TE PRODUCTS PIPELINE CO LP, S-3/A, 1998-01-13

TE PRODUCTS PIPELINE CO LP
S-3/A, 1998-01-13
PIPE LINES (NO NATURAL GAS)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1998

Registration No. 333-38473
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

AMENDMENT NO. 3

TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

DELAWARE 76-0329620
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

2929 ALLEN PARKWAY
P.O. BOX 2521
HOUSTON, TEXAS 77252-2521
(713) 759-3636
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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

JAMES C. RUTH
VICE PRESIDENT AND GENERAL COUNSEL
TEXAS EASTERN PRODUCTS PIPELINE COMPANY
2929 ALLEN PARKWAY
P.O. BOX 2521
HOUSTON, TEXAS 77252-2521
(713) 759-3636
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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

COPY TO:

JOHN A. WATSON JAMES M. PRINCE
FULBRIGHT & JAWORSKI L.L.P. ANDREWS & KURTH L.L.P.
1301 MCKINNEY, SUITE 5100 600 TRAVIS, SUITE 4200
HOUSTON, TEXAS 77010-3095 HOUSTON, TEXAS 77002-3090
(713) 651-5151 (713) 220-4200

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[_]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest investment plans, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

================================================================================

<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JANUARY 13, 1998

PROSPECTUS
$390,000,000

TE PRODUCTS PIPELINE COMPANY,
LIMITED PARTNERSHIP

[LOGO]
$150,000,000 % SENIOR NOTES DUE 2008
$240,000,000 % SENIOR NOTES DUE 2028

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

The % Senior Notes due January 15, 2008 (the "2008 Notes") and the %
Senior Notes due January 15, 2028 (the "2028 Notes") are being issued by TE
Products Pipeline Company, Limited Partnership (the "Partnership"). Interest on
the 2008 Notes and the 2028 Notes (collectively, the "Notes") is payable
semi-annually on January 15 and July 15 of each year, commencing July 15, 1998.
The 2008 Notes will mature on January 15, 2008, and the 2028 Notes will mature
on January 15, 2028. The 2008 Notes may not be redeemed prior to their maturity.
The 2028 Notes may be redeemed at any time after January 15, 2008, at the option
of the Partnership, in whole or in part, on not less than 30 nor more than 60
days' prior written notice, at the redemption prices set forth in this
Prospectus, together with all accrued but unpaid interest, if any, to the date
of redemption. See "Description of Notes--Optional Redemption".

The Notes will be unsecured obligations of the Partnership and will rank
on a parity with all other unsecured and unsubordinated indebtedness of the
Partnership. Upon the sale of the Notes and the application of the proceeds
therefrom as described under "Use of Proceeds", the Partnership will have no
indebtedness for borrowed money ranking senior to or on a parity with the
Notes. However, the indenture governing the Notes does not limit the
Partnership's ability to incur such indebtedness in the future.

Each series of Notes will be represented by one or more global notes
registered in the name of The Depository Trust Company (the "Depositary") or
its nominee. Interests in the global notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary
(with respect to beneficial interests of participants) or by participants or
persons that hold interests through participants (with respect to beneficial
interests of beneficial owners). Except as described in the accompanying
Prospectus, Notes in certificated form will not be issued. See "Description of
the Notes--Book Entry Procedures".

The Partnership is 99% owned by TEPPCO Partners, L.P. ("TEPPCO" or the
"Parent Partnership"). Limited Partnership Units of the Parent Partnership are
traded on the New York Stock Exchange under the symbol "TPP". The Notes have
been approved for listing on the New York Stock Exchange.

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

<PAGE> 3
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
===============================================================================
Price to Underwriting Proceeds to
Public(1) Discounts(2) Partnership(1)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 2008 Note . . . . . . . . % % %
- -------------------------------------------------------------------------------
Per 2028 Note . . . . . . . . % % %
- -------------------------------------------------------------------------------
Total . . . . . . . . . . . . $ $ $
===============================================================================
</TABLE>

(1) Plus accrued interest, if any, from January 27, 1998.

(2) The Partnership has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting".
(3) Before deducting expenses payable by the Partnership estimated at $ .

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

The Notes are being offered by the Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters, subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. See "Underwriting". It
is expected that delivery of the Notes will be made through the book-entry
facilities of the Depositary on or about .

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

MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.

The date of this Prospectus is January , 1998.

<PAGE> 4

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
NOTES, INCLUDING PURCHASES OF THE NOTES TO STABILIZE THEIR MARKET PRICE AND
PURCHASES OF THE NOTES TO COVER ALL OR SOME OF A SHORT POSITION IN THE NOTES.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

AVAILABLE INFORMATION

The Partnership has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-3 under the Securities
Act of 1933, as amended (the "Securities Act"), for the registration of the
Notes offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain items of which are contained in exhibits
to, or incorporated by reference in, the Registration Statement as permitted by
the rules and regulations of the Commission. For further information with
respect to TEPPCO Partners, L.P. (the "Parent Partnership"), the Partnership
and the Notes offered hereby, reference is made to the Registration Statement,
including the exhibits thereto, and financial statements and notes filed as a
part thereof or incorporated by reference therein. Statements made in this
Prospectus concerning the contents of any document referred to herein are not
necessarily complete. With respect to each such document filed with the
Commission as an exhibit to, or incorporated by reference in, the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.

The Parent Partnership is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
accordance therewith, the Parent Partnership files consolidated reports, proxy
statements and other information with the Commission. Under the rules and
policies of the Commission, it is not expected that the Partnership will file
separate periodic reports under the Exchange Act. Reports, proxy statements
and other information filed by the Parent Partnership may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material may be obtained by mail from the Public Reference
Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a Web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding the Parent Partnership and the Partnership. In addition, such
material may also be inspected and copied at the offices of the New York Stock
Exchange. Limited Partnership Units issued by the Parent Partnership are listed
on the New York Stock Exchange under the symbol "TPP".

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents have been filed with the Commission and are
incorporated by reference in this Prospectus: (i) the Annual Report on Form 10-K
of the Parent Partnership (File No. 1-10403) for the year ended December 31,
1996 (the "1996 Form 10-K"), filed February 21, 1997, (ii) the Parent
Partnership's Quarterly Report on Form 10-Q for the period ended March 31, 1997,
filed May 6, 1997, (iii) the Parent Partnership's Quarterly Report on Form 10-Q
for the period ended June 30, 1997, filed August 7, 1997; (iv) the Parent
Partnership's Quarterly Report on Form 10-Q for the period ended September 30,
1997, filed November 14, 1997 and (v) the Parent Partnership's Current Report on
Form 8-K filed December 22, 1997. All documents filed by the Parent Partnership
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offering of the
Notes registered on the Registration Statement shall be deemed to be
incorporated herein by reference and to be a part hereof from the respective
dates of filing of such documents.

Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein, or in any other subsequently
filed document that also is or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

2
<PAGE> 5

Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered, upon written or oral request. Copies of this
Prospectus, as amended or supplemented from time to time, and any other
documents (or parts of documents) that constitute part of the Prospectus under
Section 10(a) of the Securities Act will also be provided without charge to
each such person, upon written or oral request. Requests should be directed to
the Parent Partnership at 2929 Allen Parkway, P.O. Box 2521, Houston, Texas
77252-2521, Attention: Investor Relations (telephone number: (713) 759-3636).

NO SEPARATE FINANCIAL INFORMATION FOR THE PARTNERSHIP HAS BEEN PROVIDED
OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS BECAUSE: (i) THE PARENT
PARTNERSHIP DOES NOT ITSELF CONDUCT ANY OPERATIONS BUT RATHER ALL OPERATIONS OF
THE PARENT PARTNERSHIP AND ITS SUBSIDIARIES ARE CONDUCTED BY THE PARTNERSHIP;
(ii) THE PARENT PARTNERSHIP HAS NO MATERIAL ASSETS OTHER THAN SUBSTANTIALLY ALL
OF THE OWNERSHIP INTEREST IN THE PARTNERSHIP; AND (iii) ALL OF THE ASSETS AND
LIABILITIES SHOWN IN THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PARENT
PARTNERSHIP ARE LOCATED AT THE PARTNERSHIP.

SYSTEM MAP

[Map]

3
<PAGE> 6

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto set forth or
incorporated by reference in this Prospectus.

THE PARTNERSHIP

TE Products Pipeline Company, Limited Partnership is a Delaware limited
partnership (the "Partnership") that was formed on March 7, 1990 to own and
operate the refined petroleum products and liquefied petroleum gases ("LPGs")
pipeline business of Texas Eastern Products Pipeline Company, a Delaware
corporation (the "Company" or "General Partner"). The Company, an indirect
wholly owned subsidiary of Duke Energy Corporation ("Duke"), is the general
partner of the Partnership and has an approximate one percent general partner's
interest therein. TEPPCO Partners, L.P. (the "Parent Partnership") is the
limited partner of the Partnership and has an approximate 99% limited partner's
interest therein. The Parent Partnership is a publicly-held master limited
partnership, the Limited Partnership Units ("Units") of which are listed on the
New York Stock Exchange under the symbol "TPP". The Company, as general
partner, performs all management and operating functions required for the
Partnership pursuant to the Agreements of Limited Partnership of the
Partnership and the Parent Partnership (the "Partnership Agreements"). The
Company owns an effective combined two percent general partner's interest in
the Partnership and the Parent Partnership.

The Partnership is one of the largest pipeline common carriers of
refined petroleum products and LPGs in the United States. The Partnership owns
and operates an approximate 4,300-mile pipeline system (together with the
receiving, storage and terminaling facilities mentioned below, the "Pipeline
System" or "Pipeline" or "System") extending from southeast Texas through the
central and midwestern United States to the northeastern United States. The
Pipeline System includes delivery terminals along the Pipeline for outloading
product to other pipelines, tank trucks, rail cars or barges, as well as
substantial storage capacity at Mont Belvieu, Texas, the largest LPGs storage
complex in the United States, and at other locations. The Partnership also owns
two marine receiving terminals, one near Beaumont, Texas, and the other at
Providence, Rhode Island. The Providence terminal is not physically connected
to the Pipeline. As an interstate common carrier, the Pipeline System offers
interstate transportation services, pursuant to tariffs filed with the Federal
Energy Regulatory Commission (the "FERC"), to any shipper of refined petroleum
products and LPGs who requests such services, provided that the shipper and the
products tendered by such shipper for transportation satisfy the conditions and
specifications contained in the applicable tariff. In addition to the revenues
received by the Pipeline System from its interstate tariffs, it also receives
revenues from the shuttling of LPGs between refinery and petrochemical
facilities on the upper Texas Gulf Coast and ancillary transportation, storage
and marketing services at key points along the System. Substantially all the
petroleum products transported and stored in the Pipeline System are owned by
the Partnership's customers. Petroleum products are received at terminals
located principally on the southern end of the Pipeline System, stored,
scheduled into the Pipeline in accordance with customer nominations and shipped
to delivery terminals for ultimate delivery to the final distributor (e.g., gas
stations and retail propane distribution centers) or to other pipelines.
Pipelines are generally the lowest cost method for intermediate and long-haul
overland transportation of petroleum products. The Pipeline System is the only
pipeline that transports LPGs to the Northeast.

The Partnership conducts business and owns properties located in 12
states. Products are transported in liquid form from the upper Texas Gulf Coast
through two parallel underground pipelines that extend to Seymour, Indiana.
From Seymour, segments of the Pipeline System extend to the Chicago, Illinois;
Lima, Ohio; Selkirk, New York; and Philadelphia, Pennsylvania, areas.

4
<PAGE> 7
THE OFFERING

SECURITIES OFFERED. . . $150,000,000 principal amount of % Senior Notes
due 2008 and $240,000,000 principal amount of %
Senior Notes due 2028.

MATURITY DATE. . . . . January 15, 2008 with respect to the 2008 Notes and
January 15, 2028 with respect to the 2028 Notes.

INTEREST PAYMENT Interest on the Notes will be paid semi-annually in
DATES. . . . . . . . . arrears on January 15 and July 15 of each year,
commencing July 15, 1998.

OPTIONAL REDEMPTION. . . The 2008 Notes will not be subject to redemption prior
to their maturity. The 2028 Notes will not be
subject to redemption prior to January 15, 2008.
Thereafter, the 2028 Notes are subject to redemption
upon not less than 30 nor more than 60 days' notice
at the election of the Partnership at the redemption
prices set forth herein, together with accrued
interest to the redemption date. See "Description of
the Notes--Optional Redemption".

RANKING. . . . . . . . The Notes will be unsecured obligations of the
Partnership and will rank on a parity with all
other unsecured and unsubordinated indebtedness
of the Partnership. Upon the sale of the Notes
and the application of the proceeds therefrom as
described under "Use of Proceeds", the
Partnership will have no indebtedness for
borrowed money ranking senior to or on a parity
with the Notes. However, the indenture governing
the Notes does not limit the Partnership's
ability to incur additional indebtedness.

CERTAIN COVENANTS. . . . The indenture governing the Notes will contain
covenants, including, but not limited to,
covenants limiting (i) the creation of liens
securing indebtedness and (ii) sale and leaseback
transactions.

USE OF PROCEEDS. . . . The net proceeds from the sale of the Notes offered
hereby, estimated to be approximately $387
million, will be used to repay the Partnership's
First Mortgage Notes of approximately $327
million, together with substantially all of the
redemption premium thereon, currently estimated at
approximately $63 million. The balance, if any, of
the redemption premium will be paid from available
cash of the Partnership. See "Use of Proceeds".

LISTING. . . . . . . . The Notes have been approved for listing on the New
York Stock Exchange.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This Prospectus and the documents incorporated by reference herein
include "forward-looking statements" within the meaning of various provisions
of the Securities Act and the Exchange Act. All statements, other than
statements of historical facts, included in this Prospectus and the documents
incorporated by reference herein that address activities, events or
developments that the Partnership expects or anticipates will or may occur in
the future, including such things as estimated future capital expenditures
(including the amount and nature thereof), business strategy and measures to
implement strategy, competitive strengths, goals, expansion and growth of the
Partnership's business and operations, plans, references to future success,
references to intentions as to future matters and other such matters are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Partnership in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate under the
circumstances. However, whether

5
<PAGE> 8
actual results and developments will conform with the Partnership's expectations
and predictions is subject to a number of risks and uncertainties, including
general economic, market or business conditions, the opportunities (or lack
thereof) that may be presented to and pursued by the Partnership, competitive
actions by other pipeline companies, changes in laws or regulations, and other
factors, many of which are beyond the control of the Partnership. Consequently,
all of the forward-looking statements made in this Prospectus and the documents
incorporated by reference herein are qualified by these cautionary statements
and there can be no assurance that the actual results or developments
anticipated by the Partnership will be realized or, even if substantially
realized, that they will have the expected consequences to or effects on the
Partnership or its business or operations.

<PAGE> 9
SUMMARY FINANCIAL AND OPERATING DATA

The following table sets forth, for the periods and at the dates
indicated, summary consolidated financial and operating data for the
Partnership and the Parent Partnership. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations". The summary
consolidated financial data should be read in conjunction with the Parent
Partnership's consolidated financial statements incorporated by reference in
this Prospectus. There have been no factors (e.g., accounting changes,
business combinations or dispositions of business operations) that materially
affect the comparability of the information reflected in the following table.

No separate financial information for the Partnership has been provided
or incorporated by reference in this Prospectus because: (i) the Parent
Partnership does not itself conduct any operations but rather all operations of
the Parent Partnership and its subsidiaries are conducted by the Partnership;
(ii) the Parent Partnership has no material assets other than substantially all
of the ownership interest in the Partnership; and (iii) all of the assets and
liabilities shown in the consolidated financial statements for the Parent
Partnership are located at the Partnership.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- -------- -------- -------- --------- ---------
INCOME STATEMENT DATA (IN THOUSANDS, EXCEPT RATIOS AND TARIFF INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues: (UNAUDITED)
Transportation--Refined Products .... $ 70,041 $ 75,144 $ 89,442 $ 96,190 $ 98,641 $ 74,913 $ 81,020
Transportation--LPGs ................ 61,385 74,270 73,458 70,576 80,219 54,342 52,587
Gain on sale of inventory ........... 2,524 1,848 966 4,115 3,674 3,616 2,247
Mont Belvieu operations ............. 13,144 12,611 12,290 13,570 11,811 8,359 9,385
Other ............................... 19,128 19,761 21,146 19,265 21,680 16,093 16,140
--------- --------- --------- --------- --------- --------- ---------
Total operating revenues .......... 166,222 183,634 197,302 203,716 216,025 157,323 161,379
--------- --------- --------- --------- --------- --------- ---------
Operating, general and administrative .. 75,276 79,469 85,197 96,419 96,541 70,610 71,550
Depreciation and amortization .......... 23,535 23,485 23,063 23,286 23,409 17,805 17,740
Taxes -- other than income taxes ....... 8,417 8,788 9,140 7,519 8,641 6,426 7,191
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses .......... 107,228 111,742 117,400 127,224 128,591 94,841 96,481
--------- --------- --------- --------- --------- --------- ---------
Operating income .................. 58,994 71,892 79,902 76,492 87,434 62,482 64,898
Interest expense, First Mortgage Notes . (37,288) (36,965) (36,491) (35,844) (34,922) (26,237) (25,339)
Interest capitalized ................... 688 723 415 857 1,388 703 1,186
Other income net ....................... 2,716 1,881 3,189 5,689 5,346 4,290 2,051
--------- --------- --------- --------- --------- --------- ---------
Income before minority interest ... 25,110 37,531 47,015 47,194 59,246 41,238 42,796
Minority interest ...................... (254) (379) (475) (477) (598) (416) (432)
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect
of accounting change ............ 24,856 37,152 46,540 46,717 58,648 40,822 42,364
Accounting change, net of
minority interest ................. -- (949) -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income ...................... $ 24,856 $ 36,203 $ 46,540 $ 46,717 $ 58,648 $ 40,822 $ 42,364
========= ========= ========= ========= ========= ========= =========
Net income per Limited Partner
Unit .......................... $ 1.70 $ 2.47 $ 3.13 $ 3.08 $ 3.79 $ 2.64 $ 2.70
Cash distributions declared
per Limited Partner Unit ...... $ 2.20 $ 2.22 $ 2.37 $ 2.65 $ 2.90 $ 2.15 $ 2.30

Consolidated ratios of earnings to
fixed charges ..................... 1.6 2.0 2.2 2.2 2.5(1) 2.4 2.6(1)

CASH FLOW DATA
Net cash provided by operating
activities ........................ $ 54,977 $ 60,989 $ 70,082 $ 78,456 $ 86,121 $ 54,189 $ 51,044
Capital expenditures ................... $ 25,102 $ 16,240 $ 20,826 $ 25,967 $ 51,264 $ 29,424 $ 24,549

</TABLE>

7
<PAGE> 10

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Volumes delivered (Bbls):
Refined products ..................... 87,616 90,712 107,271 110,234 115,262 87,187 90,820
LPGs ................................. 34,821 38,813 36,636 38,237 41,640 28,866 29,052
Mont Belvieu operations .............. 28,482 22,035 28,695 30,148 22,522 17,124 20,601
--------- --------- --------- --------- --------- --------- ---------
Total ............................. 150,919 151,560 172,602 178,619 179,424 133,177 140,473
========= ========= ========= ========= ========= ========= =========
Average system tariff per barrel ....... $ 0.90 $ 1.01 $ 0.97 $ 0.96 $ 1.02 $ 0.99 $ 0.97
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------- September 30,
BALANCE SHEET DATA (AT PERIOD END) 1992 1993 1994 1995 1996 1997
-------- --------- --------- --------- --------- -------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Property, plant and equipment--net $ 552,238 $ 543,613 $ 540,577 $ 533,470 $ 561,068 $ 565,339
Total assets ......................... 652,182 655,138 665,331 669,915 671,241 655,225
First Mortgage Notes ................. 361,512 356,512 349,512 339,512 326,512 309,512
Total partners' capital .............. 250,978 257,428 269,599 276,381 290,311 296,647
</TABLE>

- ---------------
(1) Such ratios were 3.0 and 3.0 on a pro forma basis for the year ended
December 31, 1996, and the nine months ended September 30, 1997,
respectively, assuming that the sale of the Notes and the application of
the net proceeds therefrom as described under "Use of Proceeds" occurred
as of January 1, 1996, and adjusted only to give effect to the net
decrease in interest expense resulting therefrom.

<PAGE> 11

THE PARTNERSHIP

The Company, an indirect wholly owned subsidiary of Duke, is the general
partner of the Partnership and has an approximate one percent general partner's
interest therein. TEPPCO is the limited partner of the Partnership and has an
approximate 99% limited partner's interest therein. The Parent Partnership is
a publicly-held master limited partnership, the Units of which are listed on
the New York Stock Exchange under the symbol "TPP". The Company, as general
partner, performs all management and operating functions required for the
Partnership pursuant to the Partnership Agreements. The Company owns an
effective combined two percent general partner's interest in the Partnership
and the Parent Partnership. The Partnership was formed under the laws of the
State of Delaware in 1990. The Partnership's executive offices are located at
2929 Allen Parkway, P.O. Box 2521, Houston, Texas 77252-2521, and its telephone
number is (713) 759-3636.

The following chart depicts the organization relationships among the
Partnership, its partners and Duke:

[Chart]

Although the Company has no intention of doing so, it has the right to
withdraw as the general partner of the Partnership after January 1, 2000. Upon
any such withdrawal, the Parent Partnership may elect to reconstitute and
continue the Partnership with a successor general partner, in which event the
obligations of the Partnership under the Notes and the Indenture will continue
without modification. If the Partnership is not so reconstituted and
continued, the Agreement of Limited Partnership of the Partnership requires
that a liquidator be appointed to wind up the affairs of the Partnership. Such
event would not permit acceleration of the maturities of the Notes by the
holders thereof or require prepayment thereof by the Partnership. In such
event, however, the assets of the Partnership must be applied to pay creditors
of the Partnership, including the holders of the Notes, in the order of
priority provided by law before any distributions may be made to partners of
the Partnership on account of their partnership interests.

