to Members, and any resulting gain or loss from each sale shall be computed and allocated to the Capital Accounts of the Members in accordance with the provisions of Article 6;

(B) with respect to all Company property that has not been sold, the fair market value of that property shall be determined and the Capital Accounts of the Members shall be adjusted to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in property that has not been reflected in the Capital Accounts previously would be allocated among the Members if there were a taxable disposition of that property for the fair market value of that property on the date of distribution; and

(C) Company property (including cash) shall be distributed among the Members in accordance with Section 6.2; and, to the extent practicable, those distributions shall be made by the end of the taxable year of the Company during which the liquidation of the Company occurs (or, if later, 90 Days after the date of the liquidation);

provided, however, that notwithstanding the foregoing provisions of clauses (A), (B) and (C) immediately above, if the obligation to maintain Capital Accounts has been suspended under Section 13.13 of this Agreement, no allocations shall be made and all Company property shall be distributed to the sole Member.

(b) The distribution of cash or property to a Member in accordance with the provisions of this Section 12.2 constitutes a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its Membership Interest and all the

Company's property and constitutes a compromise to which all Members have consented pursuant to Section 18-502(b) of the Act. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds.

12.3. Deficit Capital Accounts. No Member will be required to pay to the Company, to any other Member or to any third party any deficit balance that may exist from time to time in the Member's Capital Account.

12.4. Certificate of Cancellation. On completion of the distribution of Company assets as provided herein, the Members (or such other Person or Persons as the Act may require or permit) shall file a certificate of cancellation with the Secretary of State of Delaware, cancel any other filings made pursuant to
Section 2.5, and take such other actions as may be necessary to terminate the existence of the Company. Upon the filing of such certificate of cancellation, the existence of the Company shall terminate (and the Term shall end), except as may be otherwise provided by the Act or by Applicable Law.

13. GENERAL PROVISIONS

13.1. Offset. Whenever the Company is to pay any sum to any Member, any amounts that Member owes the Company may be deducted from that sum before payment.

13.2. Notices. All notices, demands, requests, consents, approvals or other communications (collectively, "Notices") required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served, delivered by reputable air courier service with charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice. Notice shall be deemed given on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile. Notice otherwise sent as provided herein shall be deemed given upon delivery of such notice:

If to the Company, to it at:

5002 Buckeye Road
P.O. Box 368
Emmaus, PA 18049
Attention: Stephen C. Muther
(Fax) 610.254.4610

with a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attention: Howard L. Meyers
(Fax) 215.963.5001

If to a Member, as listed on the signature page hereto

or as such Member shall designate to the Company in writing.

13.3. Entire Agreement; Superseding Effect. This Agreement constitutes the entire agreement of the Members relating to the Company and the transactions contemplated hereby, and supersedes all provisions and concepts contained in all prior contracts or agreements between the Members with respect to the Company, whether oral or written.

13.4. Effect of Waiver or Consent. Except as otherwise provided in this Agreement, a waiver or consent, express or implied, to or of any breach or default by any Member in the performance by that Member of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Member of the same or any other obligations of that Member with respect to the Company. Except as otherwise provided in this Agreement, failure on the part of a Member to complain of any act of any Member or to declare any Member in default with respect to the Company, irrespective of how long that failure continues, does not constitute a waiver by that Member of its rights with respect to that default until the applicable statute-of-limitations period has run.

13.5. Amendment or Restatement. This Agreement or the Delaware Certificate may be amended or restated only by a written instrument executed (or, in the case of the Delaware Certificate, approved) by a Majority Interest of the Members; provided, however, that, any amendment to the provisions of Article 7 shall be approved by the Board, and that Section 7.1 may be amended or restated only by approval of the Board and the Members.

13.6. Binding Effect. Subject to the restrictions on Dispositions set forth in this Agreement, this Agreement is binding on and shall inure to the benefit of the Members and their respective successors and permitted assigns.

