<PAGE>
                                                                   EXHIBIT 10.18
 
       "Pages where confidential treatment has been requested are stamped
 `Confidential Treatment Requested.  The redacted material has been separately
   filed with the Commission,' the appropriate section has been marked at the
              appropriate place and in the margin with a star (*)."

                              OPERATING AGREEMENT

                                    BETWEEN

                  WEST TEXAS LPG PIPELINE LIMITED PARTNERSHIP

                                      AND

                           CHEVRON PIPE LINE COMPANY


THIS AGREEMENT is made and entered into as of September 1, 1996 by and between
West Texas LPG Pipeline Limited Partnership, a Texas limited partnership
(hereinafter referred to as "Company"), and Chevron Pipe Line Company, a
Delaware Corporation (hereinafter referred to as "Operator").

WHEREAS, Company is the owner of certain LPG pipeline facilities ("Facilities")
more particularly identified in Attachment II and Attachment III; and

WHEREAS, Company does not have a working staff to operate the Facilities and
desires to engage Operator in these respects;

NOW, THEREFORE, in the consideration of the premises and mutual covenants
contained in this Agreement, Company and Operator agree as follows:


Section 1.  Definitions
            -----------

As used in this Agreement, the following words and terms shall have the meanings
set forth:

(a)  "Accounting Procedure" means the accounting procedure set forth in
Attachment I, hereof.

(b)  "AFE" means an approval for expenditure in the form approved by Company.

(c)  "Affiliate" means with respect to any Person, (i) any other Person which
beneficially owns, directly or indirectly, 50% or more of such Person's stock or
50% or more of the ownership interest entitled to vote in such Person or (ii)
any other Person as to which 50% or more of the voting stock or 50% or more of
the ownership interest entitled to vote therein, is beneficially owned, directly
or indirectly, either by such Person or by an Affiliate of such Person as
defined in the preceding clause (i).

(d)  "Agreement" means this Operating Agreement together with all Attachments.
<PAGE>
 
(e)  "Capital Commitment Budget" means the capital budget as further described
in Section 5A. of this Agreement.

(f)  "Capital Expenditure Forecast" means the capital expenditure forecast as
further described in Section 5B. of this Agreement.

(g)  "Cash Operating Costs" means amounts payable to Operator under Section 3 of
this Agreement.

(h)  "Confidential Information" means any information relating to the identity
of shippers using the Facilities, the nature, kind, quantity, destination or
consignee or routing of Products using the Facilities, or any other information
which is in writing and has been labeled by Company as confidential.
Confidential Information shall not include any information which is acquired by
Operator in the course of its activities outside of the scope of this Agreement
or which becomes part of the public knowledge or literature without breach of
this Agreement.

(i)  "Costs" means all costs charged to the Company as provided in the
Accounting Procedure.

(j)  "Expenditure Authorities" means the expenditure authorities described in
Section 6. of this Agreement.

(k)  "Facilities" means the facilities identified in Attachment II and
Attachment III hereto.

(l)  "Force Majeure" means an occurrence not within the control of the party and
which by the exercise of reasonable efforts such party is unable to prevent or
overcome, and shall include, but not be limited to, acts of God, strikes,
lockouts, or other industrial disturbances, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, storms, floods, washouts, hurricanes, storm warnings requiring evacuation
of facilities, arrests or restraints of the government, either federal or state,
civil or military, civil disturbances, explosions, sabotage, breakage or
accident to equipment, machinery or lines of pipe, extreme heat or cold weather,
freezing of machinery, equipment or lines of pipe, electric power shortages,
inability of any Party to obtain necessary materials and supplies, inability of
any Party to obtain necessary permits and/or permissions due to existing or
future rules, orders, laws or governmental authorities (both federal, state and
local), temporary cleaning or testing of facilities, temporary failure of
supply, or any other causes, whether of the kind herein enumerated or otherwise,
which were not reasonably foreseeable on the effective date of this Agreement,
and which are not within the control of the Party claiming suspension and which
such Party is unable to overcome by the exercise of due diligence.  The term
"Force Majeure" shall also include those instances in which either Party hereto
is required to furnish materials and supplies for the purpose of constructing
and maintaining facilities or is required to secure permits or permission from
any governmental agency to enable such Party to acquire, or the delays on the
part of such Party in acquiring, at reasonable cost and after the exercise of
due diligence, such materials and supplies, permits and permissions.  It is
understood and agreed that the settlement of strikes or lockouts shall be
entirely within the discretion of the Party having the difficulty, and that the
above requirement that any 

                                       2
<PAGE>
 
Force Majeure shall be remedied with all reasonable dispatch shall not require
the settlement of strikes or lockouts by acceding to the demands of opposing
parties when such course is inadvisable in the discretion of the Party having
difficulty. The term "Force Majeure" shall also include any such event occurring
with respect to the facilities or services of either Operator's or Company's
third-party suppliers or customers delivering or receiving any product, fuel,
feedstock, or other substance necessary to the continuous operation of either
Party's plants or facilities or performance of such Party's obligations, and
shall also include curtailment or interruption of deliveries or service by such
third-party suppliers or customers as a result of (i) another event of Force
Majeure or (ii) a breach by such third-party under the applicable agreement(s).

(m)  "GAAP" means generally accepted accounting principles.

(n)  "Insurance Manual Rates" means the published insurance industry recognized
computations of standard accepted insurance rates.

(o)  "LPG" means liquefied petroleum gas or petroleum products, namely, natural
gasoline, ethane, propane, isobutane, normal butane, and pentanes or mixtures
thereof, recovered from gasoline recovery plants and gas recycling plants.

