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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)

NOTE 5: Related Party Transactions

The Partnership has related party  transactions  with Valero Energy for pipeline
tariff and terminalling fee revenues,  certain employee costs,  insurance costs,
administrative  costs and  interest  expense on the debt due to parent  (for the
period January 1, 2001 to April 15, 2001). The receivable from parent represents
the net amount due from Valero Energy for these related party  transactions  and
the net cash collected under Valero Energy's centralized cash management program
on the Partnership's behalf.

The following table summarizes transactions with Valero Energy:

                                                         Three Months Ended
                                                              March 31,
                                                              ---------
                                                       2002               2001
                                                       ----               ----
                                                            (in thousands)

  Revenues....................................      $ 25,910           $ 23,272
  Operating expenses..........................         3,407              2,683
  General and administrative expenses.........         1,300              1,300
  Interest expense on debt due to parent......             -              2,154

Under the Services  Agreement with the Partnership,  Valero Energy has agreed to
provide the  corporate  functions of legal,  accounting,  treasury,  information
technology and other  services for an annual fee of $5,200,000  until July 2008.
The  $5,200,000  is  adjustable  annually  based  on the  Consumer  Price  Index
published by the U.S. Department of Labor, and may also be adjusted to take into
account   additional   service  levels   necessitated   by  the  acquisition  or
construction  of  additional  assets.  This  annual  fee is in  addition  to the
incremental  general and administrative  costs to be incurred from third parties
as a result of the Partnership being a publicly held entity.

The Services  Agreement  also requires  that the  Partnership  reimburse  Valero
Energy for various recurring costs of employees who work exclusively  within the
pipeline,  terminalling  and  storage  operations  and for  certain  other costs
incurred by Valero Energy  relating  solely to the  Partnership.  These employee
costs include salary, wages and benefit costs.

Under the Pipelines and Terminals Usage Agreement with the  Partnership,  Valero
Energy has agreed to use the  Partnership's  pipelines to transport at least 75%
of the crude oil  shipped to and at least 75% of the  refined  products  shipped
from the McKee, Three Rivers and Ardmore refineries and to use the Partnership's
refined  product  terminals  for  terminalling  services for at least 50% of all
refined  products  shipped from these  refineries until at least April 2008. For
the three  months  ended March 31, 2002,  Valero  Energy used the  Partnership's
pipelines  to  transport  91% of its crude oil shipped to and 79% of the refined
products shipped from the McKee,  Three Rivers and Ardmore refineries and Valero
Energy  used the  Partnership's  terminalling  services  for 63% of all  refined
products shipped from these refineries.

If market conditions change,  either with respect to the transportation of crude
oil or refined  products  or to the end  markets in which  Valero  Energy  sells
refined  products,  in a material  manner such that Valero Energy would suffer a
material  adverse  effect  if it  were  to  continue  to use  the  Partnership's
pipelines and terminals at the required  levels,  Valero Energy's  obligation to
the  Partnership  will be  suspended  during  the period of the change in market
conditions  to the extent  required to avoid the material  adverse  effect.  The
economic-based  production  cutbacks  at the McKee,  Three  Rivers and  Ardmore
refineries  during the first  quarter of 2002 were not  considered  a triggering
event under the Pipelines and Terminals Usage Agreement.


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