13.7. Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. In the event of a direct conflict between the provisions of this Agreement and any mandatory, non-waivable provision of the Act, such provision of the Act shall control. If any provision of the Act may be varied or superseded in a limited liability company agreement (or otherwise by agreement of the members or managers of a limited liability company), such provision shall be deemed superseded and waived in its entirety if this Agreement contains a provision addressing the same issue or subject matter. If any provision of this Agreement or the application thereof to any Member or circumstance is held invalid or unenforceable to any extent,
(a) the remainder of this Agreement and the application of that provision to other Members or circumstances is not affected thereby, and (b) the Members shall negotiate in good faith to replace that provision with a new provision that is valid and enforceable and that puts the Members in substantially the same economic, business and legal position as they would have been in if the original provision had been valid and enforceable.

13.8. Further Assurances. In connection with this Agreement and the transactions contemplated hereby, each Member shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and those transactions.

13.9. Waiver of Certain Rights. Each Member irrevocably waives any right it may have to maintain any action for dissolution of the Company or for partition of the property of the Company.

13.10. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument.

13.11. Jurisdiction. Any and all Claims arising out of, in connection with or in relation to (i) the interpretation, performance or breach of this Agreement, or (ii) any relationship before, at the time of entering into, during the term of, or upon or after expiration or termination of this Agreement, between the parties hereto, shall be brought in any court of competent jurisdiction in the State of Delaware. Each party hereto unconditionally and irrevocably consents to the jurisdiction of any such court over any Claims and waives any objection that such party may have to the laying of venue of any Claims in any such court.

13.12. Suspension of Certain Provisions If Only One Member.

(a) The following definitions in Article 1 of this Agreement shall be suspended and shall have no force or effect at any time that there is only one Member of the Company:

(i) "Adjusted Capital Account Deficit",

(ii) "Capital Account",

(iii) "Depreciation",

(iv) "Gross Asset Value",

(v) "Profits" and "Losses",

(vi) "Target Capital Account Amount", and

(vii) "Treasury Regulations".

(b) The following provision of this Agreement shall be suspended and shall have no force or effect at any time that there is only one Member of the Company:

(i) Section 5.4 (Capital Accounts);

(ii) Section 6.3 (Allocations);

(iii) Section 6.4 (Varying Interests);

(iv) Section 6.5 (Tax Distributions);

(v) Section 6.6 (Withheld Taxes);

(vi) Section 10.1 (Tax Returns);

(vii) Section 10.2 (Tax Elections); and

(viii) Section 12.3 (Deficit Capital Accounts).

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Member has executed this Agreement as of the date first set forth above.

MEMBER:

BUCKEYE PARTNERS, L.P.,
its sole member

By: BUCKEYE PIPE LINE COMPANY LLC

By: /s/ Stephen C. Muther
    ------------------------------------------
    Name:  Stephen C. Muther
    Title: Senior Vice President -
           Administration, General Counsel and
           Secretary

EXHIBIT A

        MEMBER            SHARING RATIO     EFFECTIVE CAPITAL CONTRIBUTION
---------------------     -------------     ------------------------------
Buckeye Partners, L.P.        100%                      $ 100

LIMITED LIABILITY COMPANY AGREEMENT

WOOD RIVER PIPE LINES LLC

A DELAWARE LIMITED LIABILITY COMPANY

DATED AS OF

SEPTEMBER 27, 2004

Execution Copy

Exhibit 10.16
FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is made and entered into as of December 15, 2004, by and among BUCKEYE PARTNERS, L.P., a Delaware limited partnership (the "BORROWER"), the Lenders (as defined below) party hereto and SUNTRUST BANK, in its capacity as administrative agent for the Lenders (the "ADMINISTRATIVE AGENT").

