BUCKEYE PARTNERS L P, 10-K, 1995-03-17

BUCKEYE PARTNERS L P
10-K, 1995-03-17
PIPE LINES (NO NATURAL GAS)

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-9356

BUCKEYE PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 23-2432497
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

3900 HAMILTON BOULEVARD
ALLENTOWN, PENNSYLVANIA 18103
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (610) 770-4000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C>
LP Units representing
limited partnership interests................ New York Stock Exchange
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

None
(TITLE OF CLASS)

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---

At March 7, 1995, the aggregate market value of the registrant's LP Units
held by non-affiliates was $409 million. The calculation of such market value
should not be construed as an admission or conclusion by the registrant that
any person is in fact an affiliate of the registrant.

LP Units outstanding as of March 7, 1995: 12,018,760.

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TABLE OF CONTENTS

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PAGE
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<S> <C> <C>
PART I
ITEM 1. BUSINESS.................................................................... 1
ITEM 2. PROPERTIES.................................................................. 10
ITEM 3. LEGAL PROCEEDINGS........................................................... 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................... 14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S LP UNITS AND RELATED UNITHOLDER MATTERS......... 14
ITEM 6. SELECTED FINANCIAL DATA .................................................... 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................. 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................. 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE................................................................. 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......................... 40
ITEM 11. EXECUTIVE COMPENSATION ..................................................... 42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............. 48
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................. 49
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K............ 51
</TABLE>
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PART I

ITEM 1. BUSINESS

INTRODUCTION

Buckeye Partners, L.P. (the "Partnership"), the Registrant, is a limited
partnership organized in 1986 under the laws of the state of Delaware.

The Partnership conducts all its operations through subsidiary entities.
These operating subsidiaries are Buckeye Pipe Line Company, L.P. ("Buckeye"),
Laurel Pipe Line Company, L.P. ("Laurel"), Everglades Pipe Line Company, L.P.
("Everglades") and Buckeye Tank Terminals Company, L.P. ("BTT"), each of which
is 99 percent owned. (Each of Buckeye, Laurel, Everglades and BTT is referred
to as an "Operating Partnership" and collectively as the "Operating
Partnerships").

Buckeye is one of the largest independent pipeline common carriers of refined
petroleum products in the United States, with 3,291 miles of pipeline serving
10 states. Laurel owns a 344-mile common carrier refined products pipeline
located principally in Pennsylvania. Everglades owns 37 miles of refined
products pipeline in Florida. Buckeye, Laurel and Everglades conduct the
Partnership's refined products pipeline business. BTT provides bulk storage
service through leased facilities with an aggregate capacity of 235,000 barrels
of refined petroleum products.

The Partnership acquired its interests in the Operating Partnerships from
American Premier Underwriters, Inc. ("American Premier"), formerly The Penn
Central Corporation, on December 23, 1986 (the "Acquisition"). The Operating
Partnerships (other than Laurel) had been organized by American Premier for
purposes of the Acquisition and succeeded to the operations of predecessor
companies owned by American Premier, including Buckeye Pipe Line Company (an
Ohio corporation) and its subsidiaries ("Pipe Line"), in November 1986. Laurel
was formed in October 1992 and succeeded to the operations of Laurel Pipe Line
Company ("Laurel Corp") (an Ohio corporation) which was a majority owned
corporate subsidiary of the Partnership until the minority interest was
acquired in December 1991.

Buckeye Management Company (the "General Partner"), a wholly owned subsidiary
of American Premier formed in 1986, owns a 1 percent general partnership
interest in, and serves as sole general partner of, the Partnership. A
corporate subsidiary of the General Partner, Buckeye Pipe Line Company (a
Delaware corporation) (the "Manager"), owns a 1 percent general partnership
interest in, and serves as sole general partner and manager of, each Operating
Partnership.

REFINED PRODUCTS BUSINESS

The Partnership receives petroleum products from refineries, connecting
pipelines and marine terminals, and transports those products to other
locations. In 1994, refined products accounted for substantially all of the
Partnership's consolidated revenues, consolidated operating income and
consolidated property, plant and equipment.

The Partnership transported an average of approximately 1,028,800 barrels per
day of refined products in 1994. The following table shows the volume and
percentage of refined products transported over the last three years.

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VOLUME AND PERCENTAGE OF REFINED PRODUCTS TRANSPORTED(1)(2)
(VOLUME IN THOUSANDS OF BARRELS PER DAY)

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YEAR ENDED DECEMBER 31,
---------------------------------------------
1994 1993 1992
--------------- -------------- --------------
VOLUME PERCENT VOLUME PERCENT VOLUME PERCENT
------- ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Gasoline.......................... 526.0 51% 503.6 51% 458.0 50%
Jet Fuels......................... 235.5 23 234.1 24 227.7 25
Middle Distillates (3)............ 246.1 24 223.0 23 205.4 23
Other Products.................... 21.2 2 20.4 2 21.4 2
------- --- ----- --- ----- ---
Total............................. 1,028.8 100% 981.1 100% 912.5 100%
======= === ===== === ===== ===
</TABLE>
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(1) Excludes crude oil volumes of 0.7 thousand barrels per day for the year
ended December 31, 1992. No crude oil volumes were transported during 1993
or 1994.
(2) Excludes local product transfers.
(3) Includes diesel fuel, heating oil, kerosene and other middle distillates.

The Partnership provides service in the following states: Pennsylvania, New
York, New Jersey, Indiana, Ohio, Michigan, Illinois, Connecticut,
Massachusetts, Washington and Florida.

Pennsylvania--New York--New Jersey

Buckeye serves major population centers in the states of Pennsylvania, New
York and New Jersey through 1,171 miles of pipeline. Refined products are
received at Linden, New Jersey. Products are then transported through two lines
from Linden, New Jersey to Allentown, Pennsylvania. From Allentown, the
pipeline continues west, through a connection with Laurel, to Pittsburgh,
Pennsylvania (serving Reading, Harrisburg, Altoona/Johnstown and Pittsburgh)
and north through eastern Pennsylvania into New York State (serving
Scranton/Wilkes-Barre, Binghamton, Syracuse, Utica and Rochester and, via a
connecting carrier, Buffalo). Products received at Linden, New Jersey are also
transported through two lines to John F. Kennedy International and LaGuardia
Airports and to commercial bulk terminals at Long Island City and Inwood, New
York. The pipeline presently supplies Kennedy, LaGuardia and Newark
International airports with substantially all of each airport's jet fuel
requirements.

Laurel transports refined products through a 344-mile pipeline extending
westward from five refineries in the Philadelphia area to Pittsburgh,
Pennsylvania.

Indiana--Ohio--Michigan--Illinois

Buckeye transports refined products through 1,994 miles of pipeline (of which
246 miles are jointly owned with other pipeline companies) in southern
Illinois, central Indiana, eastern Michigan, western and northern Ohio and
western Pennsylvania. A number of receiving lines and delivery lines connect to
a central corridor which runs from Lima, Ohio, through Toledo, Ohio to Detroit,
Michigan. Products are received at East Chicago, Indiana; Robinson, Illinois
and at the corridor connection points of Detroit, Toledo and Lima. Major areas
served include Huntington/Fort Wayne, Indiana; Bay City, Detroit and Flint,
Michigan; Cleveland, Columbus, Lima and Toledo, Ohio; and Pittsburgh,
Pennsylvania.

Other Refined Products Pipelines

Buckeye serves Connecticut and Massachusetts through 112 miles of pipeline
that carry refined products from New Haven, Connecticut to Hartford,
Connecticut and Springfield, Massachusetts.

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Everglades carries primarily jet fuel on a 37-mile pipeline from Port
Everglades, Florida to Hollywood-Ft. Lauderdale International Airport and Miami
International Airport.

Buckeye carries jet fuel on a 14-mile pipeline from Tacoma, Washington to
McChord Air Force Base.

OTHER BUSINESS ACTIVITIES

BTT provides bulk storage services through leased facilities located in
Pittsburgh, Pennsylvania and Bay City, Michigan, which have the capacity to
store up to an aggregate of approximately 235,000 barrels of refined petroleum
products. Each facility is served by Buckeye and provides bulk storage and
loading facilities for shippers or other customers.

COMPETITION AND OTHER BUSINESS CONSIDERATIONS

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

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

A substantial portion of the refined petroleum products transported by the
Partnership's pipelines are ultimately used as fuel for motor vehicles and
aircraft. Changes in transportation and travel patterns in the areas served by
the Partnership's pipelines could adversely affect the Partnership's results of
operations.

In 1994, the Operating Partnerships had approximately 120 customers, most of
which were either major integrated oil companies or smaller marketing
companies. The largest two customers accounted for 7.1 percent and 6.6 percent,
respectively, of consolidated revenues, while the 20 largest customers
accounted for 74.4 percent of consolidated revenues.

Generally, pipelines are the lowest cost method for long-haul overland
movement of refined petroleum products. Therefore, the Operating Partnership's
most significant competitors for large volume shipments are other pipelines,
many of which are owned and operated by major integrated oil companies.
Although it is unlikely that a pipeline system comparable in size and scope to
the Operating Partnership's will be built in the foreseeable future, new
pipelines (including pipeline segments that connect with existing pipeline
systems) could be built to effectively compete with the Operating Partnerships
in particular locations.

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

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

Privately arranged exchanges of product between marketers in different
locations are an increasing but unquantified form of competition. Generally,
such exchanges reduce both parties' costs by eliminating or reducing
transportation charges.

Distribution of refined petroleum products depends to a large extent upon the
location and capacity of refineries. In past years, a significant quantity of
domestic refining capacity has been shut down. To date, the aggregate impact of
these shut-downs has affected the Operating Partnerships' volumes favorably, as
these shut-downs have resulted in the transportation of product over longer
distances to certain locations. Because the Operating Partnerships' pipelines
have numerous source points, the General Partner does not believe that the
shut-down of any particular refinery would have a material adverse effect on
the Partnership. However, the General Partner is unable to determine whether
additional shut-downs will occur or what their effects might be.

The Operating Partnerships' mix of products transported tends to vary
seasonally. Declines in demand for heating oil during the summer months are, to
a certain extent, offset by increased demand for gasoline and jet fuels.
Overall, operations have been only moderately seasonal, with somewhat lower
than average volume being transported during March, April and May as compared
to the rest of the year.

Neither the Partnership nor any of the Operating Partnerships have any
employees. All of the operations of the Operating Partnerships are managed and
operated by employees of the Manager. At December 31, 1994, the Manager had 607
full-time employees, 161 of whom were represented by two labor unions. The
collective bargaining agreement with each of these unions is subject to renewal
in 1996. The Operating Partnerships (and their predecessors) have never
experienced any significant work stoppages or other significant labor problems.

CAPITAL EXPENDITURES

The General Partner anticipates that the Partnership will continue to make
ongoing capital expenditures to maintain and enhance its assets and properties,
including improvements to meet customers' needs and those required to satisfy
new environmental and safety standards. In 1994, total capital expenditures
were $15.4 million. Projected capital expenditures for 1995 amount to $14.9
million. Planned capital expenditures in 1995 include, among other things,
tanks to accommodate specific new business opportunities, renewal and
replacement of pipe, new valves, metering systems, field instrumentation,
communications facilities and testing equipment. Capital expenditures are
expected to increase over time primarily in response to increasingly rigorous
governmental safety and environmental requirements as well as industry
standards. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

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REGULATION

General

Buckeye is an interstate common carrier subject to the regulatory
jurisdiction of the Federal Energy Regulatory Commission ("FERC") under the
Interstate Commerce Act and the Department of Energy Organization Act. FERC
regulation requires that interstate oil pipeline rates be posted publicly and
that these rates be "just and reasonable" and non-discriminatory. FERC
regulation also enforces common carrier obligations and specifies a uniform
system of accounts. In addition, Buckeye, and the other Operating Partnerships,
are subject to the jurisdiction of certain other federal agencies with respect
to environmental and pipeline safety matters.

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

Tariffs

FERC has jurisdiction over Buckeye's interstate tariffs. In July 1988, in the
midst of a rate proceeding involving Buckeye, FERC issued an order that
provided Buckeye with the opportunity to qualify for an unspecified alternative
form of "light-handed" rate regulation if Buckeye could establish that it
lacked significant market power. On December 31, 1990, after extensive
testimony and hearings, FERC issued an opinion which found that in most of its
relevant market areas, Buckeye operated in a competitive environment in which
it could not exercise significant market power and that Buckeye's tariff rates
in those markets were just and reasonable. Based on these findings, FERC
permitted Buckeye to implement a "light-handed" rate regulation program on an
experimental basis for three years beginning in March 1991. Under the program,
in markets where Buckeye does not have significant market power, individual
rate increases: (a) will not exceed a real (i.e., exclusive of inflation)
increase of 15 percent over any two-year period (the "rate cap"), and (b) will
be allowed to become effective without suspension or investigation if they do
not exceed a "trigger" equal to the change in the GDP implicit price deflator
since the date on which the individual rate was last increased, plus 2 percent.
Individual rate decreases will be presumptively valid upon a showing that the
proposed rate exceeds marginal costs. In markets where Buckeye was found to
have significant market power and in certain markets where no market power
finding was made: (i) individual rate increases cannot exceed the volume
weighted average rate increase in markets where Buckeye does not have
significant market power since the date on which the individual rate was last
increased, and (ii) any volume weighted average rate decrease in markets where
Buckeye does not have significant market power must be accompanied by a
corresponding decrease in all of Buckeye's rates in markets where it does have
significant market power. Shippers retain the right to file complaints or
protests following notice of a rate increase, but are required to show that the
proposed rates violate or have not been adequately justified under the
experimental program, that the proposed rates are unduly discriminatory, or
that Buckeye has acquired significant market power in markets previously found
to be competitive.

In October 1992, the Energy Policy Act of 1992 (the "Policy Act") was
enacted. Title XVIII of the Policy Act, "Oil Pipeline Regulatory Reform,"
provided, among other things, that certain tariff rates that were in effect on
October 25, 1991 were deemed "just and reasonable, " and that FERC was directed
by October 24, 1993 to promulgate a rule establishing a simplified and
generally applicable ratemaking methodology for oil pipelines. FERC was also
directed to issue a rule streamlining certain procedural aspects of its
proceedings.

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On October 22, 1993, FERC issued a final rule pursuant to the Policy Act with
respect to rate regulation of oil pipelines. The rule relies primarily on an
index methodology, whereby a pipeline would be allowed to change its rates in
accordance with an index that FERC believes reflects cost changes appropriate
for application to pipeline rates. In the alternative, a pipeline is allowed to
charge market-based rates if the pipeline establishes that it does not possess
significant market power in a particular market. In addition, the rule provides
for the rights of both pipelines and shippers to demonstrate that the index
should not apply to an individual pipeline's rates in light of the pipeline's
costs. The final rule became effective on January 1, 1995.

On February 22, 1994, Buckeye filed a tariff and justification material to
extend its "experimental" rate regulation program for an indefinite period. No
protests or interventions were filed and, on March 24, 1994, FERC found that
the program should be extended but that Buckeye would be subject to the generic
regulations on oil pipeline rates as of January 1, 1995. On October 26, 1994,
Buckeye filed a motion that requested FERC to permit Buckeye to continue its
existing rate program indefinitely, as an exception to the generic oil pipeline
rate regulations. On December 6, 1994, FERC issued an order granting that
motion and extended the operation of Buckeye's rate program indefinitely,
commencing January 1, 1995. The Buckeye rate program will be subject to
reevaluation at the same time FERC reviews the index selected in the generic
oil pipeline regulations, currently scheduled to occur five years after the
effective date of the generic rules. Independent of regulatory considerations,
it is expected that tariff rates will continue to be constrained by competition
and other market factors.

Environmental Matters

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

The Oil Pollution Act of 1990 ("OPA") amends certain provisions of the
federal Water Pollution Control Act of 1972, commonly referred to as the Clean
Water Act ("CWA") and other statutes as they pertain to the prevention of and
response to oil spills into navigable waters. The OPA subjects owners of
facilities to strict joint and several liability for all containment and clean-
up costs and certain other damages arising from a spill. The CWA provides
penalties for any discharges of petroleum products in reportable quantities and
imposes substantial liability for the costs of removing a spill. State laws for
the control of water pollution also provide varying civil and criminal
penalties and liabilities in the case of releases of petroleum or its
derivatives into surface waters or into the ground. Regulations are currently
being developed under OPA and state laws which may impose additional regulatory
burdens on the Partnership.

Contamination resulting from spills or releases of refined petroleum products
are not unusual in the petroleum pipeline industry. The Partnership's pipelines
cross numerous navigable rivers and streams. Although the General Partner
believes that the Operating Partnerships comply in all

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material respects with the spill prevention, control and countermeasure
requirements of federal laws, any spill or other release of petroleum products
into navigable waters may result in material costs and liabilities to the
Partnership.

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

The Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA"), also known as "Superfund," governs the release or threat of
release of a "hazardous substance." Disposal of a hazardous substance, whether
on or off-site, may subject the generator of that substance to liability under
CERCLA for the costs of clean-up and other remedial action. Pipeline
maintenance and other activities in the ordinary course of business could
subject the Operating Partnerships to the requirements of these statutes. As a
result, to the extent hydrocarbons or other petroleum waste may have been
released or disposed of in the past, the Operating Partnerships may in the
future be required to remedy contaminated property. Governmental authorities
such as the Environmental Protection Agency ("EPA"), and in some instances
third parties, are authorized under CERCLA to seek to recover remediation and
other costs from responsible persons, without regard to fault or the legality
of the original disposal. In addition to its potential liability as a
generator of a "hazardous substance," the property or right-of-way of the
Operating Partnerships may be adjacent to or in the immediate vicinity of
Superfund and other hazardous waste sites. Accordingly, the Operating
Partnerships may be responsible under CERCLA for all or part of the costs
required to cleanup such sites, which costs could be material.

