STATE OF TEXAS      )

COUNTY OF CAMERON   )                            BROWNSVILLE NAVIGATION DISTRICT
                                                 CONTRACT NO.       2823
                                                             -------------------

     THIS  CONTRACT  between  the  BROWNSVILLE  NAVIGATION  DISTRICT  OF CAMERON
COUNTY,  TEXAS,  a navigation district organized, created and existing under and
by  virtue  of the laws of the State of Texas, with its domicile in Brownsville,
Cameron County, Texas, hereinafter styled District, and PENN OCTANE CORPORATION,
a  Texas  corporation  hereinafter  styled  Lessee;

                              W I T N E S S E T H:
                              --------------------

     The  said BROWNSVILLE NAVIGATION DISTRICT OF CAMERON COUNTY, TEXAS, does by
these  presents  lease  and  demise  unto  the  said PENN OCTANE CORPORATION the
property  described on Exhibit A, attached hereto and made a part hereof for all
purposes,  for a term of one (1) year, commencing the 15th day of October, 1993,
for  and  upon  the  following  terms  and  conditions:

                                       I.

     As  a  consideration for this lease and as rental for said leased premises,
the  Lessee  agrees  to  pay  an  annual  rental of EIGHTEEN THOUSAND and NO/100
DOLLARS  ($18,000.00).  The  rental  shall  be  due and payable semi-annually in
advance  on  the  15th  day  of  October and April during the lease term and any
extension  thereof.
     All  rentals  shall be paid not later than Ten (10) days from the date when
due;  they  shall  thereafter bear interest at the rate of fifteen percent (15%)
per  annum from the date due until paid. In the event such fifteen percent (15%)
rate  at any time shall be illegal or usurious under applicable law, it shall be
automatically  reduced  to  the  highest  lawful  rate.

                                       II.

     Lessee is hereby granted the option during the term of this lease, provided
this  lease  is then in full force and effect, and that Lessee is not in default
under  any of the provisions of this lease, of extending and renewing this lease
for  four  additional one year terms and a fifth additional five year term, upon
the


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same  terms  and  conditions  except for the rent which shall be at the standard
rental  rate  established  by  the Board of Commissioners as of the commencement
date of the option terra. The exercise of said option to be by written notice to
the  District  on  or  before ninety days prior to the expiration of the primary
term  of  this  lease.

                                      III.

     The  District  acting  through  its  Board of Commissioners and in the sole
discretion  of  such  Board  shall  have the right to adjust the standard rental
rates  for  land  leases other than Fishing Harbor leases. Any such change shall
not  be  applied  to  this lease until the commencement of the option term above
provided  for.
     District  agrees  to  give  notice of the meeting at which an adjustment to
rental rates will be considered and acted on and to afford Lessee an opportunity
to  be  heard  at  such  meeting.

                                       IV.

     It  is  an  express condition of this agreement and lease that the property
leased  hereby  is  for  the  sole  purpose of constructing and operating an LPG
terminal  facility.  This lease may be terminated without judicial ascertainment
by  the District at any time Lessee discontinues the use of the premises for the
purposes named or uses such premises for any other purpose, provided that in the
case  of nonuse such default of said Lessee shall exist for a period of 180 days
at  any  time  after  commencement  of the operation of said described business.

                                          V.

     All  construction  of  improvements  and  facilities  of  Lessee which will
include  a  propane  and  butane  facility  on the leased tract of land shall be
subject to the approval of the District which approval shall not be unreasonably
withheld  prior  to  the  beginning  of  construction and shall conform with the
requirements  of  the National Board of Fire Underwriters for such occupancy and
facilities.  The  Lessee shall construct, maintain and operate its facilities on
the  leased  property  so  as  not  to  conflict  with  the


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regulations  of  any  federal,  state or municipal authority having jurisdiction
thereof,  nor  with  the rules and regulations prescribed by the District in the
official  Tariff  of  the Port of Brownsville. All private fire protection which
may be installed by the Lessee shall conform in all respects to the standards of
the private fire protection facilities installed and maintained by the District.

                                       VI.

     Lessee  may not assign this lease or sublet the leased premises without the
written consent of District. Further, Lessee may not assign this lease or sublet
the  leased  premises  for  any use other than as stated in Paragraph IV of this
lease.