(p)  "Major Maintenance Budget" means the major maintenance budget as further
described in Section 5C. of this Agreement.

(q)  "Operating Expense Budget" means the operating expense forecast as further
described in Section 5D. of this Agreement.

(r)  "Operator" means Chevron Pipe Line Company acting in its capacity as
operator of Facilities hereunder.

(s)  "Parties" or "Party" means the Operator and/or Company.

(t)  "Partnership Committee" means the managing unit of Company.

(u)  "Person" means any individual, partnership, association, trust, corporation
or other entity.

(v)  "Products" means, without restriction, natural gas liquids, LPG or products
derived from LPG.

(w)  "Year" means a calendar year.


Section 2.  Operations
            ----------

Operator, on behalf of Company, agrees to operate, maintain and repair the
Facilities, and any modifications or improvements thereof, and to perform any
other duties as may be requested by Company in a good and workmanlike manner
and, in the absence of specific instructions from 

                                       3
<PAGE>
 
Company, shall have the right and duty to act in accordance with its best
judgment as a reasonable and prudent operator would do under the same or similar
circumstances. Company does hereby authorize and empower Operator, on behalf of
Company, to do and perform or cause to be done and performed by others any and
all acts and things which Operator shall, in the exercise of its discretion and
best judgment, deem necessary or advisable for the operation, maintenance, and
repair of such Facilities in accordance with the Expenditure Authorities as set
forth in Section 6, to the end that the Facilities may be used in a safe,
efficient and economical manner for receipt, delivery, measurement and
transportation of Products. Without limiting the foregoing, subject to the
limits otherwise set forth in this Agreement, Operator shall specifically
perform the following acts on behalf of Company:

     A.   perform such mechanical activities as may be required to receive,
          deliver, transport and/or otherwise handle Products tendered to and
          accepted into the Facilities.

     B.   submit to Company recommended budgets and other information as set
          forth in Section 5. hereof.

     C.   purchase or cause to be purchased for and in the name of Company
          materials, supplies and services necessary for the operation of the
          Facilities in accordance with the budgets approved by Company (or as
          otherwise approved under this Agreement);

     D.   maintain surveillance of the Facilities, conduct assessment, and
          periodically inspect the Facilities for damage or other conditions
          which could affect the safe, efficient and economical operation of the
          Facilities, perform such repairs to the Facilities as requested by
          Company or as may from time to time be required and prepare
          appropriate reports that document such activities;

     E.   act as representative for Company in contacts with government agencies
          relating to the physical operation, maintenance and repair of the
          Facilities, where required by audits, laws, rules, regulations,
          orders, permit conditions, or right-of-way agreements;

     F.   prepare, maintain and implement operating manuals, monitoring
          programs, contingency plans and training programs satisfying all
          applicable laws, rules, regulations, orders and any other requirements
          of governmental authorities together with such other operating
          procedures or manuals as Company may require;

     G.   prepare custody transfer tickets, and other appropriate accounting
          materials to document custody transfer and receipt of Products, and
          sample and measure Products received and delivered to verify quality
          and quantity as operations may require;

                                       4
<PAGE>
 
     H.   provide Product shipments scheduling and 24-hour continuous monitoring
          and control of pipeline flows for safe and efficient operations;

     I.   file, store and maintain in a manner such that they shall be available
          for periodic inspection by Company all as-built drawings or
          descriptions of the Facilities, construction and maintenance records,
          inspection and testing records, operating procedures and manuals,
          custody transfer documents, and such other records (all collectively
          "records") as may be necessary or appropriate to the operation,
          maintenance and repair of Facilities, or required by applicable laws,
          rules, regulations, orders and any other requirements of governmental
          authorities, or requested by Company. All of such records shall remain
          the property of Company;

     J.   prepare and file all tariffs subject to approval of Company;

     K.   collect all tariffs, fees or other amounts derived from the operation
          of the Facility, keep correct complete, and accurate accounts of all
          receipts and disbursements made on the Company's behalf, and deposit
          all moneys or other valuable effects in the name and to the credit of
          Company in such depository banks, trust companies, savings and loan
          associations or other similar institutions as may be designated by
          Company, keep individual Book Capital Accounts for each partner of
          Company, prepare partnership income tax  returns for approval and
          filing by Company, recommend for approval by the Company amounts of
          cash distributions that should be made to the partners of Company, and
          preparation of any other financial accounts or statements that may be
          required by Company;

     L.   upon request, attend meetings of the Partnership Committee of Company,
          or, whenever otherwise required by Company, prepare and distribute
          reports of all financial transactions involving the Company hereunder
          and other reports reasonably requested by Company or any partner of
          Company, but only to the extent that Operator is legally authorized to
          do so;

     M.   make all statutory and regulatory filings required of the Company,
          including without limitation, all permit applications, and filings
          with the Federal Energy Regulatory Commission, Texas Railroad
          Commission and any other state Public Utilities Commissions,
          Department of Transportation, or other regulatory agencies having
          jurisdiction over Company;

     N.   sign all checks, drafts, or orders for the payment of Costs authorized
          pursuant to this Agreement;

     O.   facilitate the financing and investments including the issuance of
          commercial paper in accordance with the policies set forth by the
          Company;

     P.   administer the Facilities' regulatory, financial, contractual and
          legal affairs to the extent such administration is authorized by
          Company; and

                                       5
<PAGE>
 
     Q.   provide equipment, materials and services as legally required or as
          Company may from time to time request, for discharge prevention and
          response for Products and/or hazardous substances. These services
          shall include, but not be limited to, preparation, submission, and
          finalization of discharge prevention and/or contingency plans for
          Products and/or hazardous substances, and preparation for, prevention
          of, response to and/or cleaning up of any discharge or threatened
          discharge of Products and/or hazardous substances. Without limiting
          the foregoing, Operator shall serve as response action contractor for
          Company;

     R.   obtain rights-of-way, make renewal payments and do such other tasks as
          may required to maintain rights-of-way.