W I T N E S S E T H:

WHEREAS, the Borrower, the several banks and other financial institutions party thereto (collectively, the "LENDERS") and the Administrative Agent are parties to that certain Credit Agreement, dated as of August 6, 2004 (the "CREDIT AGREEMENT"; capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement as amended hereby), pursuant to which the Lenders have made certain financial accommodations available to the Borrower; and

WHEREAS, Buckeye Pipe Line Company LLC, a limited liability company duly organized and existing under the laws of the State of Delaware (the "COMPANY"), is the general partner of the Borrower, and holds the general partner interest of the Borrower (the "MLP GP Interest");

WHEREAS, the Company holds (i) a 1.99% general partner interest (the "MICHIGAN GP INTEREST") in Buckeye Pipe Line Company of Michigan, L.P. ("MICHIGAN"), (ii) a 1% general partner interest (collectively with the Michigan GP Interest and the Holdings GP Interest (as defined below), the "OLP GP INTERESTS") in each of Buckeye Pipe Line Company, L.P. ("BUCKEYE"), Laurel Pipe Line Company, L.P. ("LAUREL"), and Everglades Pipe Line Company, L.P. ("EVERGLADES"), and (iii) an approximate 1% general partner interest (the "HOLDINGS GP INTEREST") in Buckeye Pipe Line Holdings, L.P. ("HOLDINGS" and collectively with Michigan, Buckeye, Laurel and Everglades, the "OPERATING PARTNERSHIPS"), each a Delaware limited partnership, and serves as the sole general partner of each Operating Partnership;

WHEREAS, the Company is a wholly owned subsidiary of Buckeye Management Company LLC, a limited liability company duly organized and existing under the laws of the State of Delaware ("BMC"), and BMC is a wholly owned subsidiary of Glenmoor LLC, a limited liability company duly organized and existing under the laws of the State of Delaware ("GLENMOOR");

WHEREAS, the Company has guaranteed the obligations of its indirect owner, BPL Acquisition L.P., under that certain Credit and Guaranty Agreement (the "GS CREDIT AGREEMENT") among BPL Acquisition L.P., as borrower, BMC, Glenmoor and the Company, as guarantors, the various lenders party thereto from time to time and Goldman Sachs Credit Partners L.P.;

WHEREAS, the Company desires to be released from its guaranty obligations under the GS Credit Agreement;

WHEREAS, in connection with a release of the Company from its obligations in connection with the GS Credit Agreement, the Company desires to contribute certain assets, including the Company's MLP GP Interest and OLP GP Interests, but excluding the Company's rights under the Fourth Amended and Restated Incentive Compensation Agreement, dated as of December 15, 2004, between MAINLINE SUB LLC, a Delaware limited liability company, and BUCKEYE PARTNERS, L.P., a Delaware limited partnership (the "INCENTIVE COMPENSATION AGREEMENT"), to a new, wholly-owned subsidiary of the Company, Buckeye GP LLC, a limited liability company duly organized and existing under the laws of the State of Delaware ("BUCKEYE GP"), and to cause Buckeye GP to succeed to and assume the role of successor general partner of (i) the Partnership under the Borrower Partnership Agreement, (ii) Michigan under its Amended and Restated Agreement of Limited Partnership, dated as of March 25, 1998, (iii) Buckeye under its Amended and Restated Agreement of Limited Partnership, dated as of March 25, 1998, (iv) Laurel under its Amended and Restated Agreement of Limited Partnership, dated as of March 25, 1998, (v) Everglades under its Amended and Restated Agreement of Limited Partnership, dated as of March 25, 1998, and (vi) Holdings under its Amended and Restated Agreement of Limited Partnership, dated as of October 12, 2001 (such Agreements of Limited Partnership of the Operating Partnerships being collectively referred to herein as the "OLP PARTNERSHIP AGREEMENTS"), as well as certain other liabilities of the Company (collectively, the "GP ASSIGNMENT"); and

WHEREAS, immediately following, the GP Assignment, BMC and the Company desire to merge with and into Glenmoor, with Glenmoor being the surviving company, and Glenmoor desires to change its name to MainLine Sub LLC (such merger and change of name, collectively with the GP Assignment, the "TRANSACTION");