<PAGE> 12
USE OF PROCEEDS

The net proceeds from the sale of the Notes offered hereby, estimated to
be approximately $387 million, will be used to repay the Partnership's 9.60%
Series A First Mortgage Notes due March 7, 2000 and the Partnership's 10.20%
Series B First Mortgage Notes due March 7, 2010 (collectively, the "First
Mortgage Notes"), together with substantially all of the redemption premium
therein, currently estimated at approximately $63 million. The balance, if any,
of the redemption premium will be paid from available cash of the Partnership.
The precise amount of the redemption premium will depend upon U.S. Treasury
interest rates in effect on the day prior to the redemption of the First
Mortgage Notes. The closing of the offering of the Notes and the redemption of
the First Mortgage Notes are expected to occur simultaneously. At December 31,
1997, outstanding principal under the Series A Notes and Series B Notes was
approximately $61 million and approximately $266 million, respectively. The
First Mortgage Notes are secured by a mortgage on substantially all of the
property, plant and equipment of the Partnership. The weighted average interest
rate of the First Mortgage Notes at December 31, 1997, was 10.087%.

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Parent Partnership at September 30, 1997, and as adjusted to give effect to the
sale of the Notes and the application of the net proceeds therefrom, together
with approximately $3 million of Partnership cash, as described under "Use of
Proceeds". This table should be read in conjunction with the consolidated
financial statements of the Parent Partnership and the notes thereto
incorporated by reference in this Prospectus.

<TABLE>
<CAPTION>
September 30, 1997
---------------------
Actual As Adjusted
-------- -----------
(in thousands)
<S> <C> <C>
Cash and cash equivalents ............................. $ 27,731 $ 24,731

Current maturities of First Mortgage Notes ............ 17,000 --
First Mortgage Notes .................................. 309,512 --
2008 Notes ............................................ -- 150,000
2028 Notes ............................................ -- 240,000
Partners' capital:
General partner's interest ..................... 5,311 673
Limited partners' interests .................... 291,336 235,974
</TABLE>

<PAGE> 13
SELECTED FINANCIAL DATA

The following table sets forth, for the periods and at the dates
indicated, selected consolidated financial and operating data for the
Partnership and the Parent Partnership. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations". The selected
consolidated financial data should be read in conjunction with the Parent
Partnership's consolidated financial statements incorporated by reference in
this Prospectus. There have been no factors (e.g., accounting changes,
business combinations or dispositions of business operations) that materially
affect the comparability of the information reflected in the following table.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- -------- --------
INCOME STATEMENT DATA (IN THOUSANDS, EXCEPT RATIOS AND TARIFF INFORMATION)
Revenues: (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Transportation--Refined Products .. $ 70,041 $ 75,144 $ 89,442 $ 96,190 $ 98,641 $ 74,913 $ 81,020
Transportation--LPGs .............. 61,385 74,270 73,458 70,576 80,219 54,342 52,587
Gain on sale of inventory ......... 2,524 1,848 966 4,115 3,674 3,616 2,247
Mont Belvieu operations ........... 13,144 12,611 12,290 13,570 11,811 8,359 9,385
Other ............................. 19,128 19,761 21,146 19,265 21,680 16,093 16,140
--------- --------- --------- --------- --------- --------- ---------
Total operating revenues .......... 166,222 183,634 197,302 203,716 216,025 157,323 161,379
--------- --------- --------- --------- --------- --------- ---------
Operating, general and administrative 75,276 79,469 85,197 96,419 96,541 70,610 71,550
Depreciation and amortization ........ 23,535 23,485 23,063 23,286 23,409 17,805 17,740
Taxes -- other than income taxes ..... 8,417 8,788 9,140 7,519 8,641 6,426 7,191
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses .......... 107,228 111,742 117,400 127,224 128,591 94,841 96,481
--------- --------- --------- --------- --------- --------- ---------
Operating income .................. 58,994 71,892 79,902 76,492 87,434 62,482 64,898
Interest expense, First Mortgage Notes (37,288) (36,965) (36,491) (35,844) (34,922) (26,237) (25,339)
Interest capitalized ................ 688 723 415 857 1,388 703 1,186
Other income -- net .................. 2,716 1,881 3,189 5,689 5,346 4,290 2,051
--------- --------- --------- --------- --------- --------- ---------
Income before minority interest ..... 25,110 37,531 47,015 47,194 59,246 41,238 42,796
Minority interest .................... (254) (379) (475) (477) (598) (416) (432)
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of
accounting change ................. 24,856 37,152 46,540 46,717 58,648 40,822 42,364
Accounting change, net of minority
interest .......................... -- (949) -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income ........................ $ 24,856 $ 36,203 $ 46,540 $ 46,717 $ 58,648 $ 40,822 $ 42,364
========= ========= ========= ========= ========= ========= =========
Net income per Limited Partner
Unit ............................ $ 1.70 $ 2.47 $ 3.13 $ 3.08 $ 3.79 $ 2.64 $ 2.70
Cash distributions declared per
Limited Partner Unit ............ $ 2.20 $ 2.22 $ 2.37 $ 2.65 $ 2.90 $ 2.15 $ 2.30

Consolidated ratios of earnings to
fixed charges (1) ................. 1.6 2.0 2.2 2.2 2.5(2) 2.4 2.6(2)

Cash Flow Data
Net cash provided by operating
activities ........................ $ 54,977 $ 60,989 $ 70,082 $ 78,456 $ 86,121 $ 54,189 $ 51,044
Capital expenditures ................. $ 25,102 $ 16,240 $ 20,826 $ 25,967 $ 51,264 $ 29,424 $ 24,549
</TABLE>

11
<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data
Volumes delivered (Bbls):
Refined products ................... 87,616 90,712 107,271 110,234 115,262 87,187 90,820
LPGs ............................... 34,821 38,813 36,636 38,237 41,640 28,866 29,052
Mont Belvieu operations ............ 28,482 22,035 28,695 30,148 22,522 17,124 20,601
--------- --------- --------- --------- --------- --------- ---------
Total ............................ 150,919 151,560 172,602 178,619 179,424 133,177 140,473
========= ========= ========= ========= ========= ========= =========
Average system tariff per barrel ..... $ 0.90 $ 1.01 $ 0.97 $ 0.96 $ 1.02 $ 0.99 $ 0.97
========= ========= ========= ========= ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
December 31,
------------------------------------------------------ September 30,
Balance Sheet Data (at period end) 1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Property, plant and
equipment--net . . . . . . . . $ 552,238 $ 543,613 $ 540,577 $ 533,470 $ 561,068 $ 565,339
Total assets . . . . . . . . . 652,182 655,138 665,331 669,915 671,241 655,225
First Mortgage Notes . . . . . 361,512 356,512 349,512 339,512 326,512 309,512
Total partners' capital . . . . 250,978 257,428 269,599 276,381 290,311 296,647
</TABLE>

- ---------------
(1) The Parent Partnership's consolidated ratios of earnings to fixed
charges were computed by dividing earnings by fixed charges. For this
purpose, "earnings" consist of income from continuing operations before
income taxes, fixed charges (excluding interest capitalized) and
minority interest expenses of subsidiaries with fixed charges and "fixed
charges" consist of interest and amortization of debt expense, including
the interest portion of rental obligations deemed representative of the
interest factor.
(2) Such ratios were 3.0 and 3.0 on a pro forma basis for the year ended
December 31, 1996, and the nine months ended September 30, 1997,
respectively, assuming that the sale of the Notes and the application of
the net proceeds therefrom as described under "Use of Proceeds" occurred
as of January 1, 1996, and adjusted only to give effect to the net
decrease in interest expense resulting therefrom.

12
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Partnership's operations consist of the transportation, storage and
terminaling of petroleum products. Operations are somewhat seasonal with
higher revenues generally realized during the first and fourth quarters of each
year. Refined products volumes are generally higher during the second and
third quarters because of greater demand for gasolines during the spring and
summer driving seasons. LPGs volumes are generally higher from November
through March due to higher demand in the Northeast for propane, a major fuel
for residential heating.

The Partnership's revenues are derived from the transportation of
refined products and LPGs, the storage and short-haul shuttle transportation of
LPGs at the Mont Belvieu, Texas complex, sale of product inventory and other
ancillary services. Labor and electric power costs comprise the two largest
operating expense items of the Partnership.

The following information is provided to facilitate increased
understanding of the years ended December 31, 1996, 1995 and 1994 and the nine-
month periods ended September 30, 1997 and 1996 consolidated financial
statements and accompanying notes of the Partnership incorporated by reference
in this Prospectus. Material period-to-period variances in the consolidated
statements of income are discussed under "Results of Operations." The
"Financial Condition and Liquidity" section analyzes cash flows and financial
position. Discussion included in "Other Matters" addresses key trends, future
plans and contingencies. Throughout these discussions, management addresses
items that are reasonably likely to materially affect future liquidity or
earnings.

RESULTS OF OPERATIONS

Volume and average tariff information for the years ended December 31,
1996, 1995 and 1994 and the nine-month periods ended September 30, 1997 and
1996 is presented below:

<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
------------------------------------- ------------------------
1996 1995 1994 1997 1996
--------- -------- -------- --------- ----------
(in thousands, except tariff information)
<S> <C> <C> <C> <C> <C>
Volumes Delivered (Bbls) (unaudited)
Refined products ........... 115,262 110,234 107,271 90,820 87,187
LPGs ....................... 41,640 38,237 36,636 29,052 28,866
Mont Belvieu operations .... 22,522 30,148 28,695 20,601 17,124
------- ------- ------- ------- -------
Total ............... 179,424 178,619 172,602 140,473 133,177
======= ======= ======= ======= =======
Average Tariff per Barrel
Refined products ........... $ 0.86 $ 0.87 $ 0.83 $ 0.89 $ 0.86
LPGs ....................... 1.93 1.85 2.01 1.81 1.88
Mont Belvieu operations .... 0.17 0.15 0.14 0.14 0.16
Average system tariff
per barrel ... $ 1.02 $ 0.96 $ 0.97 $ 0.97 $ 0.99
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1996

For the nine months ended September 30, 1997, refined products
transportation revenues increased $6.1 million, compared with the corresponding
period in 1996, due to a 4% increase in volumes delivered and a 3% increase in
the refined products average tariff per barrel. The increase in refined
products transportation volumes was attributable to increased feedstock and
blending demand for natural gasoline in the Midwest, the full period impact in
1997 of the pipeline connection at the Little Rock Air Force Base, which was
completed in June 1996, and increased MTBE deliveries at the marine terminal
near Beaumont, Texas. Additionally, higher revenues

13
<PAGE> 16

were generated from the Ark-La-Tex system expansion and the pipeline connection
with Colonial. These increases were partially offset by lower motor fuel and
distillate deliveries due to higher refinery utilization rates in the Midwest
during 1997.

LPGs transportation revenues decreased $1.8 million during the nine
months ended September 30, 1997, compared with the corresponding period in
1996, due to a 4% decrease in the LPGs average tariff per barrel, partially
offset by a 1% increase in LPGs volumes delivered. Long-haul propane
deliveries were lower than the prior year because of warmer winter weather in
the Northeast during the first quarter of 1997. Increased Canadian imports of
propane in the Northeast and butane in the Midwest market areas also resulted
in decreased volumes delivered in 1997. These decreases were partially offset
by stronger demand for butane and isobutane as a refinery feedstock due to the
resumption during the second quarter of 1997 of operations at a Northeast
refinery that was shut down throughout 1996. Increased propane demand along
the upper Texas Gulf Coast resulted in a 33% increase in short-haul propane
deliveries. The 4% decrease in the LPGs average tariff per barrel resulted
from the higher percentage of short-haul propane deliveries during 1997.

Revenues generated from Mont Belvieu operations increased slightly
during the nine months ended September 30, 1997, compared with the
corresponding period in 1996, due primarily to higher terminaling fees on
butane received into the System, increased propane dehydration fees and higher
petrochemical demand for LPGs along the upper Texas Gulf Coast. The decrease
in the Mont Belvieu operations average tariff per barrel for the nine months
ended September 30, 1997, compared with the prior period, was due to a higher
percentage of contract deliveries in 1997, which generally carry lower tariffs.

Gains on the sale of inventory decreased $1.4 million during the nine
months ended September 30, 1997, compared with the corresponding period in
1996, as a result of lower volumes of gasoline being sold during 1997.

During the nine months ended September 30, 1997, other operating
revenues increased slightly due to the factors noted above, being offset by
write downs of product inventory recorded during the second quarter of 1997 and
lower propane imports received at the marine terminal at Providence, Rhode
Island, during the first quarter of 1997.

Costs and expenses increased $1.6 million during the first nine months
of 1997, compared with the same period in 1996, due primarily to a $0.9 million
increase in operating, general and administrative expenses and a $0.8 million
increase in taxes - other than income taxes. The increase in operating,
general and administrative expenses was primarily attributable to
throughput-related expenses and rental expense of the Colonial capacity lease,
partially offset by the insurance settlement during the third quarter of 1997,
lower outside service costs for system maintenance and lower product
measurement losses. The increase in taxes - other than income taxes was due to
higher ad valorem tax assessments in 1997 and the credit for ad valorem taxes
recorded during the third quarter of 1996.

Interest expense decreased during the nine-month period in 1997,
compared with the same period in 1996, due to principal payments on the First
Mortgage Notes of $10.0 million and $13.0 million in March 1996 and 1997,
respectively. Capitalized interest increased $0.5 million during the nine
month-period ended September 30, 1997, compared with the same period in 1996,
as a result of higher construction balances related to capital projects, which
commenced during 1996 and were completed during 1997.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Net income for the year ended December 31, 1996 increased 25% to $58.6
million, compared with net income of $46.7 million for the year ended December
31, 1995. Net income for 1995 included $7.4 million of charges for the
settlement of certain litigation and remediation costs at the Partnership's
Seymour, Indiana, terminal. Excluding such charges, net income for 1996 would
have increased by $4.5 million, or 8%. The increase in net income for 1996
resulted from a $12.3 million increase in operating revenues, a $0.9 million
decrease in interest expense and a $0.5 million increase in interest
capitalized. These increases for 1996 were partially offset by a $1.4 million
increase in costs and expenses.

14
<PAGE> 17

Operating revenues for the year ended 1996 increased 6% to $216.0
million from $203.7 million for the year ended 1995. This $12.3 million
increase resulted from a $9.6 million increase in LPGs transportation revenues,
a $2.5 million increase in refined products transportation revenues and a $2.4
million increase in other operating revenues. These increases were partially
offset by a $1.8 million decrease in revenues generated from Mont Belvieu
operations and a $0.4 million decrease in product inventory sales.

Refined products transportation revenues increased $2.5 million for the
year ended December 31, 1996, compared with the prior year, as a result of the
5% increase in volumes delivered. Jet fuel deliveries increased to 20.7
million barrels ("MMBbls") due to the completion of the pipeline connection to
the United States Air Force Base near Little Rock, Arkansas, in June 1996, as
well as higher demand from commercial airlines in the Midwest. Motor fuel
deliveries also increased during 1996 as a result of higher demand in the
Central and Midwest market areas. These increases were partially offset by
lower deliveries of methyl tertiary butyl ether ("MTBE"), reformulated gasoline
and gasoline blendstocks in the Chicago area, coupled with lower feedstock
demand along the upper Texas Gulf Coast.

LPGs transportation revenues increased $9.6 million, or 14%, for the
year ended December 31, 1996, compared with the prior year, due to the 9%
increase in volumes delivered and the 4% increase in the LPGs average tariff
per barrel. Propane deliveries increased to a record 35.2 MMBbls as a result
of colder winter weather during the first and second quarters of 1996, lower
inventory supplies and favorable price differentials. The increase in propane
deliveries was partially offset by a 2.8 MMBbls decrease in butane deliveries
attributable to increased Canadian supply imported into the Midwest, higher
Gulf Coast prices and the shut-down of a refinery in the Northeast that was
supplied by the Pipeline System. This refinery resumed operations in the
second quarter of 1997. The 4% increase in the LPGs average tariff per barrel
during 1996 resulted from increased long-haul propane deliveries in the upper
Midwest and Northeast, coupled with lower deliveries along the upper Texas Gulf
Coast.

Revenues generated from Mont Belvieu operations decreased $1.8 million
during 1996, compared with the prior year, due to decreased storage revenue and
lower terminaling fees on butane received into the System. Additionally,
shuttle deliveries decreased 25% from the prior year due primarily to low
butane and propane inventory supplies and lower petrochemical demand for
propane along the upper Texas Gulf Coast. The Mont Belvieu operations average
tariff per barrel for shuttle deliveries increased to $0.17 per barrel in 1996,
due to a lower percentage of contract deliveries, which generally carry lower
tariffs.

Gains on the sale of inventory decreased $0.4 million during 1996,
compared with the prior year, as a result of lower volumes of product sold in
1996.

Other operating revenues increased $2.4 million during the year ended
December 31, 1996, compared with 1995, due to higher propane imports at the
Partnership's marine terminal at Providence, Rhode Island, increased LPGs
terminaling fees and increased revenues resulting from greater volumes marketed
between customers at the Mont Belvieu complex.

Costs and expenses increased $1.4 million during the year ended December
31, 1996, compared with the prior year, due primarily to a $1.1 million
increase in taxes--other than income taxes, and a $0.1 million increase in
operating, general and administrative expenses. The increase in taxes--other
than income, was attributable to a $0.9 million adjustment recorded during 1995
related to the reclassification of the Partnership as a non-utility for Ohio
property taxes. Operating, general and administrative expenses increased in
1996 as a result of higher throughput-related expenses including higher
mainline power costs, increased usage of propane odorant and gasoline
additives, and expenses for external barges utilized during the fourth quarter
of 1996. Additionally, expenses were higher during 1996 due to increased
System maintenance, coupled with increased labor and benefits costs. These
increases were largely offset by $7.4 million of charges during 1995 related to
the settlement of certain claims and environmental remediation costs at the
Partnership's Seymour, Indiana, terminal.

15
<PAGE> 18
Interest expense decreased $0.9 million during the year ended December
31, 1996, compared with 1995, due to the $10.0 million principal payment on the
First Mortgage Notes in March 1996. Interest capitalized increased $0.5
million over the prior year as a result of increased capital spending during
1996.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Net income for the year ended December 31, 1995 totaled $46.7 million,
compared with net income of $46.5 million for the year ended December 31, 1994.
Net income for 1995 included $7.4 million of charges for the settlement of
certain litigation and remediation costs at the Partnership's Seymour, Indiana,
terminal. Excluding the charges, net income would have been $54.1 million, a
16% increase from 1994.

Operating revenues for the year ended 1995 increased 3% to $203.7
million from $197.3 million for the year ended 1994. This $6.4 million
increase resulted from a $6.8 million increase in refined products
transportation revenues, a $3.1 million increase in product inventory sales and
a $1.3 million increase in revenues generated from Mont Belvieu operations.
These increases were partially offset by a $2.9 million decrease in LPGs
transportation revenues and a $1.9 million decrease in other operating
revenues.

The $6.8 million, or 8%, increase in refined products transportation
revenues for the year ended December 31, 1995, compared with the prior year,
was due primarily to increased deliveries of jet fuel, MTBE and natural
gasoline, partially offset by lower deliveries of motor fuel. The increase in
jet fuel deliveries resulted from higher demand at airports served by the
Partnership as well as the full year impact of the completion of a pipeline
connection to the George Bush Intercontinental Airport, Houston, in July 1994.
Deliveries of MTBE increased during 1995 due primarily to contract deliveries
to the Midwest, which commenced during the first quarter of 1995, and increased
short-haul deliveries resulting from the completion of a vapor recovery unit at
the Partnership's marine terminal near Beaumont, Texas. The increase in
natural gasoline deliveries was attributable to increased demand for use as a
feedstock in the refining process as well as new supply contracts with Midwest
refiners. The decrease in motor fuel deliveries was primarily due to higher
local supply in the Partnership's Midwest market area. The increase in the
average System tariff per barrel was primarily due to the general rate
increase, averaging 4%, for refined products effective December 1, 1994.

The $2.9 million decrease in LPGs transportation revenues for the year
ended December 31, 1995, compared with the prior year, resulted from a $5.6
million decrease in propane transportation revenue, partially offset by a $2.7
million increase in butane transportation revenue. Propane transportation
revenue decreased 9% from 1994 due primarily to warmer than normal weather in
the upper Midwest and Northeast during the first quarter of 1995, partially
offset by a return of colder weather in these regions during the fourth quarter
of 1995. The increase in butane revenue resulted primarily from higher demand
for use in gasoline blending and favorable price differentials in the Midwest.
The increase in total LPGs volumes delivered was primarily attributable to
higher petrochemical demand for propane along the upper Texas Gulf Coast and
higher mainline butane volumes. The increase in propane deliveries along the
upper Texas Gulf Coast and lower long-haul propane deliveries resulted in a
lower LPGs average tariff per barrel during 1995.

Revenues generated from Mont Belvieu operations increased during 1995,
compared with the prior year, as a result of increased demand for shuttle
deliveries of propane and butane along the upper Texas Gulf Coast, coupled with
increased receipt charges on butane received for storage.

Other operating revenues decreased $1.9 million during the year ended
December 31, 1995, compared with 1994, due to lower propane imports at the
Partnership's marine terminal at Providence, Rhode Island, lower receipts of
gasoline at the Partnership's marine terminal near Beaumont, Texas, and lower
revenue generated from MTBE storage services. These decreases were partially
offset by higher revenue earned from terminaling operations along the Pipeline
System.

The increase in gain on sale of product inventory for the year ended
December 31, 1995, compared with the prior year, was due to higher volumes of
product inventory sold, coupled with higher margins.

16
<PAGE> 19
Costs and expenses increased $9.8 million during the year ended December
31, 1995, compared with the prior year, due primarily to a $11.2 million
increase in operating, general and administrative expenses, partially offset by
a $1.6 million decrease in taxes--other than income taxes. Operating, general
and administrative expenses included $7.4 million of charges related to the
settlement of certain claims and environmental remediation costs at the
Partnership's Seymour, Indiana, terminal during 1995. The additional increase
in operating, general and administrative expenses was due primarily to higher
outside services related to increased maintenance projects and environmental
remediation activities at certain Partnership facilities, higher premiums for
insurance and increased volume-related power costs, partially offset by lower
external leased storage costs. The decrease in taxes--other than income taxes
resulted from lower property taxes due primarily to a reclassification of the
Partnership as a non-utility in Ohio.

