EXECUTION COPY

                                PLEDGE AGREEMENT

           THIS  PLEDGE  AGREEMENT  (as from time to time  amended,  modified or
supplemented, this "Agreement") dated as of February 17, 1998, is made by KINDER
MORGAN NATURAL GAS LIQUIDS CORPORATION,  a Delaware corporation (the "Pledgor"),
in favor  of  FIRST  UNION  NATIONAL  BANK,  as  administrative  agent  (in such
capacity,  the  "Administrative  Agent")  for  the  banks  and  other  financial
institutions (the "Lenders") parties to the Credit Agreement (as defined below).


                             PRELIMINARY STATEMENTS

           (A) Kinder  Morgan Energy  Partners,  L.P.  (the  "Company"),  Kinder
Morgan   Operating  L.P.  "B"  (the   "Subsidiary   Borrower"),   certain  other
subsidiaries  of the  Company  (together  with the  Subsidiary  Borrower  in its
capacity as a Subsidiary Guarantor,  collectively, the "Subsidiary Guarantors"),
the Lenders, the Administrative Agent and Goldman Sachs Credit Partners L.P., as
syndication agent (in such capacity,  the "Syndication Agent"), are parties to a
Credit  Agreement dated as of the date hereof (as the same may be amended and in
effect from time to time,  the "Credit  Agreement"),  providing,  subject to the
terms and conditions thereof, for extensions of credit to be made by the Lenders
to the Company and the Subsidiary Borrower;

           (B) The Pledgor is the owner of a 50% general  partner  interest (the
"Interest")  in Mont  Belvieu  Associates,  a  Texas  general  partnership  (the
"Issuer");

           (C) In order to induce the Lenders to enter into the Credit Agreement
and to extend credit thereunder to the Company and the Subsidiary Borrower,  and
for other good and valuable consideration,  the receipt and sufficiency of which
are hereby  acknowledged,  the Pledgor has agreed to pledge and grant a security
interest  in the  Collateral  (as  defined  below) as  security  for the Secured
Obligations  (as  defined  below).  Accordingly,  the  parties  hereto  agree as
follows:

SECTION 1. Defined Terms: Interpretation.

           1.01 Defined Terms.

           (a) The capitalized terms used herein which are defined in the Credit
Agreement and not otherwise defined herein have, as used herein,  the respective
meanings provided for therein.

           (b) Unless otherwise defined herein or in the Credit Agreement, terms
defined in Articles 8 and 9 of the UCC are used herein as therein defined.


<PAGE>



           (c) As used in this  Agreement,  the  following  terms shall have the
following meanings:

           "Administrative  Agent" has the meaning specified in the
Introduction hereof.

           "Agreement"   has   the   meaning   specified   in   the
Introduction hereof.

           "Collateral" has the meaning specified in Section 3.

           "Company" has the meaning  specified in the  Preliminary
Statements.

           "Credit  Agreement"  has the  meaning  specified  in the
Preliminary Statements.

           "Interest" has the meaning  specified in the Preliminary
Statements.

           "Issuer" has the meaning  specified  in the  Preliminary
Statements.

           "Lenders" has the meaning  specified in the Introduction
hereof.

           "Pledged   Interests"  has  the  meaning   specified  in
Section 3.

           "Pledgor" has the meaning  specified in the Introduction
hereof.

           "Proceeds"  has the meaning  specified in Section  9-306
           of the UCC.

           "Secured Obligations" means collectively:

           (i)  the  payment  of  all   indebtedness  and  liabilities  by,  and
      performance  of all other  obligations  of, the Company and the Subsidiary
      Borrower in respect of the Loans;

           (ii) all  obligations  of the  Company  and the  Subsidiary  Borrower
      under,  with  respect to, and  relating  to the Letters of Credit  whether
      contingent or matured;

           (iii)all  obligations  of the Company or any  Restricted
      Subsidiary  (other than SFPP)  owing to any Lender  under any
      Hedging Agreement;

        (iv) the payment of all other  indebtedness  and  liabilities  by and
      performance  of all other  obligations  of, the Company and the Subsidiary
      Borrower to the  Administrative  Agent,  the Issuing  Bank and the Lenders
      under,  with  respect  to,  and  arising  in  connection  with,  the  Loan
      Documents,  and the payment of all  indebtedness  and  liabilities  of the
      Company and the  Subsidiary  Borrower  to the  Administrative  Agent,  the
      Issuing Bank and

                                      -2-
<PAGE>


      the  Lenders  for  fees,   costs  and   expenses   (including
      reasonable  attorneys'  fees  and  expenses)  under  the Loan
      Documents;

           (v) the payment of all sums advanced and costs and expenses  incurred
      by the Administrative Agent or any Lender under any Loan Document (whether
      directly or  indirectly)  in connection  with the  Obligations or any part
      thereof or any  renewal,  extension or change of or  substitution  for the
      Obligations   or  any  part  thereof,   whether  such   advances,   costs,
      indemnification  and expenses  were made or incurred at the request of any
      Loan Party, the Administrative Agent, the Issuing Bank or any Lender; and

           (vi)  all  renewals,  extensions,   amendments  and  changes  of,  or
      substitutions or replacements  for, all or any part of the items described
      under clauses (i) through (v) above.