The Clean Air Act, amended by the Clean Air Act Amendments of 1990 (the
"Amendments"), imposes controls on the emission of pollutants into the air.
The Operating Partnerships may be affected in several ways by the Amendments,
including required changes in operating procedures and increased capital
expenditures. The Amendments require states to develop permitting programs
over the next several years to comply with new federal programs. Existing
operating and air-emission permits like those held by the Operating
Partnerships will have to be reviewed to determine compliance with the new
programs. It is possible that new or more stringent controls will be imposed
upon the Operating Partnerships through this permit review. In addition, the
Amendments impose new requirements on the composition of fuels transported by
the Operating Partnerships. While the principal impact of these new
requirements will be on refiners and marketers of such fuels, the Operating
Partnerships may have to institute additional quality control procedures and
provide additional tankage in order to satisfy customer needs for segregated
storage of these reformulated fuels.

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

In connection with the Acquisition, Pipe Line obtained an Administrative
Consent Order ("ACO") from the New Jersey Department of Environmental
Protection and Energy ("NJDEPE") under the New Jersey Environmental Cleanup
Responsibility Act of 1983 ("ECRA") for all six of Pipe Line's facilities in
New Jersey. The ACO permitted the Acquisition to be completed prior to full
compliance with ECRA, but required Pipe Line to conduct in a timely manner a
sampling plan for environmental contamination at the New Jersey facilities and
to implement any required clean-up plan. Sampling continues in an effort to
identify areas of contamination at the New Jersey facilities, while clean-up

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operations have begun at certain of the sites. The obligations of Pipe Line
were not assumed by the Partnership, and the costs of compliance will be paid
by American Premier. Through December 1994, Buckeye's costs of approximately
$2,353,000 have been funded by American Premier.

Safety Matters

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

The Pipeline Safety Reauthorization Act of 1988 required increased
coordination of safety regulation between federal and state agencies, testing
and certification of pipeline personnel, and authorization of safety-related
feasibility studies. In 1990, the Manager initiated a random drug testing
program to comply with the regulations promulgated by the Office of Pipeline
Safety, DOT, and in January 1995, the Manager instituted a program to comply
with new DOT regulations that require alcohol testing of certain pipeline
personnel.

HLPSA requires, among other things, that the Secretary of Transportation
consider the need for the protection of the environment in issuing federal
safety standards for the transportation of hazardous liquids by pipeline. The
legislation also requires the Secretary of Transportation to issue regulations
concerning, among other things, the identification by pipeline operators of
environmentally sensitive areas; the circumstances under which emergency flow
restricting devices should be required on pipelines; training and qualification
standards for personnel involved in maintenance and operation of pipelines; and
the periodic integrity testing of pipelines in environmentally sensitive and
high-density population areas by internal inspection devices or by hydrostatic
testing. Significant expenses would be incurred if, for instance, additional
valves were required, if leak detection standards were amended to exceed the
current control system capabilities of the Operating Partnerships or additional
integrity testing of pipeline facilities were to be required. The General
Partner believes that the Operating Partnerships' operations comply in all
material respects with HLPSA. However, the industry, including the Partnership,
could be required to incur substantial additional capital expenditures and
increased operating costs depending upon the requirements of final regulations
issued by DOT pursuant to HLPSA, as amended.

The Operating Partnerships are also subject to the requirements of the
Federal Occupational Safety and Health Act ("OSHA") and comparable state
statutes. The General Partner believes that the Operating Partnerships'
operations comply in all material respects with OSHA requirements, including
general industry standards, recordkeeping, hazard communication requirements
and monitoring of occupational exposure to benzene and other regulated
substances.

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

TAX TREATMENT OF PUBLICLY TRADED PARTNERSHIPS UNDER THE INTERNAL REVENUE CODE

The Internal Revenue Code of 1986, as amended (the "Code"), imposes certain
limitations on the current deductibility of losses attributable to investments
in publicly traded partnerships and treats certain publicly traded partnerships
as corporations for federal income tax purposes. The following

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discussion briefly describes certain aspects of the Code that apply to
individuals who are citizens or residents of the United States without
commenting on all of the federal income tax matters affecting the Partnership
or its unitholders (the "Unitholders"), and is qualified in its entirety by
reference to the Code. UNITHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISOR
ABOUT THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF AN
INVESTMENT IN THE PARTNERSHIP.

Characterization of the Partnership for Tax Purposes

The Code treats a publicly traded partnership that existed on December 17,
1987, such as the Partnership, as a corporation for federal income tax purposes
beginning in the earlier of (i) 1998 or (ii) the year in which it adds a
substantial new line of business unless, for each taxable year of the
Partnership beginning in the earlier of such years, 90 percent or more of its
gross income consists of qualifying income. Qualifying income includes
interest, dividends, real property rents, gains from the sale or disposition of
real property, income and gains derived from the exploration, development,
mining or production, processing, refining, transportation (including pipelines
transporting gas, oil or products thereof), or the marketing of any mineral or
natural resource (including fertilizer, geothermal energy and timber), and gain
from the sale or disposition of capital assets that produced such income.

Because the Partnership is engaged primarily in the refined products pipeline
transportation business, the General Partner believes that 90 percent or more
of the Partnership's gross income has been qualifying income. If this continues
to be true and no subsequent legislation amends this provision, the Partnership
would continue to be classified as a partnership and not as a corporation for
federal income tax purposes.

Passive Activity Loss Rules

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

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

9
<PAGE>

Deductibility of Interest Expense

The Code generally provides that investment interest expense is deductible
only to the extent of a non-corporate taxpayer's net investment income. In
general, net investment income for purposes of this limitation includes gross
income from property held for investment, gain attributable to the disposition
of property held for investment (except for net capital gains for which the
taxpayer has elected to be taxed at a maximum rate of 28 percent) and portfolio
income (determined pursuant to the passive loss rules) reduced by certain
expenses (other than interest) which are directly connected with the production
of such income. Property subject to the passive loss rules is not treated as
property held for investment. However, the IRS has issued a Notice which
provides that net income from a publicly traded partnership (not otherwise
treated as a corporation) may be included in net investment income for purposes
of the limitation on the deductibility of investment interest. A Unitholder's
investment income attributable to its interest in the Partnership will include
both its allocable share of the Partnership's portfolio income and trade or
business income. A Unitholder's investment interest expense will include its
allocable share of the Partnership's interest expense attributable to portfolio
investments.

Unrelated Business Taxable Income

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

State Tax Treatment

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

ITEM 2. PROPERTIES

As of December 31, 1994, the principal facilities of the Operating
Partnerships included 3,672 miles of 6-inch to 24-inch diameter pipeline, 44
pumping stations, 105 delivery points and various sized tanks having an
aggregate capacity of approximately 10.1 million barrels.

The Operating Partnerships own substantially all of their facilities subject,
in the case of Buckeye, to a mortgage and security interest granted to secure
payment of the outstanding balance of Buckeye's First Mortgage Notes due
serially through 2010. See Note 7 to Consolidated Financial Statements of
Buckeye Partners, L.P. In addition, certain portions of Buckeye's pipeline in
Connecticut and Massachusetts are subject to security interests in favor of the
owners of the right-of-way to secure future lease payments.

10
<PAGE>

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

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

ITEM 3. LEGAL PROCEEDINGS

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

FREEPORT LANDSLIDE

On March 30, 1990, a landslide near Freeport, Pennsylvania caused a rupture
to one of the Partnership's pipelines which resulted in the release of
approximately 58,000 gallons of petroleum products. Undetermined amounts of
petroleum products saturated the soils surrounding the landslide area and
flowed into Knapp Run and eventually into the Allegheny River. Buckeye promptly
conducted extensive emergency response and remediation efforts.

After the emergency phase of the clean-up was complete, Buckeye and the
Pennsylvania Department of Environmental Resources ("DER") reached an agreement
on remediation and erosion and sedimentation control at the site. Under this
agreement, Buckeye is collecting and treating surface runoff water from the
site and has instituted further erosion and sedimentation control measures
under a DER-approved plan.

Following the release, various agencies and departments of both the federal
and state governments, including the United States Department of Justice, the
Pennsylvania Office of Attorney General, DER, the Pennsylvania Department of
Transportation, EPA, the National Transportation Safety Board, and DOT,
commenced investigations into the circumstances of the pipeline rupture. In May
1994, Buckeye began discussions with DER and other state agencies concerning
potential settlement of natural resource damage claims and civil penalties that
the state agencies indicated they might assert against Buckeye. In January
1995, DER filed a complaint for civil penalties with the Commonwealth of
Pennsylvania Environmental Hearing Board based on alleged violations by Buckeye
of various state strict liability environmental laws. Buckeye's negotiations
with DER and other state agencies concerning the alleged civil penalties, as
well as potential natural resource damage claims, are continuing. In addition,
in January 1995, a complaint was filed against Buckeye

11
<PAGE>

in the United States District Court for the Western District of Pennsylvania
by the United States of America. The complaint charges Buckeye with two
criminal misdemeanor violations of environmental laws. One count of the
complaint alleges a violation of the strict liability provisions of the Rivers
and Harbors Act, and the other count alleges negligence in violation of the
Clean Water Act. Buckeye is actively engaged in discussions with the
government seeking disposition of these charges.

In addition to the above governmental proceedings, eight civil class actions
against the Partnership, Buckeye and certain affiliates were filed in four
Pennsylvania counties. Plaintiffs in these lawsuits seek both injunctive and
monetary relief, including punitive damages and attorneys' fees, based on a
number of legal theories. The parties have consolidated these actions in a
single class action in the Court of Common Pleas for Allegheny County,
Pennsylvania, but the proposed class has not yet been certified and there has
been no significant activity in the case. At this time, it is not possible to
predict the likely outcome of such case.

Buckeye maintains insurance in amounts believed by the General Partner to be
adequate covering certain liabilities and claims arising out of pipeline
accidents above a self-insured retention amount. The insurance is written
generally on an indemnity basis, which requires Buckeye to seek reimbursement
from its carriers for covered claims after paying such claims directly.
Various entities that allegedly incurred costs or damages as a result of this
incident have filed claims with Buckeye's insurance adjusters. Certain claims
have been paid by Buckeye and other claims remain outstanding. The insurance
carriers are reimbursing Buckeye for covered claims subject to the terms of
the policy.

For the reasons set forth above, Buckeye is unable to estimate the total
amount of environmental clean-up and other costs and liabilities that may be
incurred in connection with this incident. However, based on information
currently available to it, Buckeye believes that its net expense after
insurance recoveries will not be material to its financial condition or
results of operations.

OTHER ENVIRONMENTAL PROCEEDINGS

With respect to other environmental litigation, certain Operating
Partnerships (or their predecessors) have been named as a defendant in several
lawsuits or have been notified by federal or state authorities that they are a
potentially responsible party ("PRP") under federal laws or a respondent under
state laws relating to the generation, disposal or release of hazardous
substances into the environment. Typically, an Operating Partnership is one of
many PRPs for a particular site and its contribution of total waste at the
site is minimal. However, because CERCLA and similar statutes impose liability
without regard to fault and on a joint and several basis, the liability of the
Operating Partnerships in connection with these proceedings could be material.
Potentially material proceedings affecting the Operating Partnerships are
described below.

In July 1986, Buckeye was named as one of several PRPs for the Whitmoyer
Laboratories site in Myerstown, Pennsylvania. Buckeye previously owned part of
the site and sold it to a purchaser now believed to be primarily responsible
for the reported substantial chemical contamination at the site. Without
knowledge of the contamination, Buckeye subsequently repurchased a small
portion of the site on which it constructed a pumping station. After
completion of a remedial investigation and feasibility study and consideration
of proposed remediation plans, EPA issued two Records of Decision in December
1990 proposing a clean-up estimated to cost approximately $125 million. In
1992, EPA entered into a Consent Decree with the two PRPs that were former
owners of Whitmoyer Laboratories. These PRPs agreed to assume the cost of
clean-up at the site, and to reimburse EPA for future response costs and a
portion of its past response costs. These two PRPs have instituted suit
against each other to determine their relative responsibility for the
Whitmoyer Laboratories site clean-up. One of the PRPs served a third-party
complaint against Buckeye for the stated purpose of tolling the statute of
limitations to preserve its rights, if any, against Buckeye. Buckeye

12
<PAGE>

subsequently settled the third-party complaint that had been filed against it.
In consideration of mutual releases and the PRP's agreement to cleanup
Buckeye's portion of the site, Buckeye agreed to remove its booster pump
station, to reroute its pipeline around the site and to reimburse the PRP for
the cost of removing the original pipeline, if such removal is required by EPA.
Buckeye estimates at this time that the costs of complying with the terms of
the settlement agreement will be between $1 million and $2 million. Buckeye has
not entered into any agreements with the EPA or the other PRP involved at the
site, and Buckeye has not waived any rights to recover for any claim arising
out of the PRP's activities at the site or any claims brought by any
governmental agency or third party based upon environmental conditions at the
site. In the event that claims were asserted by any party in connection with
the site, Buckeye believes that it would have meritorious defenses, but its
potential liability, if any, related to such claims, cannot be estimated at
this time.

In July 1987, the NJDEPE ordered Buckeye and 27 other parties to provide site
security and conduct a preliminary clean-up at the Borne Chemical site located
in Elizabeth, New Jersey. Twenty of the parties (including Buckeye) agreed to
provide security and to remove certain materials from the site. Buckeye agreed
to pay approximately $64,000 of the $4 million estimated cost of this activity.
This removal work has been completed. The NJDEPE is requiring that all parties
(including Buckeye) which are alleged to have contributed hazardous substances
to the site, conduct a remedial investigation/feasibility study to determine
the scope of additional contamination, if any, that may exist at the site.
Buckeye's involvement with this site is based on allegations that a small
amount of Buckeye's waste was stored at this site pending its ultimate disposal
elsewhere. Buckeye believes that it has meritorious defenses, but its potential
liability, if any, for future costs cannot be estimated at this time.

In March 1989, the NJDEPE issued a directive to Buckeye and 113 other parties
demanding payment of approximately $9.2 million in remediation costs incurred
by NJDEPE at the Bridgeport Rental & Oil Services site in Logan Township, New
Jersey. This site is subject to a remediation being conducted by EPA under
CERCLA. In March 1992, an action was commenced by Rollins Environmental
Services (NJ), Inc., and others, against the United States of America and
certain additional private parties seeking reimbursement for remediation
expenses incurred by plaintiffs in connection with the site. In June 1992, the
United States of America brought an action against Rollins Environmental
Services (NJ), Inc., and additional private parties, seeking reimbursement of
approximately $29 million for response costs incurred by EPA at the site.
Buckeye has not been designated by EPA as a PRP with respect to the site, and
has not been named as a defendant in any litigation connected with the site.
Buckeye believes that it is, at most, a de minimis contributor of waste to this
site. Although EPA has estimated remediation costs at the site to be over $100
million, Buckeye expects that its liability, if any, will not be material.

In May 1993, Buckeye was notified by EPA that EPA had reason to believe that
Buckeye was a PRP under CERCLA regarding certain hazardous substances located
at a former waste processing/management facility located in Niagara Falls, New
York known as the Frontier Chemical Superfund Site. Buckeye is one of several
hundred parties that have been informed by EPA that they are potential PRPs in
connection with the site. In its notification letter, EPA requested the PRPs to
refund approximately $376,000 in costs already incurred by EPA in connection
with the management of the site, and to fund the clean-up and removal of
certain alleged hazardous materials contained in drums and liquid waste holding
tanks at the site. The estimated cost of the removal activity has been
estimated by EPA at approximately $4,700,000. In addition, EPA noted that
certain subsequent clean-up activities may be required at the site, but that
such work would be the subject of a future letter to the PRPs and would be
addressed under a separate administrative order. Buckeye has entered into a PRP
Group Participation Agreement with other PRPs in order to facilitate a joint
approach to EPA and to the clean-up of the site. Buckeye believes that it is,
at most, a de minimis contributor of

13
<PAGE>

waste to the site. Although the cost of the ultimate remediation of the site
cannot be determined at this time, Buckeye expects that its liability, if any,
will not be material.

In July 1994, Buckeye was named as a defendant in an action filed by the
Michigan Department of Natural Resources ("MDNR") in Circuit Court, Oakland
County, Michigan. The complaint also names three individuals and three other
corporations as defendants. The complaint alleges that under the Michigan
Environmental Response Act, the Michigan Water Resource Commission Act and the
Leaking Underground Storage Tank Act, the defendants are liable to the state of
Michigan for remediation expenses in connection with alleged groundwater
contamination in the vicinity of Sable Road, Oakland County, Michigan. The
complaint asserts that contaminated groundwater has infiltrated drinking water
wells in the area. The complaint seeks past response costs in the amount of
approximately $1.2 million and a declaratory judgment that the defendants are
liable for future response costs and remedial activities at the site. Buckeye
believes that its pipeline in the vicinity of the contaminated groundwater has
not been a source of the contaminants and that Buckeye has no responsibility
with respect to past or future clean-up costs at the site. Buckeye's liability,
if any, cannot be estimated at this time.

In July 1994, Buckeye was named as a defendant in an action entitled Waste
Management Inc., et. al. v. Aerospace America, Inc., et. al. filed in the
United States District Court for the Eastern District of Michigan. One of the
plaintiffs, SCA Services, Inc. ("SCA"), entered into a consent order with the
state of Michigan in 1980, pursuant to which SCA agreed to remedy a portion of
a Superfund site known as the Hartley & Hartley landfill located in Kawkawlin,
Bay County, Michigan. In the pending action, plaintiffs are seeking
contributions from Buckeye and over 100 other defendants of approximately $5.7
million in response costs alleged to have been incurred to date and for future
response and remediation costs that may be incurred in connection with future
remediation at the site. Plaintiffs' claim against Buckeye is purportedly
brought pursuant to the provisions of CERCLA. Buckeye believes that it is, at
most, a de minimis contributor of wastes to the site. Although the cost of the
ultimate remediation of the site cannot be determined at this time, Buckeye
expects that its liability, if any, will not be material.