Interest expense decreased during the year ended December 31, 1995,
compared with 1994, due to the $7.0 million principal payment on the First
Mortgage Notes in March 1995.

Other income increased during the year ended December 31, 1995, compared
with the 1994, primarily from higher interest income earned on investments.

FINANCIAL CONDITION AND LIQUIDITY

Net cash from operations totaled $51.0 million for the nine-month period
ended September 30, 1997, compared with $54.2 million for the corresponding
period in 1996. The decrease resulted from a $4.6 million increase in working
capital uses of cash, partially offset by a $1.5 million increase in income
before charges for depreciation and amortization. The increase in working
capital uses of cash resulted primarily from a receivable related to insurance
claims settled in September 1997, lower trade accounts receivable balances
during 1997 and lower inventory sales during 1997, which were partially offset
by lower cash payments for accrued expenses during 1997. Additionally, net
cash from operations for the nine months ended September 30, 1997 and 1996
reflect semi-annual interest payments related to the First Mortgage Notes of
$33.6 million and $34.7 million, respectively.

Cash flows used in investing activities during the first nine months of
1997 included $24.5 million of capital expenditures and $3.9 million of
additional cash investments, partially offset by $18.0 million from investment
maturities, $1.0 million of insurance proceeds related to the replacement value
of a 20-inch diameter auxiliary pipeline at the Red River in central Louisiana,
which was damaged in 1994 and subsequently removed from service and $1.4
million from the proceeds of the sale of the Arkansas City terminal. Cash
flows used in investing activities during the first nine months of 1996
included $29.4 million of capital expenditures and additional investments of
$14.4 million, partially offset by matured investments of $10.9 million.
Capital expenditures are expected to total approximately $34 million for the
full year of 1997. The Partnership revises capital spending periodically in
response to changes in cash flows and operations. Interest income earned on
all investments is included in cash from operations.

The Partnership paid cash distributions of $36.3 million during the nine
months ended September 30, 1997. Additionally, on October 17, 1997, the
Partnership declared a cash distribution of $0.80 per Unit for the three months
ended September 30, 1997. The third quarter cash distribution was paid on
November 7, 1997 to Unitholders of record on October 31, 1997.

The First Mortgage Notes, which are secured by a mortgage on
substantially all property, plant and equipment of the Partnership, require
annual principal payments through March 2010. Interest is payable
semi-annually on March 7 and September 7. Cash and cash equivalents were
reduced by the $13.0 million principal payment related to the First Mortgage
Notes on March 7, 1997. At September 30, 1997, the current maturities of the
First Mortgage Notes were $17.0 million. The note agreement relating to the
First Mortgage Notes limits the amount of cash distributions that can be made
by TE Products Pipeline Company, Limited Partnership to TEPPCO Partners, L.P.

17
<PAGE> 20

The Partnership routinely invests excess cash in liquid investments as
part of its cash management program. Investments of cash in discounted
commercial paper and Eurodollar time deposits with original maturities at date
of purchase of 90 days or less are included in cash and cash equivalents.
Short-term investments of cash consist of investment-grade corporate notes with
maturities during 1997. Long-term investments are comprised of
investment-grade corporate notes with varying maturities between 1998 and 2001.
Interest income earned on all investments is included in cash from operations.
Cash flows from investing activities included proceeds from investments of
$18.6 million, $69.0 million and $23.8 million for each of the years ended
1996, 1995 and 1994, respectively. Cash flows from investing activities also
included additional investments of $14.4 million, $62.4 million and $65.5
million for each of the years ended 1996, 1995 and 1994, respectively. Cash
balances related to the investment of cash and proceeds from the investment of
cash were $65.0 million, $74.9 million and $70.3 million for the years ended
December 31, 1996, 1995 and 1994, respectively. The increase in cash
investments in 1995 was in anticipation of an increase in capital expenditures
which were incurred in 1996 and were funded by proceeds from investments.
Capital expenditures were $51.3 million, $26.0 million and $20.8 million for
the years ended December 31, 1996, 1995, and 1994, respectively.

Capital expenditures totaled $51.3 million for the year ended December
31, 1996, compared with capital expenditures of $26.0 million for the year
ended December 31, 1995. The increase in 1996 reflects higher spending for
revenue-generating projects that included the replacement of approximately 54
miles of an 8-inch diameter line with a 10-inch diameter line between
Shreveport, Louisiana, and El Dorado, Arkansas; pipeline modifications to
increase mainline capacity by 50,000 barrels per day between El Dorado and
Seymour, Indiana; and the completion of facilities required to deliver jet fuel
to the United States Air Force Base near Little Rock, Arkansas, which became
operational in June 1996. Capital expenditures for 1994 totaled $20.8 million.
Capital expenditures for System integrity projects and for sustaining existing
operations totaled $12.1 million, $16.1 million and $11.9 million for each of
the years ended 1996, 1995 and 1994, respectively.

The Partnership estimates that capital expenditures for 1997 will be
approximately $34.0 million. Approximately $11.7 million is expected to used
for revenue-generating projects including $8.1 million to be used to complete
the capacity expansion between Shreveport and El Dorado as well as the mainline
expansion to serve the Midwest market area. An additional $2.2 million is
projected to be spent to connect the Pipeline System to Colonial Pipeline
Company's pipeline at Beaumont, Texas. The remaining capital expenditures
during 1997 will primarily be used for life-cycle replacements and to upgrade
current facilities. The Partnership revises capital spending periodically in
response to changes in cash flows and operations.

During 1995 and 1994, the Partnership received $9.8 million and $0.2
million, respectively, in insurance proceeds related to the failure of a LPGs
storage cavern in Ohio during April 1993. Pursuant to the agreements relating
to the First Mortgage Notes, these proceeds were held in a trust account and
were invested in discounted commercial paper. The proceeds and interest income
were released by the trustee during August 1996 after storage and capacity
modifications were completed along the Pipeline System to replace the reduced
storage capacity of the failed storage cavern in Ohio.

In connection with the formation of the Parent Partnership in 1990, the
Company received 1,250,000 DPIs, which represent an effective 8.45% limited
partner interest in the Parent Partnership. Effective April 1, 1994, the DPIs
began participating in distributions of cash and allocations of profit and loss
because Available Cash (constituting Cash From Operations) for the preceding
two successive quarters was sufficient to distribute not less than the Minimum
Quarterly Distribution ($0.55 per Unit) with respect to all Units outstanding
at the applicable record date plus the DPIs. The DPIs began receiving cash
distributions effective with the quarterly payment on May 13, 1994.

OTHER MATTERS

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<PAGE> 21
Moreover, it is possible that other developments, such as increasingly strict
environmental laws and regulations and enforcement policies thereunder, and
claims for damages to property or persons resulting from the operations of the
Pipeline System, could result in substantial costs and liabilities to the
Partnership. The Partnership does not anticipate that changes in environmental
laws and regulations will have a material adverse effect on its financial
position, operations or cash flows in the near term.

The Partnership and the Indiana Department of Environmental Management
("IDEM") have entered into an Agreed Order that will ultimately result in a
remediation program for any on-site and off-site environmental groundwater
contamination attributable to the Partnership's operations at the Seymour,
Indiana, terminal. As part of the Agreed Order, the Partnership has completed
the remedial investigation sampling for groundwater contamination. In November
1997, IDEM approved the final remedial investigation report for the Seymour
terminal. The Partnership is currently negotiating with IDEM the clean-up
levels to be attained at the Seymour terminal. In the opinion of the Company,
the completion of the remediation program to be proposed by the Partnership, if
such program is approved by IDEM, will not have a material adverse impact on
the Partnership.

During June 1997, the Partnership filed rate increases on selective
refined products tariffs and LPGs tariffs, averaging 1.7%. These rate
increases became effective July 1, 1997 without suspension or refund
obligation.

The Partnership periodically enters into futures contracts to hedge its
exposure to price risk on product inventory transactions. Recognized gains and
losses related to futures contracts which qualify as hedges are recognized in
income when the related inventory transactions are completed. Gains and losses
related to futures contracts, which have been insignificant, are reported as a
component of product inventory in the consolidated balance sheet until
recognized as income. At December 31, 1996, September 30, 1997, and the date
of this Prospectus, there were no outstanding futures contracts.

Effective January 1, 1996, the Partnership adopted Statement of
Financial Accounting Standards ("SFAS") 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," with no impact
to the Partnership's consolidated financial statements. Assets were grouped
and evaluated based on the ability to identify their respective cash flows.

In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS 123, "Accounting for Stock-Based Compensation." This standard addresses the
timing and measurement of stock-based compensation expense. The Partnership has
elected to retain the approach of Accounting Principles Board Opinion ("APB")
No. 25, "Accounting for Stock issued to Employees," (the intrinsic value method)
for recognizing stock-based expense in the consolidated financial statements.
The Partnership adopted SFAS 123 in 1996 with respect to the disclosure
requirements set forth therein for companies retaining the intrinsic value
approach of APB No. 25. See Note 10 of the Notes to Consolidated Financial
Statements of the Parent Partnership incorporated by reference in this
Prospectus.

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<PAGE> 22
BUSINESS AND PROPERTIES

GENERAL

The Partnership is one of the largest pipeline common carriers of
refined petroleum products and LPGs in the United States. The Partnership owns
and operates an approximate 4,300-mile pipeline system extending from southeast
Texas through the central and midwestern United States to the northeastern
United States. The Pipeline System includes delivery terminals along the
Pipeline for outloading product to other pipelines, tank trucks, rail cars or
barges, as well as substantial storage capacity at Mont Belvieu, Texas, the
largest LPGs storage complex in the United States, and at other locations. The
Partnership also owns two marine receiving terminals, one near Beaumont, Texas,
and the other at Providence, Rhode Island. The Providence terminal is not
physically connected to the Pipeline. As an interstate common carrier, the
Pipeline System offers interstate transportation services, pursuant to tariffs
filed with the FERC, to any shipper of refined petroleum products and LPGs who
requests such services, provided that the shipper and the products tendered by
such shipper for transportation satisfy the conditions and specifications
contained in the applicable tariff. In addition to the revenues received by
the Pipeline System from its interstate tariffs, it also receives revenues from
the shuttling of LPGs between refinery and petrochemical facilities on the
upper Texas Gulf Coast and ancillary transportation, storage and marketing
services at key points along the System. Substantially all the petroleum
products transported and stored in the Pipeline System are owned by the
Partnership's customers. Petroleum products are received at terminals located
principally on the southern end of the Pipeline System, stored, scheduled into
the Pipeline in accordance with customer nominations and shipped to delivery
terminals for ultimate delivery to the final distributor (e.g., gas stations
and retail propane distribution centers) or to other pipelines. Pipelines are
generally the lowest cost method for intermediate and long-haul overland
transportation of petroleum products. The Pipeline System is the only pipeline
that transports LPGs to the Northeast.

The Partnership's business depends in large part on (i) the level of
demand for refined petroleum products and LPGs in the geographic locations
served by it and (ii) the ability and willingness of customers having access to
the Pipeline System to supply such demand by deliveries through the System.
The Partnership cannot predict the impact of future fuel conservation measures,
alternate fuel requirements, governmental regulation, technological advances in
fuel economy and energy-generation devices, all of which could reduce the
demand for refined petroleum products and LPGs in the areas served by the
Partnership.

OPERATIONS

The Partnership conducts business and owns properties located in 12
states. Products are transported in liquid form from the upper Texas Gulf
Coast through two parallel underground pipelines that extend to Seymour,
Indiana. From Seymour, segments of the Pipeline System extend to the Chicago,
Illinois; Lima, Ohio; Selkirk, New York; and Philadelphia, Pennsylvania, areas.
The Pipeline System east of Todhunter, Ohio, is dedicated solely to LPGs
transportation and storage services.

The Pipeline System includes 30 storage facilities with an aggregate
storage capacity of 13 MMBbls of refined petroleum products and 38 MMBbls of
LPGs, including storage capacity leased to outside parties, as well as 20
product delivery terminals. In addition, the Pipeline System makes deliveries
to terminals and storage facilities owned by third parties.

PIPELINE SYSTEM

The Pipeline System is comprised of a 20-inch diameter line extending in
a generally northeasterly direction from Baytown, Texas (located approximately
30 miles east of Houston), to a point in southwest Ohio near Lebanon and
Todhunter. A second line, which also originates at Baytown, is 16 inches in
diameter until it reaches Beaumont, Texas, at which point it reduces to a
14-inch diameter line. This second line extends along the same path as the
20-inch diameter line to the Pipeline System's terminal in El Dorado, Arkansas,
before continuing as a 16-inch diameter line to Seymour, Indiana. The Pipeline
System also has smaller diameter lines that extend laterally from El Dorado to
Helena and Arkansas City, Arkansas, from Tyler, Texas, to El Dorado and from
McRae,

20
<PAGE> 23
Arkansas, to West Memphis, Arkansas. The lines from El Dorado to Helena and
Arkansas City have 10-inch diameters. The line from Tyler to El Dorado varies
in diameter from 8 inches to 10 inches. The line from McRae to West Memphis
has a 12-inch diameter. The Pipeline System also includes a 14-inch diameter
line from Seymour, Indiana, to Chicago, Illinois, and a 10-inch diameter line
running from Lebanon to Lima, Ohio. This 10-inch diameter pipeline connects to
the Buckeye Pipe Line Company system that serves, among others, markets in
Michigan and eastern Ohio. Also, the Pipeline System has a 6-inch diameter
pipeline connection to the Greater Cincinnati/Northern Kentucky International
Airport and a 8-inch diameter pipeline connection to the George Bush
Intercontinental Airport, Houston. In addition, there are numerous smaller
diameter lines associated with the gathering and distribution system.

The Pipeline System continues eastward from Todhunter, Ohio, to
Greensburg, Pennsylvania, at which point it branches into two segments, one
ending in Selkirk, New York (near Albany), and the other ending at Marcus Hook,
Pennsylvania (near Philadelphia). The Pipeline east of Todhunter and ending in
Selkirk is an 8-inch diameter line, whereas the line starting at Greensburg and
ending at Marcus Hook varies in diameter from 6 inches to 8 inches. East of
Todhunter, Ohio, the Partnership transports only LPGs through the Pipeline.

The Pipeline System has been constructed and is in general compliance
with applicable federal, state and local laws and regulations, and accepted
industry standards and practices. The Partnership performs regular maintenance
on all the facilities of the Pipeline System and has an ongoing process of
inspecting segments of the Pipeline System and making repairs and replacements
when necessary or appropriate. In addition, the Partnership conducts periodic
air patrols of the Pipeline System to monitor pipeline integrity and
third-party right of way encroachments.

TITLE TO PROPERTIES

The Partnership believes it has satisfactory title to all of its assets.
Although such properties are subject to liabilities in certain cases, such as
customary interests generally contracted in connection with acquisition of the
properties, liens for taxes not yet due, easements, restrictions, and other
minor encumbrances, the Partnership believes none of such burdens materially
detracts from the value of such properties or from the Partnership's interest
therein or will materially interfere with their use in the operation of the
Partnership's business. Substantially all of the property, plant and equipment
of the Partnership is subject to a mortgage securing the First Mortgage Notes.
Such mortgage will be released upon the repayment of the First Mortgage Notes
with the proceeds of the offering made hereby.

MAJOR BUSINESS SECTOR MARKETS

The Pipeline System's major operations are the transportation, storage
and terminaling of refined petroleum products and LPGs along its mainline
system, and the storage and short-haul transportation of LPGs associated with
its Mont Belvieu operations. Product deliveries on a regional basis over the
last three years were as follows:

21
<PAGE> 24

<TABLE>
<CAPTION>
Product Deliveries (MMBbls)
Years Ended December 31,
----------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Refined Products Transportation:
Central(1) . . . . . . . . . . . . . . . . . . . . 66.9 60.6 56.2
Midwest(2) . . . . . . . . . . . . . . . . . . . . 28.7 29.3 26.1

Ohio and Kentucky . . . . . . . . . . . . . . . . . 19.7 20.3 25.0
----- ----- -----
Subtotal . . . . . . . . . . . . . . . . . . 115.3 110.2 107.3
----- ----- -----
LPGs Mainline Transportation:
Central, Midwest and Kentucky(1)(2) . . . . . . . . 24.6 23.3 20.0
Ohio and Northeast(3) . . . . . . . . . . . . . . . 17.0 15.0 16.6
----- ----- -----
Subtotal . . . . . . . . . . . . . . . . . . 41.6 38.3 36.6
----- ----- -----

Mont Belvieu Operations:
LPGs . . . . . . . . . . . . . . . . . . . . . . . 22.5 30.1 28.7
----- ----- -----
Total Product Deliveries . . . . . . . . . . 179.4 178.6 172.6
===== ===== =====
</TABLE>

- ----------------
(1) Arkansas, Louisiana, Missouri and Texas.
(2) Illinois and Indiana.
(3) New York and Pennsylvania.

The mix of products delivered varies seasonally, with gasoline demand
generally stronger in the spring and summer months and LPGs demand generally
stronger in the fall and winter months. Weather and economic conditions in the
geographic areas served by the Pipeline System also affect the demand for and
the mix of the products delivered.

Refined products and LPGs deliveries over the last three years were as
follows:

<TABLE>
<CAPTION>
Product Deliveries (MMBbls)
Years Ended December 31,
--------------------------
1996 1995 1994
------ ------ -------
<S> <C> <C> <C>
Refined Products Transportation:
Gasoline . . . . . . . . . . . . . . . . . . . . . 65.4 64.1 67.3
Jet Fuels . . . . . . . . . . . . . . . . . . . . . 20.7 18.1 14.9
Middle Distillates (1) . . . . . . . . . . . . . . 23.2 22.4 23.3
MTBE/Toluene . . . . . . . . . . . . . . . . . . . 6.0 5.6 1.8
----- ----- -----
Subtotal . . . . . . . . . . . . . . . . . . 115.3 110.2 107.3
----- ----- -----

LPGs Mainline Transportation:
Propane . . . . . . . . . . . . . . . . . . . . . . 35.2 29.1 28.9
Butanes . . . . . . . . . . . . . . . . . . . . . . 6.4 9.2 7.7
----- ----- -----
Subtotal . . . . . . . . . . . . . . . . . . 41.6 38.3 36.6
----- ----- -----
Mont Belvieu Operations:
LPGs . . . . . . . . . . . . . . . . . . . . . . . 22.5 30.1 28.7
----- ----- -----
Total Product Deliveries . . . . . . . . . . 179.4 178.6 172.6
===== ==== =====
</TABLE>

- ---------------
(1) Primarily diesel fuel, heating oil and other middle distillates.

22
<PAGE> 25

Refined Petroleum Products Transportation. The Pipeline System
transports refined petroleum products from the upper Texas Gulf Coast, eastern
Texas and southern Arkansas to the Central and Midwest regions of the United
States with deliveries in Texas, Louisiana, Arkansas, Missouri, Illinois,
Kentucky, Indiana and Ohio. At these points, refined petroleum products are
delivered to Partnership-owned terminals, connecting pipelines and
customer-owned terminals. The volume of refined petroleum products transported
by the Pipeline System is directly affected by the demand for such products in
the geographic regions the System serves. Such market demand varies based upon
the different end uses to which the refined products deliveries are applied.
Demand for gasoline, which accounts for a substantial portion of the volume of
refined products transported through the Pipeline System, depends upon price,
prevailing economic conditions and demographic changes in the markets served.
Demand for refined products used in agricultural operations is affected by
weather conditions, government policy and crop prices. Demand for jet fuel
depends upon prevailing economic conditions and military usage.

Effective January 1, 1995, the Clean Air Act Amendments of 1990 mandated
the use of reformulated gasolines in nine metropolitan areas of the United
States, including the Houston and Chicago areas served by the System. A
portion of the reformulated and oxygenated gasolines includes MTBE as a major
blending component. The Partnership has invested in modifications to the
System needed to allow the Partnership to achieve increased revenues from the
transportation and storage of MTBE as well as other blending components used in
the production of reformulated gasolines.

LPGs Mainline Transportation. The Pipeline System transports LPGs from
the upper Texas Gulf Coast to the Central, Midwest and Northeast regions of the
United States. The Pipeline System east of Todhunter, Ohio, is devoted solely
to the transportation of LPGs. Since LPGs demand is generally stronger in the
winter months, the Pipeline System often operates near capacity during such
time. Propane deliveries are generally sensitive to the weather and meaningful
year-to-year variations have occurred and will likely continue to occur.

The Partnership's ability to serve markets in the Northeast is enhanced
by its propane import terminal at Providence, Rhode Island. This facility
includes a 400,000-barrel refrigerated storage tank along with ship unloading
and truck loading facilities. Although the terminal is operated by the
Partnership, the utilization of the terminal is committed by contract to a
major propane marketer through May 2001.

Mont Belvieu LPGs Storage and Pipeline Shuttle. A key aspect of the
Pipeline System's LPGs business is its storage and pipeline asset base in the
Mont Belvieu, Texas, complex serving the fractionation, refining and
petrochemical industries. The complex is the largest of its kind in the United
States and provides substantial capacity and flexibility in the transportation,
terminaling and storage of natural gas liquids, LPGs and olefins.

The Partnership has 33 MMBbls of LPGs storage capacity, including
storage capacity leased to outside parties, at the Mont Belvieu complex. The
Partnership's Mont Belvieu short-haul transportation shuttle system, consisting
of a complex system of pipelines and interconnects, ties Mont Belvieu to
virtually every refinery and petrochemical facility on the upper Texas Gulf
Coast.

Product Sales and Other. The Partnership also derives revenue from the
sale of product inventory, terminaling activities and other ancillary services
associated with the transportation and storage of refined petroleum products
and LPGs.

