Western Pipeline System

• Crude Oil Pipelines
  We own and operate approximately 3,115 miles of crude oil trunk pipelines and approximately 520 miles of crude oil gathering lines in: Oklahoma and Texas. We are the primary shipper on our Western Pipeline System. We also deliver crude oil for Sunoco, Inc. (R&M) and for various third parties from points in Texas and Oklahoma. Our pipelines access several trading hubs, including the largest and most significant trading hub for crude oil in the United States located in Cushing, OK, and other trading hubs located in Colorado City and Longview, TX. Our crude oil pipelines also connect with other pipelines that deliver crude oil to a number of third-party refineries.
• On August 1, 2005, the Partnership completed the acquisition of a crude oil pipeline system and storage facilities, located in Texas for $100 million. The system consists primarily of a 187-mile, 16-inch pipeline, with an operating capacity of 125 mbpd, originating at the Corsicana, Texas terminal and terminating at Wichita Falls, Texas. The Corsicana Texas terminal consists of 2.9 million shell barrels of crude oil storage, while the Ringgold, Texas terminal consists of 0.5 million shell barrels of crude oil capacity. We also constructed a new $17 million, 20-mile pipeline connecting the West Texas Gulf Pipe Line at Wortham, Texas to Corsicana in December 2005.
• In December 2005, the Partnership purchased a 37.0% undivided interest in the Mesa Pipe Line System for approximately $6.6 million from affiliates of Sunoco and Chevron. The Mesa Pipe Line System consists of an 80-mile, 24- inch crude oil pipeline from Midland, Texas to Colorado City, Texas, with an operating capacity of 316,000 bpd, and approximately 800,000 barrels of tankage at Midland. The Mesa Pipe Line System connects to the West texas Gulf Pipeline, of which we own a 43.8% interest, which supplies crude oil to the Mid-Valley pipeline.
• On March 1, 2006, the Partnership purchased a crude oil pipeline system from affilates of Black Hills Energy, Inc. for $41.4 million. The system consists of 390 miles of crude oil pipelines with an operating capacity of 100,000 bpd and 340,000 shell barrels of active storage capacity.
• On March 1, 2006, the Partnership acquired a crude oil pipeline system located in Texas from affilates of Alon USA Energy, Inc. for $68.0 million. The system consists of 528 miles of crude oil pipelines with an operating capacity of 67,000 bpd. Alon has also agreed to ship a minimum of 15,000 bpd on these pipelines under a 10-year throughput and deficiency agreement. These pipelines are currently idled and are scheduled to be returned to service on June 1, 2006.
• A 43.8% interest in West Texas Gulf Pipe Line Company, a joint venture that owns and operates a 580-mile crude oil pipeline. This pipeline originates from the West Texas oil fields at Colorado City and the Nederland import terminal and extends to Longview, Texas where deliveries are made to Sunoco Inc.'s 55% owned Mid-Valley Pipeline. On January 1, 2005, we became the operator of the West Texas Gulf pipeline.
• Crude Oil Acquisition and Marketing Operations
  Conducted primarily in Oklahoma and Texas, these include:
  • purchasing approximately 180,000 mbpd of crude oil at the wellhead from approximately 3,400 producers (from about 34,000 leases), and in bulk from aggregators at major pipeline interconnections and trading locations. Generally, as we purchase crude oil, we enter into corresponding sales transactions thereby establishing a substantially balanced position, minimizing exposure to price volatility. We do not enter into commodity derivative contracts,
  • transporting crude oil in our pipelines and trucks or, when necessary or cost-effective, in pipelines or trucks owned and operated by third parties. We own about 116 crude oil transport trucks, and operate approximately 130 crude oil truck unloading facilities in Oklahoma, Texas, and New Mexico, and
  • marketing crude oil to major integrated oil companies, independent refiners, including Sunoco, Inc. (R&M) for its Tulsa, OK and Toledo, OH refineries, and other resellers in various types of sale and exchange transactions, at market prices for terms generally ranging from one month to one year.