Additional claims for the cost of cleaning up releases of hazardous
substances and for damage to the environment resulting from the activities of
the Operating Partnerships or their predecessors may be asserted in the future
under various federal and state laws, but the amount of such claims or the
potential liability, if any, cannot be estimated. See "Business--Regulation--
Environmental Matters."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the holders of LP Units during the
fourth quarter of the fiscal year ended December 31, 1994.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S LP UNITS AND RELATED UNITHOLDER MATTERS

The LP Units of the Partnership are listed and traded principally on the New
York Stock Exchange. The high and low sales prices of the LP Units in 1994 and
1993, as reported on the New York Stock Exchange Composite Tape, were as
follows:

<TABLE>
<CAPTION>
1994 1993
------------- -------------
QUARTER HIGH LOW HIGH LOW
- - ------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
First............................................... 41 35 1/2 35 1/2 28 3/4
Second.............................................. 39 1/4 35 1/4 36 7/8 32 1/4
Third............................................... 37 3/4 35 1/2 38 33 1/8
Fourth.............................................. 37 1/2 30 7/8 41 5/8 36 1/2
</TABLE>

14
<PAGE>

During the months of December 1994 and January 1995, the Partnership
gathered tax information from its known LP Unitholders and from
brokers/nominees. Based on the information collected, the Partnership
estimates its number of beneficial LP Unitholders to be approximately 18,000.

Cash distributions paid quarterly during 1993 and 1994 were as follows:

<TABLE>
<CAPTION>
RECORD DATE PAYMENT DATE AMOUNT PER UNIT
- - ----------- ------------ ---------------
<S> <C> <C>
February 8, 1993............................. February 26, 1993 $0.65
May 7, 1993.................................. May 28, 1993 $0.65
August 6, 1993............................... August 31, 1993 $0.65
November 8, 1993............................. November 30, 1993 $0.65
February 8, 1994............................. February 28, 1994 $0.70
May 6, 1994.................................. May 31, 1994 $0.70
August 8, 1994............................... August 31, 1994 $0.70
November 8, 1994............................. November 30, 1994 $0.70
</TABLE>

In general, the Partnership makes quarterly cash distributions of
substantially all of its available cash less such retentions for working
capital, anticipated expenditures and contingencies as the General Partner
deems appropriate.

On February 1, 1995, the Partnership announced a quarterly distribution of
$0.70 per LP Unit payable on February 28, 1995.

15
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth, for the period and at the dates indicated,
the Partnership's income statement and balance sheet data for the years ended
December 31, 1994, 1993, 1992, 1991 and 1990. The tables should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Report.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue......................... $186,338 $175,495 $163,064 $151,828 $159,253
Depreciation and amortization... 11,203 11,002 10,745 10,092 9,971
Operating income................ 72,481 66,851 63,236 58,452 63,863
Interest and debt expense....... 24,931 25,871 27,452 27,502 28,767
Income from continuing opera-
tions before extraordinary
charge and cumulative effect of
change in accounting principle. 48,086 41,654 34,546 30,465 34,312
Net income...................... 45,817 39,366 9,002 30,465 15,200
Income per Unit from continuing
operations before extraordinary
charge and cumulative effect of
change in accounting principle. 3.96 3.44 2.85 2.51 2.83
Net income per Unit............. 3.77 3.25 0.74 2.51 1.25
Distributions per Unit.......... 2.80 2.60 2.60 2.60 2.60
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets..................... $534,765 $543,493 $533,143 $545,281 $551,888
Long-term debt................... 214,000 224,000 225,000 242,500 260,000
General Partner's capital........ 2,460 2,338 2,259 2,521 2,531
Limited Partners' capital........ 243,516 231,357 223,585 249,533 250,573
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following is a discussion of the liquidity and capital resources and the
results of operations of the Partnership for the periods indicated below.
Amounts in the Management's Discussion and Analysis of Financial Condition and
Results of Operations relate to continuing operations unless otherwise
indicated. This discussion should be read in conjunction with the consolidated
financial statements and notes thereto, which are included elsewhere in this
Report.

RESULTS OF OPERATIONS

Through its Operating Partnerships, the Partnership is principally engaged in
the transportation of refined petroleum products including gasoline, jet fuel,
diesel fuel, heating oil and kerosene. The Partnership's revenues are
principally a function of the volumes of refined petroleum products transported
by the Partnership, which are in turn a function of the demand for refined
petroleum products in the regions served by the Partnership's pipelines and the
tariffs or transportation fees charged for such transportation. Results of
operations are affected by factors which include competitive conditions, demand
for products transported, seasonality and regulation. See "Business--
Competition and Other Business Considerations."

16
<PAGE>

1994 Compared With 1993

Revenue for the year ended December 31, 1994 was $186.3 million, $10.8
million, or 6.2 percent greater than revenue of $175.5 million for 1993. Volume
delivered during 1994 averaged 1,028,800 barrels per day, 47,700 barrels per
day or 4.9 percent greater than volume of 981,100 barrels per day delivered in
1993. Greater revenue in 1994 was related to increased gasoline and distillate
deliveries and to the effect of tariff rate increases (see "Tariff Changes"
below). Gasoline volumes increased primarily due to higher end-use demand in
response to continued economic recovery and moderate growth in market share.
Higher distillate shipments were the result of increased demand due to colder
weather early in the year and the effect of carrying two distillate
inventories, both high and low sulfur product, as required by Clean Air Act
regulations that became effective in October 1993. Turbine fuel shipments
increased slightly due to market demand growth at major airports.

Costs and expenses during 1994 were $113.9 million, $5.3 million or 4.9
percent greater than costs and expenses of $108.6 million during 1993.
Categories of increased expenses included payroll and employee benefits,
maintenance services, power, supplies and casualty loss. A significant portion
of these increased expenses were directly related to the transportation of
additional volume. In addition, costs incurred in connection with environmental
remediation activities were $2.9 million greater than the prior year. See
"Environmental Matters."

Other income (expenses) consist of interest income, interest and debt
expense, and minority interests and other. Net reductions in debt, plus
refinancing of debt at lower interest rates, resulted in a decline in interest
expense of $0.9 million from 1993 levels.

1993 Compared With 1992

Revenue for the year ended December 31, 1993 was $175.5 million, $12.5
million, or 7.7 percent greater than revenue of $163.0 million for 1992. Volume
delivered during 1993 averaged 981,100 barrels per day, 67,900 barrels per day
or 7.4 percent greater than volume of 913,200 barrels per day delivered in
1992. Greater revenue in 1993 was related to increased gasoline, distillate and
turbine fuel deliveries and to the effect of tariff rate increases implemented
in July 1992 and August 1993. Gasoline and distillate volume increases were due
primarily to higher end-use demand in response to moderate economic recovery
and a return to normal winter temperatures. In addition, 1993 volume improved
as a result of new business captured from barge and other pipelines, a decline
in Canadian imports to upstate New York and extended refinery maintenance
activities that required transportation of additional refined products into the
Partnership's service areas. Increased turbine fuel volume was due to a
moderate improvement in domestic and international air travel and continued
growth in air cargo business.

Costs and expenses during 1993 were $108.6 million, $8.8 million or 8.8
percent greater than costs and expenses of $99.8 million during 1992.
Categories of increased expenses included payroll and employee benefits,
maintenance services, power and supplies. A significant portion of these
increased expenses were directly related to the transportation of additional
volume and related maintenance activities.

Other income (expenses) consist of interest income, interest and debt
expense, and minority interests and other. Interest and debt expense of $25.9
million in 1993 was $1.6 million less than interest and debt expense of $27.5
million in 1992 reflecting lower debt outstanding following payment of $16.3
million of Series E First Mortgage Notes in December 1992.

Tariff Changes

In November 1994, July 1993 and June 1992, Buckeye filed proposed changes in
certain tariff rates that represented, on average, increases of 0.4 percent,
1.4 percent and 3.0 percent, respectively.

17
<PAGE>

The November 1994, July 1993 and June 1992 changes were projected to generate
approximately $0.4 million, $1.5 million and $4.0 million in additional revenue
per year, respectively. Each of these proposed changes became effective during
the month after they were filed.

Change in Accounting Principle

In December 1992, the Partnership adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" ("SFAS 106") effective as of January 1, 1992. As a result, the
Partnership recorded a one-time, non-cash charge of $25.5 million as of the
first quarter of 1992 to reflect the cumulative effect of the change in
accounting principle for periods prior to 1992. In addition, quarterly results
for 1992 were restated to reflect an additional $1.5 million, or approximately
$0.4 million per quarter, in related operating expenses throughout the year.

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's financial condition at December 31, 1994, 1993 and 1992 is
highlighted in the following comparative summary:

Liquidity and Capital Indicators

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Current ratio...................................... 1.2 to 1 1.1 to 1 0.9 to 1
Ratio of cash and temporary investments and trade
receivables to current liabilities................ 1.0 to 1 1.0 to 1 0.8 to 1
Working capital (deficiency) (in thousands)........ $ 5,750 $ 5,709 $ (4,548)
Ratio of total debt to total capital............... .46 to 1 .50 to 1 .51 to 1
Book value (per Unit).............................. $ 20.27 $ 19.28 $ 18.63
</TABLE>

Cash Provided by Operations

During 1994, cash provided by operations of $58.1 million was derived
principally from $48.1 million of income from continuing operations before an
extraordinary charge and $11.2 million of depreciation. Operating working
capital decreased by $0.7 million. Increases in accrued and other current
liabilities, trade receivables, temporary investments and prepaid and other
current assets account for the majority of the change. Remaining cash uses,
totaling $0.5 million, were related to an extraordinary charge on early
extinguishment of debt of $2.3 million, changes in minority interests and
changes in other non-current liabilities.

During 1993, cash provided by operations of $52.9 million was derived
principally from $41.7 million of income from continuing operations before an
extraordinary charge, $11.0 million of depreciation and $3.7 million of
operating working capital changes. Operating working capital changes relate to
a decrease in trade receivables and an increase in accrued and other current
liabilities. Remaining cash uses, totaling $3.5 million, were related to an
extraordinary charge on early extinguishment of debt of $2.2 million and
changes in minority interests and other non-current liabilities.

During 1992, cash provided by operations of $52.2 million was derived
principally from $34.5 million of income from continuing operations before the
cumulative effect of a change in accounting principle, $10.7 million of
depreciation and $3.5 million of changes in operating working capital. Other
net cash sources, totaling $3.5 million, were largely provided by discontinued
operations and an increase in other non-current liabilities.

18
<PAGE>

Debt Obligation and Credit Facilities

The indenture pursuant to which the First Mortgage Notes were issued (the
"Mortgage Note Indenture") was amended in March 1994 by a Fourth Supplemental
Indenture to permit Buckeye to issue additional First Mortgage Notes from time
to time under certain circumstances; so long as the aggregate principal amount
of First Mortgage Notes outstanding after any such issuance does not exceed
$275 million.

At December 31, 1994, the Partnership had $214.0 million in outstanding
current and long-term debt representing the First Mortgage Notes of Buckeye
which does not include $45.0 million in First Mortgage Notes which had been
retired by in-substance defeasance. The First Mortgage Notes are collateralized
by substantially all of Buckeye's currently existing and after acquired
property, plant and equipment. Debt outstanding at December 31, 1994 includes
$15 million of additional First Mortgage Notes, Series N, bearing interest at a
rate of 7.93 percent. The First Mortgage Notes, Series N, were issued on April
11, 1994 and are due December 2010. Current and long-term debt excludes $20
million of 9.72 percent First Mortgage Notes, Series I, due December 1996,
which were retired by an in-substance defeasance with the proceeds of the
Series N First Mortgage Notes and an additional defeasance of $5 million in
December 1994. Also excluded from long-term debt is $5 million of 11.18 percent
First Mortgage Notes, Series J, which were retired by an in-substance
defeasance in December 1994. Total debt due beyond 1994 that was retired by an
in-substance defeasance during 1994 amounted to $25 million with total new debt
issued during 1994 of $15.0 million. During 1994, the Partnership also paid $16
million of principal on the First Mortgage Notes, Series G, that became due in
December 1994.

At December 31, 1993, the Partnership had $240.0 million in outstanding
current and long-term debt representing the First Mortgage Notes of Buckeye
which does not include $20.0 million in First Mortgage Notes which had been
retired by in-substance defeasance. Debt outstanding at 1993 year end included
$35 million of additional First Mortgage Notes (Series K, L and M) bearing
interest rates from 7.11 percent to 7.19 percent which were issued on January
7, 1994 in accordance with an agreement entered into on December 31, 1993 and
excluded $20 million of 9.50 percent First Mortgage Notes, Series H, due
December 1995 that were retired by an in-substance defeasance with a portion of
the proceeds from such additional First Mortgage Notes. During 1993, the
Partnership paid $17.5 million of principal on the First Mortgage Notes, Series
F, that became due in December 1993. In December 1993, Buckeye entered into an
agreement with the purchaser of the $35 million of additional First Mortgage
Notes which permits Buckeye, under certain circumstances, to issue up to $40
million of additional First Mortgage Notes to such purchaser.At December 31,
1994, Buckeye has the capacity to borrow up to $25.0 million of additional
First Mortgage Notes under this agreement.

The Partnership has a $15 million unsecured short-term revolving credit
facility with a commercial bank. This facility, which has options to extend
borrowings through September 1999, is available to the Partnership for general
purposes, including capital expenditures and working capital. In addition,
Buckeye has a $10 million short-term line of credit secured by accounts
receivable. Laurel has an unsecured $1 million line of credit. At December 31,
1994, there were no outstanding borrowings under these facilities.

The ratio of total debt to total capital was 46 percent, 50 percent, and 51
percent at December 31, 1994, 1993 and 1992, respectively. For purposes of the
calculation of this ratio, total capital consists of current and long-term
debt, minority interests and partners' capital.

Cash Distributions

Pursuant to the Mortgage Note Indenture, cash distributions by Buckeye to the
Partnership cannot exceed Net Cash Available to Partners (generally defined to
equal net income plus

19
<PAGE>

depreciation and amortization less (a) capital expenditures funded from
operating cash flows, (b) payments of principal of debt and (c) certain other
amounts, all on a cumulative basis since the formation of the Partnership). The
maximum amount available for distribution by Buckeye to the Partnership under
the formula as of December 31, 1994 amounted to $11.0 million. The Partnership
is also entitled to receive cash distributions from Everglades, BTT and Laurel.

Capital Expenditures

At December 31, 1994, property, plant and equipment was approximately 94
percent of total consolidated assets. This compares to 92 percent and 93
percent for the years ended December 31, 1993 and 1992, respectively. Capital
expenditures are generally for expansion of the Operating Partnerships' service
capabilities and sustaining the Operating Partnerships' existing operations.

Capital expenditures by the Partnership were $15.4 million, $13.3 million and
$10.8 million for 1994, 1993 and 1992, respectively. Projected capital
expenditures for 1995 amount to $14.9 million. Planned capital expenditures
include, among other things, tanks to accommodate specific new business
opportunities, renewal and replacement of pipe and station facilities, new
valves, metering systems, field instrumentation, communication facilities and
testing equipment. Capital expenditures are expected to increase over time
primarily in response to increasingly rigorous governmental safety and
environmental requirements as well as industry standards.

Environmental Matters

The Operating Partnerships are subject to federal and state laws and
regulations relating to the protection of the environment. These regulations,
as well as the Partnership's own standards relating to protection of the
environment, cause the Operating Partnerships to incur current and ongoing
operating and capital expenditures. During 1994, the Operating Partnerships
incurred operating expenses of $5.9 million and capital expenditures of $4.3
million related to environmental matters. Capital expenditures of $4.5 million
for environmental related projects are included in the Partnership's plans for
1995. Expenditures, both capital and operating, relating to environmental
matters are expected to increase due to the Partnership's commitment to
maintain high environmental standards and to increasingly rigorous
environmental laws.

Certain Operating Partnerships (or their predecessors) have been named as a
defendant in lawsuits or have been notified by federal or state authorities
that they are a PRP under federal laws or a respondent under state laws
relating to the generation, disposal, or release of hazardous substances into
the environment. These proceedings generally relate to potential liability for
clean-up costs. The total potential remediation costs to be borne by the
Operating Partnerships relating to these clean-up sites cannot be reasonably
estimated and could be material. With respect to each site, however, the
Operating Partnership involved is one of several or as many as several hundred
PRPs that would share in the total costs of clean-up under the principle of
joint and several liability. The General Partner believes that the generation,
handling and disposal of hazardous substances by the Operating Partnerships and
their predecessors have been in material compliance with applicable
environmental and regulatory requirements.

At the Whitmoyer Laboratories site in Myerstown, Pennsylvania, Buckeye is one
of several PRPs for a clean-up estimated to cost approximately $125 million.
However, in 1992, EPA entered into an agreement with the estate of one of the
PRPs to recover a portion of EPA's past costs and a Consent Decree with the two
PRPs that were former owners of Whitmoyer Laboratories to assume the cost of
clean-up at the site and to reimburse EPA for future response costs and a
portion of its past response costs. These two PRPs have instituted suit against
each other to determine their relative responsibility for the Whitmoyer
Laboratories site clean-up. One of the PRPs served a third-party complaint
against Buckeye for the stated purpose of tolling the statute of limitations to

20
<PAGE>

preserve its rights, if any, against Buckeye. Buckeye subsequently settled the
third-party complaint that had been filed against it. In consideration of
mutual releases and the PRP's agreement to cleanup Buckeye's portion of the
site, Buckeye agreed to remove its booster pump station, to reroute its
pipeline around the site and to reimburse the PRP for the cost of removing the
original pipeline, if such removal is required by EPA. Buckeye has not entered
into any agreements with the EPA or the other PRP involved at the site, and
Buckeye has not waived any rights to recover for any claim arising out of the
PRP's activities at the site or any claims brought by any governmental agency
or third party based upon environmental conditions at the site. Although the
exact costs of the settlement are not known, Buckeye estimates at this time
that the costs of complying with the terms of the settlement agreement will be
between $1 million and $2 million.