WHEREAS, the Borrower has requested that the Lenders and the Administrative Agent amend certain provisions of the Credit Agreement in connection with the Transaction, and subject to the terms and conditions hereof, the Lenders are willing to do so;

NOW, THEREFORE, for good and valuable consideration, the sufficiency and receipt of all of which are acknowledged, the Borrower, the Lenders and the Administrative Agent agree as follows:

1. AMENDMENTS.

(a) Section 1.01, Certain Defined Terms, of the Credit Agreement is hereby amended by adding the following definitions in proper alphabetical order:

"BUCKEYE GP LLC" shall mean Buckeye GP LLC, a Delaware limited liability company.

"FIRST AMENDMENT TO CREDIT AGREEMENT" shall mean that certain First Amendment to Credit Agreement, dated as of December __, 2004, by and among the Borrower, the Lenders party thereto and the Agent.

"TRANSACTION" shall have the meaning ascribed to such term in the recitals of the First Amendment to Credit Agreement.

(b) Section 1.01, Certain Defined Terms, of the Credit Agreement is hereby amended by replacing the definitions of "BMC," "Change of Control," "General Partner" and "GP Incentive Compensation Payments" in their entirety with the following definitions

"BMC" shall mean Buckeye Management Company LLC, a Delaware limited liability company, and its successors in connection with consummation of the Transaction.

"CHANGE OF CONTROL" shall mean either (i) the Carlyle Riverstone Global Energy and Power Fund II, L.P. shall cease to Beneficially Own, directly or indirectly, at least 51% of outstanding equity interests of the General Partner on a fully diluted basis or (ii) the General Partner shall cease to Beneficially Own 100% of the general partnership interest of the Borrower. As used herein "Beneficially Own" means "beneficially own" as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, or any successor provision thereto; provided, however, that, for purposes of this definition, a Person shall not be deemed to Beneficially Own securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates until such tendered securities are accepted for purchase or exchange.

"GENERAL PARTNER" shall mean BPLC until such time as the Transaction is consummated, and thereafter Buckeye GP LLC.

"GP INCENTIVE COMPENSATION PAYMENTS" shall mean the quarterly incentive compensation payments paid to MainLine Sub LLC by the Borrower pursuant to that certain Fourth Amended and Restated Incentive Compensation Agreement, dated as of December 15, 2004, as it may be amended from time to time.

(c) Section 7.22, Ownership of Parties, of the Credit Agreement is hereby amended by replacing subsection (a) thereof in its entirety with the following:

(a) The Borrower is a limited partnership formed under the laws of the State of Delaware and owned 1% (general partnership interest) by the General Partner and 99% (limited partnership interests) by public holders of limited partnership units, MainLine Sub, LLC and Buckeye Pipe Line Services Company.

2. CONSENT TO AMENDMENTS TO PARTNERSHIP AGREEMENTS. Subject to the terms and conditions set forth herein, each of the undersigned Lenders hereby consents to (i) the consummation of the Transaction for purposes of compliance with
Section 9.16 and (ii) the amendment of the Borrower Partnership Agreement and the Buckeye Pipe Line Partnership Agreement, as contained in (a) that certain Amended and Restated Agreement of Limited Partnership of Buckeye Partners, L.P., dated as of the date hereof, among Buckeye GP LLC and the other parties signatory thereto and (b) that certain Amended and Restated Agreement of Limited Partnership of Buckeye Pipe Line Company L.P., dated as of the date hereof, between Buckeye GP LLC and Buckeye Partners, L.P. (collectively, the "Partnership Agreement Amendment Documents").

3. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. Notwithstanding any other provision of this Amendment and without affecting in any manner the rights of the Lenders hereunder, it is understood and agreed that this Amendment shall not become effective, and the Borrower shall have no rights under this Amendment, until the Administrative Agent shall have received (i) reimbursement or payment of its costs and expenses incurred in connection with this Amendment and the Credit Agreement (including reasonable fees, charges and disbursements of King & Spalding LLP, counsel to the Administrative Agent) and (ii) each of the following documents:

(a) executed counterparts to this Amendment from the Borrower, the Guarantors and the Required Lenders;

(b) certified copies of all documents executed in connection with the Transaction, each in form and substance acceptable to the Administrative Agent; and

(c) certified copies of the Partnership Agreement Amendment Documents, together with all documents, agreements and instruments executed in connection therewith, each in form and substance acceptable to the Administrative Agent.