     S.   supervise the construction of any expansions, modifications, or
          extensions of the Facilities that are approved by Company;

     T.   provide engineering services that may be necessary in operating,
          expanding or modifying the Facilities as approved by Company; and

     U.   keep the Facilities free and clear of all material liens and
          encumbrances not otherwise authorized by Company.

     V.   pay and discharge promptly all costs and expenses reasonably incurred
          in operating the Facility.

Operator agrees to perform all services hereunder in a manner consistent with
the usual and customary practices, codes and standards in the pipeline industry
(including specifically the Federal Energy Regulatory Commission, the Texas
Railroad Commission and state Public Utilities Commissions as well as applicable
Department of Transportation and American National Standards Institute) and in
accordance with all valid and applicable laws, rules, regulations, orders and
any other requirements of governmental authorities. Operator in its capacity as
Operator pursuant to this Agreement, shall assume no other liability to Company
except in the case of Operator's own gross negligence or willful misconduct.
Notwithstanding the foregoing, the gross negligence standard shall apply only to
the operations performed hereunder and shall not apply to any actions, inactions
or negligence of the Operator in connection with the operation of any pipeline
other than Facilities. Operator shall furnish or arrange for the necessary
personnel to efficiently perform such services. None of such personnel shall be
employees or agents of Company, statutory or otherwise.


Section 3.  Payment for Operator Services
            -----------------------------
 
     A.   Company shall pay and Operator shall receive as full and complete
          compensation for the performance of Operator's services as Operator
          hereunder, the sum of the amounts becoming due (hereinafter referred
          to as "Cash Operating Costs") as 

                                       6
<PAGE>
 
          described and authorized in Attachment I, Accounting Procedure.
          Company shall make payment in the time and manner specified herein.

     B.   Within the month immediately following the previous month of service,
          Operator shall invoice Company for the actual Cash Operating Costs for
          the immediately prior month. Company shall pay to Operator the amount
          of such invoice, payable upon receipt.


Section 4.  Accounting
            ----------

     A.   Operator shall keep and maintain proper and complete books and
          accounts, in the name of Company, in conformity and consistent with
          GAAP utilizing the principles and practices generally employed in
          regulated oil pipeline accounting unless any regulatory agency with
          jurisdiction over the System or the Partnership shall rule otherwise;
          and shall furnish monthly financial statements and such other reports,
          statistics and statements as Company or any partner of Company may
          reasonably from time to time request.

     B.   Operator shall maintain accurate accounts of all expenditures and
          liabilities incurred by it in operating, maintaining and repairing the
          Facilities and shall render a monthly statement to Company and each
          partner of the Company of all such expenditures and liabilities. The
          failure to include any item in the current monthly statement rendered
          for the month in which the same was incurred or expended shall not
          preclude such item from being brought forward and included in any
          subsequent monthly statement. All books, records and accounts shall be
          open to inspection and audit by Company or Company's authorized
          representatives at all reasonable times during business hours.

     C.   Operator shall establish a separate bank account(s) on behalf of
          Company and all revenues received in the operation of the Facilities
          shall be deposited in the name and to the credit of Company. All
          interest or other benefits generated by this account shall accrue to
          the benefit of Company. Operator shall not commingle any of its funds
          in the account established hereunder.


Section 5.  Budgets and Forecasts
            ---------------------

On or before November 1 of each year, Operator shall prepare and submit to the
Partnership Committee of Company for review, approval, or modification the
following annual budgets and forecasts:

     A.   Capital Commitment Budget

                                       7
<PAGE>
 
          The Capital Commitment Budget shall consist of an itemization of
          commitments for each capital project equal to or in excess of $50,000
          (large projects) and a combined total of all Items less than $50,000
          (small projects) for the following calendar year.


     B.   Capital Expenditure Forecast

          The Capital Expenditure Forecast shall identify separately all
          expenditures for capital items from prior budgets which are not yet
          complete and all capital items anticipated to be approved in the
          pending budget. Large projects shall be listed individually and small
          projects may be combined. The forecast shall indicate expenditures by
          quarter for the following calendar year and indicate any appropriate
          carryover in subsequent years.

     C.   Major Maintenance Budget

          The Major Maintenance Budget shall consist of an itemization of each
          maintenance project equal to or in excess of $50,000 (large projects)
          and a combined total of all items less than $50,000 each (small
          projects) for the following calendar year.

     D.   Operating Expense Budget

          The Operating Expense Budget shall identify for the following calendar
          year the expected Operating Expenses including Direct Costs,
          Management Fee, and Major Maintenance items.

     E.   Volume Forecast

          All volumes expected to be handled through the Facilities shall be
          identified for the following calendar year.

Company may at any time supplement or amend the budgets and forecasts as
necessary to carry out the purposes of this Agreement.


Section 6.  Expenditure Authorities__
            -------------------------

     A.   Projects or Expenses not Exceeding $50,000

          The Operator shall have the authority to make expenditures for any
          individual capital project, major maintenance project or operating
          expense not exceeding $50,000 to the extent that Operator deems such
          expenditures necessary and appropriate for the operation or
          maintenance of the Facilities. The sum of any such expenditures may
          not, during any Year, exceed the amounts indicated for all such

                                       8
<PAGE>
 
          projects or expenses in the budget which have been approved by Company
          for that Year.