Buckeye has worked with the U.S. Coast Guard and other federal, state and
local agencies since October 15, 1994 to remedy the environmental consequences
of a pipeline release in New Haven, Connecticut. Product released from one of
Buckeye's pipelines contaminated the groundwater in the area and, for a short
period of time, discharged into the Quinnipiac River. Buckeye replaced
approximately 2,000 feet of pipe in the area of the release site and presently
has in place facilities to remedy groundwater contamination associated with the
release. Although it is possible that costs related to this incident could
increase to a level which would materially effect the Partnership's results of
operations for a future period, the General Partner does not believe, based
upon information currently available, that costs arising out of this event will
have a material adverse effect on the Partnership's consolidated financial
condition or annual results of operations. During 1994, Buckeye paid claims and
other charges in the amount of $1.4 million and made capital expenditures of
$0.5 million related to this incident.

In March 1990, a landslide near Freeport, Pennsylvania caused a rupture to
one of Buckeye's pipelines which resulted in the release of approximately
58,000 gallons of petroleum products. During 1994, Buckeye paid claims and
other charges related to this incident in the amount of $0.3 million.
Substantially all of this amount has been reimbursed by Buckeye's insurance
carriers. Buckeye is unable to estimate the total amount of environmental
clean-up and other costs and liabilities that may be incurred in connection
with this incident. However, based on information currently available to it,
Buckeye believes that its net expense after insurance recoveries will not be
material to its financial condition or results of operations. See "Legal
Proceedings--Freeport Landslide."

Various claims for the cost of cleaning up releases of hazardous substances
and for damage to the environment resulting from the activities of the
Operating Partnerships or their predecessors have been asserted and may be
asserted in the future under various federal and state laws. Although the
Partnership has made a provision for certain legal expenses relating to these
matters, the General Partner is unable to determine the timing or outcome of
any pending proceedings or of any future claims and proceedings. See
"Business--Regulation--Environmental Matters" and "Legal Proceedings."

Discontinued Operations

In the fourth quarter of 1990, the Partnership recorded a non-cash charge to
earnings of $19.1 million, net of estimated earnings during phase-out, relating
to the Partnership's decision to discontinue its 16-inch crude oil pipeline and
a refined products terminal. The Partnership closed the sale of the 16-inch
crude oil pipeline, together with associated real and personal property to Sun
Pipe Line Company on February 1, 1993. Proceeds from the sale amounted to $9.2
million. Remaining discontinued operations consisting of petroleum facilities
at a refined products terminal were dismantled and removed during the first
quarter 1993. Disposal of these discontinued operations resulted in a loss of
$127,000 in 1993.

21
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BUCKEYE PARTNERS, L.P.

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
Financial Statements and Independent Auditors' Report:
Independent Auditors' Report..................................... 23
Consolidated Statements of Income--For the years ended December
31, 1994, 1993 and 1992......................................... 24
Consolidated Balance Sheets--December 31, 1994 and 1993.......... 25
Consolidated Statements of Cash Flows--For the years ended Decem-
ber 31, 1994, 1993 and 1992..................................... 26
Notes to Consolidated Financial Statements....................... 27
Financial Statement Schedules and Independent Auditors' Report:
Independent Auditors' Report..................................... S-1
Schedule I--Registrant's Condensed Financial Statements.......... S-2
Schedule II--Valuation and Qualifying Accounts--For the years
ended December 31, 1994, 1993 and 1992.......................... S-3
</TABLE>

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

22
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Partners of Buckeye Partners, L.P.:

We have audited the accompanying consolidated balance sheets of Buckeye
Partners, L.P. and its subsidiaries (the "Partnership") as of December 31, 1994
and 1993, and the related consolidated statements of income and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Partnership as of December 31, 1994 and 1993, and the results of its operations
and cash flows for each of the three years in the period ended December 31,
1994 in conformity with generally accepted accounting principles.

As discussed in Note 10 to the consolidated financial statements, in 1992 the
Partnership changed its method of accounting for postretirement benefits other
than pensions to conform with Statement of Financial Accounting Standards
Number 106.

Deloitte & Touche

Philadelphia, Pennsylvania
January 27, 1995

23
<PAGE>

BUCKEYE PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
NOTES 1994 1993 1992
----- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue.................................... 2 $186,338 $175,495 $163,064
-------- -------- --------
Costs and expenses
Operating expenses....................... 3,13 92,097 87,029 79,111
Depreciation and amortization............ 2 11,203 11,002 10,745
General and administrative expenses...... 13 10,557 10,613 9,972
-------- -------- --------
Total costs and expenses............... 113,857 108,644 99,828
-------- -------- --------
Operating income........................... 72,481 66,851 63,236
-------- -------- --------
Other income (expenses)
Interest income.......................... 1,465 919 960
Interest and debt expense................ (24,931) (25,871) (27,452)
Minority interests and other............. (929) (245) (129)
-------- -------- --------
Total other income (expenses).......... (24,395) (25,197) (26,621)
-------- -------- --------
Income from continuing operations before
income taxes.............................. 48,086 41,654 36,615
Provision for income taxes................. 2 -- -- (2,069)
-------- -------- --------
Income from continuing operations before
extraordinary charge and cumulative effect
of change in accounting principle......... 48,086 41,654 34,546
Loss from discontinued operations.......... 5 -- (127) --
Extraordinary charge on early
extinguishment of debt.................... 11 (2,269) (2,161) --
Cumulative effect of change in accounting
principle................................. 10 -- -- (25,544)
-------- -------- --------
Net income................................. $ 45,817 $ 39,366 $ 9,002
======== ======== ========
Net income allocated to General Partner.... 14 $ 458 $ 394 $ 90
Net income allocated to Limited Partners... 14 $ 45,359 $ 38,972 $ 8,912
Income allocated to General and Limited
Partners per Partnership Unit:
Income from continuing operations before
extraordinary charge and cumulative
effect of change in accounting
principle............................... $ 3.96 $ 3.44 $ 2.85
Loss from discontinued operations........ -- (.01) --
Extraordinary charge on early extinguish-
ment of debt............................ (.19) (.18) --
Cumulative effect of change in accounting
principle............................... -- -- (2.11)
-------- -------- --------
Net income............................... $ 3.77 $ 3.25 $ 0.74
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

24
<PAGE>

BUCKEYE PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
NOTES 1994 1993
----------- -------- --------
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents..................... 2 $ 6,071 $ 22,748
Temporary investments......................... 2 1,400 250
Trade receivables............................. 2 17,057 15,341
Inventories................................... 2 1,320 1,174
Prepaid and other current assets.............. 5,474 4,445
-------- --------
Total current assets........................ 31,322 43,958
Property, plant and equipment, net.............. 2,4 503,083 499,075
Other non-current assets........................ 360 460
-------- --------
Total assets................................ $534,765 $543,493
======== ========
Liabilities and partners' capital
Current liabilities
Current portion of long-term debt............. 7 $ -- $ 16,000
Accounts payable.............................. 2,325 2,562
Accrued and other current liabilities......... 3,6,9,10,13 23,247 19,687
-------- --------
Total current liabilities................... 25,572 38,249
Long-term debt.................................. 7,11 214,000 224,000
Minority interests.............................. 2,616 2,492
Other non-current liabilities................... 3,8,9,10,13 46,601 45,057
Commitments and contingent liabilities.......... 3 -- --
-------- --------
Total liabilities........................... 288,789 309,798
Partners' capital................................. 14
General Partner................................. 2,460 2,338
Limited Partners................................ 243,516 231,357
-------- --------
Total partners' capital..................... 245,976 233,695
-------- --------
Total liabilities and partners' capital..... $534,765 $543,493
======== ========
</TABLE>

See notes to consolidated financial statements.

25
<PAGE>

BUCKEYE PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
NOTES 1994 1993 1992
----- -------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations before
extraordinary charge and cumulative
effect of change in accounting principle. $ 48,086 $ 41,654 $ 34,546
-------- -------- --------
Adjustments to reconcile income to net
cash provided by operating activities:
Extraordinary charge on early
extinguishment of debt................. (2,269) (2,161) --
Depreciation and amortization........... 11,203 11,002 10,745
Minority interests...................... 469 145 29
Distributions to minority interests..... (345) (532) (345)
Change in assets and liabilities:
Temporary investments.................. (1,150) (250) --
Trade receivables...................... (1,716) 1,497 (1,834)
Inventories............................ (146) (153) 333
Prepaid and other current assets....... (1,029) (1,189) 2,894
Accounts payable....................... (237) 1,378 203
Accrued and other current liabilities
(a)................................... 3,560 2,394 1,863
Other non-current assets............... 100 -- (200)
Other non-current liabilities (a)...... 1,544 (1,043) 1,313
-------- -------- --------
Total adjustments from continuing
operating activities.................. 9,984 11,088 15,001
-------- -------- --------
Net cash provided by continuing
operating activities................... 58,070 52,742 49,547
Net cash provided by discontinued
operations (b)......................... 5 -- 206 2,660
-------- -------- --------
Net cash provided by operating
activities............................ 58,070 52,948 52,207
-------- -------- --------
Cash flows from investing activities:
Capital expenditures...................... (15,364) (13,328) (10,789)
Proceeds from sale of net assets of
discontinued operations.................. 5 -- 9,200 --
Net proceeds from (expenditures for)
disposal of property, plant and
equipment................................ 153 (1,810) 713
-------- -------- --------
Net cash used in investing activities.. (15,211) (5,938) (10,076)
-------- -------- --------
Cash flows from financing activities:
Capital contribution...................... 4 -- --
Proceeds from exercise of unit options.... 428 -- --
Proceeds from issuance of long-term debt.. 7 15,000 35,000 --
Payment of long-term debt................. 7 (41,000) (37,500) (16,250)
Distributions to Unitholders.............. 14,15 (33,968) (31,515) (31,515)
Increase in minority interests............ -- -- 555
-------- -------- --------
Net cash used in financing activities.. (59,536) (34,015) (47,210)
-------- -------- --------
Net (decrease) increase in cash and cash
equivalents............................... 2 (16,677) 12,995 (5,079)
Cash and cash equivalents at beginning of
year...................................... 2 22,748 9,753 14,832
-------- -------- --------
Cash and cash equivalents at end of year... $ 6,071 $ 22,748 $ 9,753
======== ======== ========
Supplemental cash flow information:
Cash paid during the year for interest
(net of amount capitalized).............. $ 24,947 $ 26,169 $ 27,398
Non-cash effect of change in accounting
principle................................ 10 -- -- 25,544
Non-cash changes in property, plant and
equipment................................ -- 602 --
(a) Non-cash changes in accrued and other
liabilities............................... -- 3,173 10,437
(b) Non-cash changes in discontinued
operations................................ -- 3,259 2,537
</TABLE>

See notes to consolidated financial statements.

26
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993 AND
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

1. ORGANIZATION

Buckeye Partners, L.P. (the "Partnership") is a limited partnership organized
in 1986 under the laws of the state of Delaware. The Partnership owns 99
percent limited partnership interests in Buckeye Pipe Line Company, L.P.
("Buckeye"), Laurel Pipe Line Company, L.P. ("Laurel"), Everglades Pipe Line
Company, L.P. ("Everglades") and Buckeye Tank Terminals Company, L.P. ("BTT").
The foregoing entities are hereinafter referred to as the "Operating
Partnerships." Laurel owns a 98.01 percent limited partnership interest in
Buckeye Pipe Line Company of Michigan, L.P. ("BPL Michigan") which discontinued
operations in 1993 (see Note 5).

During December 1986, the Partnership sold 12,000,000 limited partnership
units ("LP Units") in a public offering representing an aggregate 99 percent
limited partnership interest in the Partnership. Concurrently, the Partnership
sold 121,212 units representing a 1 percent general partnership interest in the
Partnership ("GP Units") to Buckeye Management Company (the "General Partner"),
a wholly owned subsidiary of American Premier Underwriters, Inc. ("American
Premier"), formerly The Penn Central Corporation. The Partnership used the
proceeds from such sales to purchase from subsidiaries of American Premier the
99 percent limited partnership interests in the then existing Operating
Partnerships and an 83 percent stock interest in Laurel Pipe Line Company
("Laurel Corp"). In December 1991, the Partnership acquired the minority
interest in Laurel Corp. Laurel was formed in October 1992 and succeeded to the
operations of Laurel Corp. During 1994, the Partnership issued an additional
16,060 limited partnership units and 162 general partnership units under its
Unit Option and Distribution Equivalent Plan. At December 31, 1994, there were
12,016,060 limited partnership units and 121,374 general partnership units
outstanding (see Note 14 and Note 16).

A subsidiary of the General Partner, Buckeye Pipe Line Company (the
"Manager"), owns a 1 percent general partnership interest in, and serves as
sole general partner and manager of, each Operating Partnership. The Manager
also owns a 1 percent general partnership interest and a 0.99 percent limited
partnership interest in BPL Michigan.

The Partnership maintains its accounts in accordance with the Uniform System
of Accounts for Pipeline Companies, as prescribed by the Federal Energy
Regulatory Commission ("FERC"). Reports to FERC differ from the accompanying
consolidated financial statements, which have been prepared in accordance with
generally accepted accounting principles, generally in that such reports
calculate depreciation over estimated useful lives of the assets as prescribed
by FERC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements of the Partnership have been prepared
using the purchase method of accounting. An allocation of the purchase price to
the net assets acquired was made on their relative fair market values as
appraised. The financial statements include the accounts of the Operating
Partnerships on a consolidated basis. All significant intercompany transactions
have been eliminated in consolidation.

Financial Instruments

The fair value of financial instruments is determined by reference to various
market data and other valuation techniques as appropriate. Unless otherwise
disclosed, the fair values of financial instruments approximate their recorded
values (see Note 7).

27
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Cash and Cash Equivalents

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

Temporary Investments

In accordance with Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities," all
temporary investments are considered to be trading securities. The aggregate
market value of temporary investments approximates cost as of December 31,
1994. The adoption of SFAS 115 did not have a material effect on the
Partnership's net income for the year ended December 31, 1994.

Revenue Recognition

Substantially all revenue is derived from interstate and intrastate
transportation of petroleum products. Such revenue is recognized as products
are delivered to customers. Such customers are major integrated oil companies,
major refiners and large regional marketing companies. While the consolidated
Partnership's continuing customer base numbers approximately 120, no customer
during 1994 contributed more than 10 percent of total revenue. The Partnership
does not maintain an allowance for doubtful accounts.

Inventories

Inventories, consisting of materials and supplies, are carried at cost which
does not exceed realizable value.

Property, Plant and Equipment

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

Income Taxes

For federal and state income tax purposes, the Partnership and Operating
Partnerships are not taxable entities. Accordingly, the taxable income or loss
of the Partnership and Operating Partnerships, which may vary substantially
from income or loss reported for financial reporting purposes, is generally
includable in the federal and state income tax returns of the individual
partners. In October 1992 (see Note 1), Laurel Corp and its parent LE Holdings,
Inc. ("LEH") were merged into Laurel. Laurel Corp and its parent, LEH, as
corporations, had been separate taxpaying entities whose taxable income was
included in a consolidated federal income tax return. As a result of the
merger, the then existing deferred income taxes of $3,697,000 were charged
directly to the Partnership's capital accounts. The provision for federal
income taxes on operations of Laurel Corp and LEH prior to the merger
approximates the statutory tax rate applied to the pretax accounting income. As
of December 31, 1994, the Partnership's reported amount of net assets for
financial reporting purposes exceeded its tax basis by approximately $179
million.

Environmental Expenditures

Environmental expenditures that relate to current or future revenues are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations, and do not contribute to current or future
revenue generation, are expensed. Liabilities

28
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
are recorded when environmental assessments and/or clean-ups are probable, and
the costs can be reasonably estimated. Generally, the timing of these accruals
coincides with the Partnership's commitment to a formal plan of action.

Pensions

The Manager maintains a defined contribution plan and a defined benefit plan
(see Note 9) which provide retirement benefits to substantially all of its
regular full-time employees. Certain hourly employees of the Manager are
covered by a defined contribution plan under a union agreement.

Postretirement Benefits Other Than Pensions

The Manager provides postretirement health care and life insurance benefits
for certain of its retirees. In 1992, the Manager adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106") (see Note 10) to
account for the cost of these plans. Certain other retired employees are
covered by a health and welfare plan under a union agreement.

Reclassifications

Certain amounts in the consolidated financial statements for the periods
prior to 1994 have been reclassified to conform to the current presentation.

3. CONTINGENCIES

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

Environmental

In accordance with its accounting policy on environmental expenditures, the
Partnership recorded expenses of $5.9 million, $3.0 million and $3.1 million
for 1994, 1993 and 1992, respectively, which were related to the environment.
Expenditures, both capital and operating, relating to environmental matters are
expected to increase due to the Partnership's commitment to maintain high
environmental standards and to increasingly strict environmental laws and
government enforcement policies.

