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SEC Filings
10-Q
NUSTAR ENERGY L.P. filed this Form 10-Q on 05/15/2002
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               VALERO L.P. AND VALERO LOGISTICS OPERATIONS, L.P.
      NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Continued)

o    amends  Statement  No.  13,   "Accounting  for  Leases,"  to  eliminate  an
     inconsistency   between  the   required   accounting   for   sale-leaseback
     transactions  and the required  accounting for certain lease  modifications
     that have economic effects that are similar to sale-leaseback transactions.


This statement also amends other existing  authoritative  pronouncements to make
various technical corrections, clarify meanings, or describe their applicability
under  changed  conditions.  The  provisions of Statement No. 145 related to the
rescission of Statement No. 4 shall be applied in fiscal years  beginning  after
May 15, 2002 and the provisions of this  statement  related to the Statement No.
13 sale-leaseback  inconsistency  shall be effective for transactions  occurring
after May 15, 2002, with early application  encouraged.  All other provisions of
this statement  shall be effective for financial  statements  issued on or after
May 15, 2002, with earlier  application  encouraged.  The  Partnership  does not
expect that the adoption of this  statement  will have a material  impact on its
financial position or results of operations.

NOTE 4: Commitments and Contingencies

The Partnership's  operations are subject to environmental  laws and regulations
adopted by various  federal,  state and local  governmental  authorities  in the
jurisdictions  in which it  operates.  Although  the  Partnership  believes  its
operations are in general compliance with applicable environmental  regulations,
risks of additional costs and liabilities are inherent in pipeline, terminalling
and storage operations, and there can be no assurance that significant costs and
liabilities  will  not  be  incurred.   Moreover,  it  is  possible  that  other
developments, such as increasingly stringent environmental laws, regulations and
enforcement policies  thereunder,  and claims for damages to property or persons
resulting  from  the   operations,   could  result  in  substantial   costs  and
liabilities.  Accordingly,  the Partnership has adopted policies,  practices and
procedures  in the areas of  pollution  control,  product  safety,  occupational
health and the  handling,  storage,  use and disposal of hazardous  materials to
prevent  material  environmental  or other  damage,  and to limit the  financial
liability  which  could  result  from  such  events.   However,   some  risk  of
environmental or other damage is inherent in pipeline,  terminalling and storage
operations, as it is with other entities engaged in similar businesses. Although
environmental  costs may have a significant  impact on results of operations for
any single  period,  the  Partnership  believes  that such costs will not have a
material adverse effect on its financial position.

In connection  with the initial  public  offering of Valero L.P.,  UDS agreed to
indemnify  Valero L.P. for  environmental  liabilities that arose prior to April
16, 2001 and are discovered within 10 years after April 16, 2001.  Excluded from
this  indemnification are liabilities that result from a change in environmental
law after  April  16,  2001.  Effective  with the  acquisition  of UDS by Valero
Energy,  Valero  Energy  has  assumed  this  environmental  indemnification.  In
addition,  as an operator or owner of the assets,  the Partnership could be held
liable for  pre-April  16, 2001  environmental  damage  should  Valero Energy be
unable to fulfill its obligation.  However, the Partnership believes that such a
situation is remote given Valero Energy's financial condition.

In  conjunction  with the sale of the Wichita  Falls  Business  to Valero  L.P.,
Valero  Energy  has  agreed  to  indemnify  Valero  L.P.  for any  environmental
liabilities that arose prior to February 1, 2002 and are discovered by April 15,
2011. As of and for the years ended December 31, 2001,  2000 and 1999, and as of
and for the one month ended January 31, 2002, the Wichita Falls Business did not
incur any  environmental  liability;  thus there was no  accrual on January  31,
2002.

The  Partnership  is  involved  in  various  lawsuits,   claims  and  regulatory
proceedings  incidental  to its  business.  In the  opinion of  management,  the
outcome  of  such  matters  will  not  have a  material  adverse  effect  on the
Partnership's financial position or results of operations.




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