           "Secured  Parties"  means (i) the Lenders,  (ii) the Issuing Bank and
(iii) the Administrative Agent.

           "Security Interests" means the security interests granted pursuant to
Section  3, as well as all other  security  interests  created  or  assigned  as
additional  Collateral for the Secured Obligations pursuant to the provisions of
this Agreement.

           "Subsidiary  Borrower" has the meaning  specified in the
Preliminary Statements.

           "Subsidiary  Guarantors"  has the meaning  specified  in
the Preliminary Statements.

           "Syndication  Agent" has the  meaning  specified  in the
Preliminary Statements.

           "UCC" means the Uniform  Commercial  Code in effect from time to time
in the State of New York; provided that if by reason of mandatory  provisions of
law,  the  perfection  or the  effect of  perfection  or  non-perfection  of the
Security  Interest in any Collateral is governed by the Uniform  Commercial Code
as in effect in a jurisdiction other than the State of New York, "UCC" means the
Uniform  Commercial Code as in effect in such other jurisdiction for purposes of
the  provisions  hereof  relating to such  perfection or effect of perfection or
non-perfection.

           1.02 Interpretation.

           (a) In this Agreement, unless a clear contrary intention appears:

           (i)  the singular  number includes the plural number and
      vice versa;

           (ii) reference to any gender includes each other gender;


                                      -3-
<PAGE>


           (iii)the words "herein,"  "hereof" and "hereunder" and other words of
      similar  import  refer  to  this  Agreement  as a  whole  and  not  to any
      particular Section or other subdivision;

           (iv)  reference to any Person  includes such Person's  successors and
      assigns  but,  if  applicable,  only if such  successors  and  assigns are
      permitted  by this  Agreement,  and  reference to a Person in a particular
      capacity  excludes  such  Person in any other  capacity  or  individually,
      provided  that  nothing in this clause (iv) is intended to  authorize  any
      assignment not otherwise permitted by this Agreement;

           (v) reference to any agreement  (including this Agreement),  document
      or  instrument  means such  agreement,  document or instrument as amended,
      supplemented  or modified  and in effect  from time to time in  accordance
      with  the  terms  thereof  and,  if  applicable,  the  terms  hereof,  and
      references to any Note includes any note issued in renewal, rearrangement,
      reinstatement,    enlargement,    amendment,   modification,    extension,
      substitution or replacement therefor;

           (vi)  unless  the  context  indicates  otherwise,  reference  to  any
      Section, Schedule or Exhibit means such Section hereof or such Schedule or
      Exhibit hereto;

           (vii)the word "including" (and with  correlative  meaning  "include")
      means  including,  without  limiting  the  generality  of any  description
      preceding such term;

           (viii) with respect to the  determination  of any period of time, the
      word  "from"  means "from and  including"  and the word "to" means "to but
      excluding"; and

           (ix)  reference  to  any  law,   ordinance,   statute,   code,  rule,
      regulation, interpretation or judgment means such law, ordinance, statute,
      code, rule, regulation,  interpretation or judgment as amended,  modified,
      codified  or  reenacted,  in whole or in part,  and in effect from time to
      time.

           (b) The Section  headings herein are for  convenience  only and shall
not affect the construction hereof.

           (c) No provision of this Agreement  shall be interpreted or construed
against  any  Person  solely  because  that  Person or its legal  representative
drafted such provision.

                                      -4-
<PAGE>




SECTION 2. Representations and Warranties of the Pledgor.

           The Pledgor represents and warrants as follows:

           (a) The Pledgor is the sole beneficial owner of the Collateral listed
      on Schedule I. No Lien exists or will exist upon the Pledged  Interests at
      any time (and no right or option to  acquire  the same  exists in favor of
      any other Person), except for the pledge and security interest in favor of
      the Administrative Agent for the benefit of the Secured Parties created or
      provided for herein, which pledge and security interest constitute a first
      priority  perfected  pledge  and  security  interest  in and to all of the
      Interests pledged hereunder.