     B.   Projects or Expenses in Excess of $50,000

          The Operator shall have the authority to make expenditures for any
          individual capital project, major maintenance project or operating
          expense in excess of $50,000 if such project or expense was
          specifically identified in an approved budget or Company has approved
          an AFE for the project.  The amount of the Operator's authority under
          this subsection may be overrun by the greater of 10% or $10,000
          without seeking prior approval by Company; provided, however that such
          overrun does not cause any of the Capital Expenditure Forecast, Major
          Maintenance Forecast or Operating Expense Forecast approved by the
          Company to be exceeded.

     C.   Settlement of Claims

          Operator shall have authority to make expenditures in settlement of
          claims, demands and litigation resulting from or arising out of
          operations of Facilities up to $25,000 for each such claim. Operator
          shall notify Company and each partner of Company immediately of any
          claim, demand or suit, and if the amount required for full settlement
          exceeds the above specified amount, Operator shall notify the Company
          and each partner of Company and the Company shall determine how to
          further handle the claim, demand or suit.

     D.  Taxes

          The Operator shall have the authority to make expenditures for, and
          shall be entitled to receive full and complete compensation from
          Company for, Taxes as described in Section 2.A.8 of "Cash Operating
          Costs" in Attachment I, Accounting  Procedure.  Such authority to make
          expenditures for, and entitlement to receive full and complete
          compensation for, Taxes, shall be true whether or not the expenditure
          is within an approved budget or the action has prior approval of
          Company.

     E.   Operation In Lieu of An Approved Budget

          In the event Company fails to deliver to the Operator on or before
          December 31 an approved budget for the ensuing year, the previous
          year's budget shall remain in effect until an approved budget is
          delivered. Notwithstanding the foregoing, the Operator may take such
          actions and make such expenditures as may be deemed necessary, under
          laws, rules, regulations, orders or good industry practices, in 

                                       9
<PAGE>
                                              "Confidential Treatment Requested.
                                                  The redacted material has been
                                          separately filed with the Commission."

 
          order to continue the orderly conduct of the business of Company
          hereunder and to preserve and maintain the Facilities. In the event
          that any such expenditure was not specifically approved in an earlier
          budget or otherwise approved by the Company, Operator's authority
          shall be limited to a maximum of $500,000 for any one expenditure and
          a total maximum of $ 1,000,000 for all such expenditures in any one
          year. In the event of such operation without an approved budget, the
          Operator shall, on a monthly basis, give telephone notice or otherwise
          contact Company and each partner of Company as soon as practicable and
          advise it of the circumstances of such operation without an approved
          budget, the actions taken or proposed and the expenditures made,
          incurred, committed, or proposed. All expenditures made pursuant to
          this Section 6.E. shall be treated as Cash Operating Costs hereunder.
          Nothing in this Section 6.E. shall in any way restrict the Operator's
          authority as set forth in Section 6.F.

     F.   Emergencies

          In an emergency, the Operator may take such actions and make such
          expenditures as may be deemed necessary, under laws, rules,
          regulations, orders or good industry practices, in order to cure such
          emergency. This shall be true whether or not the expenditure is within
          an approved budget or the action has prior approval of Company. In the
          event of such an emergency, the Operator shall give telephone notice
          or otherwise contact Company as soon as practicable and advise it of
          the circumstances of such emergency, the actions taken or proposed and
          the expenditures made, incurred, committed, or proposed. All
          expenditures made pursuant to this Section 6.F. shall be treated as
          Cash Operating Costs hereunder.

Section 7.  Term
            ----

  This Agreement shall take effect as of the day and year first above written
* and shall continue for a term of REDACTED and continue thereafter until
  canceled on 180 days prior written notice by either Party which such notice
  may be given for any reason or no reason in the sole discretion of either
  Party; provided, however, in the event that Company has not selected a
  replacement operator who is ready and capable of assuming the operation of
  Facilities at the end of such notice period, Operator shall continue to
  operate the Facilities hereunder for such period until a replacement operator
  is selected who is ready and capable of assuming the operation of Facilities
  but such continuation by Operator shall not extend beyond 180 days following
  the end of the notice period. Company shall have the right to terminate this
  Agreement if Operator ceases to own a majority of the interest in the Company.

Upon termination of this Agreement, Company shall pay Operator the amounts
chargeable to Company hereunder as of the date of termination which have not
already been paid by Company; Company shall also reimburse Operator for the full
amount of any obligations or commitments Operator has made in the interest of
performing the services hereunder  in accordance with the annual budget and any
approved projects which were not paid by Company prior to the date of

                                      10
<PAGE>
 
such termination or, if agreeable to Operator, Company may assume such
obligations or commitments. Upon termination of this Agreement, Operator shall
turn over to Company all records, data, and information in Operator's possession
pertaining to operations hereunder, as well as materials, equipment, facilities,
and operating supplies on hand which had been purchased by Company or in its
name. Termination of this Agreement shall not affect the rights and privileges
or duties, liabilities and obligations of either Party which arose or accrued
prior to the date of termination.


Section 8.  Insurance
            ---------

Operator shall procure and maintain all insurance required by applicable law or
regulation for operation of the Facilities, including but not limited to
Workers' Compensation and Employer's Liability Insurance in accordance with all
applicable state, federal, and maritime laws.  Where permitted, Operator may
fulfill its Workers' Compensation obligations by approved self-insurance and
shall charge Company its actual costs of self-insurance which shall not exceed
Insurance Manual Rates applicable to such operations in the place where the same
are performed.  The Operator shall procure and maintain in effect such types and
amounts of insurance as Company shall determine to be necessary to cover loss or
damage to the Facilities.  No other insurance shall be carried by Operator for
the account of Company without prior approval from Company.