CUSTOMERS

The Pipeline System's customers for the transportation of refined
petroleum products include major integrated oil companies, independent oil
companies and wholesalers. End markets for these deliveries are primarily (i)
retail service stations, (ii) truckstops, (iii) agricultural enterprises, (iv)
refineries (for MTBE and other blendstocks), and (v) military and commercial
jet fuel users.

Propane shippers include wholesalers and retailers who, in turn, sell to
commercial, industrial, agricultural and residential heating customers, as well
as utilities who use propane as a fuel source. Refineries constitute the

23
<PAGE> 26
Partnership's major customers for butane and isobutane, which are used as a
blendstock for gasolines and as a feedstock for alkylation units, respectively.

At December 31, 1996, the Pipeline System had approximately 165
customers. Transportation revenues (and percentage of total revenues)
attributable to the top 10 shippers were $81 million (38%), $77 million (38%),
and $74 million (37%) for the years ended December 31, 1996, 1995 and 1994,
respectively. During 1996 and 1995, no single customer accounted for greater
than 10% of total revenues. During 1994, billings to Marathon Oil Company, a
major integrated oil company, accounted for approximately 10% of the
Partnership's total revenues. Loss of a business relationship with a
significant customer could have an adverse affect on the consolidated financial
position and results of operations of the Partnership.

COMPETITION

The Pipeline System conducts operations without the benefit of exclusive
franchises from government entities. Interstate common carrier transportation
services are provided through the System pursuant to tariffs filed with the
FERC.

Because pipelines are generally the lowest cost method for intermediate
and long-haul overland movement of refined petroleum products and LPGs, the
Pipeline System's most significant competitors (other than indigenous
production in its markets) are pipelines in the areas where the Pipeline System
delivers products. Competition among common carrier pipelines is based
primarily on transportation charges, quality of customer service and proximity
to end users. The General Partner believes the Partnership is competitive with
other pipelines serving the same markets; however, comparison of different
pipelines is difficult due to varying product mix and operations.

Trucks, barges and railroads competitively deliver products in some of
the areas served by the Pipeline System. Trucking costs, however, render that
mode of transportation less competitive for longer hauls or larger volumes.
Barge fees for the transportation of refined products are generally lower than
the Partnership's tariffs. The Partnership faces competition from rail
movements of LPGs in several geographic areas. The most significant area is
the Northeast, where rail movements of propane from Sarnia, Canada, compete
with propane moved on the Pipeline System.

CAPITAL EXPENDITURES

Capital expenditures by the Partnership were $51.3 million for the year
ended December 31, 1996. This amount includes capitalized interest of $1.4
million. Approximately $37.8 million was used for revenue-generating projects
and $12.1 million for System integrity projects and for sustaining existing
operations. Revenue-generating projects included $18.7 million of expenditures
to provide additional capacity from a refinery near Shreveport, Louisiana,
which included the replacement of approximately 54 miles of an 8-inch diameter
line with a 10-inch diameter line between Shreveport and El Dorado, Arkansas.
Revenue-generating projects also included $11.9 million of spending to increase
mainline capacity by 50,000 barrels per day between El Dorado and Seymour,
Indiana. An additional $4.3 million of 1996 spending was used to complete
facilities required to deliver jet fuel to the United States Air Force Base
near Little Rock, Arkansas, which became operational in June 1996.

24
<PAGE> 27
REGULATION

The Partnership's interstate common carrier pipeline operations are
subject to rate regulation by the FERC under the Interstate Commerce Act
("ICA"), the Energy Policy Act of 1992 ("Act") and rules and orders promulgated
pursuant thereto. FERC regulation requires that interstate oil pipeline rates
be posted publicly and that these rates be "just and reasonable" and
nondiscriminatory.

Rates of interstate oil pipeline companies, like the Partnership, are
currently regulated by FERC primarily through an index methodology, whereby a
pipeline is allowed to change its rates based on the change from year-to-year
in the Producer Price Index for finished goods less 1% ("PPI Index"). In the
alternative, interstate oil pipeline companies may elect to support rate
filings by using a cost-of-service methodology, competitive market showings or
agreements between shippers and the oil pipeline company that the rate is
acceptable. With one immaterial exception, the Partnership has used the index
methodology since the adoption thereof in 1995 and intends to continue using
such methodology in the future.

In a June 1995 decision, the FERC disallowed the inclusion of imputed
income taxes in the cost-of-service tariff filing of Lakehead Pipeline Company,
Limited Partnership ("Lakehead"), an unrelated oil pipeline limited partnership.
The FERC's decision held that Lakehead was entitled to include an income tax
allowance in its cost-of-service for income attributable to corporate partners
but not on income attributable to individual partners. In 1996, Lakehead
reached an agreement with its shippers on all contested rates and withdrew its
appeal of the June 1995 decision. In another FERC proceeding, SFPP, L.P., the
Administrative Law Judge in the Initial Decision Concerning Rates, Terms and
Conditions of Service, and Other Matters, followed the Commission's decision in
Lakehead and held that SFPP may claim an income tax allowance with respect to
income attributable to SFPP, Inc.'s general partnership interest and income
attributable to corporations holding publicly traded limited partnership
interests, but not for income attributable to non-corporate limited partners,
both individuals and other entities. The decision also disallowed the income
tax allowance attributable to SFPP, Inc.'s limited partnership interest under
facts peculiar to the way SFPP held its limited partnership interests. Neither
the FERC's decision in Lakehead nor the Administrative Law Judge's initial
decision in SFPP, L.P. affects the Partnership's current rates and rate
structure because the Partnership uses the index methodology to support its
rates and intends to continue to do so. However, the Lakehead and SFPP
precedents might become relevant to the Partnership should it (i) elect in the
future to use the cost-of-service methodology or (ii) be required to use such
methodology to defend its indexed rates against a shipper protest alleging that
an indexed rate increase substantially exceeds actual cost increases. Should
such circumstances arise, there can be no assurance with respect to the effect
of such precedents on the Partnership's rates in view of the uncertainties
involved in this issue.

ENVIRONMENTAL MATTERS

The operations of the Partnership are subject to federal, state and
local laws and regulations relating to protection of the environment. Although
the Partnership believes the operations of the Pipeline System are in material
compliance with applicable environmental regulations, risks of significant
costs and liabilities are inherent in pipeline operations, and there can be no
assurance that significant costs and liabilities will not be incurred.
Moreover, it is possible that other developments, such as increasingly strict
environmental laws and regulations and enforcement policies thereunder, and
claims for damages to property or persons resulting from the operations of the
Pipeline System, could result in substantial costs and liabilities to the
Partnership.

Water. The Federal Water Pollution Control Act of 1972, as renamed and
amended as the Clean Water Act ("CWA"), imposes strict controls against the
discharge of oil and its derivatives into navigable waters. The CWA provides
penalties for any discharges of petroleum products in reportable quantities and
imposes substantial potential liability for the costs of removing an oil or
hazardous substance spill. State laws for the control of water pollution also
provide varying civil and criminal penalties and liabilities in the case of a
release of petroleum or its derivatives in surface waters or into the
groundwater. Spill prevention control and countermeasure requirements of
federal laws require appropriate containment berms and similar structures to
help prevent the contamination of navigable waters in the event of a petroleum
tank spill, rupture or leak.

25
<PAGE> 28
Contamination resulting from spills or release of refined petroleum
products is an inherent risk within the petroleum pipeline industry. To the
extent that groundwater contamination requiring remediation exists along the
Pipeline System as a result of past operations, the Partnership believes any
such contamination could be controlled or remedied without having a material
adverse effect on the financial condition of the Partnership, but such costs
are site specific, and there can be no assurance that the effect will not be
material in the aggregate.

The primary federal law for oil spill liability is the Oil Pollution Act
of 1990 ("OPA"), which addresses three principal areas of oil pollution --
prevention, containment and cleanup, and liability. It applies to vessels,
offshore platforms, and onshore facilities, including terminals, pipelines and
transfer facilities. In order to handle, store or transport oil, shore
facilities were required to file oil spill response plans with the appropriate
agency being either the United States Coast Guard, the United States Department
of Transportation Office of Pipeline Safety ("OPS") or the Environmental
Protection Agency ("EPA"). Numerous states have enacted laws similar to OPA.
Under OPA and similar state laws, responsible parties for a regulated facility
from which oil is discharged may be liable for removal costs and natural
resources damages. The General Partner believes that the Partnership is in
material compliance with regulations pursuant to OPA and similar state laws.

The EPA has adopted regulations that require the Partnership to have
permits in order to discharge certain storm water run-off. Storm water
discharge permits may also be required by certain states in which the
Partnership operates. Such permits may require the Partnership to monitor and
sample the effluent. The General Partner believes that the Partnership is in
material compliance with effluent limitations at existing facilities.

Air Emissions. The operations of the Partnership are subject to the
federal Clean Air Act and comparable state and local statutes. The Clean Air
Act Amendments of 1990 (the "Clean Air Act") will require most industrial
operations in the United States to incur future capital expenditures in order
to meet the air emission control standards that are to be developed and
implemented by the EPA and state environmental agencies during the next decade.
Pursuant to the Clean Air Act, any Partnership facilities that emit volatile
organic compounds or nitrogen oxides and are located in ozone non-attainment
areas will face increasingly stringent regulations, including requirements that
certain sources install the reasonably available control technology. The EPA
is also required to promulgate new regulations governing the emissions of
hazardous air pollutants. Some of the Partnership's facilities are included
within the categories of hazardous air pollutant sources which will be affected
by these regulations. The Partnership does not anticipate that changes
currently required by the Clean Air Act hazardous air pollutant regulations
will have a material adverse effect on the Partnership.

The Clean Air Act also introduced the new concept of federal operating
permits for major sources of air emissions. Under this program, one federal
operating permit (a "Title V" permit) will be issued. The permit will act as
an umbrella that includes all other federal, state and local preconstruction
and/or operating permit provisions, emission standards, grandfathered rates,
and recordkeeping, reporting, and monitoring requirements in a single document.
The federal operating permit will be the tool that the public and regulatory
agencies use to review and enforce a site's compliance with all aspects of
clean air regulation at the federal, state and local level. The Partnership
expects approximately ten of its facilities to apply for and obtain these
federal operating permits in the next two years.

Solid Waste. The Partnership generates hazardous and non-hazardous
solid wastes that are subject to requirements of the federal Resource
Conservation and Recovery Act ("RCRA") and comparable state statutes.
Amendments to RCRA have required the EPA to promulgate regulations banning the
land disposal of all hazardous wastes unless the wastes meet certain treatment
standards or the land-disposal method meets certain waste containment criteria.
In 1990, the EPA issued the Toxicity Characteristic Leaching Procedure, which
substantially expanded the number of materials defined as hazardous waste.
Certain wastewater and other wastes generated from the Partnership's business
activities previously classified as nonhazardous are now classified as
hazardous due to the presence of dissolved aromatic compounds. The Partnership
has utilized waste minimization and recycling processes and has installed
pre-treatment facilities to reduce the volume of its hazardous waste. The
Partnership is currently permitted to utilize five regional on-site waste water
treatment facilities. Operating expenses of these facilities have not had a
material adverse effect on the financial position or results of operations of
the Partnership.

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<PAGE> 29
Superfund. The Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), also known as "Superfund," imposes liability, without
regard to fault or the legality of the original act, on certain classes of
persons who contributed to the release of a "hazardous substance" into the
environment. These persons include the owner or operator of a facility and
companies that disposed or arranged for the disposal of the hazardous
substances found at a facility. CERCLA also authorizes the EPA and, in some
instances, third parties to take actions in response to threats to the public
health or the environment and to seek to recover from the responsible classes
of persons the costs they incur. In the course of its ordinary operations, the
Pipeline System generates wastes that may fall within CERCLA's definition of a
"hazardous substance." Should a disposal facility previously used by the
Partnership require clean up in the future, the Partnership may be responsible
under CERCLA for all or part of the costs required to clean up sites at which
such wastes have been disposed.

Other Environmental Proceedings. The Partnership and the Indiana
Department of Environmental Management have entered into an Agreed Order that
will ultimately result in a remediation program for any on-site and off-site
environmental problems attributable to the Partnership's operations at the
Seymour, Indiana, terminal. As part of the Agreed Order, the Partnership has
completed the remedial investigation sampling for groundwater contamination and
has submitted to IDEM the final remedial investigation report for the Seymour
terminal. The Partnership estimates that the costs of the remediation program
to be proposed by the Partnership for the Seymour terminal will not exceed the
amount accrued therefor (approximately $2.0 million at September 30, 1997). In
the opinion of the General Partner, the completion of the remediation program
to be proposed by the Partnership, if such program is approved by IDEM, will
not have a material adverse impact on the Partnership.

The Partnership received a compliance order from the Louisiana
Department of Environmental Quality ("DEQ") during 1994 relative to potential
environmental contamination at the Partnership's Arcadia, Louisiana facility,
which may be attributable to the operations of the Partnership and surrounding
petroleum terminals of other companies. The Partnership has finalized a
negotiated Compliance Order with DEQ that will allow the Partnership to
continue with a remediation plan similar to the one previously agreed to by DEQ
and implemented by the Company. In the opinion of the General Partner, the
completion of the remediation program being proposed by the Partnership will
not have a future material adverse impact on the Partnership.

SAFETY REGULATION

The Partnership is subject to regulation by the United States Department
of Transportation ("DOT") under the Hazardous Liquid Pipeline Safety Act of
1979 ("HLPSA") and comparable state statutes relating to the design,
installation, testing, construction, operation, replacement and management of
its pipeline facilities. HLPSA covers petroleum and petroleum products and
requires any entity that owns or operates pipeline facilities to comply with
such regulations, to permit access to and copying of records and to make
certain reports and provide information as required by the Secretary of
Transportation. The Partnership believes it is in material compliance with
HLPSA requirements.

The Partnership is also subject to the requirements of the federal
Occupational Safety and Health Act ("OSHA") and comparable state statutes. The
Partnership believes it is in material compliance with OSHA and state
requirements, including general industry standards, recordkeeping requirements
and monitoring of occupational exposure to benzene.

The OSHA hazard communication standard, the EPA community right-to-know
regulations under Title III of the federal Superfund Amendment and
Reauthorization Act, and comparable state statutes require the Partnership to
organize and disclose information about the hazardous materials used in its
operations. Certain parts of this information must be reported to employees,
state and local governmental authorities, and local citizens upon request. In
general, the Partnership expects to increase its expenditures during the next
decade to comply with higher industry and regulatory safety standards such as
those described above. Such expenditures cannot be accurately estimated at
this time, although the General Partner does not believe that they will have a
future material adverse impact on the Partnership.

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<PAGE> 30
The Partnership is subject to OSHA Process Safety Management ("PSM")
regulations which are designed to prevent or minimize the consequences of
catastrophic releases of toxic, reactive, flammable, or explosive chemicals.
These regulations apply to any process which involves a chemical at or above
the specified thresholds; or any process which involves a flammable liquid or
gas, as defined in the regulations, stored on site in one location, in a
quantity of 10,000 pounds or more. The Partnership utilizes certain covered
processes and maintains storage of LPG in pressurized tanks, caverns and wells
in excess of 10,000 pounds at various locations. Flammable liquids stored in
atmospheric tanks below their normal boiling point without benefit of chilling
or refrigeration are exempt. The Partnership believes it is in material
compliance with the PSM regulations.

LITIGATION

The Partnership has been, in the ordinary course of business, a
defendant in various lawsuits and a party to various other legal proceedings,
some of which are covered in whole or in part by insurance. The General
Partner believes that the outcome of such lawsuits and other proceedings will
not individually or in the aggregate have a material adverse effect on the
Partnership's financial condition, operations or cash flows. See
"--Environmental Matters--Other Environmental Proceedings."

EMPLOYEES

The Partnership does not have any employees, officers or directors. The
General Partner is responsible for the management of the Partnership. As of
December 31, 1996, the General Partner had 516 employees.

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<PAGE> 31
DESCRIPTION OF THE NOTES

The Notes are to be issued under an indenture to be dated as of January
27, 1998 (the "Indenture") between the Partnership and The Bank of New York,
as trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summaries of certain provisions of the Indenture do not purport to be complete,
and are subject, and are qualified in their entirety by reference, to all of the
provisions of the Indenture, including the definitions therein of certain terms.

GENERAL

The Notes will be issued under the Indenture in two series which are
limited in the following aggregate principal amounts: $150,000,000 of 2008 Notes
and $240,000,000 of 2028 Notes. The 2008 Notes will mature on January 15, 2008.
The 2028 Notes will mature on January 15, 2028. The Notes will bear interest at
the rate per annum shown on the front cover of this Prospectus from January 27,
1998 or from the most recent Interest Payment Date to which interest has been
paid or provided for, payable semi-annually on January 15 and July 15 of each
year, commencing January 15, 1998, to the Person in whose name the Note (or any
predecessor Note) is registered at the close of business on the preceding
December 31 or June 30, as the case may be. The Notes will not be subject to any
sinking fund, but the 2028 Notes are subject to redemption at the option of the
Partnership.

The Notes and any future debt securities issued under the Indenture will
be unsecured obligations of the Partnership and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Partnership. The
Indenture does not limit the aggregate principal amount of debt securities that
may be issued thereunder and provides that debt securities may be issued
thereunder from time to time in one or more additional series. The Indenture
does not limit the Partnership's ability to incur additional indebtedness.

OPTIONAL REDEMPTION

The 2008 Notes will not be subject to redemption prior to their maturity.

The 2028 Notes will not be subject to redemption prior to January 15,
2008. Thereafter, the 2028 Notes are subject to redemption upon not less than
30 nor more than 60 days' notice by mail, at any time, in whole or in part, at
the election of the Partnership at the following Redemption Prices (expressed in
percentages of the principal amount) if redeemed during the 12 months beginning
January 15 of the years indicated:

<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
-------------- ------------ -------------- ------------
<S> <C> <S> <C>
2008 . . . . % 2013 . . . . %
2009 . . . . % 2014 . . . . %
2010 . . . . % 2015 . . . . %
2011 . . . . % 2016 . . . . %
2012 . . . . % 2017 . . . . %
</TABLE>

<PAGE> 32
and thereafter at 100% of the principal amount, together in each case with
accrued interest to the Redemption Date.

BOOK ENTRY PROCEDURES

Upon issuance, all Notes of a series will be represented by one or more
fully registered global notes in the aggregate principal amount of such series
of Notes (whether one or more, and with respect to each series of Notes, the
"Global Notes"). Each such Global Note will be deposited with, or on behalf
of, The Depository Trust Company, as Depositary, and registered in the name of
the Depositary or a nominee thereof. The Depositary will maintain the Notes in
denominations of $1,000 and integral multiples thereof through its book-entry
facilities. Unless and until it is exchanged in whole or in part for Notes of
the related series in definitive form, no Global Note may be transferred except
as a whole by the Depositary to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary.

Ownership of beneficial interests in Notes of each series will be
limited to Persons that have accounts with the Depositary ("Participants") or
Persons that may hold interests through Participants. Upon the issuance of the
Global Note representing the Notes of a related series, the Depositary will
credit, on its book-entry registration and transfer system, the Participants'
accounts with the respective principal amounts of such Notes beneficially owned
by such Participants. Ownership of beneficial interests in such Global Note
will be shown on, and the transfer of such ownership interests will be effected
only through, records maintained by the Depositary or its nominee (with respect
to interests of Participants) and on the records of Participants (with respect
to interests of persons holding through Participants). The laws of some states
may require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to own, transfer or pledge beneficial interests in Global Notes.

So long as the Depositary, or its nominee, is the registered owner of a
Global Note, the Depositary or its nominee, as the case may be, will be
considered the sole owner or Holder of the series of Notes represented by such
Global Note for all purposes under the Indenture. Except as provided below,
owners of beneficial interests in a Global Note will not be entitled to have
the Notes represented by such Global Notes registered in their names, will not
receive or be entitled to receive physical delivery of such Notes in definitive
form and will not be considered the owners or Holders thereof under the
Indenture. Accordingly, each Person owning a beneficial interest in a Global
Note must rely on the procedures of the Depositary and, if such Person is not a
Participant, on the procedures of the Participant through which such Person
owns its interest, to exercise any rights of a Holder under the Indenture. The
Partnership understands that under existing industry practices, in the event
that the Partnership requests any actions of Holders or that an owner of a
beneficial interest in such a Global Note desires to give or take any action
which a Holder is entitled to give or take under the Indenture, the Depositary
would authorize the Participants holding the relevant beneficial interests to
give or take such action, and such Participants would authorize beneficial
owners owning through such Participants to give or take such action or would
otherwise act upon the instructions of beneficial owners holding through them.

Payment of principal of, premium, if any, and interest on, Notes
registered in the name of the Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the Holder of the Global
Notes representing such Notes. None of the Partnership, the Trustee or any
other agent of the Partnership or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for supervising
or reviewing any records relating to such beneficial ownership interests. The
Partnership expects that the Depositary, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit the accounts of
the Participants with payment in amounts proportionate to their respective
beneficial interests in such Global Note as shown on the records of the
Depositary. The Partnership also expects that payments by Participants to
owners of beneficial interests in a Global Note will be governed by standing
customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name,"and will be the responsibility of such Participants.

The Depositary has advised the Partnership as follows: The Depositary is
a limited-purpose trust company organized under the Banking Law of the State of
New York, a member of the Federal Reserve System, a "clearing

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<PAGE> 33
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary was created to hold securities of its
Participants and to facilitate the clearance and settlement transactions among
its Participants in such securities through electronic book-entry changes in
accounts of the Participants, thereby eliminating the need for physical
movement of securities certificates. The Participants include securities
brokers and dealers (including the Underwriters), banks, trust companies,
clearing corporations, and certain other organizations, some of whom (and/or
their representatives) own the Depositary. Access to the Depositary's book-
entry system is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants
may beneficially own securities held by the Depositary only through
Participants.