           (b) The Pledged  Interests  are duly  authorized,  validly  existing,
      fully  paid  and  non-assessable  and is not nor  will be  subject  to any
      contractual  restriction,  or any restriction  pursuant to the partnership
      agreement of the Issuer,  upon the transfer of the  Interests  (except for
      any such restriction contained herein or in the Credit Agreement).

           (c) No authorization,  approval, or other action by, and no notice to
      or filing with, any Governmental  Authority is required either (i) for the
      pledge by the Pledgor of the Collateral  pursuant to this Agreement or for
      the execution, delivery or performance of this Agreement by the Pledgor or
      (ii) for the exercise by the  Administrative  Agent of the voting or other
      rights  provided for in this  Agreement or the remedies in respect of such
      Collateral  pursuant  to this  Agreement  (except  as may be  required  in
      connection  with such  disposition by laws affecting the offering and sale
      of securities generally).

           (d)  The  Interest  constitutes  50% of the  issued  and  outstanding
      general partner interests of the Issuer.

           (e) This  Agreement  creates a valid  and  perfected  first  priority
      security  interest in the Collateral,  securing the payment of the Secured
      Obligations.

           (f) Upon the  filing of a  financing  statement  in the office of the
      Secretary of State of the State of Texas, the Administrative Agent for the
      benefit of the other Secured  Parties will have a perfected first priority
      security interest in the Pledged Interests.

                                      -5-
<PAGE>


SECTION 3.  The Security Interests.

        (a) In order to secure the full and  punctual  payment of the Secured
Obligations  in  accordance   with  the  terms   thereof,   the  Pledgor  hereby
hypothecates,  transfers and grants to the Administrative  Agent for the ratable
benefit of the  Secured  Parties a  continuing  security  interest in and to all
right, title and interest of the Pledgor in the following property,  whether now
owned or existing or  hereafter  acquired  or arising  and  regardless  of where
located (all being collectively referred to as the "Collateral"):

           (i) the  Interest  and all other  general  partner  interests  of the
      Issuer,  now or hereafter  owned by the Pledgor (the Interest and all such
      additional   general   partner   interests,   collectively   the  "Pledged
      Interests");

           (ii) all securities,  moneys or property  representing a distribution
      in respect of any of the Pledged  Interests,  or  representing a return of
      capital upon or in respect of the Pledged  Interests,  or resulting from a
      split-up,  revision,  reclassification or other like change of the Pledged
      Interests   or   otherwise   received  in  exchange   therefor,   and  any
      subscriptions,  warrants,  rights or options  issued to the holders of, or
      otherwise in respect of, the Pledged Interests;

           (iii)without  affecting  the  obligations  of the  Pledgor  under any
      provision prohibiting such action hereunder or under the Credit Agreement,
      in the event of any consolidation or merger in which the Issuer is not the
      surviving entity,  50% of the Capital Stock of the successor entity formed
      by or resulting  from such  consolidation  or merger,  in which event only
      such Capital Stock shall be included as Collateral; and

           (iv)  all  Proceeds  of and to any  of the  property  of the  Pledgor
      described in the preceding clauses of this Section 3 (including all causes
      of action,  claims and  warranties now or hereafter held by the Pledgor in
      respect of any of the items  listed  above) and, to the extent  related to
      any  property  described  in said  clauses  or such  Proceeds,  all books,
      correspondence, credit files, records, invoices and other papers.

           The  Administrative  Agent  shall have the right,  at any time in its
sole discretion and without notice to the Pledgor, to transfer to or to register
in the name of the Administrative Agent or any of its nominees any or all of the
Collateral,  subject only to the revocable  rights  specified in Section 4.03(b)
and (c) hereof.

           (b) The  inclusion of Proceeds in this  Agreement  does not authorize
the Pledgor to sell,  dispose of or otherwise  use the  Collateral in any manner
not specifically authorized hereby or by the Credit Agreement.

                                      -6-
<PAGE>


SECTION 4.   Further Assurances; Remedies.

           In  furtherance  of the grant of the Security  Interest,  the Pledgor
hereby agrees with each Lender and the Administrative Agent as follows:

           4.01 Delivery and Other Perfection. The Pledgor shall:

           (a) if any of the securities,  instruments,  moneys or other property
      required to be pledged by the Pledgor  under  Section 3(a) are received by
      the   Pledgor,   forthwith   either  (x)   transfer  and  deliver  to  the
      Administrative  Agent such  securities or  instruments  so received by the
      Pledgor  duly  endorsed  in blank or  accompanied  by undated  powers duly
      executed  in  blank),  all  of  which  thereafter  shall  be  held  by the
      Administrative  Agent  pursuant to the terms of this  Agreement as part of
      the Collateral or (y) take such other action as the  Administrative  Agent
      shall deem  necessary  or  appropriate  to duly  record  the Lien  created
      hereunder in such  securities,  instruments,  moneys or other  property in
      said clauses (i), (ii) and (iii); and