Section 9.  Indemnity
            ---------

Company ("Indemnitor") shall indemnify and save harmless Operator, its
affiliates, agents and employees ("Indemnitees") in its or their role as
Operator from and against any and all loss, damage, injury, liability, expense
(including attorney's fees), and claims thereof which arise from any injury to
or death of a person, including third parties, Indemnitor, its agents,
contractors or subcontractors, or employees, but excluding Indemnitees, from
loss of or damage to property or from penalties imposed or proceedings brought
by government agencies, resulting directly or indirectly from any operations
under or pursuant to this Agreement, including, but not limited to, the use of
equipment provided by others. The indemnity provided by Indemnitor shall remain
in full force and effect regardless of the passive, active or concurrent
negligence of, and regardless of whether liability without fault is imposed or
sought to be imposed on, one or more of the Indemnitees. However, such indemnity
shall not be given effect to the extent that such indemnity is void or otherwise
unenforceable under applicable law in effect or validly retroactive to the date
of the Agreement. Further excepted from such indemnity shall be any such loss,
damage, injury, liability or claim which is the result of the gross negligence
or willful misconduct of an Indemnitee. Operator shall give Company immediate
notice of any suit brought against Operator with respect to which Company is or
may be obligated to indemnify Operator hereunder.

Operator shall indemnify and save harmless Company, its affiliates, agents and
employees in its or their role as owner of Facilities from and against all loss,
damage, injury, liability, expense (including attorney's fees), and claims
thereof which arise from any injury to or death of a person, including third
parties, Operator's  agents, contractors, subcontractors, or employees, or from

                                      11
<PAGE>
 
loss of or damage to property of Operator or Operator's agents, contractors,
subcontractors or employees resulting directly or indirectly from any operations
under or pursuant to this Agreement. The indemnity provided by Operator shall
remain in full force and effect regardless of the passive, active or concurrent
negligence of, and regardless of whether liability without fault is imposed or
sought to be imposed on Company.  However, such indemnity shall not be given
effect to the extent that such indemnity is void or otherwise unenforceable
under applicable law in effect or validly retroactive to the date of this
Agreement.  Further excepted from such indemnity shall be any such loss, damage,
injury, liability or claim which is the result of the gross negligence or
willful misconduct of Company.  Company shall give Operator immediate notice of
any suit brought against Company with respect to which Operator is or may be
obligated to indemnify Company hereunder.


Section 10.  Confidentiality
             ---------------

A.   Each Party agrees that it will maintain this Agreement, all terms and
     conditions of this Agreement and all other Confidential Information (as
     hereinafter defined) in strictest confidence and that it will not cause or
     permit disclosure of Confidential Information to any third Party without
     the express written consent of the other Party hereto.  Disclosures of
     Confidential Information otherwise prohibited by this Section 10 may be
     made by either Party; (i) to the extent necessary for such Party to enforce
     its rights hereunder against the other Party; (ii) to the extent a Party is
     contractually or legally bound to disclose financial information to a third
     Party (such as a shareholder or commercial lender); (iii) only to the
     extent to which a Party hereto is required to disclose all or part of this
     Agreement by a statute or by the order of a Court, agency, or other
     governmental body exercising jurisdiction over the subject matter hereof,
     by order, by regulations, or by other compulsory process (including, but
     not limited to, deposition, subpoena, interrogatory, or request for
     production of documents); (iv) to the extent required by the applicable
     regulations of a securities or commodities exchange; or (v) to an Affiliate
     (but only if such Affiliate agrees to be bound by the provisions of this
     Section 10).  "Confidential Information" shall mean any information
     proprietary to either Party and maintained by it in confidence or as a
     trade secret, including, without limitation, business plans and strategies,
     proprietary software, financing statements, customer or client lists,
     personnel records, analysis of general energy market conditions, sales,
     transportation and service contracts and the commercial terms thereof,
     relationships with current and potential business partners, supplies
     customers, service providers and financial sources, data base contents and
     valuable information of a like nature relating to the business of such
     Party.  It is understood and agreed that Confidential Information shall not
     include information of a Party that (i) was generally available to the
     public at the time of disclosure to the other Party, (ii) after the time of
     disclosure to the other Party, becomes generally available to the public,
     (iii) the Party receiving the information can know that the information was
     in its possession at the time of disclosure, or (iv) was rightfully
     acquired by the recipient from third Persons who did not themselves obtain
     such information under a confidentiality or other similar agreement with
     the disclosing Party.

                                      12
<PAGE>
 
B.   If either Party is or becomes aware of a fact, obligation, or circumstance
     that has resulted or may result in a disclosure of Confidential Information
     authorized by this Section 10, it shall so notify the other Party promptly
     and shall provide documentation or an explanation of such disclosure as
     soon as it is available.  Each Party further agrees to cooperate to the
     fullest extent in seeking confidential status to protect any Confidential
     Information so disclosed.

C.   The Parties hereto acknowledge that independent legal counsel may, from
     time to time, be provided with a copy of this Agreement and agree that such
     disclosure does not require consent by the other Party, provided that such
     counsel agrees to be bound by the provisions of this Section 10.

D.   Each Party will be deemed solely responsible and liable for the actions of
     its employees, independent contractors, officers, agents and Affiliates for
     maintaining the confidentiality commitments of this Section 10, but will be
     required in that regard only to exercise such care in maintaining the
     confidentiality of the Confidential Information as such Party normally
     exercises in preserving the confidentiality of its other commercially
     sensitive information.


Section 11.  Force Majeure
             -------------

A delay in or failure of performance of either Party hereto shall not constitute
default, nor shall either Party be held liable for loss or damage arising from
such delay or failure to the extent such delay, failure, loss or damage is
caused by Force Majeure.