Certain Operating Partnerships (or their predecessors) have been named as a
defendant in lawsuits or have been notified by federal or state authorities
that they are a potentially responsible party ("PRP") under federal laws or a
respondent under state laws relating to the generation, disposal, or release of
hazardous substances into the environment. These proceedings generally relate
to potential liability for clean-up costs. The total potential remediation
costs relating to these clean-up sites cannot be reasonably estimated. With
respect to each site, however, the Operating Partnership involved is one of
several or as many as several hundred PRPs that would share in the total costs
of clean-up under the principle of joint and several liability. The General
Partner believes

29
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

that the generation, handling and disposal of hazardous substances by the
Operating Partnerships and their predecessors have been in material compliance
with applicable environmental and regulatory requirements. Additional claims
for the cost of cleaning up releases of hazardous substances and for damage to
the environment resulting from the activities of the Operating Partnerships or
their predecessors may be asserted in the future under various federal and
state laws. Although the Partnership has made a provision for certain legal
expenses relating to these matters, the General Partner is unable to determine
the timing or outcome of any pending proceedings or of any future claims and
proceedings.

Guaranteed Investment Contract

The Buckeye Pipe Line Company Retirement and Savings Plan (the "Plan") held a
guaranteed investment contract ("GIC") issued by Executive Life Insurance
Company ("Executive Life"), which entered conservatorship proceedings in the
state of California in April 1991. The GIC was purchased in July 1989, with an
initial principal investment of $7.4 million earning interest at an effective
rate per annum of 8.98 percent through June 30, 1992. As a result of the
conservatorship proceedings, no payment of principal or interest was made on
the maturity date. A Plan of Rehabilitation was approved by the Superior Court
of the state of California, and the Rehabilitation Plan was consummated on
September 3, 1993. Various policy holders and creditors have, however, appealed
certain aspects of the Plan of Rehabilitation, including the priority status of
entities such as the Plan which purchased GICs subsequent to January 1, 1989.
Pursuant to the Plan of Rehabilitation, the Plan has received an interest only
contract from Aurora National Life Assurance Company in substitution for its
Executive Life GIC. The contract provides for semi-annual interest payments at
a rate of 5.61 percent per annum through September 1998, the maturity date of
the contract. In addition, the Plan is to receive certain additional cash
payments, the amounts of which cannot be accurately estimated at this time,
over the next four years pursuant to the Plan of Rehabilitation. The timing and
amount of payment with respect to the GIC is dependent upon the outcome of the
pending appeals as well as clarification of various provisions of the
Rehabilitation Plan. In May 1991, the General Partner, in order to safeguard
the basic retirement and savings benefits of its employees, announced its
intention to enter an arrangement with the Plan that would guarantee that the
Plan would receive at least its initial principal investment of $7.4 million
plus interest at an effective rate per annum of 5 percent from July 1, 1989.
The General Partner's present intention is to effectuate its commitment no
later than September 1998, the maturity date of the Aurora contract. The costs
and expenses of the General Partner's employee benefit plans are reimbursable
by the Partnership under the applicable limited partnership and management
agreements. The General Partner believes that an adequate provision has been
made for costs which may be incurred by the Partnership in connection with the
guarantee.

30
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land...................................................... $ 10,189 $ 9,978
Buildings and leasehold improvements...................... 23,887 23,667
Machinery, equipment and office furnishings............... 514,287 511,590
Construction in progress.................................. 8,576 2,735
-------- --------
556,939 547,970
Less accumulated depreciation........................... 53,856 48,895
-------- --------
Total................................................... $503,083 $499,075
======== ========
</TABLE>

Depreciation expense was $11,203,000, $11,002,000 and $10,745,000 for the
years 1994, 1993 and 1992, respectively.

5. DISCONTINUED OPERATIONS

In the fourth quarter of 1990, the Partnership recorded a non-cash charge to
earnings of $19.1 million, net of estimated earnings during phase-out, relating
to the Partnership's decision to discontinue its 16-inch crude oil pipeline and
a refined products terminal. The Partnership closed the sale of the 16-inch
crude oil pipeline, together with associated real and personal property to Sun
Pipe Line Company on February 1, 1993. Proceeds from the sale amounted to $9.2
million. Remaining discontinued operations consisting of petroleum facilities
at the refined products terminal were dismantled and removed during the first
quarter 1993. Disposal of these discontinued operations resulted in a loss of
$127,000 in 1993.

6. ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Taxes -- other than income.................................. $ 7,557 $ 7,011
Accrued charges due Manager................................. 6,011 6,037
Accrued outside services.................................... 2,377 904
Environmental liabilities................................... 2,530 2,069
Interest.................................................... 969 958
Other....................................................... 3,803 2,708
------- -------
Total..................................................... $23,247 $19,687
======= =======
</TABLE>

31
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. LONG-TERM DEBT AND CREDIT FACILITIES

Long-term debt (excluding current maturities) consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
First Mortgage Notes
9.72% Series I due December 15, 1996.................... $ -- $ 20,000
11.18% Series J due December 15, 2006 (subject to $16.9
million annual sinking fund requirement commencing
December 15, 1997)..................................... 164,000 169,000
7.11% Series K due December 15, 2007.................... 11,000 11,000
7.15% Series L due December 15, 2008.................... 11,000 11,000
7.19% Series M due December 15, 2009.................... 13,000 13,000
7.93% Series N due December 15, 2010.................... 15,000 --
-------- --------
Total................................................. $214,000 $224,000
======== ========
</TABLE>

Maturities of debt outstanding at December 31, 1994 are as follows: None in
1995; none in 1996; $11,900,000 in 1997; $16,900,000 in 1998; $16,900,000 in
1999 and a total of $168,300,000 in the period 2000 through 2010.

In accordance with SFAS 107, "Disclosure about Fair Value of Financial
Instruments," the fair value of the Partnership's debt is estimated to be $221
million and $285 million as of December 31, 1994 and 1993, respectively. These
values were calculated using interest rates currently available to the
Partnership for issuance of debt with similar terms and remaining maturities.

The First Mortgage Notes are collateralized by a mortgage on and a security
interest in substantially all of the currently existing and after-acquired
property, plant and equipment (the "Mortgaged Property") of Buckeye.

The indenture pursuant to which the First Mortgage Notes were issued (the
"Mortgage Note Indenture"), as amended by Supplemental Indentures, contains
covenants which generally (a) limit the outstanding indebtedness of Buckeye
under the Mortgage Note Indenture at any time to $275 million plus up to $15
million of short-term borrowings for working capital purposes, (b) prohibit
Buckeye from creating or incurring additional liens on its property, (c)
prohibit Buckeye from disposing of substantially all of its property or
business to another party and (d) prohibit Buckeye from disposing of any part
of the Mortgaged Property unless the proceeds in excess of $1 million in a
fiscal year are available for reinvestment in assets subject to the lien of the
Mortgage Note Indenture.

In December 1993, Buckeye entered into an agreement to issue $35 million of
additional First Mortgage Notes in accordance with provisions under a Third
Supplemental Indenture and as permitted under the Mortgage Note Indenture.
These additional First Mortgage Notes, which were issued on January 7, 1994,
mature from 2007 to 2009 and bear interest at rates ranging from 7.11 percent
to 7.19 percent. A portion of the proceeds of these notes was used to complete
an in-substance defeasance of principal and interest with respect to Buckeye's
$20 million, 9.50 percent First Mortgage Notes (Series H) due December 1995
(see Note 11). Remaining proceeds of the additional notes were used for working
capital purposes. In addition, Buckeye entered into an agreement with the
purchaser of the $35 million of additional First Mortgage Notes which permitted
Buckeye, under certain circumstances, to issue up to $40 million of additional
First Mortgage Notes to such purchaser (the "Mortgage Note Facility").

32
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

During March 1994, Buckeye entered into an agreement with such purchaser to
issue $15 million of additional First Mortgage Notes under the Mortgage Note
Facility and in accordance with provisions under a Fourth and Fifth
Supplemental Indenture and the Mortgage Note Indenture. These additional First
Mortgage Notes mature in 2010 and bear interest at 7.93 percent. The proceeds
of these notes, plus additional cash of $1.6 million, were used to complete an
in-substance defeasance of principal and interest with respect to $15 million
of 9.72 percent First Mortgage Notes (Series I) due December 1996. In addition,
in December 1994, Buckeye completed an in-substance defeasance of $5 million of
Buckeye's 9.72 percent Series I First Mortgage Notes and $5 million of
Buckeye's 11.18 percent Series J First Mortgage Notes (see Note 11). As of
December 1994, Buckeye has the capacity to borrow up to $25 million of
additional First Mortgage Notes under the Mortgage Note Facility.

The Amended and Restated Agreement of Limited Partnership of the Partnership
(the "Partnership Agreement") contains certain restrictions which limit the
incurrence of any debt by the Partnership or any Operating Partnership to the
First Mortgage Notes, any additional debt of Buckeye permitted by the Mortgage
Note Indenture and other debt not in excess of an aggregate consolidated
principal amount of $25 million plus the aggregate proceeds from the sale of
additional partnership interests.

The Partnership maintains a $15 million unsecured revolving credit facility
with a commercial bank which is available to the Partnership for general
purposes, including capital expenditures and working capital. Interest on any
borrowings under this facility is calculated on the bank's Alternate Base Rate
("ABR") or LIBOR plus one percent. ABR is defined as the highest of the bank's
prime rate, the three month secondary CD rate plus one percent, and the Federal
Funds Rate plus one-half of one percent. At December 31, 1994, there was no
amount outstanding under this facility.

Buckeye has a line of credit from two commercial banks (the "Working Capital
Facility") which permits short-term borrowings of up to $10 million outstanding
at any time. Borrowings under the Working Capital Facility bear interest at
each bank's prime rate and are secured by the accounts receivable of Buckeye.
The Mortgage Note Indenture contains covenants requiring that, for a period of
45 consecutive days during any year, no indebtedness be outstanding under the
Working Capital Facility. In addition, Laurel has an unsecured line of credit
from a commercial bank which permits short-term borrowings of up to $1 million
outstanding at any time. Borrowings bear interest at the bank's prime rate.
Laurel's unsecured line of credit contains covenants requiring that, for a
period of 30 consecutive days during any year, no indebtedness be outstanding
under this facility. At December 31, 1994, there were no amounts outstanding
under either of these facilities.

8. OTHER NON-CURRENT LIABILITIES

Other non-current liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued employee benefit liabilities........................ $34,121 $33,094
Other....................................................... 12,480 11,963
------- -------
Total..................................................... $46,601 $45,057
======= =======
</TABLE>

33
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. PENSION PLANS

The Manager provides retirement benefits, primarily through noncontributory
pension plans, for substantially all of its regular full-time employees,
except those covered by certain labor contracts, under which the Manager
contributes 5 percent of each covered employee's salary, and a retirement
income guarantee plan (a defined benefit plan) which generally guarantees
employees hired before January 1, 1986 a retirement benefit at least equal to
the benefit they would have received under a previously terminated defined
benefit plan. The Manager's policy is to fund amounts as are necessary to at
least meet the minimum funding requirements of ERISA. All of these plans were
assumed by the Manager.

Net pension expense (benefit) for 1994, 1993 and 1992 for the defined
benefit plans included the following components:

<TABLE>
<CAPTION>
1994 1993 1992
----- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost......................................... $ 448 $ 431 $ 346
Interest cost on projected benefit obligation........ 785 784 664
Actual return on assets.............................. (31) (1,142) (655)
Net amortization and deferral........................ (854) 229 (389)
----- ------- -----
Net pension expense (benefit)...................... $ 348 $ 302 $ (34)
===== ======= =====
</TABLE>

The pension expense for the defined contribution plan included in the
consolidated statements of income approximated $1,471,000, $1,403,000 and
$1,342,000 for 1994, 1993 and 1992, respectively.

The following table sets forth the funded status of the Manager's defined
benefit plans and amounts recognized in the Partnership's consolidated balance
sheets at December 31, 1994 and 1993 related to those plans:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligations............................. $ (3,386) $ (4,977)
======== ========
Accumulated benefit obligations........................ $ (4,312) $ (6,235)
======== ========
Projected benefit obligation........................... $(11,712) $(12,621)
Plan assets at fair value................................ 7,891 8,467
-------- --------
Projected benefit obligation in excess of plan assets.... (3,821) (4,154)
Unrecognized net (gain) loss............................. (763) 78
Unrecognized net asset................................... (1,422) (1,582)
-------- --------
Pension liability recognized in the balance sheet........ $ (6,006) $ (5,658)
======== ========
</TABLE>

As of December 31, 1994, approximately 39.6 percent of plan assets were
invested in debt securities, 56.1 percent in equity securities and 4.3 percent
in cash equivalents.

The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.5 percent and 6.0 percent, respectively.
The expected long-term rate of return on assets was 8.5 percent as of January
1, 1994 and 1995.

34
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Manager also participates in a multi-employer retirement income plan
which provides benefits to employees covered by certain labor contracts.
Pension expense for the plan was $152,000, $156,000 and $137,000 for 1994, 1993
and 1992, respectively.

10. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

Effective January 1, 1992, the Partnership adopted SFAS 106. This statement
requires that the cost of postretirement benefits other than pensions be
accrued over the employee's years of service. Prior to the adoption of SFAS
106, the cost of these postretirement benefits was expensed on a "pay as you
go" basis.

The Manager provides postretirement health care and life insurance benefits
to certain of its retirees. To be eligible for these benefits an employee had
to be hired prior to January 1, 1991 and has to meet certain service
requirements. The Manager does not pre-fund this postretirement benefit
obligation. On January 1, 1992, the accumulated postretirement benefit
obligation ("APBO") amounted to $25,544,000. The Manager chose to recognize
immediately the APBO as expense in 1992 for financial reporting purposes.

Net postretirement benefit costs for 1994, 1993 and 1992 included the
following components:

<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Service cost......................................... $ 583 $ 442 $ 548
Interest cost on accumulated postretirement benefit
obligation.......................................... 1,712 1,673 2,003
Net amortization and deferral........................ (576) (580) --
------ ------ ------
Net postretirement expense........................... $1,719 $1,535 $2,551
====== ====== ======
</TABLE>

The following table sets forth the amounts related to postretirement benefit
obligations recognized in the Partnership's consolidated balance sheets as of
December 31, 1994 and 1993:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated postretirement
benefits Retirees and dependents...................... $(11,666) $(12,373)
Employees eligible to retire......................... (3,828) (3,998)
Employees ineligible to retire....................... (7,363) (7,589)
-------- --------
Accumulated postretirement benefit obligation........ (22,857) (23,960)
Unamortized gain due to plan amendment................. (5,217) (5,796)
Unrecognized net (gain) loss........................... (41) 2,320
-------- --------
Postretirement liability recognized in the balance
sheet................................................. $(28,115) $(27,436)
======== ========
</TABLE>

The weighted average discount rate used in determining the APBO was 8.5
percent. The assumed rate for plan cost increases in 1994 was 12.3 percent and
10.4 percent for non-Medicare eligible and Medicare eligible retirees,
respectively. The assumed annual rates of cost increase decline each year
through 2005 to a rate of 5.75 percent, and remain at 5.75 percent thereafter
for both non-Medicare eligible and Medicare eligible retirees. The effect of a
1 percent increase in the health care cost trend rate for each future year
would have increased the aggregate of service and interest cost components by
$391,200 in 1994 and the APBO would have increased by $3,421,300 as of
December 31, 1994.

35
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Manager also contributes to a multi-employer postretirement benefit plan
which provides health care and life insurance benefits to employees covered by
certain labor contracts. The cost of providing these benefits was approximately
$130,000, $123,000 and $112,000 for 1994, 1993 and 1992, respectively.

11. EARLY EXTINGUISHMENT OF DEBT

In March 1994, Buckeye entered into an agreement to issue $15 million of
additional First Mortgage Notes (Series N) bearing interest at 7.93 percent
(see Note 7). The proceeds from the issuance of these First Mortgage Notes,
plus additional amounts approximating $1.6 million, were used to purchase U.S.
Government securities. These securities were deposited into an irrevocable
trust to complete an in-substance defeasance of $15 million of Buckeye's 9.72
percent, Series I, First Mortgage Notes. In addition, during December 1994,
Buckeye purchased approximately $10.7 million of U.S. Government securities.
These securities were deposited into an irrevocable trust to complete an in-
substance defeasance of $5 million of Buckeye's 9.72 percent, Series I, First
Mortgage Notes and $5 million of Buckeye's 11.18 percent, Series J, First
Mortgage Notes. The funds placed in trust in 1994 will be used solely to
satisfy the interest due and principal amounts of $20 million Series I Notes
due December 1996 and $5 million Series J Notes due serially through December
2006. Accordingly, these U.S. Government securities, the Series I First
Mortgage Notes and $5 million of the Series J First Mortgage Notes have been
excluded from the 1994 balance sheet. This debt extinguishment resulted in an
extraordinary charge of $2,269,000 in 1994.

In December 1993, Buckeye entered into an agreement to issue $35 million of
additional First Mortgage Notes (Series K, L and M) bearing interest at rates
ranging from 7.11 percent to 7.19 percent (see Note 7). A portion of the
proceeds from the issuance of these First Mortgage Notes were used to purchase
approximately $22.2 million of U.S. Government securities. These securities
were deposited into an irrevocable trust to complete an in-substance defeasance
of Buckeye's 9.50 percent, Series H, First Mortgage Notes. The funds in the
trust will be used solely to satisfy the interest due and principal amount of
$20 million due at maturity in December 1995. Accordingly, these U.S.
Government securities and the Series H First Mortgage Notes have been excluded
from the balance sheets. This debt extinguishment resulted in an extraordinary
charge of $2,161,000 in 1993.

12. LEASES

The Operating Partnerships lease certain land and rights-of-way. Minimum
future lease payments for these leases as of December 31, 1994 are
approximately $2.6 million for each of the next five years. Substantially all
of these lease payments can be cancelled at any time should they not be
required for operations.