If (x) the Depositary is at any time unwilling or unable to continue as
Depositary or the Depositary ceases to be a clearing agency registered under
the Exchange Act and a successor Depositary registered as a clearing agency
under the Exchange Act is not appointed by the Partnership in 90 days, (y) the
Partnership, at its option, executes and delivers to the Trustee a Partnership
Order to the effect that the Global Notes shall be transferable and
exchangeable or (z) an Event of Default has occurred and is continuing with
respect to any series of the Notes, then upon notification to the Trustee, the
Global Notes (or in the case of the circumstances described in the preceding
clause (z), the Global Notes representing the series of Notes as to which an
Event of Default has occurred and is continuing) will, upon surrender thereof
by the Depositary, be transferable or exchangeable for Notes in definitive form
of like tenor and of an equal aggregate principal amount, in denominations of
$1,000 and integral multiples thereof. Such definitive Notes shall be
registered in such name or names, and issued to such Person or Persons, in each
case as the Depositary shall identify to the Trustee as the beneficial owners
of the related Notes. It is expected that such instructions may be based upon
directions received by the Depositary from Participants with respect to
ownership of beneficial interests in such Global Notes. None of the
Partnership, the Trustee or any other agent of the Partnership or agent of the
Trustee will have any liability for any delay by the Depositary in identifying
the beneficial owners of the Notes, and each such Person may conclusively rely
on and shall be protected in relying on, instruction from the Depositary for
all purposes (including with respect to registration and delivery, and the
respective principal amount, of the Notes to be issued).

SAME-DAY SETTLEMENT AND PAYMENT

Settlement for the Notes will be made in immediately available funds.
So long as the Notes are subject to the Depositary's book-entry system, the
Notes will trade in the Depositary's Same-Day Funds Settlement System until
maturity, and therefore the Depositary will require that secondary trading
activity be settled in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.

LIMITATION ON LIENS

The Indenture will provide that the Partnership will not, and will not
permit any of its Subsidiaries to, create, assume or incur any Lien on any
Principal Property to secure any Debt of the Partnership or any other Person
(other than the Notes issued thereunder) without effectively providing that the
Notes shall be secured equally and ratably with, or prior to, such Debt so long
as such Debt shall be secured. There is, however, excluded from the foregoing
restriction the following: (a) Permitted Liens; (b) any Lien on any (i)
property or assets created at the time of the acquisition of such property or
assets by the Partnership or any of its Subsidiaries, or within one year after
such time, to secure all or part of the purchase price for such property or
assets or Debt incurred to finance such purchase price, whether such Debt was
incurred prior to, at the time of, or within one year of, such acquisition, or
(ii) property to secure all or part of the cost of the development,
construction, repair or improvement thereon or to secure Debt incurred prior
to, at the time of, or within one year after, the completion of such
development, construction, repair or improvement or the commencement of full
operations thereof (whichever is later) to provide funds for any such purpose;
(c) any Lien on any current assets that secures current liabilities or Debt of
the Partnership or its Subsidiaries; (d) (i) any Lien on any property or assets
existing thereon at the time of acquisition thereof by the Partnership or any
of its Subsidiaries (whether or not the obligations secured thereby are assumed
by the Partnership or any of its Subsidiaries), or (ii) the assumption by the
Partnership or any of its

31
<PAGE> 34
Subsidiaries of obligations secured by any Lien existing at the time of
acquisition by the Partnership or any of its Subsidiaries of the property or
assets subject to such Lien or at the time of the acquisition of the Person
which owns such property or assets, or (iii) any Lien on any property or assets
of a Person existing thereon at the time (1) such Person becomes a Subsidiary
of the Partnership, (2) such Person is merged into, or consolidated with, the
Partnership or any of its Subsidiaries or (3) of a sale, lease or other
disposition of the properties of a Person (or division thereof) as an entirety
or substantially as an entirety to the Partnership or any of its Subsidiaries;
(e) any Lien on any property or assets of the Partnership or any of its
Subsidiaries in existence on the date of the Indenture or created pursuant to
an "after-acquired property" clause or similar term in existence on the date of
the Indenture or the terms of any mortgage, pledge agreement, security
agreement or similar agreement or instrument in existence on the date of the
Indenture; (f) any Lien arising by reason of any attachment, judgment, decree
or order of any governmental or court authority, so long as any proceeding
initiated to review such attachment, judgment, decree or order shall not have
been terminated or the period within which such proceeding may be initiated
shall not expire, or such attachment, judgment, decree or order shall otherwise
be effectively stayed; and (g) any extension, renewal, refinancing, refunding
or replacement (or successive extensions, renewals, refinancings, refundings or
replacements) of any Lien, in whole or part, that is referred to in clauses (a)
through (f) (inclusive) above, or any Debt secured thereby.

Notwithstanding the foregoing, under the Indenture, the Partnership may,
and may permit any of its Subsidiaries to, create, assume or incur any Lien
upon any Principal Property to secure any Debt of the Partnership or any Person
(other than the Notes) that is not excepted by clauses (a) through (g)
(inclusive) above without securing the Notes, provided that, after giving
effect to the creation, assumption or incurrence of such Lien and Debt, and the
application of proceeds of such Debt, if any, received by the Partnership or
any of its Subsidiaries as a result thereof, the aggregate principal amount of
all Debt then outstanding secured by such Lien and all similar Liens, together
with all net sale proceeds from Sale-Leaseback Transactions (excluding Sale-
Leaseback Transactions permitted by clauses (a) through (d) (inclusive) of the
first paragraph of the covenant below entitled "Limitation on Sale-Leaseback
Transactions") would not exceed 10% of Consolidated Net Tangible Assets.

LIMITATION ON SALE-LEASEBACK TRANSACTIONS

The Indenture will provide that the Partnership will not, nor will it
permit any of its Subsidiaries to, engage in a Sale-Leaseback Transaction,
unless: (a) such Sale-Leaseback Transaction occurs within one year from the
date of completion of the acquisition of the Principal Property subject thereto
or the date of the completion of construction, development or substantial
repair or improvement, or commencement of full operations, on such Principal
Property, whichever is later; (b) the Sale-Leaseback Transaction involves a
lease for a period, including renewals, of not more than three years; (c) the
Partnership or such Subsidiary would be entitled to incur Debt secured by a
Lien on Principal Property subject thereto in a principal amount equal to or
exceeding the net sale proceeds from such Sale-Leaseback Transaction without
equally and ratably securing the Notes pursuant to the above covenant entitled
"Limitation on Liens"; or (d) the Partnership or such Subsidiary, within a one-
year period after such Sale-Leaseback Transaction, applies or causes to be
applied an amount not less than the net sale proceeds from such Sale-Leaseback
Transaction to (i) the prepayment, repayment, reduction or retirement of any
pari passu Funded Debt or Debt of the Partnership or any of its Subsidiaries,
or (ii) the expenditure or expenditures for Principal Property used or to be
used in the ordinary course of business of the Partnership or any of its
Subsidiaries.

Notwithstanding the foregoing, under the Indenture, the Partnership may,
and may permit each of its Subsidiaries to, effect any Sale-Leaseback
Transaction that is not excepted by clauses (a) through (d) (inclusive) of the
above paragraph, provided that, after giving effect thereto and the application
of proceeds, if any, received by the Partnership or any its Subsidiaries as a
result thereof, the net sale proceeds from such Sale-Leaseback Transaction,
together with the aggregate principal amount of all Debt then outstanding (other
than the Notes) secured by Liens upon Principal Property not excepted by clauses
(a) through (g) (inclusive) of the above covenant entitled "Limitation on
Liens", would not exceed 10% of the Consolidated Net Tangible Assets.

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<PAGE> 35
CERTAIN DEFINITIONS

The Indenture will define the following terms as follows:

"Consolidated Net Tangible Assets" means, at any date of determination,
the total amount of assets after deducting therefrom (a) all current
liabilities (excluding (i) any current liabilities that by their terms are
extendable or renewable at the option of the obligor thereon to a time more
than 12 months after the time as of which the amount thereof is being computed,
and (ii) current maturities of long-term debt), and (b) the value (net of any
applicable reserves) of all goodwill, trade names, trademarks, patents or other
like intangible assets, all as set forth, or on a pro forma basis would be set
forth, in the consolidated balance sheet of the Partnership and its
Subsidiaries.

"Debt" means (without duplication) all liabilities for borrowed money,
and any guarantee therefor.

"Funded Debt" means Debt maturing one year or more from the date of the
creation thereof, Debt directly or indirectly renewable or extendible, at the
option of the debtor, by its terms or by the terms of the instrument or
agreement relating thereto, to a date one year or more from the date of the
creation thereof, and Debt under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of one year or
more.

"Lien" means, as to any entity, any mortgage, lien, pledge, security
interest or other encumbrance in or on, or adverse interest or title of any
vendor, lessor, lender or other secured party to or of the entity under
conditional sale or other title retention agreement or capital lease with
respect to, any property or asset of the entity.

"Permitted Liens" means: (a) Liens upon rights-of-way for pipeline
purposes; (b) any statutory or governmental Lien or Lien arising by operation
of law, or any mechanics', repairmen's, materialmen's, suppliers', carriers',
landlords', warehousemen's or similar Lien incurred in the ordinary course of
business which is not yet due or which is being contested in good faith by
appropriate proceedings and any undetermined Lien which is incidental to
construction, development, improvement or repair; (c) the right reserved to, or
vested in, any municipality or public authority by the terms of any right,
power, franchise, grant, license, permit or by any provision of law, to
purchase or recapture or to designate a purchaser of, any property; (d) Liens
of taxes and assessments which are (i) for the then current year, (ii) not at
the time delinquent, or (iii) delinquent but the validity of which is being
contested at the time by the Partnership or any of its Subsidiaries in good
faith; (e) Liens of, or to secure performance of, leases; (f) any Lien upon, or
deposits of, any assets in favor of any surety company or clerk of court for
the purpose of obtaining indemnity or stay of judicial proceedings; (g) any
Lien upon property or assets acquired or sold by the Partnership or any of its
Subsidiaries resulting from the exercise of any rights arising out of defaults
on receivables; (h) any Lien incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance, temporary
disability, social security, retiree health or similar laws or regulations or
to secure obligations imposed by statute or governmental regulations; (i) any
Lien in favor of the Partnership or any of its Subsidiaries; (j) any Lien in
favor of the United States of America or any State thereof, or any department,
agency or instrumentality or political subdivision of the United States of
America or any State thereof, to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any Debt incurred by
the Partnership or any of its Subsidiaries for the purpose of financing all or
any part of the purchase price of, or the cost of constructing, developing,
repairing or improving, the property or assets subject to such Lien; or (k) any
Lien securing industrial development, pollution control or similar revenue
bonds.

"Person" means (a) any form of business entity, association, grouping,
trust or other form now or hereafter permitted by the laws of any State of the
United States of America or utilized by businesses in the conduct of their
activities and (b) a natural person, as the context may require.

"Principal Property" means, whether owned or leased on the date of the
Indenture or thereafter acquired, (a) pipeline assets of the Partnership or its
Subsidiaries, including any related facilities employed in the transportation,
distribution, storage or marketing of refined petroleum products or liquefied
petroleum gases, that are located in the United States of America or any
territory or political subdivision thereof, and (b) any processing or
manufacturing plant or terminal owned or leased by the Partnership or any of
its Subsidiaries that is located in

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<PAGE> 36
the United States of America or any territory or political subdivision thereof
except, in the case of either of the foregoing clauses (a) or (b), (i) any such
assets consisting of inventories, furniture, office fixtures and equipment
(including data processing equipment), vehicles and equipment used on, or
useful with, vehicles, and (ii) any such assets, plant or terminal which, in
the opinion of the Company's Board of Directors, is not material in relation to
the activities of the Partnership or of the Partnership and its Subsidiaries,
taken as a whole.

"Sale-Leaseback Transaction" means the sale or transfer by the
Partnership or any of its Subsidiaries of any Principal Property to a Person
(other than the Partnership or any of its Subsidiaries) and the taking back by
the Partnership or any of its Subsidiaries, as the case may be, of a lease of
such Principal Property.

"Subsidiary" means, as to a Person, any other Person as to which it has
the sole and absolute right to liquidate and terminate and upon such
liquidation and termination, it has the right to receive, after accommodation
for legitimate debts and similar obligations of such Person, at least 50% of
its assets.

CONSOLIDATION, MERGER AND SALE OF ASSETS

The Partnership may consolidate with or merge into, or convey, transfer
or lease its properties and assets substantially as an entirety to, any Person,
provided that (i) the Partnership is the continuing entity or if the
Partnership is not the continuing entity, the continuing entity must be a
Person organized and validly existing under the laws of a domestic jurisdiction
and must assume the Partnership's obligations on the Notes and under the
Indenture, and (ii) after giving effect to the transaction no Event of Default,
and no event which, after notice or lapse of time or both, would become an
Event of Default, shall exist.

EVENTS OF DEFAULT

Each of the following will constitute an Event of Default under the
Indenture with respect to the Notes of any series thereunder: (a) failure to pay
principal of or any premium on any Note when due; (b) failure to pay any
interest on any Note when due, continued for 30 days; (c) failure to perform any
other covenant of the Partnership in the Notes or Indenture, continued for 60
days after written notice has been given by the Trustee, or the Holders of at
least 25% in principal amount of all series of the then outstanding Notes, as
provided in the Indenture; and (d) certain events in bankruptcy, insolvency or
reorganization of the Partnership.

If an Event of Default (other than an Event of Default described in
clause (d) above) with respect to any of the Notes of any series at the time
outstanding shall occur and be continuing, either the Trustee or the Holders of
at least 25% of the then outstanding Notes (together as a single class) by
notice to the Partnership as provided in the Indenture may declare the principal
amount of all affected series of the Notes to be due and payable immediately. If
an Event of Default described in clause (d) above shall occur, the principal
amount of all the then outstanding Notes will automatically, and without any
action by the Trustee or any Holder, become immediately due and payable. After
any acceleration, but before a judgment or decree for the payment of the money
due has been obtained by the Trustee, the Holders of a majority in aggregate
principal amount of the then outstanding Notes (together as a single class), by
written notice to the Trustee, may rescind and annul such acceleration and its
consequences if all Events of Default with respect to such series of Notes,
other than the non-payment of accelerated principal, have been cured or waived
as provided in the Indenture. For information as to waiver of defaults, see
"Modification and Waiver".

Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of the Notes,
unless such Holders of the Notes shall have offered to the Trustee reasonable
indemnity. Subject to such provisions for the indemnification of the Trustee,
the Holders of a majority in aggregate principal amount of the then outstanding
Notes (together as a single class) will have the right to
direct the time, method and place of conducting any proceeding for any

34
<PAGE> 37
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to such Notes.

No Holder of any Note of any series will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or a trustee, or for any other remedy thereunder, unless (i) such Holder has
previously given to the Trustee written notice of a continuing Event of Default
with respect to the Notes of that series, (ii) the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes (together as a single
class) have made written request, and such Holder or Holders have offered
reasonable indemnity, to the Trustee to institute such proceeding in respect to
such Event of Default as trustee and (iii) the Trustee has failed to institute
such proceeding, and has not received from the Holders of a majority in
aggregate principal amount of the then outstanding Notes (together as a single
class) a direction inconsistent with such request, within 60 days after such
notice, request and offer. However, such limitations do not apply to any
proceeding which is instituted by a Holder of a Note for the enforcement of
payment of the principal of or interest on such Note on or after the applicable
due date specified in such Note.

The Partnership will be required to furnish to the Trustee annually a
statement by certain of its officers as to whether or not the Partnership, to
their knowledge, is in default in the performance or observance of any of the
terms, provisions and conditions of the Indenture and, if so, specifying all
such known defaults.

MODIFICATION AND WAIVER

Modifications and amendments of the Indenture may be made by the
Partnership and the Trustee with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (together as a single class);
provided, however, that no such modification or amendment may, without the
consent of the Holder of each Note affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of principal of or interest on,
any such Note, (b) reduce the principal amount of, or any interest on, any such
Note, (c) reduce the amount of principal of any such Note payable upon
acceleration of the Maturity thereof, (d) change the place or currency of
payment of principal of, or interest on, any such Note, (e) impair the right to
institute suit for the enforcement of any payment on or with respect to any such
Note, (f) reduce the percentage in principal amount of such Note, the consent of
whose Holders is required for modification or amendment of the Indenture, (g)
reduce the percentage in principal amount of such Note necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults or (h) modify such provisions with respect to modification and waiver.

The Holders of a majority in principal amount of the then outstanding
Notes (together as a single class) may waive compliance by the Partnership with
certain restrictive provisions of the Indenture or waive any past default under
the Indenture, except a continuing default in the payment of principal of or
interest on such Notes and covenants and provisions of the Indenture that under
the proviso in the preceding paragraph cannot be amended without the consent of
the Holder of each Note affected thereby.

The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Notes of any affected series (together as a
single class) have given or taken any direction, notice, consent, waiver or
other action under the Indenture as of any date, certain Notes, including those
that have been defeased and discharged as described under "--Satisfaction and
Discharge; Defeasance--Defeasance and Discharge" will not be deemed to be
outstanding.

Except in certain limited circumstances, the Partnership will be entitled
to set any day as a record date for the purpose of determining the Holders of
Notes of a series entitled to give or take any direction, notice, consent,
waiver or other action under the Indenture, in the manner and subject to the
limitations provided in the Indenture. In certain limited circumstances, the
Trustee also will be entitled to set a record date for action by Holders of
Notes of a series. If a record date is set for any action to be taken by
Holders of the Notes of a series, such action may be taken only by persons who
are Holders of such Notes on the record date. To be effective, such action must
be taken by Holders of the requisite principal amount of the Notes (together as
a single class) within a specified period following the record date. For any
particular record date, this period will be 180 days or such

35
<PAGE> 38
shorter period as may be specified by the Partnership (or the Trustee, if it
sets the record date), and may be shortened or lengthened (but not beyond 180
days) from time to time.

SATISFACTION AND DISCHARGE; DEFEASANCE

Satisfaction and Discharge. The Indenture will provide that the
Partnership may satisfy and discharge certain obligations to Holders of Notes
of any series which have not already been delivered to the Trustee for
cancellation and which have either become due and payable or are by their terms
due and payable within one year or are to be called for redemption within one
year by (a) depositing or causing to be deposited with the Trustee funds in an
amount sufficient to pay the principal and any premium and interest to the date
of such deposit (in case of Notes of such series which have become due and
payable) or to the Stated Maturity or any applicable redemption date, as the
case may be, (b) paying or causing to be paid all other sums payable under the
Indenture with respect to such Notes, and (c) delivering to the Trustee an
Officer's Certificate relating to such satisfaction and discharge.

Defeasance and Discharge. The Indenture will provide that the
Partnership will be discharged from all its indebtedness and obligations with
respect to Notes of any series (except for certain obligations to exchange or
register the transfer of such outstanding Notes of such series, to replace
stolen, lost or mutilated outstanding Notes of such series, to maintain paying
agencies and to hold moneys for payment in trust) upon the deposit in trust for
the benefit of the Holders of such outstanding Notes of such series of money or
U.S. Government Obligations, or both, which, through the payment of principal
and interest in respect thereof in accordance with their terms, will provide
money in an amount sufficient to pay the principal of and interest on such
outstanding Notes of such series at Maturity in accordance with the terms of
the Indenture and such outstanding Notes of such series. Such defeasance or
discharge may occur only if, among other things, the Partnership has delivered
to the Trustee an Opinion of Counsel to the effect that the Partnership has
received from, or there has been published by, the United States Internal
Revenue Service a ruling, or there has been a change in tax law, in either case
to the effect that Holders of such outstanding Notes of such series will not
recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge were not to occur.

Defeasance of Certain Covenants. The Indenture will provide that the
Partnership may, with respect to Notes of any series omit to comply with
certain restrictive covenants, including the covenants described under
"Limitation on Liens", "Limitation on Sale-Leaseback Transactions" and
"Consolidation, Merger and Sale of Assets", in which event certain Events of
Default, which are described above in clause (c) (with respect to such
respective covenants) under "Events of Default", will no longer constitute
Events of Default with respect to such Notes of the series affected thereby.
The Partnership, in order to exercise such option to defease such covenants,
will be required to deposit, in trust for the benefit of the Holders of such
outstanding Notes of such series, money or U.S. Government Obligations, or
both, which, through the payment of principal and interest in respect thereof
in accordance with their terms, will provide money in an amount sufficient to
pay the principal of and interest on such Notes at Maturity in accordance with
the terms of the Indenture and such outstanding Notes of such series. The
Partnership will also be required, among other things, to deliver to the
Trustee an Opinion of Counsel to the effect that Holders of such outstanding
Notes of such series will not recognize gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and
defeasance were not to occur.

If subsequent to the completion of a defeasance of certain covenants as
described in the immediately preceding paragraph, such outstanding Notes of an
affected series are declared due and payable because of the occurrence of any
remaining Event of Default, the amount of money and U.S. Government Obligations
so deposited in trust would be sufficient to pay amounts due on such Notes at
Maturity but may not be sufficient to pay amounts due on such Notes upon any
acceleration resulting from such Event of Default. In such case, the
Partnership would remain liable for such payments.

36
<PAGE> 39
NON-RECOURSE TO COMPANY AND THE PARENT PARTNERSHIP; NO PERSONAL LIABILITY OF
OFFICERS, DIRECTORS, EMPLOYEES, STOCKHOLDERS OR UNITHOLDERS

The Indenture will provide that obligations of the Partnership under the
Indenture and the Notes will be non-recourse to the Company and the Parent
Partnership and their respective Affiliates (other than the Partnership), and
payable only out of cash flow and assets of the Partnership. The Trustee, and
each Holder of a Note by its acceptance thereof, will be deemed to have agreed
in the Indenture that (a) neither the Company nor its assets nor the Parent
Partnership nor its assets (nor any of their respective Affiliates other than
the Partnership, nor their respective assets) shall be liable for any of the
obligations of the Partnership under the Indenture or the Notes, and (b) no
director, officer, employee, stockholder or unitholder, as such, of the
Partnership, the Trustee, the Company, the Parent Partnership or any Affiliate
of any of the foregoing entities shall have any personal liability in respect of
the obligations of the Partnership under the Indenture or the Notes by reason of
his, her or its status; provided, however, that the Company shall be liable by
operation of law as general partner of the Partnership for up to $40,000,000 of
payment obligations in respect of the 2008 Notes.