           (b)  give,  execute,   deliver,  file  and/or  record  any  financing
      statement,  notice, instrument,  document,  agreement or other papers that
      may be  reasonably  requested  by the  Administrative  Agent  in  order to
      create,  preserve,  perfect or  validate  the  security  interest  granted
      pursuant  hereto or to enable the  Administrative  Agent to  exercise  and
      enforce its rights  hereunder  with  respect to such  pledge and  security
      interest, including causing any or all of the Collateral to be transferred
      of record into the name of the  Administrative  Agent or its nominee  (and
      the Administrative Agent agrees that if any Collateral is transferred into
      its  name or the  name  of its  nominee,  the  Administrative  Agent  will
      thereafter  promptly  give  to  the  Pledgor  copies  of any  notices  and
      communications received by it with respect to the Collateral). The Pledgor
      hereby authorizes the  Administrative  Agent to file one or more financing
      or continuation statements, and amendments thereto, relative to all or any
      part  of  the  Collateral  without  the  signature  of the  Pledgor  where
      permitted by law. A carbon,  photographic  or other  reproduction  of this
      Agreement or any financing  statement  covering the Collateral or any part
      thereof shall be sufficient as a financing  statement  where  permitted by
      law.

           4.02 Other  Financing  Statements  and Liens.  (a)  Without the prior
written consent of the  Administrative  Agent (granted with the authorization of
the Lenders as specified in Section 11.02 of the Credit Agreement),  the Pledgor
shall not file or suffer to be on file, or authorize or permit to be filed or to
be on file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Administrative  Agent is not named as the
sole secured party for the benefit of the other Secured Parties.



                                      -7-
<PAGE>


           (b) The  Pledgor  agrees  that,  from time to time  upon the  written
request of the  Administrative  Agent, the Pledgor will execute and deliver such
further documents and do such other acts and things as the Administrative  Agent
may reasonably request in order fully to effect the purposes of this Agreement.

        4.03 Collateral.

           (a) The Pledgor will cause the Pledged Interests to constitute at all
times 50% of the general partner interest of the Issuer then outstanding.

           (b) Unless an Event of Default  shall have occurred and be continuing
and the  Administrative  Agent has  notified  the Pledgor to the  contrary,  the
Pledgor shall have the right to exercise all voting, consensual and other powers
of ownership pertaining to the Collateral for all purposes not inconsistent with
the terms of this Agreement,  the Credit Agreement,  the other Loan Documents or
any other instrument or agreement  referred to herein or therein,  provided that
the Pledgor  agrees that it will not vote the  Collateral  in any manner that is
inconsistent with the terms of this Agreement,  the Credit Agreement,  the other
Loan Documents or any such other instrument or agreement; and the Administrative
Agent shall  execute  and  deliver to the  Pledgor or cause to be  executed  and
delivered  to the Pledgor all such  proxies,  powers of  attorney,  dividend and
other orders,  and all such instruments,  without  recourse,  as the Pledgor may
reasonably  request  for the purpose of  enabling  the  Pledgor to exercise  the
rights and powers  that it is entitled  to  exercise  pursuant  to this  Section
4.03(b).

           (c) The  Pledgor  shall be entitled to receive and retain any and all
distributions paid in respect of the Collateral, provided, however, that any and
all (A)  distributions  paid or payable  other  than in cash in respect  of, and
instruments and other property received,  receivable or otherwise distributed in
respect  of, or in exchange  for,  any  Collateral,  (B)  distributions  paid or
payable in cash in respect of any  Collateral  in  connection  with a partial or
total  liquidation or dissolution or in connection  with a reduction of capital,
capital  surplus or  paid-in-surplus,  and (C) cash paid,  payable or  otherwise
distributed in redemption of, or in exchange for any  Collateral,  shall be, and
shall be forthwith delivered to the Administrative  Agent to hold as, Collateral
and shall,  if received by the Pledgor,  be received in trust for the benefit of
the Administrative  Agent, be segregated from the other property or funds of the
Pledgor, and be forthwith delivered to the Administrative Agent as Collateral in
the same form as so received (with any necessary endorsement).