The Manager leases space in an office building and certain copying equipment
and Buckeye leases certain computing equipment and automobiles. The rent on
such leases is charged to the Operating Partnerships. Future minimum lease
payments under these noncancellable operating leases at December 31, 1994 were
as follows: $859,000 for 1995, $733,000 for 1996, $620,000 for 1997, $493,000
for 1998, $351,000 for 1999, and $2,381,000 thereafter.

Rent expense for all operating leases was $4,834,000, $4,890,000 and
$4,417,000 for 1994, 1993 and 1992, respectively.

36
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. RELATED PARTY TRANSACTIONS

The Partnership and the Operating Partnerships are managed and controlled by
the General Partner and the Manager. Under certain partnership agreements and
management agreements, the General Partner, the Manager, and certain related
parties are entitled to reimbursement of all direct and indirect costs related
to the business activities of the Partnership and the Operating Partnerships.
These costs, which totaled $52.5 million, $52.7 million and $46.3 million in
1994, 1993 and 1992, respectively, include insurance fees, consulting fees,
general and administrative costs, compensation and benefits payable to
officers and employees of the General Partner and Manager, tax information and
reporting costs, legal and audit fees and an allocable portion of overhead
expenses.

In 1986, Buckeye's predecessor (then owned by a subsidiary of American
Premier) obtained an Administrative Consent Order ("ACO") from the New Jersey
Department of Environmental Protection and Energy under the New Jersey
Environmental Cleanup Responsibility Act of 1983 for all six of its facilities
in New Jersey. The ACO required Pipe Line to conduct in a timely manner a
sampling plan for environmental contamination at the New Jersey facilities and
to implement any required clean-up plan. Sampling continues in an effort to
identify areas of contamination at the New Jersey facilities, while clean-up
operations have begun at certain of the sites. The obligations of Pipe Line
were not assumed by the Partnership and the costs of compliance will be paid
by American Premier. Through December 1994, Buckeye's costs of approximately
$2,353,000 have been funded by American Premier.

14. PARTNERS' CAPITAL

Changes in partners' capital for the years ended December 31, 1992, 1993,
and 1994 were as follows:

<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
---------------------- -----------
(IN THOUSANDS, EXCEPT FOR UNITS)
<S> <C> <C> <C>
Partners' capital at January 1, 1992....... $ 2,521 $ 249,533 $ 252,054
Net income............................... 90 8,912 9,002
Distributions............................ (315) (31,200) (31,515)
Reversal of corporate deferred income
taxes................................... (37) (3,660) (3,697)
-------- ----------- -----------
Partners' capital at December 31, 1992..... 2,259 223,585 225,844
Net income............................... 394 38,972 39,366
Distributions............................ (315) (31,200) (31,515)
-------- ----------- -----------
Partners' capital at December 31, 1993..... 2,338 231,357 233,695
Net income............................... 458 45,359 45,817
Distributions............................ (340) (33,628) (33,968)
Proceeds from Exercise of unit options
and capital contributions............... 4 428 432
-------- ----------- -----------
Partners' capital at December 31, 1994..... $ 2,460 $ 243,516 $ 245,976
======== =========== ===========
Units outstanding at December 31, 1993 and
1992...................................... 121,212 12,000,000 12,121,212
Units issued pursuant to the unit option
and distribution equivalent plan and capi-
tal contributions......................... 162 16,060 16,222
-------- ----------- -----------
Units outstanding at December 31, 1994..... 121,374 12,016,060 12,137,434
======== =========== ===========
</TABLE>

The net income per unit for 1994 was calculated using the weighted average
outstanding units of 12,131,640. The net income per unit for 1993 and 1992 was
calculated using 12,121,212 outstanding units.

37
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Partnership Agreement provides that without prior approval of limited
partners of the Partnership holding an aggregate of at least two-thirds of the
outstanding LP Units, the Partnership cannot issue more than 4,800,000
additional LP Units, or issue any additional LP Units of a class or series
having preferences or other special or senior rights over the LP Units. At
December 31, 1994, the Partnership has the ability to issue up to 4,783,940
additional LP Units without prior approval of the Limited Partners of the
Partnership.

15. CASH DISTRIBUTIONS

The Mortgage Note Indenture covenants permit cash distributions by Buckeye to
the Partnership so long as no default exists under the Mortgage Note Indenture
and provided that such distributions do not exceed Net Cash Available to
Partners (generally defined to equal net income plus depreciation and
amortization less (a) capital expenditures funded from operating cash flows,
(b) payments of principal of debt and (c) certain other amounts, all on a
cumulative basis since the formation of the Partnership). The maximum amount
available for distribution by Buckeye to the Partnership under the formula as
of December 31, 1994 amounted to $11.0 million. The Partnership is also
entitled to receive cash distributions from Everglades, BTT and Laurel.

The Partnership makes quarterly cash distributions to Unitholders of
substantially all of its available cash, generally defined as consolidated cash
receipts less consolidated cash expenditures and such retentions for working
capital, anticipated cash expenditures and contingencies as the General Partner
deems appropriate or as are required by the terms of the Mortgage Note
Indenture. In 1994, quarterly distributions of $0.70 per GP and LP Unit were
paid in February, May, August and November. In 1993 and 1992, quarterly
distributions of $0.65 per GP and LP Unit were paid in February, May, August
and November. All such distributions were paid on the then outstanding GP and
LP Units. Cash distributions aggregated $33,968,000 in 1994 and $31,515,000 in
each of 1993 and 1992.

On February 1, 1995, the General Partner announced a quarterly distribution
of $0.70 per GP and LP Unit payable on February 28, 1995.

16. UNIT OPTION AND DISTRIBUTION EQUIVALENT PLAN

The Partnership has a Unit Option and Distribution Equivalent Plan (the
"Option Plan"), which was approved by the Board of Directors of the General
Partner on April 25, 1991 and by holders of the LP Units on October 22, 1991.
The Option Plan authorizes the granting of options (the "Options") to acquire
LP Units to selected key employees (the "Optionees") of the General Partner or
any subsidiary, not to exceed 360,000 LP Units in the aggregate. The price at
which each LP Unit may be purchased pursuant to an Option granted under the
Option Plan is generally equal to the market value on the date of the grant.
Options may be granted with a feature that allows Optionees to apply accrued
credit balances (the "Distribution Equivalents") as an adjustment to the
aggregate purchase price of such Options. The Distribution Equivalents shall be
an amount equal to (i) the Partnership's per LP Unit regular quarterly
distribution, multiplied by (ii) the number of LP Units subject to such Options
that have not vested. Vesting in the Options is determined by the number of
anniversaries the Optionee has remained in the employ of the General Partner or
a subsidiary following the date of the grant of the Option. Options become
vested in varying amounts beginning generally three years after the date of
grant and remain exercisable for a period of five years. The aggregate number
of Options granted during 1994, 1993 and 1992 were 26,750 units, 23,500 units
and 22,250 units, respectively, with a purchase price of $39.438, $32.750 and
$27.688, respectively. All such Options

38
<PAGE>

BUCKEYE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

were granted with Distribution Equivalents. During 1994, a total of 16,060
Options were exercised at an exercise price ranging from $18.025 to $29.450 per
unit. At December 31, 1994, there were 76,540 Options outstanding and none of
the outstanding Options were exercisable.

17. QUARTERLY FINANCIAL DATA (NOT COVERED BY INDEPENDENT AUDITORS' REPORT)

Summarized quarterly financial data for 1994 and 1993 are set forth below.
Quarterly results were influenced by seasonal factors inherent in the
Partnership's business.

<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL
--------------- --------------- --------------- --------------- -----------------
1994 1993 1994 1993 1994 1993 1994 1993 1994 1993
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $45,619 $41,429 $46,114 $42,152 $46,574 $44,394 $48,031 $47,520 $186,338 $175,495
Operating income........ 18,201 15,734 18,054 15,773 18,766 17,627 17,460 17,717 72,481 66,851
Income from continuing
operations before
extraordinary charge... 11,784 9,338 12,013 9,765 12,706 11,190 11,583 11,361 48,086 41,654
Net income.............. 10,215 9,211 12,013 9,765 12,706 11,190 10,883 9,200 45,817 39,366
Income per Unit from
continuing operations
before extraordinary
charge................. 0.97 0.77 0.99 0.81 1.05 0.92 0.95 0.94 3.96 3.44
Net income per Unit..... 0.84 0.76 0.99 0.81 1.05 0.92 0.89 0.76 3.77 3.25
</TABLE>

39
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Partnership does not have directors or officers. The directors and
officers of the General Partner and the Manager perform all management
functions. Directors and officers of the General Partner and the Manager are
selected by American Premier.

DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER

Set forth below is certain information concerning the directors and executive
officers of the General Partner. All of such persons were elected to their
present positions with the General Partner in October 1986, except as noted
below.

<TABLE>
<CAPTION>
NAME, AGE AND PRESENT
POSITION WITH GENERAL BUSINESS EXPERIENCE DURING
PARTNER PAST FIVE YEARS
--------------------- ---------------------------
<S> <C>
Alfred W. Martinelli, 67 Mr. Martinelli has been Chairman of the Board and
Chairman of the Board, Chief Executive Officer of the General Partner for
Chief Executive Officer more than five years. He served as President of the
and Director* General Partner from February 1991 to February 1992.
Mr. Martinelli has been Chairman and Chief Executive
Officer of Penn Central Energy Management Company
("PCEM") for more than five years. He is also Vice
Chairman and a director of American Premier and a
director of American Annuity Group, Inc.

Neil M. Hahl, 46 Mr. Hahl was elected President of the General Part-
President and ner in February 1992. He has been a director of the
Director General Partner since February 1989. Mr. Hahl was
elected a director of American Premier in December
1992 and has been Senior Vice President of American
Premier for more than five years.

Ernest R. Varalli, 64 Mr. Varalli was elected to his present position in
Executive Vice President, July 1987. He is also Executive Vice President,
Chief Chief Financial Officer and Treasurer of PCEM. Mr.
Financial Officer, Trea- Varalli has been a consultant to American Premier
surer and Director* for more than five years.

Brian F. Billings, 56 Mr. Billings served as President of the General
Director* Partner from October 1986 to December 1990. He
served as Chairman of the Manager to February 1995.
Mr. Billings was President of the Manager from July
1987 to December 1990. Mr. Billings was President of
PCEM from December 1986 to 1995.

A. Leon Fergenson, 82 Mr. Fergenson has been a director of the General
Director Partner since December 1986. He is also a director
of American Annuity Group, Inc., Sequa Corporation,
National Benefit Life Insurance Company and various
mutual funds sponsored by Neuberger & Berman.
</TABLE>

40
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE AND PRESENT
POSITION WITH GENERAL BUSINESS EXPERIENCE DURING
PARTNER PAST FIVE YEARS
- - --------------------- ---------------------------
<S> <C>
Edward F. Kosnik, 50 Mr. Kosnik has been Executive Vice President and
Director Chief Financial Officer of Alexander & Alexander
Services, Inc. since August 1994. He was Chairman of
the Board, President and Chief Executive Officer of
JWP, Inc. from May 1993 through April 1994. Mr.
Kosnik was Executive Vice President and Chief Finan-
cial Officer of JWP, Inc. from December 1992 to
April 1993. He was President of Sprague Technolo-
gies, Inc. from May 1992 to June 1992 and President
and Chief Executive Officer of Sprague Technologies,
Inc. from July 1987 to May 1992.

William C. Pierce, 54 Mr. Pierce has been a director of the General Part-
Director ner since February 1987. He has been Executive Vice
President and Group Executive of Chemical Bank and
Chemical Banking Corporation from November 1992 un-
til his retirement in July 1994. Mr. Pierce was Ex-
ecutive Vice President and Chief Risk Policy Officer
of Chemical Bank and Chemical Banking Corporation
from December 1991 to November 1992. He was Chief
Credit Officer of Chemical Bank and Chemical Banking
Corporation from January 1988 to December 1991.

C. Richard Wilson, 50 Mr. Wilson was elected as a director of the General
Director* Partner in February 1995. He was elected Chairman of
the Board of the Manager in February 1995. Mr.
Wilson has been President and Chief Operating Offi-
cer of the Manager since February 1991. He was Exec-
utive Vice President and Chief Operating Officer of
the Manager from July 1987 to February 1991.

Robert H. Young, 73 Mr. Young has been a director of the General Partner
Director since July 1987. He was Secretary of the General
Partner from July 1987 through October 1991. Since
October 1991, Mr. Young has been Counsel to the law
firm of Morgan, Lewis & Bockius. Prior to October
1991, he was a Senior Partner with that firm for
more than five years. Mr. Young is also Chairman of
the Board of Directors of Independence Blue Cross.
</TABLE>
- - --------
* Also a director of the Manager.

The General Partner has an Audit Committee, which currently consists of three
directors: A. Leon Fergenson, William C. Pierce and Robert H. Young. Messrs.
Fergenson, Pierce and Young are neither officers nor employees of the General
Partner or any of its affiliates.

The General Partner also has a Compensation Committee, which currently
consists of four directors: Alfred W. Martinelli, Brian F. Billings, Ernest R.
Varalli and Robert H. Young. The Compensation Committee is concerned primarily
with establishing executive compensation policies for officers of the Manager
and administering of the Partnership's Option Plan. See "Executive
Compensation--Compensation Committee Interlocks and Insider Participation in
Compensation Decisions."

41
<PAGE>

DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGER

Set forth below is certain information concerning the directors and executive
officers of the Manager. Messrs. Billings and Martinelli were elected as
directors of the Manager in March 1987, and Mr. Varalli was elected as a
director of the Manager in July 1987.

<TABLE>
<CAPTION>
NAME, AGE AND PRESENT
POSITION WITH THE BUSINESS EXPERIENCE DURING
MANAGER PAST FIVE YEARS
--------------------- --------------------------
<S> <C>
C. Richard Wilson, 50 Mr. Wilson was elected Chairman of the Board of the
Chairman of the Board, Manager in February 1995. He was named President and
President, Chief Oper- Chief Operating Officer in February 1991. Mr. Wilson
ating Officer was Executive Vice President and Chief Operating Of-
and Director ficer from July 1987 to February 1991. He has been a
director of the Manager since October 1986. Mr.
Wilson was elected as a Director of the General
Partner in February 1995.

Michael P. Epperly, 51 Mr. Epperly was named Senior Vice President--Opera-
Senior Vice President-- tions in March 1990. He was Vice President--Opera-
Operations tions from October 1986 to February 1990.

Stephen C. Muther, 45 Mr. Muther was named Senior Vice President--Adminis-
Senior Vice President-- tration, General Counsel and Secretary in February
Administration, General 1995. He served as General Counsel, Vice President--
Counsel and Secretary* Administration and Secretary from May 1990 to Febru-
ary 1995. From July 1985 to April 1990 Mr. Muther
was Associate Litigation and Antitrust Counsel for
General Electric Company.

Steven C. Ramsey, 40 Mr. Ramsey was named Vice President--Finance and
Vice President--Finance Treasurer in February 1995. He served as Vice Presi-
and Treasurer dent and Treasurer from February 1991 to February
1995. Mr. Ramsey was elected Treasurer in June 1989.
Prior to June 1989, he served in various positions
in the marketing and engineering departments of the
Manager.
</TABLE>
- - --------
* Also Secretary of the General Partner since February 1992.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the total compensation earned by the Chief
Executive Officer of the General Partner and the four most highly compensated
executive officers of the General Partner and the Manager for services rendered
to the Partnership, the General Partner or the Manager for the fiscal year
ended December 31, 1994, as well as the total compensation earned by such
individuals for the two previous fiscal years. Alfred W. Martinelli, Chairman
of the Board, Chief Executive Officer and Director of the General Partner, did
not receive any cash compensation for serving as an officer of the General
Partner in 1994, but received fees for serving as a Director of the General
Partner. See "Director Compensation" below. Executive officers of the Manager,
including Messrs. Wilson, Epperly, Muther and Ramsey, are compensated by the
Manager and, pursuant to management agreements with each of the Operating
Partnerships, such compensation is reimbursed by the Operating Partnerships in
accordance with an allocation formula based upon the results of the prior
year's operations.