                                      VII.

     All  notices required hereunder shall be deemed to have been served if hand
delivered  or  sent  by registered or certified mail, to District at the address
below  or  to  Lessee  at  the  leased  premises  or  at  the  address  below:

TO DISTRICT:                                 TO LESSEE:
------------                                 ----------

BROWNSVILLE NAVIGATION DISTRICT                PENN OCTANE CORPORATION
    OF CAMERON COUNTY, TEXAS                   100 McKINNEY PLACE
POST OFFICE BOX 3070                           3131 McKINNEY AVE.
BROWNSVILLE, TEXAS  78520-3070                 DALLAS, TEXAS   75204

                                        VIII.

     Lessee  shall have the right to erect electric lights, power, water and gas
lines over and across lands belonging to District, including the premises leased
herein, incidental to the rights and privileges herein given, and shall have the
further  right  to  connect said lines to main lines maintained by the District;
provided  and  except,  however, that the rights in this paragraph defined shall
be,  and the same are, specifically made subject to the following conditions and
restrictions:
     1.   The  location  and  construction by Lessee of all or any of said lines
shall  be  subject to the approval of District and after the same are installed,
no  change  shall  be  made  without  the  written  consent  of  said  District.


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<PAGE>
     2.   District  may  at  any time require a change in location of any wires,
poles,  water or gas mains or pipelines, accessories or other facilities laid on
or  across any land or facilities of District other than the leased premises, if
it is deemed by District necessary that the same be changed, by giving Lessee 30
days'  written notice of such requirements, and such changes so made shall be at
the  cost  and  expense  of  Lessee;  provided such right shall not be exercised
arbitrarily  by  District,  but  only  when  such  action  is made necessary for
improvements then on said property or the construction thereof being immediately
contemplated, and provided that, where any changes arc required to be made under
this provision, District shall furnish Lessee with a new location therefor; such
new  location  to  be  the  most  convenient  and direct available at such time.
     3.   Lessee  agrees  to  pay District for all water used and all applicable
standby  charges,  at  rates  customarily  charged  to  other  industries on the
District's  property.
     4.   Connection  to District's water main must be of standard installation,
installed  to  the  satisfaction  of District, and with a meter of adequate size
properly operating and equipped with a check valve. The meter shall be furnished
by  Lessee  and installed immediately at the point of connection with District's
main.
     5.   All  electrical  and  power  line  connections,  extensions  and
installations are to be made in accordance with the rules and regulations of the
National  Electrical  Code.
     6.   Lessee  agrees  to  pay to District as and when they accrue, wharfage,
port,  harbor  and  other  charges  for  the  use of its facilities at the rates
published  in  the  District's  them  effective  official Port Tariff containing
authorized  rates,  rules and regulations governing the Brownsville Ship Channel
and  its  publicly  owned  wharves, piers and docks, as well as all other lawful
charges  incurred  to  District  by reason of Lessee's operations on the demised
premises.


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                                                                          Page 4
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     7.   District  will provide a pipeline easement from the leased premises to
the  District  oil  dock.
     8.   In  the  event that Lessee stores more than 5,000 gallons of petroleum
hydrocarbon  Lessee  agrees  to  install  groundwater  monitoring wells prior to
receiving  such  liquid  hydrocarbon  products.
     A  minimum of four (4) monitoring wells shall be installed on the perimeter
of  the  facility and shall be placed at an approximate equal distance from each
other.  Wells  shall  be  constructed to comply with current USEPA standards for
monitoring  wells.
     The wells shall be fully developed upon installation. The groundwater shall
be  monitored  when  they  are  developed and once a year thereafter. Parameters
analyzed  shall  include  TPH (Total Petroleum Hydrocarbons) for all facilities,
and  BTEX  (Benzene,  Toluene,  Ethylbenzene,  and  Xylene)  for  all facilities
handling  crude  oil  and  light  distillates.  Facilities  handling  Hazardous
Materials,  as  defined by USDOT regulations in 49 CFR 100-199 (subpart C) shall
also  install groundwater monitoring wells as described above, and shall monitor
for  all  chemicals  stored  in  tanks with a capacity in excess of 500 gallons.