The Party claiming Force Majeure as an excuse for delay in or failure of
performance shall immediately notify the other Party of the event and any steps
being taken to remove the impediment to performance.

Force Majeure shall not prevent either Party from terminating this Agreement
under Section 7.


Section 12.  Assignment
             ----------

This Agreement shall be binding upon and shall inure to the benefit of the
successors and assigns of the Parties hereto; provided, however, that such
Agreement and the obligations of the Parties hereunder shall not be assignable
by either Party hereto without the express prior written consent of the other
Parties hereto, except that any Party may assign this Agreement without consent,
including the performance thereof, in whole or in part to (i) an Affiliate of
the Party or the Party's shareholders; (ii) the successor of all or
substantially all of the Party's business and assets; or (iii) a corporation
which such Party may merge or be consolidated into.  An assignment hereunder
shall not be effective unless and until the assignee agrees to be bound by all
the terms and conditions of this Agreement.  Further, no assignment hereunder
shall relieve the assignor of any duties, liabilities or obligations accruing
hereunder before the effective date of the assignment. 

                                      13
<PAGE>
 
Any assignments prohibited hereunder shall be void. This Agreement shall not be
assignable by operation of law and shall not become an asset in any bankruptcy
or receivership proceedings. The consent requirement set forth in this Section
12 shall apply to a sale or assignment of a controlling interest in an Affiliate
to whom a Party's interest has been assigned.


Section 13.  Notices
             -------

Any notice, request, consent, approval or other similar communication of a
routine nature required or permitted under this Agreement shall be in writing
(including facsimile) and shall be deemed to have been properly given or
delivered to a Party when delivered personally to the person designated below to
receive such communication for each Party or when sent by telegram or United
States mail with postage prepaid and properly addressed to the Party to whom
given.  Any such notice or other communication sent or mailed shall be deemed
given at the time it is received by the office of the individual to whom sent.
For purposes hereof the proper addresses of the Parties (unless otherwise
designated in writing which each Party may do from time to time) shall be as
follows:

     If to Company:
 
          West Texas LPG Pipeline Limited Partnership
          Attention:  Chairman of the Partnership Committee
          1400 Woodloch Forest Drive
          The Woodlands, Texas 77380
          Fax:  (713) 363-7214

          with a copy to:

          WTLPS, Inc.
          Attention: President
          13430 Northwest Freeway
          Suite 1200
          Houston, Texas 77040

     If to Operator:

          Chevron Pipe Line Company
          1400 Woodloch Forest Drive
          The Woodlands, Texas 77380
          Attention:  Corridor Team Leader


Section 14.  Governing Law
             -------------

The validity, nature, obligations, effect and construction of this Agreement
shall be governed by the laws of the State of Texas without giving effect to any
choice or conflict of law provision or 

                                      14
<PAGE>
 
rule that would cause the application of the laws of any other jurisdiction
other than the State of Texas.


Section 15.  Attachments
             -----------

Attachment I, Attachment II, and Attachment III attached hereto are incorporated
in and made a part of this Agreement.  In the event of any inconsistency between
the Attachments and this Agreement, the Agreement shall control.


Section 16.  Gifts Prohibited
             ----------------

The Parties shall maintain complete and accurate records in connection with any
commission, fee, rebate, gift or entertainment of significant cost or value in
connection with the performance of this Agreement and all transactions related
thereto for at least twenty-four months from the date of invoice to Company and
Operator. No director, officer, employee or agent of any Party hereto shall give
or receive any commission, fee, rebate, gift or entertainment of significant
cost or value in connection with the performance of this Agreement.


Section 17.  Federal Compliance
             ------------------

     A.   Insofar as applicable hereto, each Party hereto shall comply with
          Executive Order No. I1246, as amended by Executive Order No. I1375,
          and the rules and regulations issued thereunder, to ensure that
          applicants are employed, and that employees are treated during
          employment without regard to their race, creed, color, sex or national
          origin. Also, if applicable, each Party hereto shall comply with all
          provisions of the Vietnam Era Veterans' Readjustment Assistance Act of
          1974 and the rules and regulations issued thereunder, including 41
          C.F.R., Chapter 60, Part 60-250. Each Party hereto shall also, if
          applicable, comply with all provisions of the Rehabilitation Act of
          1973, and the rules and regulations issued thereunder including 41
          C.F.R., Chapter 60, Part 60-74. Operator agrees and covenants that
          none of its employees or employees of its subcontractors who provide
          services to Company pursuant to this Agreement are unauthorized aliens
          as defined in the Immigration Reform and Control Act of 1986. All
          acts, orders, rules and regulations hereinabove referred to are hereby
          incorporated by reference unless this Agreement is excepted by
          appropriate federal law, rules, regulations or orders.

     B.   Company and Operator shall comply with all laws and regulations
          applicable to Company and Operator relating to Facilities hereunder,
          including but not limited to any regulations of the United States
          Department of Transportation applicable to 

                                      15
<PAGE>
 
          facilities operated by Company that are connected to or a part of
          Facilities hereunder.


Section 18.  Section Headings
             ----------------

The headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.


Section 19.  Waiver
             ------

No waiver by either Party of any breach of any of the terms and conditions
contained in this Agreement shall be construed as a waiver of any subsequent
breach of the same or any other terms or conditions.


Section 20.  Entire Agreement
             ----------------

This Agreement and its Exhibits constitute the sole and entire Agreement among
the Parties pertaining to the subject matter hereof. Effective as of the
commencement of the term hereof, this Agreement supersedes and cancels any and
all other prior or contemporaneous oral or written agreements or understandings
between or assumed by the Parties or any of them with respect to the foregoing
matters or any part thereof. No amendment to this Agreement shall be effective
unless in writing and executed by a duly authorized representative of each
Party.


IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first above written.


COMPANY,                              OPERATOR,

WEST TEXAS LPG PIPELINE               CHEVRON PIPE LINE COMPANY
LIMITED PARTNERSHIP


By:                                   By:
   -----------------------------         --------------------------------

Its:                                  Its:
   -----------------------------         --------------------------------

                                      16
<PAGE>
 
                                  ATTACHMENT I

                              OPERATING AGREEMENT

                              ACCOUNTING PROCEDURE


1.  Definitions
    -----------

     Unless defined otherwise below, terms used in this Accounting Procedure
     shall have the same meaning as defined in the Agreement.

     "Management Fee" means the management fees  referenced in Section 2.B. of
     this Attachment.

     "Person" means any individual, partnership, association, trust,
     corporation, government authority or other entity.

     "Personal Expenses" means travel expenses and other reasonable reimbursable
     expenses of Operator's employees in the operation and maintenance of
     Facilities and in any other activities required of the Operator pursuant to
     this Agreement; and such expenses of employees of Operator's Affiliate(s)
     when such Affiliates perform activities pursuant to this Agreement.

2.  Cash Operating Costs
    --------------------

    A.  Direct Costs
        ------------

          Operator shall charge Company with the following items but only to the
          extent such charges are incurred in the operation and maintenance of
          Facilities and in any other activities required of the Operator
          pursuant to the Agreement and then, only that portion thereof that is
          attributable to work and/or time allocated on a proportional basis to
          the Facilities if the work performed can in any way benefit pipelines
          operated by Operator other than the Facilities:

          1.  Labor and Benefits
              ------------------

               a.   Salaries and wages of Operator's employees (or employees of
                    Operator's Affiliate) directly assigned to the operation,
                    support and 

                                      17
<PAGE>
                                              "Confidential Treatment Requested.
                                                  The redacted material has been
                                          separately filed with the Commission."

 
                    maintenance of Facilities, including that portion of such
                    employees' time related to ancillary activities such as
                    training required by Operator, and in any other activities
                    required of the Operator pursuant to the Agreement.

               b.   Overhead related to direct labor salaries and wages, to be
*                   calculated as REDACTED of the amount provided for in A.1.a.
                    above.

               c.   Operator's cost of all payroll taxes, and benefits and
                    allowances and any other payment paid or contributed by the
                    Operator which is measured by Operator's employees'
                    compensation; the above to include without limitation
                    F.I.C.A., Operator's cost of holiday, vacation, sickness and
                    disability and other customary allowances, Operator's
                    current costs of established plans for employees' group life
                    insurance, hospitalization, retirement, stock purchase, and
                    other benefit plans of a like nature. Such costs will be
                    charged on a percentage assessment rate on the amount of
                    salaries and wages chargeable to the Company under Paragraph
                    1.a. of this Section. The percentage assessment rate shall
                    be based on the Operator's actual cost experience.

          2.   Employee Expenses
               -----------------

               a.   Reasonable Personal Expenses of those employees whose
                    salaries and wages are chargeable to the Company under
                    Paragraph 1.a. of this Section, and for which expenses the
                    employees are reimbursed under the Operator's usual
                    practices.

          3.   Customer Service Center
               -----------------------

               The allocated share attributable to the West Texas LPG Pipeline
               of Operator's cost for its Customer Service Center, including but
               not limited to:

               a.   Labor and benefits of Operator's employees directly assigned
                    to the operation and support of Facilities,  following the
                    methodology in Sections 2.A.1.a. and 2.A.1.c.

                                      18
<PAGE>
 
               b.   An allocation of depreciation for Customer Service Center
                    capitalized costs of facility and equipment used in the
                    scheduling of shipments and 24-hour continuous monitoring
                    and control of pipeline flows for the Facilities.

               c.   An allocation of other Customer Service Center costs,
                    including support personnel and other expenses, required for
                    support of the Facilities.


          4.   Materials and Supplies
               ----------------------

               Material purchased by Operator for use in the operation and
               maintenance of Facilities shall be charged to the Company at the
               price paid by Operator after deduction of all discounts received.
               Material furnished by Operator from its stocks or inventory shall
               be charged in accordance with the accounting guidelines
               established by COPAS (Council of Petroleum Accountants Societies
               of North America). Cost of warehousing and handling material
               shall be chargeable to the Company.  The accumulation of surplus
               stocks shall be avoided, and if surplus stocks are accumulated,
               such stocks shall be timely disposed of. Proceeds from such
               disposition shall be credited to the Company at the time they are
               received by Operator.  Operator does not warrant the material
               furnished.  In the case of material found to be defective, or
               returned to a vendor or the Operator for any other reason,
               Operator shall credit the Company when adjustment is received by
               Operator.

           5.  Contracts and Services
               ----------------------

               The cost of contracts and subcontracts, contract services
               (including those for technical personnel), professional
               consultants, equipment, and utilities employed in the operation
               and maintenance of the Facilities under the general direction of
               Operator.

           6.  Equipment Furnished by Operator
               -------------------------------

               a.   Use of equipment owned by Operator at the lower of (1) rates
                    commensurate with costs of ownership and operation. Such
                    rates shall include costs of maintenance, repairs, other
                    operating expense, insurance, taxes, and depreciation, or
                    (2) commercial rates prevailing in the geographic area of
                    the Company Facilities as published in Petroleum Motor
                    Transport Association rate schedules.

                                      19
<PAGE>
 
               b.   Whenever requested, Operator shall inform Company of the
                    rates it proposes to charge.