NOTICES

Notices to Holders of the Notes will be given by mail to the addresses
of such Holders as they may appear in the Security Register.

TITLE

The Partnership, the Trustee and any agent of the Partnership or the
Trustee may treat the Person in whose name a Note is registered as the absolute
owner thereof (whether or not the Notes may be overdue) for the purpose of
making payment and for all other purposes.

GOVERNING LAW

The Indenture and the Notes will be governed by, and construed in
accordance with, the law of the State of New York.

37
<PAGE> 40
UNDERWRITING

Subject to the terms and conditions set forth in a purchase agreement
(the "Purchase Agreement") among the Partnership and Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Goldman, Sachs & Co. (the "Underwriters"), the
Partnership has agreed to sell to the Underwriters, and the Underwriters have
severally agreed to purchase, the respective principal amounts of the Notes set
forth after their names below. The Purchase Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters will be obligated to purchase all of the Notes if any are
purchased.

<TABLE>
<CAPTION>
Principal Amount Principal Amount
Underwriter of 2008 Notes of 2028 Notes
----------- ---------------- ----------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . $ $
Goldman, Sachs & Co. . . . .. . . . . . . . . . . . . .
------------ ------------
$150,000,000 $240,000,000
Total . . . . . . . . . . . . . . . . . . . ============ ============
</TABLE>

The Underwriters have advised the Partnership that they propose initially
to offer the Notes to the public at the public offering prices set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of % and % of the principal amount of
the 2008 Notes and 2028 Notes, respectively. The Underwriters may allow, and
such dealers may reallow, discounts not in excess of % and % of
the principal amount of the 2008 Notes and 2028 Notes, respectively, to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.

The Notes have been approved for listing on the New York Stock
Exchange. The Notes are a new issue of securities with no established trading
market. No assurance can be given as to the trading market for the Notes.

In order to facilitate the offering of the Notes the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the Notes.

Until the distribution of the Notes is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Notes. As an exception to these rules, the
Underwriters are permitted to engage in certain transactions that stabilize the
price of the Notes. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Notes. If the
Underwriters create a short position in the Notes in connection with the
offering, i.e., if they sell more Notes than are set forth on the cover page of
this Prospectus, the Underwriters may reduce that short position by purchasing
Notes in the open market. In general, purchases of a security for the purpose
of stabilization or to reduce a short position could cause the price of the
security to be higher than it might be in the absence of such purchases.

Neither the Partnership nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Notes. In
addition, neither the Partnership nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.

The Partnership has agreed to indemnify the Underwriters against certain
liabilities (including reimbursements to the Underwriters for certain fees and
expenses of their counsel), including civil liabilities under the Securities
Act of 1933, as amended, or to contribute to payments the Underwriters may be
required to make in respect of such liabilities. In the ordinary course of
their respective businesses, the Underwriters or their affiliates have
performed, and may in the future perform, investment banking services or other
financial services for Duke and its affiliated companies.

<PAGE> 41
LEGAL MATTERS

The validity of the Notes will be passed upon for the Partnership by
Fulbright & Jaworski L.L.P., Houston, Texas. Certain legal matters will be
passed upon for the Underwriters by Andrews & Kurth L.L.P., Houston, Texas.

EXPERTS

The consolidated financial statements of TEPPCO Partners, L.P. as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, and the consolidated balance sheet of Texas Eastern
Products Pipeline Company as of December 31, 1996, incorporated by reference
herein and elsewhere in the registration statement, have been incorporated by
reference herein and in the registration statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.

<PAGE> 42
================================================================================

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE PARTNERSHIP SINCE THE DATE
HEREOF, OR THAT INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

<TABLE>
<CAPTION>
TABLE OF CONTENTS

PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain
Information by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
System Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Management's Discussion and Analysis
of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Business and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Description of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>

================================================================================

$390,000,000

[logo]

TE PRODUCTS PIPELINE
COMPANY, LIMITED
PARTNERSHIP

$150,000,000 % Senior Notes Due 2008
$240,000,000 % Senior Notes Due 2028

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

PROSPECTUS

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

Merrill Lynch & Co.
Goldman, Sachs & Co.

January ,1998

================================================================================
<PAGE> 43
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following sets forth the estimated expenses and costs (other than
underwriting discounts and commissions) expected to be incurred in connection
with the issuance and distribution of the securities registered hereby:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee . . . . . . . . . . . . . . . . $ 118,182
Printing and engraving costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000
Registrar and trustee fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,818
---------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 400,000
===============
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Each partnership agreement provides that the Parent Partnership or the
Partnership, as the case may be, will indemnify (to the fullest extent
permitted by applicable law) certain persons (each, an "Indemnitee") from and
against any and all losses, claims, damage, liabilities (joint or several),
expenses (including, without limitation, legal fees and expenses), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
Indemnitee in connection with any claim, demand, action, suit or proceeding to
which the Indemnitee is or was an actual or threatened party and which relates
to the partnership agreement of the Parent Partnership or the Partnership or
the property, business, affairs or management of the Parent Partnership or the
Partnership. This indemnity is available only if the Indemnitee acted in good
faith, in a manner which such Indemnitee believed to be in or not opposed to
the best interests of the Partnership and, with respect to any criminal
proceeding, had no reasonable cause to believe its conduct was unlawful.
Indemnitees include the General Partner, any Departing Partner, any affiliate
of the General Partner or any Departing Partner, any person who is or was a
director, officer, employee or agent of the General Partner or any Departing
Partner or any affiliate of either, or any person who is or was serving at the
request of the General Partner, any Departing Partner, or any such affiliate as
a director, officer, partner, trustee, employee or agent of another person.
Expenses subject to indemnity will be paid by the applicable partnership to the
Indemnitee in advance, subject to receipt of an undertaking by or on behalf of
the Indemnitee to repay such amount if it is ultimately determined by a court
of competent jurisdiction that the Indemnitee is not entitled to
indemnification. The Parent Partnership will, to the extent commercially
reasonable, purchase and maintain insurance on behalf of the Indemnitees,
whether or not the applicable partnership would have the power to indemnify
such Indemnitees against liability under the applicable partnership agreement.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

**1.1 -- Form of Purchase Agreement.
4.1 -- Form of Agreement of Limited Partnership of the
Partnership (filed as Exhibit 10.1 to the Parent
Partnership's Registration Statement on Form S-3 (Reg.
No. 33-32203) and incorporated by reference herein).
4.2 -- Certificate of Limited Partnership of the Partnership
(filed as Exhibit 10.2 to the Parent Partnership's
Registration Statement on Form S-1 (Reg. No. 33-32203)
and incorporated by reference herein).

*4.3 -- Form of Indenture, dated as of ________, 1998, between
the Partnership and The Bank of New York, as Trustee.
*4.4 -- Form of Notes (included in Exhibit 4.3).

II-1

<PAGE> 44

**5.1 -- Opinion of Fulbright & Jaworski L.L.P.

*12.1 -- Computation of Ratio of Earnings to Fixed Charges.

*23.1 -- Consent of Independent Accountants.

*23.2 -- Consent of Counsel (the consent of Fulbright &
Jaworski L.L.P. to the use of their opinion as an
exhibit to the Registration Statement and the reference
to their firm in this Registration Statement is
contained in their opinion filed as Exhibit 5.1 hereto).
24.1 -- Powers of Attorney (included on page II-5 of this
Registration Statement as originally filed).
*25.1 -- Form T-1 Statement of Eligibility of the Trustee.
_________
* Previously filed
** Filed herewith.

(b) Financial Statement Schedules

Not applicable.

ITEM 17. UNDERTAKINGS

I. The undersigned registrant hereby undertakes:

A. To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement.

1. To include any prospectus required by Section
10(a)(3) of the Securities Act;

2. To reflect in the Prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
and

3. To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in this Registration Statement;

provided, however, that paragraphs I.A.1 and I.A.2 above do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
B. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

C. For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared
effective.

D. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.

II-2

<PAGE> 45
II. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

III. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the provisions
described in Item 15 above, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.

II-3
<PAGE> 46
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 12th day of January, 1998.

TE PRODUCTS PIPELINE COMPANY, LIMITED
PARTNERSHIP, by Texas Eastern Products
Pipeline Company, as General Partner

By: WILLIAM L. THACKER
William L. Thacker
Chairman of the Board, President,
Chief Executive Officer and Director

II-4
<PAGE> 47

<TABLE>
<CAPTION>
Position with the
Signature General Partner Date
------------------------------------------------- --------------------------- ----------------------
<S> <C> <C>
WILLIAM L. THACKER Chairman of the Board, January 12, 1998
William L. Thacker President and Director
(Chief Executive Officer)

CHARLES H. LEONARD Senior Vice President, January 12, 1998
Charles H. Leonard Chief Financial Officer and
Treasurer
(Principal Financial and
Accounting Officer)

JAMES T. HACKETT* Director January 12, 1998
James T. Hackett

PAUL M. ANDERSON* Vice Chairman of the Board January 12, 1998
Paul M. Anderson and Director

CARL D. CLAY* Director January 12, 1998
Carl D. Clay

DERRILL CODY* Director January 12, 1998
Derrill Cody

JOHN P. DESBARRES* Director January 12, 1998
John P. DesBarres

Director January 12, 1998
Ruth G. Shaw

Director January 12, 1998
Milton Carroll

JIM W. MOGG* Director January 12, 1998
Jim W. Mogg

By: CHARLES H. LEONARD
Charles H. Leonard,
its attorney-in-fact
</TABLE>

II-5
<PAGE> 48
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibits
--------
<S> <C>
**1.1 -- Form of Purchase Agreement.
4.1 -- Form of Agreement of Limited Partnership of the
Partnership (filed as Exhibit 10.1 to the Parent
Partnership's Registration Statement on Form S-3 (Reg.
No. 33-32203) and incorporated by reference herein).
4.2 -- Certificate of Limited Partnership of the Partnership
(filed as Exhibit 10.2 to the Parent Partnership's
Registration Statement on Form S-1 (Reg. No. 33-32203)
and incorporated by reference herein).
*4.3 -- Form of Indenture, dated as of ________, 1998, between
the Partnership and The Bank of New York, as Trustee.
*4.4 -- Form of Notes (included in Exhibit 4.3).
**5.1 -- Opinion of Fulbright & Jaworski L.L.P.
*12.1 -- Computation of Ratio of Earnings to Fixed Charges.
*23.1 -- Consent of Independent Accountants.
*23.2 -- Consent of Counsel (the consent of Fulbright &
Jaworski L.L.P. to the use of their opinion as an
exhibit to the Registration Statement and the reference
to their firm in this Registration Statement is
contained in their opinion filed as Exhibit 5.1 hereto).
24.1 -- Powers of Attorney (included on page II-5 of this
Registration Statement as originally filed).
*25.1 -- Form T-1 Statement of Eligibility of the Trustee.
</TABLE>

_________
* Previously filed
** Filed herewith.

<PAGE> 1
EXHIBIT 1.1

Draft dated January 12, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

(a Delaware limited partnership)

$150,000,000 % Senior Notes due 2008
$240,000,000 % Senior Notes due 2028

PURCHASE AGREEMENT

Dated: January __, 1998

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

<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
------------------------------
(a) Representations and Warranties by the Partnership, the Parent
Partnership and the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(i) Compliance with Registration Requirements . . . . . . . . . . . . . . . . . . . . . . 3
-----------------------------------------
(ii) Incorporated Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
----------------------
(iii) Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-----------------------
(iv) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
--------------------
(v) No Material Adverse Change in Business . . . . . . . . . . . . . . . . . . . . . . . 5
--------------------------------------
(vi) Formation and Good Standing of the Partnership . . . . . . . . . . . . . . . . . . . 5
----------------------------------------------
(vii) Good Standing of the Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
----------------------------
(viii) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
------------
(ix) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------
(x) Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
---------------------
(xi) Capitalization of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . 6
-------------------------------------
(xii) Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------------------
(xiii) Authorization of the Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
------------------------------
(xiv) Authorization of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-------------------------------
(xv) Description of the Notes and the Indenture . . . . . . . . . . . . . . . . . . . . . 7
-----------------------------------------------
(xvi) Absence of Defaults and Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 7
---------------------------------
(xvii) Absence of Labor Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------------------
(xviii) Absence of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
----------------------
(xix) Accuracy of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
--------------------
(xx) Possession of Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 9
-----------------------------------
(xxi) Absence of Further Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-------------------------------
(xxii) Possession of Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . 9
----------------------------------
(xxiii) Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-----------------
(xxiv) Compliance with Cuba Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------------------
(xxv) Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
----------------------
(xxvi) Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . 10
----------------------------------
(xxvii) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------------
(xxviii) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---------
(xxix) Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------------------------
(xxx) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
----------
(b) Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

SECTION 2. Sale and Delivery to Underwriters; Closing . . . . . . . . . . . . . . . . . . . . . . . . 12
------------------------------------------
(a) Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(c) Denominations; Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>

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<PAGE> 3

<TABLE>
<S> <C>
SECTION 3. Covenants of the Partnership, the Parent Partnership and the
-------------------------------------------------------------
General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
---------------
(a) Compliance with Securities Regulations and Commission Requests . . . . . . . . . . . . . . 13
(b) Filing of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Delivery of Registration Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(d) Delivery of Prospectuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(e) Continued Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . 14
(f) Blue Sky Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(g) Rule 158 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(h) Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(j) Restriction on Sale of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(k) Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

SECTION 4. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-------------------
(a) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

SECTION 5. Conditions of Underwriters' Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 16
---------------------------------------
(a) Effectiveness of Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) Opinion of Counsel for Partnership, the Parent Partnership and the
General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(c) Opinion of Counsel for Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(d) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(e) Accountant's Comfort Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(f) Bring-down Comfort Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(g) Maintenance of Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(h) Approval of Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(i) Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(j) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

SECTION 6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
---------------
(a) Indemnification of Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Indemnification of the Partnership, the Parent Partnership, the General Partner, Directors and
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) Actions against Parties; Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Settlement without Consent if Failure to Reimburse . . . . . . . . . . . . . . . . . . . . 20

SECTION 7. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
------------

SECTION 8. Representations, Warranties and Agreements to Survive Delivery . . . . . . . . . . . . . . 22
--------------------------------------------------------------

</TABLE>

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<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 9. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
------------------------
(a) Termination; General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

SECTION 10. Default By One of the Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
----------------------------------

SECTION 11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-------

SECTION 12. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
-------

SECTION 13. GOVERNING LAW AND TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
----------------------

SECTION 14. Effect of Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
------------------

</TABLE>

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<PAGE> 5

<TABLE>
<S> <C> <C>
SCHEDULE A-1 List of Underwriters of 2008 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
----------------------------------

SCHEDULE A-2 List of Underwriters of 2028 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
----------------------------------

SCHEDULE B-1 Pricing Information for 2008 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
----------------------------------

SCHEDULE B-2 Pricing Information for 2028 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
----------------------------------

Exhibit A FORM OF OPINION OF PARTNERSHIP'S COUNSEL TO
BE DELIVERED PURSUANT TO SECTION 5(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

</TABLE>

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<PAGE> 6
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

(a Delaware limited partnership)

$390,000,000

$150,000,000 % Senior Notes due 2008
$240,000,000 % Senior Notes due 2028

PURCHASE AGREEMENT

January __, 1998

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated

GOLDMAN SACHS & CO.

c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

TE Products Pipeline Company, Limited Partnership, a Delaware limited
partnership (the "Partnership"), confirms its agreement with Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
Goldman, Sachs & Co. (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), with respect to the issue and sale by the Partnership and the purchase
by the Underwriters, acting severally and not jointly, of (a) $150,000,000
aggregate principal amount of the Partnership's % Senior Notes due 2008
(the "2008 Notes") in the principal amounts set forth in Schedule A-1 hereof and
(b) $240,000,000 aggregate principal amount of the Partnership's % Senior
Notes due 2028 (the "2028 Notes) in the principal amounts set forth in Schedule
A-2 hereof (collectively, the "Notes"). The Notes are to be issued pursuant to
an indenture dated as of January 27, 1998 (the "Indenture") between the
Partnership and The Bank of New York, as trustee

<PAGE> 7

(the "Trustee") which establishes the form and terms of the Notes pursuant to
Section 201 of the Indenture.

The Partnership understands that the Underwriters propose to make a
public offering of the Notes as soon as the Underwriters deem advisable
after this Agreement has been executed and delivered and the Indenture has been
qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act").

The Partnership is owned 98.9899% by its sole limited partner, TEPPCO
Partners, L.P., a Delaware limited partnership (the "Parent Partnership"), and
1.0101% by its sole general partner, Texas Eastern Products Pipeline
Company, a Delaware corporation (the "General Partner").

The Partnership has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (No. 333-38473) covering
the registration of the Notes under the Securities Act of 1933, as amended
(the "1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Partnership will
either (i) prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the
1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations or (ii) if the Partnership has elected to
rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a
term sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and
Rule 424(b). The information included in such prospectus or in such Term Sheet,
as the case may be, that was omitted from such registration statement at the
time it became effective but that is deemed to be part of such registration
statement at the time it became effective (a) pursuant to paragraph (b) of Rule
430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d)
of Rule 434 is referred to as "Rule 434 Information." Each prospectus used
before such registration statement became effective, and any prospectus that
omitted, as applicable, the Rule 430A Information or the Rule 434 Information,
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, is herein called a "preliminary prospectus." Such
registration statement, including the exhibits thereto, schedules thereto, if
any, and the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the 1933 Act, at the time it became effective and including the
Rule 430A Information and the Rule 434 Information, as applicable, is herein
called the "Registration Statement." Any registration statement filed pursuant
to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule
462(b) Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The final
prospectus, including the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act, in the form first furnished to the
Underwriters for use in connection with the offering of the Notes is herein
called the "Prospectus." If Rule 434 is relied on, the term "Prospectus" shall
refer to the preliminary prospectus dated January 13, 1998 together with the
Term Sheet and all references in this Agreement to the date of the Prospectus
shall mean the date of the Term Sheet. For purposes of this Agreement, all
references to the Registration Statement, any preliminary prospectus, the
Prospectus or any Term Sheet or any amendment or supplement to any

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<PAGE> 8
of the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR").

All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which
is incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be.

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Partnership,
the Parent Partnership and the General Partner. The Partnership, the Parent
Partnership and the General Partner, jointly and severally, represent and
warrant to each Underwriter as of the date hereof, as of the Closing Time
referred to in Section 2(b) hereof, and agree with each Underwriter, as
follows:

(i) Compliance with Registration Requirements. The
Partnership meets the requirements for use of Form S-3 under the 1933
Act. The Registration Statement has become effective under the 1933
Act and no stop order suspending the effectiveness of the Registration
Statement has been issued under the 1933 Act and no proceedings for
that purpose have been instituted or are pending or, to the knowledge
of the Partnership and the General Partner, are contemplated by the
Commission, and any request on the part of the Commission for
additional information has been complied with.

At the respective times the Registration Statement and any
post-effective amendments thereto became effective and at the Closing
Time, the Registration Statement and any amendments and supplements
thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and the 1939
Act and the rules and regulations of the Commission under the 1939 Act
(the "1939 Act Regulations"), and did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading. Neither the Prospectus nor any amendments or
supplements thereto, at the time the Prospectus or any such amendment
or supplement was issued and at the Closing Time, included or will
include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. If Rule 434 is used, the

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<PAGE> 9
Partnership will comply with the requirements of Rule 434. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Partnership in writing by any Underwriter through
Merrill Lynch expressly for use in the Registration Statement or
Prospectus.

Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.

(ii) Incorporated Documents. The documents incorporated
or deemed to be incorporated by reference in the Registration
Statement and the Prospectus, when they became effective or at the
time they were or hereafter are filed with the Commission, complied
and will comply in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations or the 1934 Act and the rules
and regulations of the Commission thereunder (the "1934 Act
Regulations"), as applicable, and, when read together with the other
information in the Prospectus, at the time the Registration Statement
became effective, at the time the Prospectus was issued and at the
Closing Time, did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.

(iii) Independent Accountants. The accountants who
certified the financial statements and supporting schedules of the
Parent Partnership included in the Registration Statement and the
Prospectus (or any amendment or supplement thereto) are independent
public accountants of the Parent Partnership and the Partnership as
required by the 1933 Act and the 1933 Act Regulations.

(iv) Financial Statements. The financial statements
included in the Registration Statement and the Prospectus, together
with the related schedules and notes, present fairly the financial
position of the Parent Partnership and its consolidated subsidiaries
at the dates indicated and the statement of operations and cash flows
of the Parent Partnership and consolidated subsidiaries for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules, if any, included in the Registration Statement
present fairly in accordance with GAAP the information required to be
stated therein. The selected financial data and the summary financial
information included in the Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with that
of the audited financial statements included in the Registration
Statement. Separate financial statements of the Partnership are

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<PAGE> 10
not required to be included in the Registration Statement either (A)
under applicable rules or policies of the Commission or (B) in order
to make the financial information included in the Registration
Statement, in light of the circumstances in which such information is
disclosed, not misleading.

(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Partnership, the Parent Partnership or the General
Partner, whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) there have been no transactions
entered into by the Partnership, the Parent Partnership or the General
Partner, other than those in the ordinary course of business, which
are material with respect to the Partnership, the Parent Partnership
or the General Partner and (C) there has been no material adverse
change in the capitalization or long-term debt of the Partnership, the
Parent Partnership or the General Partner or any material adverse
change, or any development which the Partnership, the Parent
Partnership or the General Partner have reasonable cause to believe
will involve a prospective material adverse change, in or affecting
the Partnership, the Parent Partnership or General Partner otherwise
than as set forth or contemplated in the Prospectus.

(vi) Formation and Good Standing of the Partnership. The
Partnership has been duly formed and is validly existing as a limited
partnership under the Delaware Revised Uniform Limited Partnership Act
(the "Delaware Act") and has full partnership power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its
obligations under this Agreement; and the Partnership is duly
qualified or registered as a foreign limited partnership to transact
business in each other jurisdiction in which such qualification or
registration is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to register (i) would not result in a
Material Adverse Effect, or (ii) would not subject the limited
partners of the Parent Partnership to any material liability or
disability.