                                       IX.

     If any of the rent or other sums of money to be paid by Lessee shall not be
paid  as  and  when  the  same  becomes  due  or  if Lessee shall default in the
performance  of  any  of  the  other  agreements, conditions, covenants or terms
herein  contained,  or  if  Lessee  shall  abandon  the premises as described in
Paragraph  IV;  or  if  a petition or answer for reorganization of Lessee or the
then  owner  of  Lessee's interest hereunder shall be filed; or if Lessee or the
then  owner  of  Lessee's interest hereunder shall make a general assignment for
the  benefit  of  creditors,  or  shall take any benefit under any insolvency or
bankruptcy  act,  or have a receiver or trustee or other fiduciary appointed for
its  property;  or if Lessee's leasehold interest shall be taken on execution or
other  process  of  law;  or  if  this  lease  or  the  estate


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                                                                          Page 5
<PAGE>
of  Lessee hereunder shall be transferred or passed to or devolve upon any other
person,  firm,  association  or  corporation  except  in  the  manner  provided
hereunder;  then  and  in  any  of said events, District shall have the right to
terminate  and  this  lease  and  the term hereby granted, as well as the right,
title  and  interest  of  Lessee hereunder; provided, however, that the District
shall  first  give Lessee 30 days' notice in writing of such default, specifying
in  particularity  the  nature  of  the  default,  and  shall  give  Lessee  the
opportunity  to  cure  such  default within such 30 day period. If Lessee should
fail  to  cure  such  default  within  such  30  day notice period, District may
terminate  this  lease;  and  it  is agreed that upon the expiration of the term
fixed  in  such notice, if the nonpayment, default or other cause of termination
specified  in  such notice shall not have, been made good or removed, this lease
and  the  term  hereby  granted and created, as well as all the right, title and
interest  of Lessee hereunder shall, at the option of the District, terminate in
the  same manner and with the same force and effect as if the expiration of time
in  such  notice  were  the  end  of the term herein originally demised; and the
District  may immediately, or at any time thereafter, and without further notice
or  demand,  enter into and upon said premises, or any part thereof, in the name
of the whole, and repossess the same as of its first and former estate and expel
the  Lessee  and  those  claiming under it, and remove its effects (forcibly, if
necessary)  without  being taken or deemed guilty of any manner of trespass, and
without  prejudice  to any remedies which might be otherwise used for arrears of
rent  or  preceding breach of covenants. Notwithstanding the termination of this
lease  and  possession  regained  by  District,  Lessee  will indemnify District
against  all  loss  of  rent  which  may  accrue  to  District by reason of such
termination  during  the remainder of the lease term. Lessee specifically agrees
that  this  paragraph  supersedes  its  rights under Section 93.002 of the Texas
Property  Code.


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                                                                          Page 6
<PAGE>
     In  the event District does not exercise the right hereinabove given it, it
may  accept  rent  from  the  receiver,  trustee  or other officer in possession
thereof for the term of such occupancy without impairing or affecting in any way
the  right  of  District  against  Lessee  hereunder.  Any neglect or failure to
enforce  the right of forfeiture of this lease or re-entry upon breach of any of
the  conditions,  covenants, terms and agreements herein contained, shall not be
deemed  a  waiver  of  such  right upon any subsequent breach of any such or any
other  condition,  covenant,  term  and/or  agreement  herein  contained.
     It  is understood and agreed that no part of the time of the discontinuance
or  cessation  in  operation  referred to in Paragraph IV which is caused by the
interference  of  military  authorities,  strikes,  floods,  fires,  navigation
hazards,  embargoes,  or limitations on production instituted by state, national
or  local  authorities,  or any other act not within the control of either party
hereto,  shall  be counted in the 180 day period mentioned in said Paragraph IV.

                                       X.