           (d) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue,  and whether or not the Administrative Agent or
any other  Secured Party  exercises  any available  right to declare any Secured
Obligation  due and  payable  or seeks or  pursues  any  other  relief or remedy
available  to it  under  applicable  law or under  this  Agreement,  the  Credit
Agreement,  the other Loan  Documents  or any other  agreement  relating to such
Secured  Obligation,  and the Administrative  Agent so requires by notice to the
Pledgor, all distributions received by the


                                      -8-
<PAGE>


Pledgor  on  the  Collateral  shall  be  paid  directly  by the  Pledgor  to the
Administrative  Agent and retained by it as part of the  Collateral,  subject to
the terms of this Agreement,  and, if the Administrative  Agent shall so request
in  writing,  the Pledgor  agrees to execute  and deliver to the  Administrative
Agent appropriate additional distribution and other orders and documents to that
end,  provided  that if such Event of Default  is cured,  any such  distribution
theretofore paid to the Administrative  Agent shall, upon request of the Pledgor
(except  to the  extent  theretofore  applied to the  Secured  Obligations),  be
returned by the Administrative Agent to the Pledgor.

           4.04 Events of Default,  Etc. During the period during which an Event
of Default shall have occurred and be continuing:

           (a)  the  Administrative  Agent  shall  have  all of the  rights  and
      remedies  with respect to the  Collateral of a secured party under the UCC
      (to the extent permitted by law whether or not the UCC is in effect in the
      jurisdiction  where  the  rights  and  remedies  are  asserted)  and  such
      additional  rights and remedies to which a secured party is entitled under
      the laws in effect in any  jurisdiction  including  if the  Administrative
      Agent has notified the Pledgor that it intends to exercise such right, the
      right,  to the maximum  extent  permitted  by law, to exercise all voting,
      consensual  and other powers of ownership  pertaining to the Collateral as
      if the Administrative  Agent were the sole and absolute owner thereof (and
      the Pledgor  agrees to take all such action as may be  appropriate to give
      effect to such right);

           (b) upon and  during  the  continuance  of an Event of  Default,  the
      Administrative  Agent in its discretion may, in its name or in the name of
      the Pledgor or otherwise, demand, sue for, collect or receive any money or
      property at any time  payable or  receivable  on account of or in exchange
      for any of the Collateral, but shall be under no obligation to do so; and

           (c) the  Administrative  Agent may,  upon not less than ten  Business
      Days'  prior  written  notice to the  Pledgor of the time and place,  with
      respect to the  Collateral or any part thereof that shall then be or shall
      thereafter   come  into  the   possession,   custody  or  control  of  the
      Administrative Agent, the other Secured Parties or any of their respective
      agents,  sell,  assign  or  otherwise  dispose  of all or any part of such
      Collateral,  at such  place or places as the  Administrative  Agent  deems
      best, and for cash or for credit or for future delivery  (without  thereby
      assuming  any  credit  risk),   at  public  or  private   sale,   and  the
      Administrative  Agent or any Lender or anyone  else may be the  purchaser,
      lessee,  assignee or recipient of any or all of the Collateral so disposed
      of at any public sale (or, to the extent  permitted by law, at any private
      sale)  and  thereafter  hold the same  absolutely,  free from any claim or
      right of  whatsoever  kind,  including  any right or equity of  redemption
      (statutory  or  otherwise),  of the Pledgor,  any such demand,  notice and
      right or equity being hereby  expressly  waived and released.  The Pledgor
      agrees  that  such  ten  Business  Days'  notice  constitutes  "reasonable
      notification"  within  the  meaning  of  Section  9-504  of the  UCC.  The
      Administrative  Agent may,  without  notice or  publication,  adjourn  any
      public or private sale or cause the same to

                                      -9-
<PAGE>


      be adjourned from time to time by announcement at the time and place fixed
      for the sale,  and such sale may be made at any time or place to which the
      sale may be so adjourned.

The proceeds of each collection,  sale or other  disposition  under this Section
4.04 shall be applied in accordance with Section 4.08 hereof.

           The  Pledgor  recognizes  that,  by  reason of  certain  prohibitions
contained  in the  Securities  Act of 1933,  as amended,  and  applicable  state
securities laws, the Administrative Agent may be compelled,  with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account,  for
investment  and not  with a view to the  distribution  or  resale  thereof.  The
Pledgor  acknowledges that any such private sales may be at prices lower than at
a public sale without such restrictions, and notwithstanding such circumstances,
agrees  that any such  private  sale  shall be  deemed  to have  been  made in a
commercially  reasonable manner and that the Administrative  Agent shall have no
obligation  to engage in public sales and no obligation to delay the sale of any
Collateral  for the period of time  necessary  to permit  the Issuer  thereof to
register it for public sale.

           4.05  Deficiency.  Without limiting the obligations of the Pledgor to
pay the  Secured  Obligations,  if the  proceeds  of sale,  collection  or other
realization  of or upon the  Collateral  pursuant  to  Section  4.04  hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured  Obligations,  the Pledgor  shall  remain  liable for any
deficiency.