4. REPRESENTATIONS AND WARRANTIES. To induce the Lenders and the Administrative Agent to enter into this Amendment, each of the Borrower, the General Partner and the Guarantors (collectively, the "Loan Parties") hereby represents and warrants to the Lenders and the Administrative Agent that:

(a) The execution and delivery by such Loan Party of this Amendment and the performance of this Amendment and the Credit Agreement as amended hereby (i) are within such Loan Party's power and authority; (ii) have been duly authorized by all necessary partnership, limited liability company, partner and/or member action; (iii) are not in contravention of any provision of such Loan Party's certificate of partnership, certificate of partnership, partnership agreement, operating agreement or other organizational documents; (iv) do not violate any law or regulation, or any order or decree of any Governmental Authority; (v) do not conflict with or result in the breach or termination of, constitute a default under or accelerate any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Loan Party or any of its Subsidiaries is a party or by which such Loan Party or any such Subsidiary or any of their respective property is bound; (vi) do not result in the creation or imposition of any Lien upon any of the property of such Loan Party or

any of its Subsidiaries; and (vii) do not require the consent or approval of any Governmental Authority or any other Person;

(b) This Amendment has been duly executed and delivered for the benefit of or on behalf of each Loan Party and constitutes a legal, valid and binding obligation of each Loan Party, enforceable against such Loan Party in accordance with its terms except as the enforceability hereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors' rights and remedies in general; and

(c) After giving effect to this Amendment, the representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects, and no Default or Event of Default has occurred and is continuing as of the date hereof.

5. REAFFIRMATIONS AND ACKNOWLEDGMENTS.

Each Guarantor consents to the execution and delivery by the Borrower of this Amendment and jointly and severally ratify and confirm the terms of its Guaranty with respect to the indebtedness now or hereafter outstanding under the Credit Agreement as amended hereby and all promissory notes issued thereunder. Each Guarantor acknowledges that, notwithstanding anything to the contrary contained herein or in any other document evidencing any indebtedness of the Borrower to the Lenders or any other obligation of the Borrower, or any actions now or hereafter taken by the Lenders with respect to any obligation of the Borrower, its Guaranty (i) is and shall continue to be a primary obligation of such Guarantor, (ii) is and shall continue to be an absolute, unconditional, joint and several, continuing and irrevocable guaranty of payment, and (iii) is and shall continue to be in full force and effect in accordance with its terms. Nothing contained herein to the contrary shall release, discharge, modify, change or affect the original liability of the Guarantors under the Guaranties.

6. EFFECT OF AMENDMENT. Except as set forth expressly herein, all terms of the Credit Agreement, as amended hereby, and the other Loan Documents shall be and remain in full force and effect and shall constitute the legal, valid, binding and enforceable obligations of the Borrower to the Lenders and the Administrative Agent. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lenders under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement. This Amendment shall constitute a Loan Document for all purposes of the Credit Agreement.

7. GOVERNING LAW. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York and all applicable federal laws of the United States of America.

8. NO NOVATION. This Amendment is not intended by the parties to be, and shall not be construed to be, a novation of the Credit Agreement or an accord and satisfaction in regard thereto.

9. COSTS AND EXPENSES. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including, without limitation, the reasonable fees and out-of-pocket expenses of outside counsel for the Administrative Agent with respect thereto.

10. COUNTERPARTS. This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts, each of which shall be deemed an original and all of which, taken together, shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of this Amendment by facsimile transmission or by electronic mail in pdf form shall be as effective as delivery of a manually executed counterpart hereof.