     The  Lessee  shall  comply  with  all  the conditions and covenants of this
lease.  If  the  Lessee  complies  with  all the conditions or covenants of this
lease,  upon  the  expiration  of  the term of this lease, Lessee shall have the
right  for  a  period of up to 90 days from the date of said expiration, and not
thereafter,  to  remove  all  of  its  improvements of every kind and character,
except  all  water  mains,  gas  mains, railroad tracks, power lines, wharves or
bulkheads,  which  are  hereby  agreed shall become the property of the District
upon  said  expiration,  cancellation  or  forfeiture, from the leased premises;
provided,  however,  that the leased premises shall be restored to their present
condition after the removal of said improvements, all excavations, except slips,
filled  and  all  refuse of every kind and character removed from said premises.
Until such removal and restoration is completed, Lessee shall pay to District on
a  month-to-month  basis  the  then  current  rental  for  the  premises.


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                                                                          Page 7
<PAGE>
Such  rental shall be due monthly in advance and Lessee shall pay a full month's
rental  for  any  fraction of a month during which it completes such removal and
restoration.
     In  the  event of the breach of any such conditions or covenants, and after
the  revocation  or  forfeiture  of  this  lease  by District as in Paragraph IX
provided, all improvements owned by Lessee and placed upon the premises shall be
considered  as  part  of  the  real  estate and shall become the property of the
District.

                                       XI.

     Lessee  shall  pay  all  taxes  and assessments legally levied and assessed
against  its leasehold interest and its improvements on said property during the
term  of  this lease and any extension thereof before such taxes and assessments
become delinquent, unless Lessee, by legal proceedings, contests the legality of
same,  in which event such taxes and assessments shall be promptly paid upon the
judicial  determination  thereof.

                                      XII.

     Lessee shall keep sidewalks, roads and passageways, if any, on or over said
leased  premises  in good repair, and shall indemnify and hold harmless District
against  any  and  all claims, damages, liabilities, costs (including reasonable
engineering  and/or  attorneys  fees)  arising  out  of,  in connection with, or
incident  to  any  act  or  omission  or  condition (including the negligence of
District  or  its  agents  or  employees)  in  connection  with  the  ownership,
operation, maintenance or repairs of the premises covered by the Lease including
any  additions to or extensions of the same. Lessee agrees to repair any damage,
reasonable  wear  and  tear alone excepted, to District's road contiguous to the
leased  promises  caused  by tank trucks conveying petroleum products to or from
the  leased  premises.
     Lessee  shall  keep  in  full  force and effect Bodily Injury Liability and
Property  Damage  Liability  Insurance covering its operations to be carried out
upon  or  in  connection  with  this  lease.  The  policy or policies shall name
District  as  additional


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                                                                          Page 8
<PAGE>
insured  and  contain  a  clause  that the insurance will be canceled or changed
without  giving  the  District thirty days prior written notice. Certificates of
insurance  shall be furnished to the District. The limits of liability and other
insurance  policy  particulars  required  will  be  available  at the District's
administrative  office.

                                      XIII.

     The  District  reserves  the  right to have rights-of-way and easements on,
over  and  across  the  premises  for  underground water lines, pipelines, power
lines,  telegraph  and  telephone lines, necessary or proper for the purposes of
developing  and  serving  lands adjacent to the tract leased by the Lessee; said
rights-of-way  and  easements,  however,  to be so located and said water linen,
pipelines,  power  lines,  telegraph  and  telephone  lines  so  constructed and
maintained as not to impair or interfere with any of the existing or anticipated
improvements  on  said  tract  leased  by the Lessee, or with the maintenance or
operation  thereof.

                                      XIV.

     In  construction  of  its  improvements  on  the leased premises and in its
operation  and  maintenance of said improvements and the conduct of its business
thereon, Lessee agrees and hereby obligates itself to conform to and be bound by
the  following:

     1.   No  building or other similar improvements shall be constructed within
20  feet  from  the  theoretical top of all bank lines and all road right-of-way
lines,  nor  within  10  feet  from  all  other  property  lines.
     2.   All  septic systems installed on said leased premises shall be subject
to  the  approval  of  the  District's Engineer and the County Health Officer of
Cameron  County,  Texas.
     3.   All  waste water, rain water, etc., not containing noxious, odorous or
otherwise  harmful  substances  may  be  disposed  of through direct underground
drains  into  the basin, except that such drains must leave the bank at least 8"
below the top line of rip rap rock to prevent erosion of the bank.   In no event
shall