           4.06 Removals, Etc. Without at least 30 days' prior written notice to
the  Administrative  Agent,  the Pledgor shall not (a) maintain any of its books
and  records  with  respect  to the  Collateral  at any office or  maintain  its
principal place of business at any place other than at the address indicated for
the Pledgor in the Credit  Agreement  or (b) change its name,  or the name under
which it does business, from the name shown on the signature pages hereto.

           4.07 Private  Sale.  The  Administrative  Agent and the other Secured
Parties shall incur no liability as a result of the sale of the  Collateral,  or
any part thereof,  at any private sale pursuant to Section 4.04 hereof conducted
in a  commercially  reasonable  manner  and in  compliance  with all  applicable
securities laws. The Pledgor hereby waives any claims against the Administrative
Agent or any other Secured Party arising by reason of the fact that the price at
which the Collateral may have been sold at such a private sale was less than the
price  that  might  have  been  obtained  at a public  sale or was less than the
aggregate amount of the Secured Obligations.

           4.08  Application of Proceeds.  Except as otherwise  herein expressly
provided or as otherwise  required by law, the proceeds of any collection,  sale
or other realization of all or any part of the Collateral  pursuant hereto,  and
any other cash at the time held by the  Administrative  Agent under this Section
4, shall be applied by the Administrative Agent as provided in Section 7.03


                                      -10-
<PAGE>


of the  Credit  Agreement.  The  Administrative  Agent  may  make  distributions
hereunder  in  cash  or in  kind or on a  ratable  basis  or in any  combination
thereof.

           4.09 Attorney-in-Fact.  Without limiting any rights or powers granted
by this  Agreement to the  Administrative  Agent,  while no Event of Default has
occurred and is continuing,  upon the  occurrence and during the  continuance of
any  Event  of  Default,  the  Administrative  Agent  is  hereby  appointed  the
attorney-in-fact  of the Pledgor for the purpose of carrying out the  provisions
of this Section 4 and taking any action and executing any  instruments  that the
Administrative  Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest.  Without  limiting the  generality  of the  foregoing,  so long as the
Administrative  Agent shall be entitled under this Section 4 to make collections
in respect of the Collateral, to the extent permitted by law, the Administrative
Agent shall have the right and power to receive,  endorse and collect all checks
made payable to the order of the Pledgor  representing any distribution or other
payment  in  respect  of the  Collateral  or any part  thereof  and to give full
discharge for the same.

SECTION 5. Administrative Agent.

           5.01  Limitation  on Duty of  Administrative  Agent  in
Respect of Collateral.

           The powers conferred on the Administrative Agent hereunder are solely
to protect its interest in the  Collateral and shall not impose any duty upon it
to exercise any such powers.  Except for  reasonable  care in the custody of any
Collateral in its possession and the accounting for moneys actually  received by
it hereunder,  the Administrative  Agent shall have no duty as to any Collateral
or as to the taking of any  necessary  steps to preserve  rights  against  prior
parties or any other rights  pertaining to any  Collateral.  The  Administrative
Agent  shall be deemed to have  exercised  reasonable  care in the  custody  and
preservation  of the  Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Administrative Agent accords its
own property,  it being understood that the Administrative  Agent shall not have
any  responsibility for (a) ascertaining or taking action with respect to calls,
conversions,  exchanges,  tenders or other matters  relative to any  Collateral,
whether or not the  Administrative  Agent has or is deemed to have  knowledge of
such matters,  or (b) taking any necessary  steps to preserve rights against any
parties with respect to any Collateral.

           5.02 Concerning the Administrative Agent.

           The provisions of Article VIII of the Credit Agreement shall inure to
the benefit of the  Administrative  Agent in respect of this Agreement and shall
be  binding  upon the  parties  to the  Credit  Agreement  in such  respect.  In
furtherance  and not in derogation of the rights,  privileges  and immunities of
the Administrative Agent therein set forth:

                                      -11-
<PAGE>




           (A) The Administrative Agent is authorized to take all such action as
is  provided to be taken by it as the  Administrative  Agent  hereunder  and all
other action  reasonably  incidental  thereto.  As to any matters not  expressly
provided for herein  (including the timing and methods of  realization  upon the
Collateral)  the  Administrative  Agent  shall  act or  refrain  from  acting in
accordance  with  written  instructions  from the  Required  Lenders  or, in the
absence of such instructions, in accordance with its discretion.

           (B)  The  Administrative  Agent  shall  not be  responsible  for  the
existence,  genuineness  or value of any of the  Collateral or for the validity,
perfection,  priority or enforceability of the Security  Interests in any of the
Collateral,  whether  impaired by operation of law or by reason of any action or
omission to act on its part hereunder.  The  Administrative  Agent shall have no
duty to ascertain or inquire as to the  performance  or observance of any of the
terms of this Agreement by the Pledgor.