The Partnership Agreement has been duly authorized,
executed and delivered by the General Partner and the Parent
Partnership and is a valid and legally binding agreement of the
General Partner and the Parent Partnership, enforceable against the
General Partner and the Parent Partnership in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.

(vii) Good Standing of the General Partner. The General
Partner has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware
and has full corporate power and authority to own, lease and operate
its

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<PAGE> 11
properties and to conduct its business and to act as general partner
of the Partnership, in each case in all material respects, as
described in the Registration Statement and the Prospectus and to
enter into and perform its obligations under this Agreement; and the
General Partner is duly qualified or registered as a foreign
corporation to transact business in each other jurisdiction in which
such qualification or registration is required, whether by reason of
the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to register (i) would not
result in a Material Adverse Effect, or (ii) would not subject the
limited partners of the Partnership to any material liability or
disability.

(viii) Subsidiaries. Neither the Partnership nor the Parent
Partnership has any subsidiaries which, taken as a whole, would be
deemed to be a significant subsidiary (as such term is defined in
Section 1-02 of Regulation S-X).

(ix) Capitalization. The partners' capital of the Parent
Partnership as of September 30, 1997 is as set forth in the Prospectus
in the column entitled "Actual" under the heading "Capitalization".
The adjustments to partners' capital of the Parent Partnership as of
September 30, 1997, as set forth in the Prospectus under the column
entitled "As Adjusted" under the heading "Capitalization," represents
a reasonable estimate by the General Partner (based upon certain
assumptions as to the prevailing rates of interest) of the pro forma
effects on partners' capital of the offer and sale of the Notes
and the application of the estimated net proceeds from such offer and
sale in the manner set forth in the Prospectus under the heading "Use
of Proceeds." Partners' capital of the Partnership is not less than
partners' capital of the Parent Partnership. Neither the Parent
Partnership nor the Partnership have any long term debt outstanding
other than approximately $327 million of aggregate principal amount of
First Mortgage Notes of the Partnership, which will be repaid in full
from the net proceeds from the offer and sale of the Notes.

(x) Partnership Interests. The General Partner is the
sole general partner of the Partnership with a general partner
interest in the Partnership of 1.0101 % pursuant to the Partnership
Agreement; such general partner interest is duly authorized by the
Agreement of Limited Partnership of the Partnership, as amended or
restated at or prior to Closing Time), and is validly issued to the
General Partner and is fully paid (to the extent required at such
time); and at Closing Time the General Partner will own such general
partner interest free and clear of all liens, encumbrances, charges or
claims. The Parent Partnership is the sole limited partner of the
Partnership with a limited partner interest in the Partnership of
98.9899% interest in the Partnership.

(xi) Capitalization of the General Partner. All of the
issued shares of capital stock of the General Partner have been duly
authorized and validly issued and are fully paid and non-assessable,
and all of the issued shares of capital stock of the General Partner
are registered on its books in the name of PanEnergy Corp., free and
clear of all liens, encumbrances, equities or claims, except as set
forth in the Prospectus.

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<PAGE> 12
(xii) Authorization of Agreement. This Agreement has been
duly authorized, executed and delivered by the Partnership, the Parent
Partnership and the General Partner.

(xiii) Authorization of the Indenture. The Indenture has
been duly authorized by the Partnership and duly qualified under the
1939 Act and, when duly executed and delivered by the Partnership and
the Trustee, will constitute a valid and binding agreement of the
Partnership, enforceable against the Partnership in accordance with
its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).

(xiv) Authorization of the Notes. The Notes have
been duly authorized and, at the Closing Time, will have been duly
executed by the Partnership and, when authenticated, issued and
delivered in the manner provided for in the Indenture and delivered
against payment of the purchase price therefor as provided in this
Agreement, will constitute valid and binding obligations of the
Partnership, enforceable against the Partnership in accordance with
their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), and will be in the form contemplated
by, and entitled to the benefits of, the Indenture.

(xv) Description of the Notes and the Indenture. The
Notes and the Indenture will conform in all material respects to
the respective statements relating thereto contained in the Prospectus
and will be in substantially the respective forms filed or
incorporated by reference, as the case may be, as exhibits to the
Registration Statement.

(xvi) Absence of Defaults and Conflicts. Neither the
Partnership, the Parent Partnership nor the General Partner is in
violation of its partnership agreement, certificate or articles of
incorporation or by-laws, or other organizational documents, or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Partnership, the Parent
Partnership or the General Partner is a party or by which it or any of
them may be bound, or to which any of the property or assets of the
Partnership, the Parent Partnership or the General Partner is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement, the Indenture and the
Notes and the consummation of the transactions contemplated
herein and in the Registration Statement (including the issuance and
sale of the Notes and the use of the proceeds from the sale of
the Notes as described in the Prospectus

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<PAGE> 13

under the caption "Use of Proceeds") and compliance by each of the
Partnership, the Parent Partnership and the General Partner with its
obligations hereunder and under the Indenture and the Notes have
been duly authorized by all necessary partnership or corporate action
and do not and will not, whether with or without the giving of notice
or passage of time or both, conflict with or constitute a breach of,
or default or Repayment Event (as defined below) under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Partnership, the Parent Partnership or the
General Partner pursuant to, the Agreements and Instruments (except
for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor
will such action result in any violation of the provisions of the
charter or partnership agreement of the Partnership, the Parent
Partnership or the General Partner or any applicable law, statute,
rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Partnership, the Parent Partnership or the
General Partner or any of their assets, properties or operations. As
used herein, a "Repayment Event" means any event or condition which
gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right
to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Partnership, the Parent Partnership or the
General Partner.

(xvii) Absence of Labor Dispute. Neither the Parent
Partnership nor the Partnership has employees. No labor dispute with
the employees of the General Partner or any subsidiaries exists or, to
the knowledge of the Partnership, is imminent, and the General Partner
is not aware of any existing or imminent labor disturbance by the
employees of any of its or any affiliate's principal suppliers,
manufacturers, customers or contractors, which, in either case, may
reasonably be expected to result in a Material Adverse Effect.

(xviii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Partnership, the Parent Partnership or the
General Partner, threatened, against or affecting the Partnership, the
Parent Partnership or the General Partner, which is required to be
disclosed in the Registration Statement (other than as disclosed
therein), or which are reasonably expected by the General Partner to
result in a Material Adverse Effect, or which are reasonably expected
by the General Partner to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the performance by the Partnership,
the Parent Partnership or the General Partner of the obligations
hereunder; the aggregate of all pending legal or governmental
proceedings to which the Partnership, the Parent Partnership or the
General Partner is a party or of which any of their respective
property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation
incidental to the business, are not reasonably expected by the General
Partner to result in a Material Adverse Effect.

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<PAGE> 14
(xix) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement, the Prospectus or the documents incorporated by reference
therein or to be filed as exhibits thereto which have not been so
described and filed as required.

(xx) Possession of Intellectual Property. The Partnership
and the General Partner own or possess, or can acquire on reasonable
terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them, and neither
the Partnership nor the General Partner has received any notice or is
otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any
facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Partnership or
the General Partner therein, and which infringement or conflict (if
the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, singly or in the aggregate, would result in
a Material Adverse Effect.

(xxi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the
Partnership, the Parent Partnership or the General Partner of its
obligations hereunder, in connection with the offering, issuance or
sale of the Notes hereunder or the consummation of the
transactions contemplated by this Agreement or for the due execution,
delivery or performance of the Indenture by the Partnership, except
such as have been already obtained or as may be required under the
1933 Act or the 1933 Act Regulations or state securities laws and
except for the qualification of the Indenture under the 1939 Act.

(xxii) Possession of Licenses and Permits. The Partnership
and the General Partner possess such permits, licenses, approvals,
consents and other authorizations (collectively, "Governmental
Licenses") issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by them; the Partnership and the General Partner are in
compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or
in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except
when the invalidity of such Governmental Licenses or the failure of
such Governmental Licenses to be in full force and effect would not
(i) have a Material Adverse Effect or (ii) subject the limited
partners of the Parent Partnership or the Partnership to any material
liability or disability; and neither the Partnership nor the General
Partner has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an

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<PAGE> 15
unfavorable decision, ruling or finding, would (i) result in a
Material Adverse Effect or (ii) subject the limited partners of the
Partnership to any material liability or disability.

(xxiii) Title to Property. The Partnership and the General
Partner have satisfactory and marketable title to all real property
owned by the Partnership and the General Partner, respectively, and
satisfactory title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except
such as (a) are described in the Prospectus or (b) do not, singly or
in the aggregate, materially affect the value of such property and do
not interfere with the use made and proposed to be made of such
property by the Partnership or the General Partner; and all of the
leases and subleases material to the business of the Partnership and
the General Partner, and under which the Partnership or the General
Partner holds properties described in the Prospectus, are in full
force and effect, and neither the Partnership nor the General Partner
has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Partnership or the
General Partner under any of the leases or subleases mentioned above,
or affecting or questioning the rights of the Partnership or the
General Partner to the continued possession of the leased or subleased
premises under any such lease or sublease.

(xxiv) Compliance with Cuba Act. The Partnership, the
Parent Partnership and the General Partner have has complied with, and
are and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.

(xxv) Investment Company Act. Neither the Partnership, the
Parent Partnership nor the General Partner are, and upon the issuance
and sale of the Notes as herein contemplated and the application
of the net proceeds therefrom as described in the Prospectus will not
be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").

(xxvi) Public Utility Holding Company Act. Neither the
Partnership, the Parent Partnership nor the General Partner is a
"holding company" as such term is defined in the Public Utility
Holding Company Act of 1935, as amended ("PUHCA"); neither the
Partnership, the Parent Partnership nor the General Partner nor the
issue and sale of the Notes by the Partnership is subject to
regulation under PUHCA; and neither the Partnership, the Parent
Partnership nor the General Partner is a "public utility" as such
term is defined in the Federal Power Act, as amended.

(xxvii) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the
Partnership nor the General Partner is in violation of any federal,
state,

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<PAGE> 16

local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws
and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials (collectively, "Environmental Laws"), (B) the
Partnership and the General Partner have all permits, authorizations
or approvals required under any applicable Environmental Laws and are
each in compliance with their requirements, and as to any such permit,
authorization or approval that has expired or is about to expire, the
Partnership and the General Partner have timely and properly applied
for renewal of the same, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
the Partnership or the General Partner, and (D) there are no events or
circumstances that might reasonably be expected to form the basis of
an order for clean-up or remediation, or an action, suit or proceeding
by any private party or governmental body or agency, against or
affecting the Partnership or the General Partner relating to Hazardous
Materials or any Environmental Laws; except, in each case, where such
matter would not result in a Material Adverse Effect.

(xxviii) Insurance. Each of the Partnership and the General
Partner maintain insurance coverage covering their properties,
operations, personnel and businesses. In the General Partner's
reasonable judgement, such insurance insures against such losses and
risks as are adequate to protect the Partnership and the General
Partner. Neither the Partnership nor the General Partner has received
notice from any insurer or agent of such insurer that substantial
capital improvements or other expenditures will have to be made in
order to continue such insurance; all such insurance is outstanding
and duly in force on the date hereof and will be outstanding and duly
in force at Closing Time.

(xxix) Tax Returns and Payments. The Partnership and the
General Partner have filed all tax returns required by law to be filed
by them and have paid all taxes, assessments and other governmental
charges levied upon them or any of their properties, assets, income or
franchises which are due and payable, other than (i) those which are
not past due or are presently being contested in good faith by
appropriate proceedings diligently conducted for which such reserves or
other appropriate provisions, if any, as shall be required by generally
accepted accounting principles have been made and (ii) with respect to
state and local taxes, such as will not result in a Material Adverse
Effect.

(xxx) Disclosure. Neither this Agreement, the Registration
Statement, nor any other document, certificate or instrument delivered
to the Underwriters by or on behalf of the Partnership in connection
with the transactions contemplated by this Agreement, contains

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<PAGE> 17
any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not
misleading. There is no fact known to the Partnership or the General
Partner which would result in a Material Adverse Effect or in the
future may (so far as the Partnership can now foresee) result in a
Material Adverse Effect which has not been set forth or referred to in
this Agreement or the Registration Statement.

(b) Officer's Certificates. Any certificate signed on
behalf of the Partnership by the President or Vice President of the General
Partner and on behalf of the General Partner by a President or Vice President
thereof delivered to the Underwriters or to counsel for the Underwriters
shall be deemed a representation and warranty by the Partnership, the Parent
Partnership and the General Partner to each Underwriter as to the matters
covered thereby.

SECTION 2. Sale and Delivery to Underwriters; Closing.

(a) Notes. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Partnership agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Partnership, at the prices set forth in Schedule B-1 and Schedule B-2,
the aggregate principal amount of respective Notes set forth in Schedule
A-1 and Schedule A-2 opposite the name of such Underwriter, plus any additional
principal amount of Notes which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof.

(b) Payment. Payment of the purchase price for, and
delivery of certificates for, the Notes shall be made at the offices of
Andrews & Kurth L.L.P., 600 Travis, Suite 4200, Houston, Texas 77002-3090, or
at such other place as shall be agreed upon by the Underwriters and the
Partnership, at 9:00 A.M. (Eastern time) on the third business day after the
date hereof (unless postponed in accordance with the provisions of Section 10)
(such time and date of payment and delivery being herein called "Closing
Time").

Payment shall be made to the Partnership by wire transfer of
immediately available funds to a bank account designated by the Partnership,
against delivery to the Underwriters for the respective accounts of the
Underwriters of certificates for the Notes to be purchased by them. It is
understood that each Underwriter has authorized the Underwriters, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Notes which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Notes to be
purchased by any Underwriter whose funds have not been received by the Closing
Time, but such payment shall not relieve such Underwriter from its obligations
hereunder.

(c) Denominations; Registration. Certificates for the
Notes shall be in global form and in such denominations ($1,000 or
integral multiples thereof) and registered in such names as the Underwriters
may request in writing at least one full business day before the Closing Time.

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<PAGE> 18

The Notes, which may be in temporary form, will be made available for
examination and packaging by the Underwriters in The City of New York not
later than 10:00 A.M. (Eastern time) on the business day prior to the Closing
Time or as early as practicable prior to the Closing Time.

SECTION 3. Covenants of the Partnership, the Parent Partnership
and the General Partner. The Partnership, the Parent Partnership and the
General Partner covenant with each Underwriter as follows:

(a) Compliance with Notes Regulations and Commission
Requests. Subject to Section 3(b), the Partnership will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify the
Underwriters immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become effective,
or any supplement to the Prospectus or any amended Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectus or for additional information,
and (iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Notes for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Partnership will promptly effect the filings necessary pursuant to Rule 424(b)
and will take such steps as it deems necessary to ascertain promptly whether
the form of prospectus transmitted for filing under Rule 424(b) was received
for filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Partnership will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.

(b) Filing of Amendments. The Partnership will give the
Underwriters notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term Sheet
or any amendment, supplement or revision to either the prospectus included in
the Registration Statement at the time it became effective or to the
Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will
furnish the Underwriters with copies of any such documents a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Underwriters or counsel
for the Underwriters shall object.

(c) Delivery of Registration Statements. The Partnership
has furnished or will deliver to the Underwriters and counsel for the
Underwriters, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents incorporated or
deemed to be incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Underwriters, without charge, a conformed copy of the Registration Statement
as originally filed and of each amendment thereto (without exhibits) for each
of the Underwriters. The copies of the Registration Statement and each
amendment thereto furnished to

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<PAGE> 19
the Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

(d) Delivery of Prospectuses. The Partnership has
delivered to each Underwriter, without charge, as many copies of each
preliminary prospectus as such Underwriter reasonably requested, and the
Partnership hereby consents to the use of such copies for purposes permitted by
the 1933 Act. The Partnership will furnish to each Underwriter, without
charge, during the period when the Prospectus is required to be delivered under
the 1933 Act or the 1934 Act, such number of copies of the Prospectus (as
amended or supplemented) as such Underwriter may reasonably request. The
Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.

(e) Continued Compliance with Securities Laws. The
Partnership, the Parent Partnership and General Partner will comply with the
1933 Act and the 1933 Act Regulations, the 1934 Act and the 1934 Act
Regulations and the 1939 Act and the 1939 Act Regulations so as to permit the
completion of the distribution of the Notes as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is required
by the 1933 Act to be delivered in connection with sales of the Notes, any
event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel for the Underwriters or for the
Partnership, the Parent Partnership or General Partner, to amend the
Registration Statement or amend or supplement the Prospectus in order that the
Prospectus will not include any untrue statements of a material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Partnership will promptly prepare and file
with the Commission, subject to Section 3(b), such amendment or supplement as
may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements, and the
Partnership will furnish to the Underwriters such number of copies of such
amendment or supplement as the Underwriters may reasonably request.

(f) Blue Sky Qualifications. The Partnership and the
General Partner will use their best efforts, in cooperation with the
Underwriters, to qualify the Notes for offering and sale under the
applicable securities laws of such states and other jurisdictions as the
Underwriters may designate and to maintain such qualifications in effect for
a period of not less than one year from the later of the effective date of the
Registration Statement and any Rule 462(b) Registration Statement; provided,
however, that the Partnership or the General Partner shall not be obligated to
file any general consent to service of process or to qualify as a foreign
limited partnership or a foreign corporation, respectively, or as a dealer in
Notes in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. In each jurisdiction in which the Notes have
been so qualified, the Partnership and General Partner will file such
statements and reports as may be required by the laws

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<PAGE> 20

of such jurisdiction to continue such qualification in effect for a period of
not less than one year from the effective date of the Registration Statement
and any Rule 462(b) Registration Statement. The Partnership will also supply
the Underwriters with such information as is necessary for the determination of
the legality of the Notes for investment under the laws of such
jurisdictions as the Underwriters may request.

(g) Rule 158. The Partnership will timely file such
reports pursuant to the 1934 Act as are necessary in order to make generally
available to its security holders as soon as practicable an earnings statement
for the purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.

(h) Use of Proceeds. The Partnership will use the net
proceeds received by it from the sale of the Notes in the manner specified
in the Prospectus under "Use of Proceeds".

(i) Listing. The Partnership and the General Partner
will use their best efforts to effect the listing of the Notes on the New
York Stock Exchange upon notice of official issuance.

(j) Restriction on Sale of Notes. During the period
from the date of the Prospectus to the Closing Time, the Partnership and the
General Partner will not, without the prior written consent of Merrill Lynch,
directly or indirectly, issue, sell, offer or contract to sell, grant any option
for the sale of, or otherwise transfer or dispose of, any debt securities of the
Partnership.

(k) Reporting Requirements. The Parent Partnership and,
if applicable, the Partnership, during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, will file all
documents required to be filed with the Commission pursuant to the 1934 Act
within the time periods required by the 1934 Act and the 1934 Act Regulations.

SECTION 4. Payment of Expenses.

(a) Expenses. The Partnership will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration
Statement (including financial statements and exhibits) as originally filed and
of each amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters, the Indenture
and such other documents as may be required in connection with the offering,
purchase, sale, issuance or delivery of the Notes, (iii) the preparation,
issuance and delivery of the certificates for the Notes to the
Underwriters, (iv) the fees and disbursements of the Partnership's counsel,
accountants and other advisors, (v) the qualification of the Notes under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey or "covered security" memorandum and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectus and any
amendments or supplements thereto, (vii) the preparation, printing and delivery
to the

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<PAGE> 21

Underwriters of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of the Trustee, including the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Notes, (ix) any fees payable in connection with the rating of the
Notes, and (x) the fees and expenses incurred in connection with the
listing of the Notes on the New York Stock Exchange.

(b) Termination of Agreement. If this Agreement is
terminated by the Underwriters in accordance with the provisions of Section
5 or Section 9(a)(i) hereof, the Partnership shall reimburse the Underwriters
for all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.

SECTION 5. Conditions of Underwriters' Obligations. The
obligations of the several Underwriters hereunder are subject to the accuracy
of the representations and warranties of the Partnership, the Parent
Partnership and the General Partner contained in Section 1 hereof or in
certificates of any officer of the General Partner delivered pursuant to the
provisions hereof, to the performance by the Partnership, the Parent
Partnership and the General Partner of its covenants and other obligations
hereunder, and to the following further conditions:

(a) Effectiveness of Registration Statement. The
Registration Statement, including any Rule 462(b) Registration Statement, has
become effective and at Closing Time no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel to the Underwriters. A
prospectus containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) (or a post-effective amendment
providing such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Partnership has
elected to rely upon Rule 434, a Term Sheet shall have been filed with the
Commission in accordance with Rule 424(b).

(b) Opinion of Counsel for Partnership, the Parent
Partnership and the General Partner. At Closing Time, the Representatives
shall have received the favorable opinion, dated as of Closing Time, of
Fulbright & Jaworski L.L.P., counsel for the Partnership, the Parent
Partnership and the General Partner, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters to the effect set forth in Exhibit A
hereto and to such further effect as counsel to the Underwriters may reasonably
request.

(c) Opinion of Counsel for Underwriters. At Closing
Time, the Representatives shall have received the favorable opinion, dated as
of Closing Time, of Andrews & Kurth L.L.P., counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the other
Underwriters with respect to the matters set forth in clauses (i), (ii), (vi)
through (xii), inclusive, and the penultimate paragraph of Exhibit A hereto.
In giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of

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<PAGE> 22

New York and the federal law of the United States and the General Corporation
Law of the State of Delaware, upon the opinions of counsel satisfactory to the
Underwriters. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the General Partner and its subsidiaries and
certificates of public officials.

(d) Officers' Certificate. At Closing Time, there shall
not have been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Partnership and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received on behalf of the Partnership and the Parent
Partnership by the General Partner a certificate of the President or a Vice
President of the General Partner and of the chief financial or chief accounting
officer of the General Partner, dated as of Closing Time, to the effect that
(i) there has been no such material adverse change, (ii) the representations
and warranties in Section 1(a) hereof are true and correct with the same force
and effect as though expressly made at and as of Closing Time, (iii) the
Partnership, the Parent Partnership and the General Partner have complied with
all agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or are contemplated by the
Commission.