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                                                                          Page 9
<PAGE>
any  such  drain  water be shunted or passed over banks of the harbor, nor shall
any  noxious,  odorous  or  otherwise  harmful substance be discharged into such
harbor  or  basin.
     4.   Lessee  agrees  to  connect  its  septic  system to any sanitary sewer
system  constructed  by District for the purpose of serving the leasehold, among
other  lands,  paying  the District its customary charge for such sewer service.
     5.   Lessee  agrees  to  maintain and return the leased premises in a clean
and  well  maintained  condition.  All fences will be kept in good repair, grass
mowed,  and  all  scrap  metal,  trash  or  other  litter  removed.
     6.   Lessee  agrees  to return the leased premises in the same condition as
Lessee  received them,  ordinary wear and tear excepted.   A security deposit of
FOUR THOUSAND FIVE HUNDRED AND NO/100  DOLLARS  ($4,500.00)  will be required of
Lessee  upon  execution  of  this lease.  An inspection of the premises, will be
conducted  prior  to  occupancy  and upon termination of the lease. The District
will  conduct  the  inspections,  but  Lessee  will  be  permitted  to  have  a
representative  present.  In  the  event  that  any of the lease premises is not
returned  in  the  proper condition as defined above, the District will have the
right  to use any or all of the deposit to restore the condition of the items in
question.    The  District  does  not  release the Lessee from liability for the
condition  of  the  items in question nor does it limit its right of recovery of
the  security  deposit.

                                       XV.

     In  addition  to  the District's statutory lien, District shall have at all
times  a valid security interest to secure payment of all rentals and other sums
of  money  becoming  due  hereunder  from  Lessee,  and to secure payment of any
damages  or  loss which District may suffer by reason of the breach by Lessee of
any  covenant,  agreement  or condition contained herein, upon all goods, wares,
equipment,  fixtures,  furniture,  improvements  and  other personal property of
Lessee  presently  or  which  may hereafter be situated on the premises, and all
proceeds


     BND/RAIN HARBOR LEASE
                                                                         Page 10
<PAGE>
therefrom,  and such property shall not be removed therefrom without the consent
of  District  until all arrearages in rent, as well as any and all other sums of
money  then  due to District hereunder shall first have been paid and discharged
and  all  the  covenants,  agreements  and  conditions  hereof  have  been fully
complied  with  and  performed  by  Lessee.  Upon  the occurrence of an event of
default  by  Lessee,  District  may,  in addition to any other remedies provided
herein,  after  giving thirty (30) days' notice of the intent to take possession
and  giving an opportunity for  a  hearing thereon,  enter upon the premises and
take  possession  of any and all goods, wares,  equipment,  fixtures, furniture,
improvements  and  other  personal  property of Lessee situated on the premises,
without  liability  for  trespass  or conversion, and sell the same at public or
private  sale,  with  or  without having such property at the sale, after giving
Lessee reasonable notice of the time and place of any public sale or of the time
after  which  any  private sale is to be made, at which sale the District or its
assigns  may  purchase  unless  otherwise  prohibited  by law.  Unless otherwise
provided  by  law,  and  without intending to exclude any other manner of giving
Lessee  reasonable  notice, the requirement of reasonable notice shall be met if
such  notice  is  given  at  least  10  days before the actual time of sale. The
proceeds from any such disposition, less any and all expenses connected with the
taking  possession,  holding  and selling of the property  (including reasonable
attorneys'  fees  and  other expenses), shall be applied as a credit against the
indebtedness  secured  by  the  security  interest granted in this section.  Any
surplus  shall be paid to Lessee or as otherwise required by law, and the Lessee
shall  pay  any deficiencies forthwith. Upon request by District,  Lessee agrees
to  execute  and deliver to District a financing statement in form sufficient to
perfect  the  security  interest of District under the provisions of the Uniform
Commercial  Code in force in the State of Texas.  The statutory lien for rent is
not  hereby  waived,  the security interest herein granted being in addition and
supplementary  thereto.  Anything  to


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                                                                         Page 11
<PAGE>
the  contrary  notwithstanding,  said  security  interest  shall  be subject and
subordinate to a security interest granted by the Lessee to a third party in and
to  any property owned by Lessee and located upon the leased premises ("Lessee's
Property")  to  the extent such security interest was granted for the purpose of
securing  payment (i) to a Third Party for the purchase price paid by Lessee for
Lessee's  Property  or  any  portion of such purchase price, or (ii) to a lender
advancing funds for such purchase price or any portion of such purchase price or
for  the  construction  of  improvements  upon  the  leased  premises by Lessee.