11. BINDING NATURE. This Amendment shall be binding upon and inure to the benefit of the parties hereto, their respective successors, successors-in-titles, and assigns.

12. ENTIRE UNDERSTANDING. This Amendment sets forth the entire understanding of the parties with respect to the matters set forth herein, and shall supersede any prior negotiations or agreements, whether written or oral, with respect thereto.

[Signature Pages To Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed, under seal in the case of the Borrower and the Guarantor, by their respective authorized officers as of the day and year first above written.

BORROWER:                          BUCKEYE PARTNERS, L.P.

                                   By: Buckeye Pipe Line Company LLC,
                                   its general partner

                                   By: /s/ROBERT B. WALLACE
                                       -----------------------------------------
                                   Name: Robert B. Wallace
                                     Title: Senior VP Finance & CFO

GUARANTORS:                        WOOD RIVER PIPE LINES LLC

                                   By: /s/STEPHEN C. MUTHER
                                       -----------------------------------------
                                   Name: Stephen C. Muther
                                   Title: Sr. Vice President, Administration,
                                   and Secretary

                                   BUCKEYE PIPE LINE COMPANY, L.P.

                                   By: Buckeye Pipe Line Company LLC,
                                       its General Partner

                                       By: /s/ STEPHEN C. MUTHER
                                           ---------------------------------
                                           Name: Stephen C. Muther
                                           Title: Sr. Vice President,
                                           Administration and Secretary

                                   BUCKEYE PIPE LINE HOLDINGS, L.P.

                                   By: Buckeye Pipe Line Company LLC,
                                       its General Partner

                                       By: /s/ STEPHEN C. MUTHER
                                           ---------------------------------
                                           Name: Stephen C. Muther
                                           Title: Sr. Vice President,
                                           Administration and Secretary

             [SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

                                   BUCKEYE GULF COAST HOLDINGS I, LLC

                                   By: Buckeye Pipe Line Holdings, L.P.,
                                       its Sole Manager

                                        By: Buckeye Pipe Line Company LLC,
                                        its General Partner

                                        By: /s/ STEPHEN C. MUTHER
                                            -----------------------------------
                                        Name: Stephen C. Muther
                                          Title: Sr. Vice President,
                                          Administration, and Secretary

                                   BUCKEYE GULF COAST HOLDINGS II, LLC

                                   By: Buckeye Pipe Line Holdings, L.P.,
                                       its Sole Manager

                                        By: Buckeye Pipe Line Company LLC,
                                        its General Partner

                                        By: /s/ STEPHEN C. MUTHER
                                            ------------------------------------
                                        Name: Stephen C. Muther
                                          Title: Sr. Vice President,
                                          Administration, and Secretary

                                   BUCKEYE GULF COAST PIPE LINES, L.P.

                                   By: Buckeye Gulf Coast Holdings I, LLC,
                                       its General Partner

                                        By: Buckeye Pipe Line Holdings, L.P.,
                                        its Sole Manager

                                            By:  Buckeye Pipe Line Company
                                            LLC, its General Partner

                                            By: /s/STEPHEN C. MUTHER
                                                -------------------------------
                                            Name: Stephen C. Muther
                                              Title: Sr. Vice President,
                                              Administration, and Secretary

            [SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

                                   BUCKEYE TERMINALS, LLC

                                   By: /s/ STEPHEN C. MUTHER
                                       -----------------------------------------
                                   Name: Stephen C. Muther
                                       Title: Sr. Vice President,
                                       Administration, and Secretary

                                   NORCO PIPE LINE COMPANY, LLC

                                        By: /s/ STEPHEN C. MUTHER
                                           -------------------------------------
                                            Name: Stephen C. Muther
                                            Title: Sr. Vice President,
                                            Administration and Secretary

                                   EVERGLADES PIPE LINE COMPANY, L.P.