           5.03 Appointment of Agents and Attorneys-in-Fact.

           The Administrative  Agent may employ agents and  attorneys-in-fact in
connection  herewith  and  shall  not  be  responsible  for  the  negligence  or
misconduct (except for gross negligence, willful misconduct or unlawful conduct)
of any such agents or  attorneys-in-fact  selected by it in good faith.  Without
limiting the foregoing,  at any time or times, in order to comply with any legal
requirement in any jurisdiction,  the  Administrative  Agent may appoint another
bank or trust company or one or more other Persons, either to act as co-agent or
co-agents, jointly with the Administrative Agent, or to act as separate agent or
agents on behalf of the Secured  Parties with such power and authority as may be
necessary  for the  effective  operation  of the  provisions  hereof  and may be
specified in the instrument of appointment  (which may, in the discretion of the
Administrative  Agent, include provisions for the protection of such co-agent or
separate agent similar to the provisions of the Credit Agreement  referred to in
Section 5.02).

SECTION 6. Miscellaneous.

           6.01 No Waiver. No failure on the part of the Administrative Agent or
any other Secured  Party to exercise,  and no course of dealing with respect to,
and no delay in exercising,  any right,  power or remedy hereunder shall operate
as  a  waiver  thereof;  nor  shall  any  single  or  partial  exercise  by  the
Administrative  Agent or any other Secured  Party of any right,  power or remedy
hereunder operate as a waiver thereof;  nor shall any single or partial exercise
by the  Administrative  Agent or any other Secured Party of any right,  power or
remedy hereunder  preclude any other or further exercise thereof or the exercise
of any other right,  power or remedy. The remedies herein are cumulative and are
not exclusive of any remedies provided by law.


                                      -12-
<PAGE>


           6.02.Notices.  All notices, requests,  consents and demands hereunder
shall be in writing  and  telecopied  or  delivered  to the  intended  recipient
pursuant to Section  11.01 of the Credit  Agreement  and shall be deemed to have
been given at the times specified in that Section 11.01.

           6.03.Expenses.  Without duplication of the obligations of Pledgor set
forth  in  the  Credit   Agreement,   the  Pledgor   agrees  to  reimburse   the
Administrative  Agent and each other Secured Party for all reasonable  costs and
expenses of the Administrative Agent and each other Secured Party (including the
reasonable  fees and expenses of legal counsel) in connection with (a) any Event
of Default and any  enforcement or collection  proceeding  resulting  therefrom,
including,   without  limitation,  all  manner  of  participation  in  or  other
involvement with (i) performance by the Administrative  Agent of any obligations
of the  Pledgor in  respect of the  Collateral  that the  Pledgor  has failed or
refused to perform,  (ii)  bankruptcy,  insolvency,  receivership,  foreclosure,
winding up or liquidation  proceedings,  or any actual or attempted sale, or any
exchange, enforcement, collection, compromise or settlement in respect of any of
the  Collateral,  and for the care of the  Collateral and defending or asserting
rights and claims of the Administrative  Agent in respect thereof, by litigation
or  otherwise,  (iii)  judicial  or  regulatory  proceedings  and (iv)  workout,
restructuring or other negotiations or proceedings  (whether or not the workout,
restructuring  or transaction  contemplated  thereby is consummated) and (b) the
enforcement  of this  Section  6.03,  and all such costs and  expenses  shall be
Secured Obligations entitled to the benefits of the collateral security provided
pursuant to Section 3 hereof.

           6.04.Amendments,  Etc.  The terms of this  Agreement  may be  waived,
altered or amended only by an instrument in writing duly executed by the Pledgor
and the  Administrative  Agent (with the consent of the Lenders as  specified in
Section 11.02 of the Credit  Agreement).  Any such  amendment or waiver shall be
binding upon the  Administrative  Agent, each Lender,  each holder of any of the
Secured Obligations and the Pledgor.

           6.05  Certain  Documents.  If any  agreement,  certificate  or  other
writing,  or any action taken or to be taken,  is by the terms of this Agreement
required to be  satisfactory  to the  Administrative  Agent or any other Secured
Party,   the   determination  of  such   satisfaction   shall  be  made  by  the
Administrative  Agent or such Secured  Party in their or its sole and  exclusive
judgment.

           6.06 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the  respective  successors  and assigns of the Pledgor,
the  Administrative  Agent,  the other Secured Parties and each holder of any of
the Secured Obligations (provided, however, that the Pledgor shall not assign or
transfer  its  rights  hereunder  without  the  prior  written  consent  of  the
Administrative  Agent).  In  the  event  of an  assignment  of all or any of the
Secured  Obligations,  the rights  hereunder,  to the extent  applicable  to the
indebtedness  so  assigned,  may be  transferred  with such  indebtedness.  This
Agreement shall be binding on the Pledgor and its successors and assigns.