                                      XVI.

     Lessee  agrees  to comply with all provisions of the official Tariff of the
Port  of  Brownsville as it now exists or hereafter may be amended. In the event
of  a  conflict  between the provisions of this lease and the provisions of such
Tariff,  the  provisions  of  the  Tariff  shall  control.

                                      XVII.

     District expressly warrants that it is the sole owner of the premises, that
it has the full right, power and authority to make this lease, and that no other
person  needs  to  join  in  the  execution thereof in order for the lease to be
binding  upon  all  parties  having  an  interest  in  the  leased  premises.

                                     XVIII.

     In  the  event  Lessee  or  District  breaches  any  of  the  terms of this
agreement,  whereupon Lessee or District employs attorneys to protect or enforce
its  rights  hereunder,  or  in the event Lessee or District files a petition in
bankruptcy  and Lessee or District employs attorneys to protect its rights, then
the  party  which  breaches  or files a petition in bankruptcy agrees to pay the
other  party  reasonable  attorneys'  fees.

                                      XIX.

     As used in this article, the term "Hazardous Materials" means any hazardous
or  toxic  substances, materials or wastes, including, but not limited to, those
substances,  materials  and  wastes  listed  in  the United States Department of
Transportation


BND/MAIN HARBOR LEASE
                                                                         Page 12
<PAGE>
Hazardous Materials Table (49 C.F.R. 172.101) or by the Environmental Protection
Agency  as  hazardous substances (40 C.F.R. Part 302) and amendments thereto, or
substances,  materials  and  wastes  which  are  or  become  regulated under any
applicable  local, state or federal law, rule, or regulation, including, without
limitation,  any  material,  waste  or  substance  which is: (i) petroleum; (ii)
asbestos;  (iii)  polychlorinated  biphenyls;  (iv)  designated  as a "hazardous
substance"  pursuant  to  Section  311 of the Clean Water Act, 33 U.S.C. 251, et
seq.  (33  U.S.C. 1321) or listed pursuant to Section 307 of the Clean Water Act
(33 U.S.C. 1317); (v) defined as a "hazardous waste" pursuant to Section 1004 of
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., (42
U.S.C. 6903); or (vi) defined as a "Hazardous Substance" pursuant to Section 101
of the Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C.  9601,  et  seq.  (42  U.S.C.  9601).
     Lessee  covenants  and  agrees  from  the  date  hereof  and as long as the
provisions  of this lease shall remain in effect to remove from the Premises, if
and  as required by law, any Hazardous Materials placed in or on the Premises by
Lessee,  its agents, its employees or its independent contractors, and to comply
in  all  respects  with  all  federal,  state  and  local  governmental laws and
regulations  governing  such removal. Lessee promises to give notice to District
of  any claim, action, administrative proceeding (including, without limitation,
informal proceedings), or other demand by any governmental agency or other third
party involving the existence of Hazardous Materials on the Premises, and copies
of any notice of any releases of Hazardous Materials given by Lessee pursuant to
any  law,  rule  or  regulation,  and  any  report  of  and response to any such
incident.
     Lessee  agrees  to  indemnify,  pay  and  protect, defend and save District
harmless  from  and  against  any and all claims (including, without limitation,
third  party  claims  for  personal injury or real or personal property damage),
actions, administrative proceedings (including informal proceedings), judgments,
damages,