                                   By: Buckeye Pipe Line Company LLC,
                                       its General Partner

                                        By: /s/ STEPHEN C. MUTHER
                                            ------------------------------------
                                            Name: Stephen C. Muther
                                            Title: Sr. Vice President,
                                            Administration and Secretary

                                   BUCKEYE PIPE LINE COMPANY OF MICHIGAN,
                                   L.P.

                                   By: Buckeye Pipe Line Company LLC,
                                       its General Partner

                                        By: /s/ STEPHEN C. MUTHER
                                            ------------------------------------
                                            Name: Stephen C. Muther
                                            Title: Sr. Vice President,
                                            Administration, and Secretary

            [SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

                                   LAUREL PIPE LINE COMPANY, L.P.

                                   By: BUCKEYE PIPE LINE COMPANY LLC,
                                       its General Partner

                                        By: /s/ STEPHEN C. MUTHER
                                            ------------------------------------
                                            Name: Stephen C. Muther
                                            Title: Sr. Vice President,
                                            Administration, and Secretary

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

LENDER, ISSUING BANK
AND AGENT:                              SUNTRUST BANK

                                        By /s/ DAVID EDGE
                                           -------------------------------------
                                           Name: David Edge
                                            Title: Managing Director

            [SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

                                        FLEET NATIONAL BANK

                                        By /s/ MICHAEL J. BROCHETTI
                                           -------------------------------------
                                           Name: Michael J. Brochetti
                                             Title: Director

            [SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

                                        CITIBANK, N.A.

                                        By /s/ K. CLINTON GERST
                                           -------------------------------------
                                           Name: K.Clinton Gerst
                                             Title: Attorney-In-Fact

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

BNP PARIBAS

By /s/ J. ONISCHUK
   ---------------
   Name: J. Onischuk
    Title: Director

/s/ GREG SMOTHERS
Greg Smothers
Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

JP MORGAN CHASE BANK, N.A.
Formerly known as JPMorgan Chase Bank

By /s/ LEE P. BRENNAN
   ------------------
   Name: Lee P. Brennan
    Title: Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

WACHOVIA BANK, NATIONAL ASSOCIATION

By /s/ CAROL S. ORELLANA
   ---------------------
   Name: Carol S. Orellana
    Title: Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

NATIONAL AUSTRALIA BANK LTD.

By /s/ MARK BODON
   --------------
   Name: Mark Bodon
    Title: Associate Director
           Project and Energy Finance

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

THE ROYAL BANK OF SCOTLAND plc

By /s/ KEITH JOHNSON
   -----------------
   Name: Keith Johnson
    Title: Senior Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

ROYAL BANK OF CANADA

By /s/ JASON YORK
   --------------
   Name: Jason York
    Title: Attorney-In-Fact

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

KEYBANK NATIONAL ASSOCIATION

By /s/ KEVEN D. SMITH
   ------------------
   Name: Keven D. Smith
     Title: Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

UFJ BANK LIMITED

By ______________________________
Name:
Title:

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

MIZUHO CORPORATE BANK, LTD.

By ______________________________
Name:
Title:

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

WELLS FARGO BANK, N.A.

By /s/ KAREN L. ROGERS
   -------------------
   Name: Karen L. Rogers
    Title: Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

UBS LOAN FINANCE LLC

By /s/ WINSLOWE OGBOURNE
   ---------------------
   Winslowe Ogbourne
   Associate Director
   Banking Products
   Services, US

By /s/ BARBARA EZELL-MCMICHAEL
   ---------------------------
   Barbara Ezell-McMichael
   Associate Director
   Banking Product Services US

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

MERRILL LYNCH BANK USA

By /s/ FRANK STEPAN
   ----------------
   Name: Frank Stepan
    Title: Vice President

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

WILLIAM STREET CREDIT CORPORATION

By /s/ JENNIFER M. HILL
   --------------------
   Name: Jennifer M. Hill
    Title: Chief Financial Officer

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

LEHMAN BROTHERS BANK, FSB

By /s/ JAMIE M. SHUGAN
   -------------------
   Name: Jamie M. Shugan
     Title: Authorized Signatory

[SIGNATURE PAGE TO FIRST AMENDMENT TO CREDIT AGREEMENT]

.
.