(e) Accountant's Comfort Letter. At the time of the
execution of this Agreement, the Underwriters shall have received from KPMG
Peat Marwick LLP a letter dated such date, in form and substance satisfactory
to the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus.

(f) Bring-down Comfort Letter. At Closing Time, the
Representatives shall have received from KPMG Peat Marwick LLP a letter, dated
as of Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (e) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to Closing Time.

(g) Maintenance of Rating. At Closing Time, the
Notes shall be rated at least Baa by Moody's Investor's Service Inc. and
BBB by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., and
the Partnership shall have delivered to the Underwriters a letter dated the
Closing Time, from each such rating agency, or other evidence satisfactory to
the Underwriters, confirming that the Notes have such ratings; and
since the date of this Agreement, there shall not have occurred a downgrading
in the rating assigned to the Notes or any of the Partnership's other
Notes by any "nationally recognized statistical rating agency", as

-17-
<PAGE> 23

that term is defined by the Commission for purposes of Rule 436(g)(2) under the
1933 Act, and no such organization shall have publicly announced that it has
under surveillance or review its rating of the Notes or any of the Partnership's
other securities.

(h) Approval of Listing. At Closing Time, the Notes shall
have been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.

(i) Additional Documents. At Closing Time, counsel for
the Underwriters shall have been furnished with such documents and opinions as
they may require for the purpose of enabling them to pass upon the issuance and
sale of the Notes as herein contemplated, or in order to evidence the accuracy
of any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Partnership in
connection with the issuance and sale of the Notes as herein contemplated shall
be satisfactory in form and substance to the Underwriters and counsel for the
Underwriters.

(j) Termination of Agreement. If any condition specified
in this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement may be terminated by the Underwriters by notice to
the Partnership at any time at or prior to Closing Time, and such termination
shall be without liability of any party to any other party except as provided
in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such
termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of Underwriters. The Partnership,
the Parent Partnership and the General Partner, jointly and severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:

(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the
Rule 430A Information and the Rule 434 Information, if applicable, or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened,

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<PAGE> 24
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(d) below) any such settlement is effected
with the written consent of the Partnership, the Parent Partnership
and the General Partner; and

(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Partnership,
the Parent Partnership or the General Partner by any Underwriter through
Merrill Lynch expressly for use in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto).

(b) Indemnification of the Partnership, the Parent
Partnership, the General Partner, Directors and Officers. Each Underwriter
severally agrees to indemnify and hold harmless the Partnership, the Parent
Partnership and the General Partner, and their respective directors, each of
the officers who signed the Registration Statement, and each person, if any,
who controls the Partnership, the Parent Partnership or the General Partner
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information furnished by such Underwriter through Merrill Lynch expressly for
use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).

(c) Actions against Parties; Notification. Each
indemnified party shall give notice as promptly as reasonably practicable to
each indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) above, counsel to the indemnified parties shall be
selected by Merrill Lynch, and, in the case of parties indemnified pursuant to
Section 6(b) above,

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<PAGE> 25
counsel to the indemnified parties shall be selected by the Partnership, the
Parent Partnership and the General Partner. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential
parties thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.

(d) Settlement without Consent if Failure to Reimburse.
If at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.

SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Partnership, the Parent Partnership and General Partner on the one hand and the
Underwriters on the other hand from the offering of the Notes pursuant to this
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Partnership, the Parent Partnership and the General Partner on the one hand
and of the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.

The relative benefits received by the Partnership, the Parent
Partnership and the General Partner on the one hand and the Underwriters on the
other hand in connection with the

-20-
<PAGE> 26

offering of the Notes pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Notes pursuant to this Agreement (before deducting expenses) received by the
Partnership, the Parent Partnership and the General Partner and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus, or, if Rule 434 is used, the corresponding location
on the Term Sheet, bear to the aggregate initial public offering price of the
Notes as set forth on such cover.

The relative fault of the Partnership, the Parent Partnership
and the General Partner on the one hand and the Underwriters on the other hand
shall be determined by reference to, among other things, whether any such
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Partnership, the Parent Partnership and the General Partner or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

The Partnership, the Parent Partnership, the General Partner
and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable
considerations referred to above in this Section 7. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 7 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.

Notwithstanding the provisions of this Section 7, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Notes underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of any such untrue
or alleged untrue statement or omission or alleged omission.

No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Underwriter, and each director of the Partnership, the Parent Partnership or
the General Partner, each officer of the Partnership, the Parent Partnership or
the General Partner who signed the Registration Statement, and each person, if
any, who controls the Partnership, the Parent Partnership or the General
Partner within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Partnership, the
Parent Partnership and the General Partner. The Underwriters' respective
obligations to

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<PAGE> 27

contribute pursuant to this Section 7 are several in proportion to the principal
amount of Notes set forth opposite their respective names in Schedule A-1 and
Schedule A-2 hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the General Partner submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any Underwriter or controlling
person, or by or on behalf of the Partnership, the Parent Partnership or General
Partner and shall survive delivery of the Notes to the Underwriters.

SECTION 9. Termination of Agreement.

(a) Termination; General. The Underwriters may terminate
this Agreement, by notice to the Partnership, at any time at or prior to Closing
Time (i) if there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the Prospectus,
any material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Partnership and the
Parent Partnership whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the financial markets
in the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Underwriters, impracticable to market
the Notes or to enforce contracts for the sale of the Notes, or (iii) if trading
in any securities of the Partnership has been suspended or materially limited by
the Commission or the New York Stock Exchange, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Notes Dealers, Inc. or any other governmental authority,
or (iv) if a banking moratorium has been declared by either Federal or New York
authorities.

(b) Liabilities. If this Agreement is terminated
pursuant to this Section, such termination shall be without liability of any
party to any other party except as provided in Section 4 hereof, and provided
further that Sections 1, 6, 7 and 8 shall survive such termination and remain
in full force and effect.

SECTION 10. Default By One of the Underwriters. If one
of the Underwriters shall fail at Closing Time to purchase the Notes which it or
they are obligated to purchase under this Agreement (the "Defaulted Notes"), the
non-defaulting Underwriter shall have the right, but not the obligation, within
24 hours thereafter, to make arrangements for the non-defaulting Underwriter, or
any other underwriters, to purchase all, but not less than all, of the Defaulted
Notes in such amounts as may be agreed upon and upon the terms herein set forth;
if,

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<PAGE> 28

however, the non-defaulting Underwriter shall not have completed such
arrangements within such 24-hour period, then this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.

No action pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.

In the event of any such default which does not result in a
termination of this Agreement, either the Underwriters or the Partnership
shall have the right to postpone the Closing Time for a period not exceeding
seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangement.

SECTION 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Underwriters, c/o Merrill Lynch & Co., at
North Tower, World Financial Center, New York, New York 10281-1201, attention of
Cara Londin, Vice President; and notices to the Partnership shall be directed to
it at 2929 Allen Parkway, P.O. Box 2521, Houston, Texas 77252-2521, attention of
General Counsel.

SECTION 12. Parties. This Agreement shall each inure to the
benefit of and be binding upon the Underwriters, the Partnership, the Parent
Partnership, the General Partner and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriters, the
Partnership, the Parent Partnership the General Partner and their respective
successors and the controlling persons and officers and directors referred to
in Sections 6 and 7 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Partnership, the Parent Partnership, the General Partner and
their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Notes from any
Underwriter shall be deemed to be a successor by reason merely of such
purchase.

SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 14. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.

If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Partnership a counterpart hereof,
whereupon this instrument, along with all

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<PAGE> 29
counterparts, will become a binding agreement between the Underwriters, the
Partnership, the Parent Partnership and the General Partner in accordance with
its terms.

Very truly yours,

TE PRODUCTS PIPELINE COMPANY,
LIMITED PARTNERSHIP

By: Texas Eastern Products Pipeline
Company, as General Partner

By:
--------------------------------
Title:
-----------------------------

TEPPCO PARTNERS, L.P.

By: Texas Eastern Products Pipeline
Company, as General Partner

By:
--------------------------------
Title:
-----------------------------

TEXAS EASTERN PRODUCTS PIPELINE COMPANY

By:
------------------------------------
Title:
---------------------------------

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<PAGE> 30
CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

GOLDMAN, SACHS & CO.

By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By
------------------------------
Authorized Signatory

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<PAGE> 31
SCHEDULE A-1

List of Underwriters of 2008 Notes

<TABLE>
<CAPTION>
Principal
Amount of
Name of Underwriter 2008 Notes
------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
--------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000,000
====================

</TABLE>

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<PAGE> 32
SCHEDULE A-2

List of Underwriters of 2028 Notes

<TABLE>
<CAPTION>
Principal
Amount of
Name of Underwriter 2028 Notes
------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $240,000,000
======================

</TABLE>

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<PAGE> 33
SCHEDULE B-1

Pricing Information for 2008 Notes

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

$150,000,000 Senior Notes due 2008

1. The initial public offering price of the 2008 Notes
shall be __% of the principal amount thereof, plus accrued interest, if any,
from the date of issuance.

2. The purchase price to be paid by the Underwriters for
the 2008 Notes shall be __% of the principal amount thereof.

3. The interest rate on the 2008 Notes shall be __%
per annum.

4. The 2008 Notes shall not be subject to mandatory or
optional redemption prior to stated maturity.

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<PAGE> 34
SCHEDULE B-2

Pricing Information for 2028 Notes

TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP

$240,000,000 Senior Notes due 2028

1. The initial public offering price of the 2028 Notes
shall be __% of the principal amount thereof, plus accrued interest, if any,
from the date of issuance.

2. The purchase price to be paid by the Underwriters for
the 2028 Notes shall be __% of the principal amount thereof.

3. The interest rate on the 2028 Notes shall be __% per
annum.

4. The 2028 Notes shall be subject to redemption, at the
option of the Company as stated in the Prospectus, from and after January 15 of
each of the following years, at the following redemption prices:

<TABLE>
<CAPTION>
Year Commencing Redemption Year Commencing Redemption
January 15, Price January 15, Price
- --------------- ---------- ---------------- ----------
<S> <C> <C> <C>
2008 % 2013 %
2009 % 2014 %
2010 % 2015 %
2011 % 2016 %
2012 % 2017 %
</TABLE>

and at a redemption price of 100% thereafter

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<PAGE> 35

(This is part of the Purchase Agreement)

Exhibit A

FORM OF OPINION OF PARTNERSHIP'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)

(i) Each of the Partnership and the Parent Partnership
has been duly formed and is validly existing as a limited partnership under the
laws of the State of Delaware.

(ii) Each of the Partnership and the Parent Partnership
has partnership power and authority to own and lease its properties and to
conduct its business as described in the Prospectus and to enter into and
perform its obligations under the Purchase Agreement.

(iii) Each of the Partnership and the Parent Partnership is
duly qualified as a foreign limited partnership to transact business in the
State of Texas.

(iv) The General Partner is a corporation validly
existing in good standing under the laws of the State of Delaware, with
corporate power and authority to own and lease its properties, to conduct its
business and to act as general partner of the Partnership and the Parent
Partnership, and is qualified to transact business as a foreign corporation and
is in good standing in the State of Texas.

(v) The Purchase Agreement has been duly authorized,
executed and delivered by the Partnership, the Parent Partnership and the
General Partner.

(vi) The Indenture has been duly authorized, executed and
delivered by the Partnership and, (assuming the due authorization, execution and
delivery thereof by the Trustee) under the law of the State of New York,
constitutes the legal, valid and binding obligation of the Partnership,
enforceable against the Partnership in accordance with its terms, except as the
enforcement thereof may be limited or affected by (i) bankruptcy, insolvency,
reorganization, moratorium, liquidation, rearrangement, fraudulent transfer,
fraudulent conveyance and other similar laws (including court decisions) now or
hereafter in effect and affecting the rights and remedies of creditors
generally or providing for the relief of debtors, (ii) the refusal of a
particular court to grant equitable remedies, including without limitation
specific performance and injunctive relief, and (iii) general principles of
equity (regardless of whether such remedies are sought in a proceeding in
equity or at law).

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<PAGE> 36

(vii) The Notes are in the form contemplated by the
Indenture, have been duly authorized by the Partnership for issuance and the
Partnership has full partnership power and authority to issue, sell and deliver
the Notes, and assuming that the Notes have been duly authenticated by the
Trustee in the manner described in its certificate delivered to you today (which
fact such counsel need not determine by an inspection of the Notes) and
delivered against payment of the purchase price therefor in accordance with the
terms of the Purchase Agreement, the Notes have been duly executed and delivered
by the Partnership will, under the law of the State of New York, constitute the
legal, valid and binding obligations of the Partnership, enforceable against the
Partnership in accordance with their respective terms, except as the enforcement
thereof may be limited or affected by (i) bankruptcy, insolvency,
reorganization, moratorium, liquidation, rearrangement, fraudulent transfer,
fraudulent conveyance and other similar laws (including court decisions) now or
hereafter in effect and affecting the rights and remedies of creditors generally
or providing for the relief of debtors, (ii) the refusal of a particular court
to grant equitable remedies, including without limitation specific performance
and injunctive relief, (iii) general principles of equity (regardless of whether
such remedies are sought in a proceeding in equity or at law).

(viii) The Indenture has been duly qualified under the 1939
Act.

(ix) The Notes and the Indenture conform as to legal
matters in all material respects to the descriptions thereof contained in the
Prospectus.

(x) The Registration Statement, including any Rule 462(b)
Registration Statement, has become effective under the 1933 Act; any required
filing of the Prospectus pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); and, to our knowledge, no stop
order suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are threatened by the
Commission.

(xi) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434 Information,
as applicable, the Prospectus, excluding the documents incorporated by reference
therein, and each amendment or supplement to the Registration Statement and
Prospectus, excluding the documents incorporated by reference therein, as of
their respective effective or issue dates (other than the financial statements
and supporting schedules included therein or omitted therefrom, and the
Trustee's Statement of Eligibility on Form T-1 (the "Form T-1"), as to which we
need express no opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.

(xii) The documents incorporated by reference in the
Prospectus (other than the financial statements and supporting schedules
included therein or omitted therefrom, as to which we need express no opinion),
when they became effective or were filed with the Commission, as the

-31-
<PAGE> 37

case may be, complied as to form in all material respects with the requirements
of the 1933 Act or the 1934 Act, as applicable, and the 1933 Act Regulations
and the 1934 Act Regulations, as applicable.

(xiii) We do not know of any action, suit, legal or
governmental proceeding, inquiry or investigation, to which the Partnership,
the Parent Partnership or the General Partner is a party, or to which the
property of any of the Partnership, the Parent Partnership, or the General
Partner is subject, that are required to be described in the Registration
Statement or the Prospectus and are not so described or of any statutes,
regulations, contracts or other documents that are required to be described in
the Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required;

(xiv) The statements in the Prospectus under "Business and
Properties -- Regulation", "Business and Properties -- Environmental Matters,"
"Business and Properties -- Safety Regulation," "Business and Properties --
Litigation," and "Description of the Notes" insofar as they are descriptions
of contracts, agreements or other legal documents, or refer to statements of
law or legal conclusions, are accurate in all material respects and present
fairly the information required to be shown;

(xv) No consent, approval, authorization, filing or order
of or qualification with any governmental body or agency is required by any
statutory law or regulation as a condition to the execution and delivery by the
Partnership, the Parent Partnership or the General Partner of the Purchase
Agreement or for the performance by the Partnership, the Parent Partnership or
the General Partner of their respective obligations under the Purchase
Agreement, the Notes and the Indenture, except such as has been obtained under
the 1933 Act and such as may be required by the Notes or Blue Sky laws of the
various states in connection with the offer and sale of the Notes;

(xvi) The execution and delivery by each of the Partnership,
the Parent Partnership and the General Partner of, and the performance by each
of the Partnership, the Parent Partnership and the General Partner of their
respective obligations under, the Purchase Agreement, the Notes and the
Indenture, will not violate any provision of applicable statutory law or
regulation or the partnership agreement, certificate or articles of
incorporation or bylaws, or other organizational documents, as the case may be,
of any of the Partnership, the Parent Partnership or the General Partner, or,
to our knowledge, result in a breach of, or default under, any agreement or
other instrument binding upon any of the Partnership, the Parent Partnership or
the General Partner filed as an exhibit to the Parent Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996, or, to our knowledge,
any judgement, order or decree of any governmental body, agency or court having
jurisdiction over any of the Partnership, the Parent Partnership or the General
Partner;

(xvii) To our knowledge, neither the Partnership nor the
Parent Partnership is in violation of its respective agreement of limited
partnership, and the General Partner is not in violation of its charter or
by-laws.

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<PAGE> 38

(xviii) The Partnership is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are defined in
the 1940 Act.

(xix) None of the Partnership, the Partner Partnership, the
General Partner, Duke or any parent company of the General Partner is a
"holding company" within the meaning of PUHCA.

Counsel shall also state that, based upon their participation in
conferences with officers and other representatives of the Companies,
representatives of the independent accountants of the Companies, counsel to the
Underwriters, at which conference the contents of the Registration Statement and
the Prospectus and related matters were discussed and, although we are not
passing upon and do not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration Statement and the
Prospectus (except to the extent expressly set forth in this opinion), we advise
you that, on the basis of the foregoing, no information has come to our
attention that causes us to believe that the Registration Statement (other than
the financial statements and schedules, and the other financial data, contained
therein, as to which we have not been asked to comment), at the time it became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus (other than the
financial statements and schedules, and the other financial data contained
therein, and except with respect to the Form T-1, as to which we have not been
asked to comment) as of its date and as of the date hereof, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

In rendering such opinion, such counsel may rely as to matters of fact (but
not as to legal conclusions), to the extent they deem proper, on certificates of
responsible officers of the Partnership and public officials. Such opinion shall
not state that it is to be governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).

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<PAGE> 1
Exhibit 5.1

[Letterhead of Fulbright & Jaworski L.L.P.]

January 13, 1998

TE Products Pipeline Company, Limited Partnership
P.O. Box 2521
Houston, Texas 77252-2521

Dear Sirs:

We have acted as counsel to TE Products Pipeline Company, Limited
Partnership, a Delaware limited partnership (the "Partnership"), in connection
with the proposed offering by the Partnership of $150,000,000 aggregate
principal amount of the Partnership's % Senior Notes due 2008 (the "2008
Notes") and $240,000,000 aggregate principal amount of the Partnership's %
Senior Notes due 2028 (the "2028 Notes") (collectively, the "Notes"). The
Notes are to be issued pursuant to an Indenture (the "Indenture") between the
Partnership and The Bank of New York, as Trustee.

In connection with such matters we have examined, among other
things, the Agreement of Limited Partnership and Certificate of Limited
Partnership of the Partnership, the corporate proceedings of the general
partner of the Partnership with respect to the offering of the Notes, the
proposed form of Indenture, the proposed form of Note, the Purchase Agreement
filed as Exhibit 1.1 to the Registration Statement (as hereinafter defined)
(the "Purchase Agreement"), among the Partnership and Merrill Lynch & Co.,
Merrill Lynch Pierce Fenner & Smith Incorporated and Goldman, Sachs & Co, as
the Underwriters, and the Registration Statement on Form S-3 (Registration No.
333-38473), as amended, filed by the Partnership with the Securities and
Exchange Commission, for the registration of the Notes under the Securities Act
of 1933 (such Registration Statement as amended at the time it becomes
effective being herein referred to as the "Registration Statement").

Based upon the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion that the Notes have
been duly authorized by the Partnership for issuance, and the Partnership has
full partnership power and authority to issue, sell and deliver the Notes, and,
when authenticated by the Trustee in accordance with the Indenture and
delivered to and paid for by the Underwriters in accordance with the terms of
the Purchase Agreement, will, under the law of the State of New York,
constitute the legal, valid and binding obligations of the Partnership
enforceable against the Partnership in accordance with their respective terms;
and the Indenture has been duly authorized by the Partnership and, under the
law of the State of New York, when executed and delivered by the Partnership,
will constitute the legal, valid and binding obligation of the Partnership,
enforceable against the Partnership in accordance with its terms.
<PAGE> 2
TE Products Pipeline Company, Limited Partnership
January 13, 1998
Page 2

The opinions expressed herein are limited exclusively to the laws
of the State of New York, the General Corporation Law of the State of Delaware,
the Revised Uniform Limited Partnership Act of the State of Delaware and the
federal statutory laws and regulations of the United States of America.

In rendering the opinions expressed herein, we have assumed that
the Trustee has power and authority to enter into and perform its obligations
under the Indenture, that the Indenture will be duly authorized, executed and
delivered by the Trustee, and that the Indenture will constitute the legal,
valid and binding obligation of the Trustee, enforceable against the Trustee in
accordance with the terms of the Indenture.

The opinions expressed herein are subject to the following:

a. The enforceability of the Indenture and the Notes may be
limited or affected by (i) bankruptcy, insolvency,
reorganization, moratorium, liquidation, rearrangement,
fraudulent transfer, fraudulent conveyance and other
similar laws (including court decisions) now or hereafter
in effect and affecting the rights and remedies of
creditors generally or providing for the relief of
debtors, (ii) the refusal of a particular court to grant
equitable remedies, including without limitation specific
performance and injunctive relief, and (iii) general
principles of equity (regardless of whether such remedies
are sought in a proceeding in equity or at law).

b. With respect to clause (1) of Section 6.07 of the
Indenture, we express no opinion with respect to the
enforceability of the parenthetical provision of that
clause should limitations on the compensation of trustees
be enacted in the future.

c. With respect to Section 114 of the Indenture and the
penultimate paragraph of each of the Notes, we express no
opinion as to the enforceability of any of these
provisions to the extent that any of them purport to waive
liability for violation of securities laws.

We hereby consent to the filing of this opinion as an Exhibit to
the Registration Statement and to the reference to us under "Legal Matters" in
the Prospectus included in the Registration Statement. In giving these
consents, we do not hereby admit that we are in the category of persons whose
consent if required under Section 7 of the Securities Act of 1933.

Very truly yours,

/s/

Fulbright & Jaworski L.L.P.