BND/MAIN HARBOR LEASE
                                                                         Page 13
<PAGE>
punitive  damages,  penalties, fines, costs, liabilities (including sums paid in
settlement  of  claims),  interest,  or  losses, including reasonable attorneys'
and  paralegals'  fees  and expenses, consultant fees, and expert fees, together
with  all  other  costs  and  expenses  of any kind or nature (collectively, the
"Costs")  that  arise  directly  or  indirectly  from  or in connection with the
release  or  suspected  release  by  Lessee  or its agents, its employees or its
independent  contractors  of  any  Hazardous Materials in or into the air, soil,
ground  water, or surface water at, on, about, under, or within the Premises, or
any portion thereof, or elsewhere in connection with Lessee's operations  on  or
in  connection  with  the  Premises.  The indemnification provided in this lease
shall  specifically  apply  to  and  include  claims or actions brought by or on
behalf  of employees of Lessee.  In the event District shall suffer or incur any
such Costs, Lessee shall pay to District the total of all such Costs suffered or
incurred  by District upon demand therefor by District.   Without." limiting the
generality  of  the  foregoing, the indemnification provided in this lease shall
specifically  cover  costs,  including capital, operating and maintenance costs,
incurred  in connection with any investigation or monitoring of site conditions,
any  cleanup,  containment,  remedial,  removal,  or restoration work require or
performed  by  any  federal,  state  or  local  government  agency  or political
subdivision  or performed by any nongovernmental entity or person because of the
presence,  suspected  presence,  release,  or suspected release of any Hazardous
Material in or into the air, soil, ground water, or surface water at, on, about,
under,  or  within  the  Premises  or  any  portion  thereof,  or  elsewhere  in
connection  with  Lessee's  operations on or in connection with the Premises and
any  claims of third parties for loss or damage due to such hazardous materials.
     In  the event Lessee is required to conduct or perform any investigation or
monitoring of site conditions for any cleanup, containment, restoration, removal
or  other  remedial  work


BND/MAIN HARBOR LEASE
                                                                         Page 14
<PAGE>
(collectively  the "Remedial Work") under any applicable federal, state or local
law  or  regulation,  by any judicial order or by any governmental entity, or in
order  to  comply  with  any  agreements affecting the Premises because of or in
connection  with  any  occurrence or event described in this lease, Lessee shall
perform  or cause to be performed the Remedial Work in compliance with such law,
regulation,  order  or  agreement;  provided  that  Lessee  may  withhold  such
compliance  pursuant  to  a  good  faith  dispute  regarding  the  application,
interpretation,  or validity of the law, regulation, order or agreement, subject
to  the requirements of the following paragraph. All such Remedial Work shall be
performed  by one or more contractors selected by Lessee and approved in advance
in  writing  by  District,  and  under  the supervision of a consulting engineer
selected by Lessee and approved in advance in writing by District. All costs and
expenses  of  such  Remedial  Work  shall  be paid by Lessee, including, without
limitation,  the  charges  of  such  contractors and/or the consulting engineer,
District's  reasonable  attorneys  and paralegals'  fees and costs  incurred  in
connection  with  monitoring  or  review of such Remedial Work.  If Lessee shall
fail  to  timely  commence  or  cause  to  be  commenced,  or fail to diligently
prosecute  to  completion,  such  Remedial  Work, District may, but shall not be
required  to,  cause  such  Remedial  Work  to  be performed,  and all costs and
expenses  thereof  or incurred in connection therewith shall be Costs within the
meaning  of  this  lease.   All  such Costs shall be due and payable upon demand
therefor  by  District.
     Lessee  shall  be permitted to contest or cause to be contested, subject to
compliance  with  the  requirements of this paragraph, by appropriate action any
Remedial  Work  requirement,  and District shall not perform such requirement on
its  behalf,  so long as Lessee has given District written notice that Lessee is
contesting  or  shall  contest  or  cause  to  be  contested  the  application,
interpretation,  or  validity  of  the  governmental  law,  regulation, order or
agreement  pertaining  to  the  Remedial  Work  by