EXHIBIT 21.1

BUCKEYE PARTNERS, L.P.
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 2004

                                                                              JURISDICTION OF
                                         SUBSIDIARY                            ORGANIZATION
                                         ----------                            ------------
Buckeye Pipe Line Company, L.P. (99% owned).................................     Delaware
Buckeye Pipe Line Holdings, L.P. (99% owned)................................     Delaware
Everglades Pipe Line Company, L.P. (99% owned)..............................     Delaware
Laurel Pipe Line Company, L.P. (99% owned)..................................     Delaware
Wood River Pipe Lines LLC (100% owned)......................................     Delaware
Buckeye Terminals, LLC (99% owned)..........................................     Delaware
Norco Pipe Line Company, LLC (99% owned)....................................     Delaware
Buckeye Gulf Coast Pipe Lines, L.P. (99% owned).............................     Delaware
Buckeye Gulf Coast Holdings I, LLC (99% owned)..............................     Delaware
Buckeye Gulf Coast Holdings II, LLC (99% owned).............................     Delaware
Buckeye Products Pipe Line, L.P. (63% owned)................................     Delaware
Gulf Coast Pipe Line, L.P. (63% owned)......................................     Delaware
Gulf Coast/Products GP Holding LLC (99% owned)..............................     Delaware
Gulf Coast/Products Holding L.P. (99% owned)................................     Delaware
Buckeye Pipe Line Co. of Michigan, L.P. (97.10% owned)......................     Delaware
WesPac Pipelines - San Diego LLC (49.5% owned)..............................     Nevada
WesPac Pipelines - Reno LLC (74.25% owned)..................................     Nevada
WesPac Pipelines - Austin LLC (74.25% owned)................................     Nevada
WesPac Pipelines - Memphis LLC (74.25% owned)...............................     Nevada
WesPac Pipelines - San Jose LLC (74.25% owned)..............................     Nevada

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 033-52761 of Buckeye Partners, L.P. on Form S-8 and in Registration Statement No. 333-116540 of Buckeye Partners, L.P. on Form S-3 of our reports dated March 14, 2005, relating to the financial statements of Buckeye Partners, L.P. and management's report of the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of Buckeye Partners, L.P. for the year ended December 31, 2004.

Deloitte & Touche, LLP

Philadelphia, Pennsylvania

March 14, 2005

EXHIBIT 31.1

CERTIFICATION

I, William H. Shea, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Buckeye Partners, L.P.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

BUCKEYE GP LLC, as general partner of the registrant

Date: March 14, 2005        WILLIAM H. SHEA, JR.
                            ----------------------------------------------------
                            William H. Shea, Jr.



                            Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, Robert B. Wallace, certify that:

1. I have reviewed this annual report on Form 10-K of Buckeye Partners, L.P.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

BUCKEYE GP LLC, as general partner of the registrant

Date: March 14, 2005        ROBERT B. WALLACE
                            ---------------------------------------------------
                            Robert B. Wallace
                            Senior Vice President, Finance and



                            Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Buckeye Partners, L.P. (the "Partnership") on Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William H. Shea, Jr., Chief Executive Officer of Buckeye GP LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, (15 U.S.C. 78m(a)); and >

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. >

                           BUCKEYE GP LLC, as general partner of the Partnership

Date: March 14, 2005       WILLIAM H. SHEA, JR.
                           -----------------------------------------------------
                           William H. Shea, Jr.



                           Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Buckeye Partners, L.P. (the "Partnership") on Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert B. Wallace, Chief Financial Officer of Buckeye GP LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934, (15 U.S.C. 78m(a)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

                           BUCKEYE GP LLC, as general partner of the Partnership

Date: March 14, 2005       ROBERT B. WALLACE
                           -----------------------------------------------------
                           Robert B. Wallace
                           Senior Vice President, Finance and
                           Chief Financial Officer