42
<PAGE>

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ---------- ----------
OTHER SECURITIES
ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND BONUS(1) COMPEN- OPTIONS(2) PAYOUTS(3) COMPEN-
PRINCIPAL POSITION YEAR SALARY ($) ($) SATION($) (#) ($) SATION ($)
------------------ ---- ---------- -------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Alfred W. Martinelli.... 1994 0 0 11,033(5) 0 0 24,500(7)
Chairman of the Board 1993 0 0 5,539(5) 0 0 22,500(7)
and Chief Executive 1992 218,750(4) 0 (6) 0 0 9,500(7)
Officer of the General
Partner
C. Richard Wilson....... 1994 225,000 120,000 (6) 9,000 13,050 33,938(8)
Chairman of the Board, 1993 206,667 105,000 (6) 7,500 37,050 20,977(8)
President and Chief 1992 188,333 73,101 (6) 7,500 40,400 31,469(8)
Operating Officer of
the Manager
Michael P. Epperly...... 1994 155,000 67,500 (6) 4,500 10,875 23,650(8)
Senior Vice President-- 1993 143,333 60,000 (6) 3,750 30,729 19,901(8)
Operations of the 1992 135,833 37,595 (6) 3,750 29,556 17,929(8)
Manager
Stephen C. Muther....... 1994 155,000 60,000 (6) 4,000 0 20,000(8)
Senior Vice President-- 1993 144,167 45,000 (6) 3,000 20,000 17,550(8)
Administration, General 1992 126,667 31,329 (6) 3,000 20,000 14,930(8)
Counsel and Secretary
of the Manager
Steven C. Ramsey........ 1994 135,000 60,000 (6) 4,000 7,250 18,000(8)
Vice President--Finance 1993 126,667 45,000 (6) 2,500 20,377 15,800(8)
and Treasurer of the 1992 108,667 31,329 (6) 2,500 15,750 13,130(8)
Manager
</TABLE>
- - --------
(1) Represents amounts awarded by the Compensation Committee as cash bonuses
earned under the Manager's Annual Incentive Compensation Plan ("AIC Plan").
Under the AIC Plan, individual awards are granted to participants based
upon satisfaction of such participant's target award opportunities and such
awards are paid to participants as soon as practicable after they are
granted.
(2) Represents options granted under the Partnership's Unit Option and
Distribution Equivalent Plan (the "Option Plan"). See "Long Term
Compensation--Option Plan" below. Certain officers of the Manager are also
eligible to participate in the American Premier Stock Option Plan (the
"American Premier Option Plan"). No cost or expense relating to the
American Premier Option Plan is borne by the Partnership. No options were
awarded in 1992, 1993 or 1994 under the American Premier Option Plan to the
Chief Executive Officer of the General Partner or the four most highly
compensated executive officers of the General Partner and the Manager.
(3) Represents payments received during the applicable year under the Manager's
Long-Term Incentive Compensation Plans (the "LTIC Plans"). See "Long-Term
Compensation--Long-Term Incentive Plans" below.
(4) Represents consulting fees paid by PCEM and reimbursed by the Partnership
prior to the termination of Mr. Martinelli's consulting arrangement in July
1992.
(5) Represents lease payments made by the Partnership for an automobile used by
Mr. Martinelli.
(6) During the year indicated, no perquisites or non-cash compensation exceeded
the lesser of $50,000 or an amount equal to 10 percent of such person's
salary and bonus.

43
<PAGE>

(7) Represents director fees which commenced in July 1992. See "Director
Compensation" below.
(8) Represents the amount contributed by the Manager to the Manager's defined
contribution retirement plan and the Manager's matching contributions under
the Manager's savings plan and, for Messrs. Wilson, Epperly, Muther and
Ramsey an additional $18,313, $7,150, $5,000 and $3,000, respectively,
under the Manager's Benefit Equalization Plan for 1994. Mr. Wilson and Mr.
Epperly received an additional $733 and $379, respectively, in 1993 and Mr.
Wilson received an additional $10,748 in 1992 under the Manager's Benefit
Equalization Plan. In addition to participation in the Manager's defined
contribution plan, Messrs. Wilson, Epperly and Ramsey are guaranteed
certain defined benefits upon retirement under the Manager's retirement
income guarantee plan. See "Retirement and Savings Plans" below.

LONG-TERM COMPENSATION

Option Plan

The following table sets forth additional information regarding options
granted under the Option Plan to the Chief Executive Officer of the General
Partner and the four most highly compensated executive officers of the General
Partner and Manager during 1994.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF LP UNIT
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------ --------------------------
PERCENT OF
TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED (1) IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/UNIT) DATE 5% ($) (2) 10% ($) (2)
---- ----------- ---------- -------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alfred W. Martinelli.... 0 -- -- -- -- --
C. Richard Wilson....... 9,000 33.6% 39.438 1/28/2004 223,200 565,650
Michael P. Epperly...... 4,500 16.8% 39.438 1/28/2004 111,600 282,825
Stephen C. Muther....... 4,000 15.0% 39.438 1/28/2004 99,200 251,400
Steven C. Ramsey........ 4,000 15.0% 39.438 1/28/2004 99,200 251,400
</TABLE>

- - --------
(1) Represents LP Unit options granted under the Option Plan. Options shown in
the table were granted with a feature that allows optionees to apply
accrued credit balances (the "Distribution Equivalents") as a reduction to
the aggregate purchase price of such options. The Distribution Equivalents
are equal to (i) the Partnership's per LP Unit regular quarterly
distribution as declared from time to time by the Board of Directors of the
General Partner, multiplied by (ii) the number of LP Units subject to
options that have not vested. Vesting in the options is determined by the
number of anniversaries the optionee has remained in the employ of the
General Partner or a subsidiary following the date of the grant of the
option. Vesting shall be at the rate of 0 percent if the number of
anniversaries are less than three, 60 percent if the number of
anniversaries are three but less than four, 80 percent if the number of
anniversaries are four but less than five and 100 percent if the number of
anniversaries are five or more. In addition, the optionee may become fully
vested upon death, retirement, disability or a determination by the Board
of Directors of the General Partner or the Compensation Committee that
acceleration of the vesting in the option would be desirable for the
Partnership. Up to 95 percent of the LP Unit purchase price and up to 100
percent of any taxes required to be withheld in connection with the
purchase of the LP Units pursuant to such options may be financed through a
loan program established by the General Partner.

44
<PAGE>

(2) The dollar amounts under these columns are the values of options (not
including accrual of any Distribution Equivalents) at the 5 percent and 10
percent rates set by the Securities and Exchange Commission and therefore
are not intended to forecast possible future appreciation, if any, of the
price of LP Units. No alternative formula for a grant date valuation was
used, as the General Partner is not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
or volatile factors.

The following table sets forth information regarding options exercised in
1994 and values of unexercised options as of December 31, 1994 for the Chief
Executive Officer of the General Partner and the four most highly compensated
executive officers of the General Partner and the Manager.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1994 (#) DECEMBER 31, 1994 ($)(1)
--------------------- ------------------------
LP UNITS ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ----------------- ------------------ --------------------- ------------------------
<S> <C> <C> <C> <C>
Alfred W. Martinelli.... 0 -- 0/0 --
C. Richard Wilson....... 3,510 65,700 0/26,340 0/80,100
Michael P. Epperly...... 2,250 42,300 0/13,500 0/42,800
Stephen C. Muther....... 1,800 35,400 0/11,200 0/34,200
Steven C. Ramsey........ 1,500 29,200 0/10,000 0/28,500
</TABLE>

- - --------
(1) The values of the unexercised options do not include any accrual for
Distribution Equivalents.

In 1994, Mr. Muther exercised options to purchase 546 shares of American
Premier with a net value realized of $3,784. In 1993, Messrs. Wilson, Epperly
and Muther exercised options to purchase 11,294 shares, 1,636 shares and 1,090
shares of American Premier, respectively, with a net value realized of $63,559,
$22,141 and $8,916, respectively. All shares were acquired pursuant to the
American Premier Option Plan. No cost or expense relating to the exercise of
these options was incurred by the Partnership.

Long-Term Incentive Plans

Prior to 1991 when the Option Plan went into effect, the Manager created a
LTIC Plan each year which permitted the Board of Directors of the General
Partner or the Compensation Committee to grant cash awards to certain employees
of the Manager for performance during three-year periods. Although cash award
payments continued under these LTIC Plans through 1994, no new LTIC plans were
established after 1990. In addition to the LTIC Plans, the Manager created a
transition plan which grants to each participant an additional cash award in an
amount equal to the difference between the target amount under the 1990-1992
LTIC Plan and the sum of (i) amounts received pursuant to LTIC Plans and (ii)
the value of Distribution Equivalents vested under the Option Plan for each
year from 1992 through 1995.

Awards under LTIC Plans were based on achievement of certain long-term
financial performance goals for the Partnership and could not exceed 150
percent of the target award opportunity established by the Board of Directors
of the General Partner or the Compensation Committee at the beginning of such
period (or as soon as practicable thereafter) for such period. A participant's
target award opportunity under the LTIC Plans could not exceed 25 percent of
such

45
<PAGE>

participant's aggregate base salary earned during the three-year period. If the
Partnership met or exceeded the interim financial performance goals under the
LTIC Plans, cash payments up to the full amount of the target award were made
in the following installments: 10 percent in the second year of the award
period, 30 percent in the third year of the award period and 60 percent in the
first year following the award period. Any cash award in excess of the target
award was paid in the second year following the award period with 10 percent
simple interest.

RETIREMENT AND SAVINGS PLANS

Effective December 31, 1985, Pipe Line terminated its defined benefit
retirement plan (the "Retirement Plan") and adopted a new defined contribution
plan (the "New Retirement Program"). Those employees hired prior to January 1,
1986 are covered by a retirement income guarantee plan (the "RIGP"). These
plans were assumed by the Manager.

The Operating Partnerships reimburse the Manager for cash costs incurred in
connection with the New Retirement Program, the RIGP, the Equalization Plan
(described below) and the Savings Plan (described below).

Under the New Retirement Program, the Manager makes contributions equal to 5
percent of an employee's covered compensation, which includes base salary plus
overtime, annual cash bonuses and any periodic salary continuance payments but
does not include extraordinary cash bonuses, deferred awards, other forms of
deferred compensation, lump-sum severance pay, fees or any other kind of
special or extra compensation. Employees may elect to have the Manager's
contributions invested in any of five investment funds.

The RIGP generally provides for an additional retirement benefit equal to the
amount, if any, by which the aggregate of the annuity equivalent of the
employee's accrued benefit under the former Retirement Plan at December 31,
1985 plus the annuity equivalent of the vested portion of employer
contributions under the New Retirement Program for the account of such employee
(plus or minus aggregate investment gains or losses thereon) is less than the
retirement benefit that the employee would have received if the former
Retirement Plan had continued. The vesting formula for the New Retirement
Program and the RIGP provides for 100 percent vesting after 5 years of service.
Service under the former Retirement Plan is carried over to the new plans. The
minimum retirement benefit guaranteed under the RIGP is based on the highest
average compensation during any five consecutive calendar years of employment
within the last ten years of employment preceding retirement ("Highest Average
Compensation"). For purposes of the RIGP, compensation is defined to include
the same components as under the New Retirement Program, except that periodic
salary continuance payments are not included. The former Retirement Plan
benefit, which the RIGP was established to guarantee, provides for a retirement
benefit equal to 1.75 percent per year of service (maximum of 60 percent) of
the Highest Average Compensation, reduced by 1.46 percent for each year of
service (with a maximum offset of 50 percent) of the estimated primary
insurance amount that an employee is entitled to receive upon retirement, other
termination of employment or, if earlier, attainment of age 65 under the Social
Security Act.

The Manager also assumed Pipe Line's Benefit Equalization Plan (the
"Equalization Plan"), which generally makes up the reductions caused by
Internal Revenue Code limitations in the annual retirement benefit determined
pursuant to the RIGP and in the Manager's contributions on behalf of an
employee pursuant to the New Retirement Program and the Savings Plan. Those
amounts not payable under the RIGP (or under affiliated company retirement
plans and employee transfer policies), the New Retirement Program or the
Savings Plan are payable under the Equalization Plan.

46
<PAGE>

Estimated annual benefits under the RIGP and the Equalization Plan,
calculated under the single life annuity option form of pension, payable to
participants at the normal retirement age of 65, are illustrated in the
following table.

<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFIT
AVERAGE OF 5 -------------------------------------------
HIGHEST ANNUAL YEARS OF SERVICE
COMPENSATION -------------------------------------------
LEVELS 15 20 25 30 35
-------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000........................ $23,099 $ 30,799 $ 38,498 $ 46,198 $ 52,804
150,000........................ 36,224 48,299 60,373 72,448 82,808
200,000........................ 49,349 65,799 82,248 98,698 112,812
250,000........................ 62,474 83,299 104,123 124,948 142,816
300,000........................ 75,599 100,799 125,998 151,198 172,819
350,000........................ 88,724 118,299 147,873 177,448 202,823
400,000........................ 101,849 135,799 169,748 203,698 232,827
450,000........................ 114,974 153,299 191,623 229,948 262,831
500,000........................ 128,099 170,799 213,498 256,198 292,834
</TABLE>

The amounts shown in the above table have been reduced by the percentage
equal to 1.46 percent for each year of service of the estimated maximum annual
benefits payable under the Social Security Act in respect of each category. The
amounts shown in the table would be further reduced, as described above, by the
accrued benefit under the former Retirement Plan as of December 31, 1985, as
well as by the aggregate amount of vested employer contributions under the New
Retirement Program (plus or minus aggregate investment gains or losses
thereon).

Messrs. Wilson, Epperly and Ramsey have 20, 29 and 13 full credited years of
service with the Manager and its affiliates, respectively, under the New
Retirement Program, the RIGP and the Equalization Plan. Each of them is 100
percent vested under such plans. Mr. Muther has four full years of credited
service with the Manager. He is not covered under the RIGP and is currently
vested under the New Retirement Program.

Officers of the Manager are also eligible to participate on a voluntary basis
in the Manager's Savings Plan (the "Savings Plan"). An employee may elect to
contribute to the Savings Plan annually a specified percentage of his pay,
subject to certain limitations. The Manager will contribute to the Savings
Plan, out of its current or accumulated profits, for the benefit of each
participating employee, an amount equal to his contributions up to a maximum of
5 percent of his pay (6 percent of pay if the employee has completed 20 or more
years of service). Employees may elect to have the Manager's contributions
invested in any of four investment funds. The Manager's contributions vest
immediately for the first 2 percent of the employee's pay and at the rate of 20
percent per year of service (excluding the first year of service) for the
remainder, with 100 percent vesting upon death, disability, retirement or
attainment of age 65. Benefits are payable, at the election of the employee, in
a lump-sum cash distribution after termination of employment or as an annuity
upon retirement or a combination of the two.

DIRECTOR COMPENSATION

The fee schedule for directors of the General Partner other than Messrs.
Martinelli, Hahl and Wilson is as follows: annual fee, $15,000; attendance fee
for each Board of Directors meeting, $1,000; and attendance fee for each
committee meeting, $750. Directors' fees paid by the General Partner in 1994 to
such directors amounted to $118,500.

Mr. Martinelli, Chairman of the Board, Chief Executive Officer and Director
of the General Partner is entitled to receive the following fees as Chairman of
the Board of Directors: annual fee $20,000; attendance fee for each Board of
Directors meeting, $1,500; and attendance fee for each committee meeting,
$1,000. Director's fees paid by the General Partner in 1994 to Mr. Martinelli
amounted to $24,500.

47
<PAGE>

Mr. Hahl, President and Director of the General Partner, is an employee of
American Premier and devotes substantially all of his time to American Premier
rather than to the General Partner or the Partnership. Consequently, no
compensation or other benefits payable to Mr. Hahl is paid or reimbursed by the
Partnership for Mr. Hahl's services as a director of the General Partner.

Mr. Wilson, Chairman of the Board, President and Chief Operating Officer of
the Manager and Director of the General Partner, is compensated by the
Partnership for his services to the Manager (see "Summary Compensation Table")
and does not receive any additional compensation or other benefits with respect
to his services as a director of the General Partner.

Members of the Board of Directors of the Manager were not compensated for
their services as directors, and it is not currently anticipated that any such
compensation will be paid in the future to directors of the Manager who are
full-time employees of the Manager or any of its affiliates.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

The Compensation Committee consists of Messrs. Martinelli, Varalli, Billings
and Young. Messrs. Martinelli and Varalli are executive officers of the General
Partner and Mr. Billings is a former executive officer of the General Partner.
Mr. Martinelli is on the American Premier Compensation Committee. The members
of the Board of Directors of the General Partner are chosen by American
Premier, as beneficial owner of all outstanding capital stock of the General
Partner. See "Certain Relationships and Related Transactions." Mr. Hahl, the
President and Director of the General Partner, also serves as Senior Vice
President and Director of American Premier, although he does not serve on the
Compensation Committee. Mr. Young, who is also a member of the Compensation
Committee, is counsel to the law firm of Morgan, Lewis and Bockius, which
supplies legal services to the Partnership.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

No person or group is known to be the beneficial owner of more than 5 percent
of the LP Units as of February 1, 1995.

48
<PAGE>

The following table sets forth certain information, as of February 1, 1995,
concerning the beneficial ownership of LP Units by each director of the General
Partner, the Chief Executive Officer of the General Partner, the four most
highly compensated officers of the General Partner and the Manager and by all
directors and executive officers of the General Partner and the Manager as a
group. Such information is based on data furnished by the persons named. Based
on information furnished to the General Partner by such persons, no director or
executive officer of the General Partner or the Manager owned beneficially, as
of February 1, 1995, more than 1 percent of any class of equity securities of
the Partnership or any of its subsidiaries outstanding at that date.

<TABLE>
<CAPTION>
NAME NUMBER OF LP UNITS (1)
---- ----------------------
<S> <C>
Brian F. Billings................................... 7,500
Michael P. Epperly.................................. 25(2)
A. Leon Fergenson................................... 200
Neil M. Hahl........................................ 2,500
Edward F. Kosnik.................................... 5,000
Alfred W. Martinelli................................ 4,500
William C. Pierce................................... 800(2)
Steven C. Ramsey.................................... 300(2)
Ernest R. Varalli................................... 6,500
C. Richard Wilson................................... 2,000
Robert H. Young..................................... 2,500
All directors and executive officers as a group
(consisting of 12 persons, including those named
above)............................................. 31,825(2)
</TABLE>
- - --------
(1) Unless otherwise indicated, the persons named above have sole voting and
investment power over the LP Units reported.
(2) The LP Units owned by Messrs. Epperly, Pierce and Ramsey have shared voting
and investment power with their respective spouses.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Partnership and the Operating Partnerships are managed and controlled by
the General Partner and the Manager, respectively, pursuant to the Amended and
Restated Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement"), the several Amended and Restated Agreements of Limited Partnership
of the Operating Partnerships (the "Operating Partnership Agreements") and the
several Management Agreements between the Manager and the Operating
Partnerships (the "Management Agreements").