                                      -13-
<PAGE>


           6.07 Marshaling of Assets.  All rights to marshaling of assets of the
Pledgor,  including  any such right with respect to the  Collateral,  are hereby
waived by the Pledgor.

           6.08 Termination.  When all Secured  Obligations shall have been paid
in full and all of the  Commitments  of the Lenders shall have been  terminated,
this Agreement shall  terminate,  and the  Administrative  Agent shall forthwith
cause to be assigned, transferred and delivered, against receipt but without any
recourse,  warranty or representation  whatsoever,  any remaining Collateral and
money received in respect thereof, to or upon the order of the Pledgor.

           6.09   Severability.   If  any   provision   hereof  is  invalid  and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other  provisions  hereof  shall remain in full force and effect in such
jurisdiction  and shall be liberally  construed  in favor of the  Administrative
Agent and the other Secured  Parties in order to carry out the intentions of the
parties  hereto  as  nearly  as  may be  possible  and  (b)  the  invalidity  or
unenforceability  of any provision hereof in any  jurisdiction  shall not affect
the validity or enforceability of such provision in any other jurisdiction.

           6.10 Waivers.  The Pledgor  hereby  expressly  waives,  to the extent
permitted by applicable law (a) notice of the  acceptance by the  Administrative
Agent or any other Secured Party of this Agreement,  (b) notice of the existence
or  creation  or  non-payment  of all or any  of the  Secured  Obligations,  (c)
presentment,   demand,  notice  of  dishonor,  protest,  intent  to  accelerate,
acceleration  and  all  other  notices  whatsoever,  and (d)  all  diligence  in
collection or protection of or realization  upon the Secured  Obligations or any
thereof, any obligation hereunder, or any security for or guaranty of any of the
foregoing.

           6.11  Rescission.  The Pledgor agrees that, if at any time all or any
part of any payment theretofore applied by the Administrative Agent or any other
Secured  Party to any of the  Secured  Obligations  is or must be  rescinded  or
returned  by the  Administrative  Agent or such  Secured  Party  for any  reason
whatsoever  (including  the  insolvency,  bankruptcy  or  reorganization  of the
Pledgor or any of its  Affiliates),  such  Secured  Obligations  shall,  for the
purposes  of this  Agreement,  to the  extent  that such  payment  is or must be
rescinded or returned, be deemed to have continued in existence, notwithstanding
such application by the Administrative  Agent, and the Security Interest granted
hereunder  shall continue to be effective or be reinstated,  as the case may be,
as  to  such  Secured  Obligations,  all  as  though  such  application  by  the
Administrative Agent or such Secured Party had not been made.

           6.12  Limitation by Law. All rights,  remedies and powers provided in
this  Agreement  may be exercised  only to the extent that the exercise  thereof
does not violate any applicable provision of law, and all the provisions of this
Agreement are intended to be subject to all applicable  mandatory  provisions of
law which may be  controlling  and  which may not be  effectively  waived by the
Pledgor and to be limited to the extent necessary so that they will not

                                      -14
<PAGE>


render  this  Agreement  invalid,  unenforceable,  in whole  or in part,  or not
entitled  to be  recorded,  registered  or filed  under  the  provisions  of any
applicable law.

           6.13  Effectiveness  of this  Agreement.  This Agreement shall become
effective (and shall become a Security  Agreement and a Loan Document) when, and
only when, the consent(s) referred to in Section 5.13 of the Credit Agreement is
obtained.

           6.14  Counterparts.  This  Agreement may be executed in any number of
counterparts,  all of which taken  together  shall  constitute  one and the same
instrument  and either of the  parties  hereto may  execute  this  Agreement  by
signing any such counterpart.

           6.15  Governing  Law.  This  Agreement  shall  be  governed  by,  and
construed  in  accordance  with,  the law of the  State  of New York  except  as
required  by  mandatory  provisions  of law and  except to the  extent  that the
validity or  perfection of the Security  Interests,  or remedies  hereunder,  in
respect of any particular  Collateral are governed by the laws of a jurisdiction
other than the State of New York.

           IN WITNESS WHEREOF,  the Pledgor has caused this Agreement to be duly
executed by its authorized officer as of the day and year first above written.

                                 KINDER MORGAN NATURAL GAS
                                 LIQUIDS CORPORATION


                                 By: /s/ William V. Morgan
                                 Name: William V. Morgan
                                 Title: Vice Chairman