           7.  Legal Expenses
               --------------

               Expenses of investigating litigation or claims incurred in or
               resulting from the operation and maintenance of Facilities under
               the Agreement; provided, however that no direct charge for
               services of Operator's legal staff or fees or expense of
               attorneys shall be made unless previously agreed to by Company.
               All other legal expense incurred by Operator hereunder is
               considered to covered by the overhead provisions of Section 2.B.
               below, unless otherwise agreed to by Company.

           8.  Taxes
               -----

               All taxes of every kind and nature assessed or levied upon, or in
               connection with the Company operations, property or Facilities
               and which have been paid for the benefit of Company, excluding
               any income or franchise taxes.

          9.   Insurance
               ---------

               In accordance with Section 8 of the Agreement, net premiums paid
               for insurance required by law or by the Company to be carried for
               operation, maintenance and repair of Facilities and for the
               protection of the Company.

          10.  Communications
               --------------

               Costs of purchasing, leasing, installing, operating, and
               maintaining communications equipment and services necessary for
               the conduct of Facilities' operation and maintenance.

          11.  Utilities
               ---------

               Costs incurred for electricity and other utilities necessary for
               the operations hereunder.

          12.  Ecological and Environmental
               ----------------------------

               Costs incurred for the benefit of the Company as a result of
               statutory regulation for archeological and geophysical surveys
               relative to the identification and protection of cultural
               resources, or other ecological surveys as may be required by
               regulatory authority. Also, costs to provide or have available
               pollution containment and removal equipment, plus costs of actual
               control, cleanup and resulting responsibilities of oil spills as
               required by applicable laws and regulations.

                                      20
<PAGE>
 
          13.  Permits and Rights-of-Way
               -------------------------

               Costs incurred in obtaining or maintaining permits, licenses,
               leases, certificates, rights-of-way, easements, and other similar
               items necessary for the operation or maintenance of the
               Facilities.

          14.  Dismantling, Removal, and Restorative Costs
               -------------------------------------------

               Costs incurred for dismantling, removal, and restoration of
               Company property to the extent such costs are incurred.

          15.  Rentals
               -------

               Rentals paid by Operator for the benefit of the Company in the
               conduct of Facilities' operation and maintenance.

          16.  Discounts and Allowances
               ------------------------

               Operator shall take advantage of and credit to the Company all
               cash and trade discounts, freight allowances and equalization,
               annual volume and other allowances, credits, salvages,
               commissions, insurance discount dividends and retrospective
               premium adjustments, and other such items which accrue.

          17.  Other Expenditures
               ------------------

               Any other expenditures directly attributable to Facilities'
               operation and maintenance not covered and dealt with in the
               foregoing provisions of this Section 2.A., and which are incurred
               by the Operator in the necessary and proper conduct of
               Facilities' operation and maintenance, and which are:

               (a) within the scope of the Agreement; and

               (b) are included in the approved operating budget.

     B.  Management Fee
         --------------

          The purpose of this Section 2.B. is to provide for the reimbursement
          of Operator's overhead in conjunction with services rendered. Operator
          shall charge the Company as follows to cover any portion of costs and
          expenses resulting from the performance of services for Facilities not
          otherwise chargeable under Section 2.A. herein:

                                      21
<PAGE>

                                              "Confidential Treatment Requested.
                                                  The redacted material has been
                                          separately filed with the Commission."

 
1.        Operator's Management Fee
          -------------------------

        * Operator shall receive REDACTED as an annual charge billed monthly,
          hereinafter referred to as "Operator's Management Fee" to cover all of
          Operator's overhead and indirect costs incurred in the performance of
          services for the Facilities. Such Operator's management duties
          hereunder shall not be subcontracted by Operator to any other entity,
          without prior approval of Company. The Operator's Management Fee shall
          be adjusted annually by a calculated amount based upon the Producers
          Price Index (excluding the Fuels And Related Products And Power
          component) in effect on October 1 with a base year of October 1, 1997.
          Such adjusted amount shall be effective beginning January 1 of each
          ensuing year, starting for the calendar year 1998.

                                      22
<PAGE>
 
                                 ATTACHMENT II

                              PIPELINE FACILITIES


I)   PIPELINE:  There is about 1,950 miles of various sizes of pipe ranging from
     2" TO 14", 0.156 Gr B to 0.365 X 46 w.t., and 1957 - 1992 vintage.  The
     lateral lines are up to 8" and the trunk portion is all 10" and 14".

II)  BOOSTER STATIONS:  There are 18 pump stations, 24 pump and electric motor
     units and associated electrical switchgear and control equipment.  Total
     horsepower is 28,200.  Pumps are all horizontal centrifugal type.

III) COAHOMA FACILITY:  There are 2 - 1,000 horsepower pump units with
     centrifugal pumps and electric motors.  It is an 80 acre site with three
     storage wells(nominal 300,000 Bbls), two brine pits (nominal 350,000 Bbls
     capacity), and all associated piping and electrical equipment.

     ** Of the 19 booster stations (including Coahoma), 13 are on separately
     identifiable property.

IV)  METER STATIONS:  There are about 62 receipt, custody transfer meter
     stations of which about 54 are at plant sites.  There are another 18 check
     meter locations with a total of 34 meter runs.  Each facility generally
     includes turbine meter runs, instrumentation, and equipment buildings.

V)   MISCELLANEOUS:
     
     * Sending and receiving swab trap facilities (22 on the trunk line alone).

     * Portable meter provers

     * Spare parts inventory

                                      23
<PAGE>
 
                                 ATTACHMENT III

                               MAP OF FACILITIES


                                      24