Under the Partnership Agreement and the Operating Partnership Agreements, as
well as the Management Agreements, the General Partner, the Manager and certain
related parties are entitled to reimbursement of all direct and indirect costs
and expenses related to the business activities of the Partnership and the
Operating Partnerships. These costs and expenses include insurance fees,
consulting fees, general and administrative costs, compensation and benefits
payable to officers and other employees of the General Partner and Manager, tax
information and reporting costs, legal and audit fees and an allocable portion
of overhead expenses. Such reimbursed amounts constitute a substantial portion
of the revenues of the General Partner and the Manager. These costs and
expenses reimbursed by the Partnership totaled $52.2 million in 1994.

The Partnership receives management consulting services from PCEM. The cost
of this management consulting service allocated to the Partnership in 1994
totaled $337,600. See "Executive Compensation--Summary Compensation and
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions."

49
<PAGE>

The Partnership and the General Partner have entered into incentive
compensation arrangements which provide for incentive compensation payable to
the General Partner in the event quarterly or special distributions to
Unitholders exceed certain specified targets. In general, subject to certain
limitations and adjustments, if a quarterly cash distribution exceeds a target
of $0.65 per LP Unit, the Partnership will pay the General Partner, in respect
of each outstanding LP Unit, incentive compensation equal to (i) 15 percent of
that portion of the distribution per LP Unit which exceeds the target quarterly
amount of $0.65 but is not more than $0.75 plus (ii) 25 percent of the amount,
if any, by which the quarterly distribution per LP Unit exceeds $0.75. The
General Partner is also entitled to incentive compensation, under a comparable
formula, in respect of special cash distributions exceeding a target special
distribution amount per LP Unit. The target special distribution amount
generally means the amount which, together with all amounts distributed per LP
Unit prior to the special distribution compounded quarterly at 13 percent per
annum, would equal $20.00 (the initial public offering price of the LP Units)
compounded quarterly at 13 percent per annum from the date of the closing of
the initial public offering. Incentive compensation paid by the Partnership, to
the General Partner totaled $360,000 in 1994.

On February 1, 1995, the General Partner announced a quarterly distribution
of $0.70 per GP and LP Unit payable on February 28, 1995. As such distribution
exceeds a target of $0.65 per LP Unit, the Partnership will pay the General
Partner incentive compensation aggregating $90,000 as a result of this
distribution.

50
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

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

(1) and (2) Financial Statements and Financial Statement Schedules--see
Index to Financial Statements and Financial Statement Schedules appearing
on page 22.

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

<TABLE>
<CAPTION>
EXHIBIT NUMBER
(REFERENCED TO
ITEM 601 OF
REGULATION S-K)
---------------
<C> <S>
3.1 --Amended and Restated Agreement of Limited Partnership of the
Partnership, dated as of December 23, 1986.(1) (Exhibit 3.1)
3.2 --Amended and Restated Certificate of Limited Partnership of
the Partnership, dated as of November 18, 1986.(1) (Exhibit
3.1)
4.1 --Indenture of Mortgage and Deed of Trust and Security Agree-
ment, dated as of December 15, 1986, by Buckeye to Pittsburgh
National Bank and J. G. Routh, as Trustees.(1) (Exhibit 4.1)
4.2 --Note Purchase Agreement, dated as of December 15, 1986,
among Buckeye and the several purchasers named therein relat-
ing to $300,000,000 of First Mortgage Notes.(1) (Exhibit 4.2)
4.3 --First Supplemental Indenture of Mortgage and Deed of Trust
and Security Agreement, dated as of December 1, 1987, by
Buckeye Pipe Line Company, L.P., to Pittsburgh National Bank
and J. G. Routh, as Trustees.(2) (Exhibit 4.4)
4.4 --Second Supplemental Indenture and Deed of Trust and Security
Agreement, dated as of November 30, 1992 by Buckeye Pipe Line
Company, L.P. to Pittsburgh National Bank and J. G. Routh, as
Trustees.(3) (Exhibit 4.5)
4.5 --Third Supplemental Indenture and Deed of Trust and Security
Agreement, dated as of December 31, 1993, by Buckeye Pipe
Line Company, L.P. to Pittsburgh National Bank and J. G.
Routh, as Trustees.(8) (Exhibit 4.5)
4.6 --Note Purchase and Private Shelf Agreement, dated as of De-
cember 31, 1993 between Buckeye Pipe Line Company, L.P. and
The Prudential Insurance Company of America.(8) (Exhibit 4.6)
4.7 --Fourth Supplemental Indenture of Mortgage and Deed of Trust
and Security Agreement, dated as of March 15, 1994, by Buck-
eye Pipe Line Company, L.P., to PNC Bank, National Associa-
tion and J.G. Routh, as Trustees.(9) (Exhibit 4.8)
4.8 --Fifth Supplemental Indenture of Mortgage and Deed of Trust
and Security Agreement, dated as of March 30, 1994, by Buck-
eye Pipe Line Company, L.P., to PNC Bank, National Associa-
tion and J.G. Routh, as Trustees.(9) (Exhibit 4.9)
4.9 --Certain instruments with respect to long-term debt of the
Operating Partnerships which relate to debt that does not ex-
ceed 10 percent of the total assets of the Partnership and
its consolidated subsidiaries are omitted pursuant to Item
601(b) (4) (iii) (A) of Regulation S-K, 17 C.F.R. (S)229.601.
The Partnership hereby agrees to furnish supplementally to
the Securities and Exchange Commission a copy of each such
instrument upon request.
</TABLE>

51
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NUMBER
(REFERENCED TO
ITEM 601 OF
REGULATION S-K)
---------------
<C> <S>
10.1 --Amended and Restated Agreement of Limited Partnership of
Buckeye, dated as of December 23, 1986.(1)(4) (Exhibit 10.1)
10.2 --Purchase Agreement, dated December 23, 1986, between the
Partnership and Marathon Energy Holdings, Inc. providing for
the purchase by the Partnership of the 99 percent limited
partnership interests in Buckeye, BTT and Everglades.(1) (Ex-
hibit 10.2)
10.3 --Purchase Agreement, dated December 23, 1986, between LEH and
Pennsylvania Company providing for the purchase by LEH of the
83 percent stock interest in Laurel.(1) (Exhibit 10.3)
10.4 --Management Agreement, dated November 18, 1986, between the
Manager and Buckeye.(1)(5) (Exhibit 10.4)
10.5 --Distribution Support, Incentive Compensation and APU Redemp-
tion Agreement, dated as of December 15, 1986, among the Gen-
eral Partner, the Partnership and American Premier.(1) (Ex-
hibit 10.6)
10.6 --Annual Incentive Compensation Plan for key employees of the
Manager.(1)(6) (Exhibit 10.8)
10.7 --Form of Long-Term Incentive Compensation Plan for key em-
ployees of the Manager.(1)(6) (Exhibit 10.9)
10.8 --Unit Option and Distribution Equivalent Plan of Buckeye
Partners, L.P.(6)(7) (Exhibit 10.10)
10.9 --Buckeye Management Company Unit Option Loan Program.(6)(7)
(Exhibit 10.11)
10.10 --Buckeye Pipe Line Company Benefit Equalization Plan.(3)(6)
(Exhibit 10.10)
*11.1 --Computation of earnings per Unit.
*21.1 --List of subsidiaries of the Partnership.
</TABLE>

- - --------
(1) Previously filed with the Securities and Exchange Commission as the Exhibit
to the Buckeye Partners, L.P. Annual Report on Form 10-K for the year 1986.

(2) Previously filed with the Securities and Exchange Commission as the Exhibit
to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for the quarter
ended March 31, 1988.

(3) Previously filed with the Securities and Exchange Commission as the Exhibit
to Buckeye Partners, L.P. Annual Report on Form 10-K for the year 1992.

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

(5) The Management Agreements of the other Operating Partnerships are not filed
because they are identical to Exhibit 10.4 except for the identity of the
partnership.

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

(7) Previously filed with the Securities and Exchange Commission as the Exhibit
to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for the quarter
ended September 30, 1991.

(8) Previously filed with the Securities and Exchange Commission as the Exhibit
to the Buckeye Partners, L.P. Annual Report on Form 10-K for the year 1993.

(9) Previously filed with the Securities and Exchange Commission as the Exhibit
to the Buckeye Partners, L.P. Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994.

* Filed herewith

(b) Reports on Form 8-K filed during the quarter ended December 31, 1994:

None

52
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

Buckeye Partners, L.P.
(Registrant)

By: Buckeye Management Company,
as General Partner

/s/ Alfred W. Martinelli
Dated: March 14, 1995 By: _________________________________
Alfred W. Martinelli
Chairman of the Board

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

/s/ Brian F. Billings
Dated: March 14, 1995 By: _________________________________
Brian F. Billings
Director

/s/ A. Leon Fergenson
Dated: March 14, 1995 By: _________________________________
A. Leon Fergenson
Director

/s/ Neil M. Hahl
Dated: March 14, 1995 By: _________________________________
Neil M. Hahl
President and Director

/s/ Edward F. Kosnik
Dated: March 14, 1995 By: _________________________________
Edward F. Kosnik
Director

/s/ Alfred W. Martinelli
Dated: March 14, 1995 By: _________________________________
Alfred W. Martinelli
Chairman of the Board and
Director
(Principal Executive Officer)

/s/ William C. Pierce
Dated: March 14, 1995 By: _________________________________
William C. Pierce
Director

/s/ Ernest R. Varalli
Dated: March 14, 1995 By: _________________________________
Ernest R. Varalli
Executive Vice President,
Chief Financial Officer,
Treasurer and Director
(Principal Accounting and
Financial Officer)

/s/ C. Richard Wilson
Dated: March 14, 1995 By: _________________________________
C. Richard Wilson
Director

/s/ Robert H. Young
Dated: March 14, 1995 By: _________________________________
Robert H. Young
Director

53
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Partners of Buckeye Partners, L.P.:

We have audited the consolidated financial statements of Buckeye Partners,
L.P. and its subsidiaries as of December 31, 1994 and 1993, and for each of the
three years in the period ended December 31, 1994, and have issued our report
thereon dated January 27, 1995; such report is included elsewhere in this Form
10-K. Our audits also included the consolidated financial statement schedules
of Buckeye Partners, L.P. and subsidiaries referred to in Item 14. These
consolidated financial statement schedules are the responsibility of the
Partnership's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement schedules,
when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly in all material respects the information set
forth therein.

Deloitte & Touche

Philadelphia, Pennsylvania
January 27, 1995

S-1
<PAGE>

SCHEDULE I

BUCKEYE PARTNERS, L.P.
REGISTRANT'S CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)

BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1993
-------- --------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents................................. $ 41 $ 1,412
Temporary investments.................................. 2,255 250
Other current assets...................................... 30 18
-------- --------
Total current assets.................................... 2,326 1,680
Investments in and advances to subsidiaries (at equity)..... 245,689 233,707
-------- --------
Total assets............................................ $248,015 $235,387
-------- --------
-------- --------
Liabilities and partners' capital
Current liabilities......................................... $ 2,039 $ 1,692
-------- --------
Partners' capital
General Partner........................................... 2,460 2,338
Limited Partners.......................................... 243,516 231,357
-------- --------
Total partners' capital................................. 245,976 233,695
-------- --------
Total liabilities and partners' capital................. $248,015 $235,387
-------- --------
-------- --------
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Equity in income of subsidiaries................. $ 46,250 $ 39,462 $ 8,484
Operating expenses............................... (16) (10) (135)
Interest income.................................. -- -- 780
Interest and debt expense........................ (57) (86) (127)
Incentive compensation to General Partner........ (360) -- --
-------- -------- --------
Net income................................. $ 45,817 $ 39,366 $ 9,002
-------- -------- --------
-------- -------- --------
STATEMENTS OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 45,817 $ 39,366 $ 9,002
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed earnings of subsidiaries....... (11,982) (7,858) 22,403
Change in assets and liabilities:
Temporary investments...................... (2,005) (250) 1,139
Other current assets....................... (12) 342 (359)
Current liabilities........................ 347 1,287 (693)
-------- -------- --------
Net cash provided by operating activities.. 32,165 32,887 31,492
Cash flows from financing activities:
Capital contributions.......................... 4 -- --
Proceeds from exercise of unit options......... 428 -- --
Distributions to Unitholders................... (33,968) (31,515) (31,515)
-------- -------- --------
Net (decrease) increase in cash and cash equiv-
alents........................................ (1,371) 1,372 (23)
Cash and cash equivalents at beginning of peri-
od............................................ 1,412 40 63
-------- -------- --------
Cash and cash equivalents at end of period..... $ 41 $ 1,412 $ 40
======== ======== ========
</TABLE>

See footnotes to consolidated financial statements of Buckeye Partners, L.P.

S-2
<PAGE>

SCHEDULE II

BUCKEYE PARTNERS, L.P.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES, NET ACCOUNTS DEDUCTIONS OF PERIOD
- - ----------- ---------- ------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1994
Reserve for discontinued
operations............. $ -- $-- $ -- $ -- $ --
======= ==== ====== ======= =======
Year ended December 31,
1993
Reserve for discontinued
operations............. $21,768 $127 $ -- $21,895(a) $ --
======= ==== ====== ======= =======
Year ended December 31,
1992
Reserve for discontinued
operations............. $19,231 $-- $2,537(b) $ -- $21,768
======= ==== ====== ======= =======
</TABLE>
- - --------
(a) Represents disposition of discontinued operations upon sale of net assets
of discontinued operations during 1993.
(b) Reversal of corporate deferred income taxes.

S-3
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<S> <C>
11.1 Computation of earnings per Unit.
21.1 List of subsidiaries of the Partnership.
</TABLE>

<PAGE>

EXHIBIT 11.1
BUCKEYE PARTNERS, L.P.
COMPUTATION OF EARNINGS PER UNIT
(IN THOUSANDS, EXCEPT FOR UNITS AND PER UNIT AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Income from continuing operations before
extraordinary charge and cumulative effect
of change in accounting principle......... $48,086 $41,654 $ 34,546
Loss from disposal of discontinued
operations................................ -- (127) --
Extraordinary charge on early
extinguishment of debt.................... (2,269) (2,161) --
Cumulative effect of change in accounting
principle................................. -- -- (25,544)
---------- ---------- ----------
Net income................................. $45,817 $39,366 $ 9,002
========== ========== ==========
Primary earnings per Unit:
Income from continuing operations before
extraordinary charge and cumulative
effect of change in accounting
principle............................... $ 3.96 $ 3.43 $ 2.85
Loss from disposal of discontinued
operations.............................. -- (0.01) --
Extraordinary charge on early
extinguishment of debt.................. (0.19) (0.18) --
Cumulative effect of change in accounting
principle............................... -- -- (2.11)
---------- ---------- ----------
Net income............................... $ 3.77 $ 3.24 $ 0.74
========== ========== ==========
Fully-diluted earnings per Unit:
Income from continuing operations before
extraordinary charge and cumulative
effect of change in accounting
principle............................... $ 3.96 $ 3.43 $ 2.85
Loss from disposal of discontinued
operations.............................. -- (0.01) --
Extraordinary charge on early
extinguishment of debt.................. (0.19) (0.18) --
Cumulative effect of change in accounting
principle............................... -- -- (2.11)
---------- ---------- ----------
Net income............................... $ 3.77 $ 3.24 $ 0.74
========== ========== ==========
Average number of Units outstanding:
Units outstanding at December 31,........ 12,131,640 12,121,212 12,121,212
Exercise of Options reduced by the number
of Units purchased with proceeds (Prima-
ry)..................................... 20,376 18,945 6,566
---------- ---------- ----------
Total Units outstanding--Primary......... 12,052,016 12,140,157 12,127,778
========== ========== ==========
Units outstanding at December 31,........ 12,131,640 12,121,212 12,121,212
Exercise of Options reduced by the number
of Units purchased with proceeds (Fully-
diluted)................................ 20,268 25,589 8,612
---------- ---------- ----------
Total Units outstanding--Fully-diluted... 12,151,908 12,146,801 12,129,824
========== ========== ==========
</TABLE>
- - --------
Although not required to be presented in the income statement under provisions
of APB Opinion No. 15, this calculation is submitted in accordance with
Regulations S-K item 601(b)(11).

<PAGE>

EXHIBIT 21.1
BUCKEYE PARTNERS, L.P.
SUBSIDIARIES OF THE REGISTRANT

The following table lists each significant subsidiary of Buckeye Partners,
L.P. and its jurisdiction of organization.

<TABLE>
<CAPTION>
JURISDICTION
OF
SUBSIDIARY ORGANIZATION
---------- ------------
<S> <C>
Buckeye Pipe Line Company, L.P. (99% owned)..................... Delaware
Buckeye Tank Terminals Company, L.P. (99% owned)................ Delaware
Everglades Pipe Line Company, L.P. (99% owned).................. Delaware
Laurel Pipe Line Company, L.P. (99% owned)...................... Delaware
</TABLE>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,071
<SECURITIES> 1,400
<RECEIVABLES> 17,057
<ALLOWANCES> 0
<INVENTORY> 1,320
<CURRENT-ASSETS> 31,322
<PP&E> 556,939
<DEPRECIATION> 53,856
<TOTAL-ASSETS> 534,765
<CURRENT-LIABILITIES> 25,572
<BONDS> 214,000
<COMMON> 0
0
0
<OTHER-SE> 245,976
<TOTAL-LIABILITY-AND-EQUITY> 534,765
<SALES> 0
<TOTAL-REVENUES> 186,338
<CGS> 0
<TOTAL-COSTS> 113,857
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,931
<INCOME-PRETAX> 48,086
<INCOME-TAX> 0
<INCOME-CONTINUING> 48,086
<DISCONTINUED> 0
<EXTRAORDINARY> 2,269
<CHANGES> 0
<NET-INCOME> 45,817
<EPS-PRIMARY> 3.77
<EPS-DILUTED> 3.77

</TABLE>