BND/MAIN HARBOR LEASE
                                                                         Page 15
<PAGE>
appropriate  proceedings  conducted  in  good faith with due diligence; provided
that  such  contests  shall  not subject District or any assignees of District's
interest  in  the  Premises  to civil liability and does not jeopardize any such
parties' interest in the Premises. Lessee shall give such security or assurances
as  may  be  reasonably required by District to insure compliance with the legal
requirements  pertaining  to  the  Remedial  Work  (and  payment of all Costs in
connection  therewith) and to prevent any sale, forfeiture, or loss by reason of
such  nonpayment  or  noncompliance.
     This  article  shall  be  binding  upon,  inure  to  the benefit of, and be
enforceable  by  District  and  Lessee,  and  their  respective  heirs,  legal
representatives,  successors  and  assigns,  including,  without limitation, any
assignee  or  purchaser  of all or any portion of the District's interest in the
Premises.  If  any  term  of  this  article  or any application thereof shall be
invalid,  illegal, or unenforceable, the remainder of this article and any other
application  of such term shall not be affected thereby. No delay or omission in
exercising  any  right  hereunder shall operate as a waiver of such right or any
other  right.  The  provisions  of this article shall survive the termination or
expiration  of  this  lease.

                                       XX.

     District reserves the right, on ninety (90) days' notice, to move Lessee at
District's  expense  to  another location on District's lands fully suitable for
Lessee's  purposes.

                                      XXI.

     Neither  Lessee  nor anyone claiming by, through or under Lessee shall have
the  right  to  file  or  place  any  mechanic's  lien  of any kind or character
whatsoever  on the premises, or on any of the buildings or improvements thereon,
and notice is hereby given that no contractor, subcontractor, or anyone else who
may  furnish  any  material, service or labor for any buildings or improvements,
alterations  or  repairs  at  any  time  shall be or become entitled to any lien
thereon  whatsoever.  For  the  further  security  of


BND/MAIN HARBOR LEASE
                                                                         Page 16
<PAGE>
District,  Lessee shall give actual notice of this restriction in advance to any
and all contractors, subcontractors or other persons, firms or corporations that
may  furnish  any  such  material,  service  or  labor.

                                      XXII.

     This  instrument  contains the entire Agreement between the parties hereto,
and  neither  party  shall  be bound by any representation or agreement, oral or
written,  made  by  either  party  or  any  of  their agents, representatives or
employees,  not  set  forth  herein.
     IN  TESTIMONY  WHEREOF  said  BROWNSVILLE  NAVIGATION  DISTRICT  OF CAMERON
COUNTY, TEXAS, and said PENN OCTANE CORPORATION, have each caused these presents
to  be executed by its proper officers thereunto duly authorized on this 5th day
                                                                         ---
of  October,  1993.
    -------


                                        BROWNSVILLE NAVIGATION DISTRICT
                                        OF CAMERON COUNTY, TEXAS

                                        /s/ Joe Saenz
                                        ----------------------------------------
                                        JOE SAENZ, Chairman of
                                        the Board of Navigation and
                                        Canal Commissioners of the
                                        Brownsville Navigation District
                                        of Cameron County, Texas
Attest:

By:  /s/ John B. Allison
     ------------------------------
     Secretary

                                        PENN OCTANE CORPORATION

                                        By: Mark D. Casaday
                                           -------------------------------------


BND/MAIN HARBOR LEASE
                                                                         Page 17
<PAGE>
STATE OF TEXAS      )

COUNTY OF CAMERON   )

     This  instrument  was  acknowledged  before  me on the 20th day of October,
                                                            ----        -------
1993,  by  JOE SAENZ, in his capacity as Chairman of the Board of Navigation and
Canal  Commissioners  of  the Brownsville Navigation District of Cameron County,
Texas.

------------------------------------------
|[Seal of Notary]   BEATRICE G. ROSENBAUM|
|    Notary Public of State of Texas     |
|     My Commission Expires 2-17-97      |
------------------------------------------

                              /s/ Beatrice G. Rosenbaum
                              -------------------------------------------
                              Notary Public in and for the State of Texas
                              My Commission Expires:
                                                    ---------------------


STATE OF  TEXAS     )

COUNTY OF CAMERON   )

     This instrument was acknowledged before me on the 5th day of October, 1993,
                                                       ---        -------
by  Mark D. Casaday, President, of PENN OCTANE CORPORATION, a Texas corporation,
    ---------------  ---------
on  behalf  of  said  corporation.


                              /s/ inledgible
                              -------------------------------------------
                              Notary Public in and for the State of Texas
                              My Commission Expires: 10-16-96
                                                     --------------------


BND/MAIN HARBOR LEASE
                                                                         Page 18
<PAGE>