Exhibit 10.12

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT(the "Agreement") is made and entered
into as of the 1st day of October, 2002 by and between Pacific Energy GP, Inc., a Delaware corporation, having its principal executive offices in Long Beach, California (the
"Company") and Douglas L. Polson, residing in Douglas County, Colorado (the "Executive").

WHEREAS,the Executive is currently serving as Executive Chairman of the Company; and

WHEREAS,the Company and the Executive mutually desire to formalize the employment arrangement of the Executive and to agree upon the
terms of the Executive's employment as the Executive Chairman of the Company and, in addition, to agree as to certain benefits of said employment.

NOW, THEREFORE,in consideration of the mutual promises and agreements set forth below, the Company and the Executive hereby agree as
follows:

1.TERM OF EMPLOYMENT:Subject to the terms of this Agreement, the Company hereby continues the
employment of the Executive, and the Executive hereby accepts such continuing employment, for the period beginning on October 1, 2002 and ending September 30, 2004, except as provided
herein in Paragraph 4 (the "Term"). This Agreement shall be extended for a period of one year on each September 30, beginning in 2004,
unless either party gives notice of termination by the immediately preceding May 31. The Executive and the Company acknowledge that, except as may otherwise be provided under this Agreement,
the employment of the Executive by the Company is "at will", and the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time. The consequences
of termination of employment are as set forth in this
Agreement. Portions of this Agreement that by their terms provide or imply that they survive the end of the Term shall survive the end of the Term.

2.POSITION AND DUTIES:



3.COMPENSATION AND BENEFITS:During the Term, while the Executive is employed by the Company, the
Company shall compensate the Executive for his services as set forth in this Paragraph 3. The Executive recognizes that during the Term of the Agreement, the Company reserves the right to
change from time to time the terms and benefits of any welfare or fringe benefit plan of the Company, including the right to change any service provider, so long as such changes are also generally
applicable to all executives of the Company.



4.TERMINATION:The Executive's employment with the Company during the Term may be terminated by the
Company or the Executive only under the circumstances described in this Paragraph 4, and subject to the provisions of Paragraph 5:



5.OBLIGATIONS OF THE COMPANY AND THE EXECUTIVE UPON TERMINATION:



Provided,
however, that Executive may not terminate his employment for "Good Reason" as defined herein, unless and until he has given the Company written notice of the reason or reasons
why he believes there is "Good Reason" to terminate his employment, and thereafter gives the Company a minimum of forty-five (45) days to cure the alleged act or failure which the
Executive believes constitutes "Good Reason" for termination. In the absence of such written notice and opportunity by the Company to cure, there can be no termination by Executive for "Good Reason"
as defined herein.

If
an event constituting Good Reason occurs prior to a Change of Control but after there is knowledge of a potential Change of Control, it shall be deemed to constitute Good Reason for
purposes of this Agreement, provided notice is given and the Company is given an opportunity to cure.



6.CONFIDENTIAL INFORMATION:During and after the Term, the Executive shall not use or disclose any
secret, confidential, and/or proprietary information, knowledge, or data relating to the Company, any of its subsidiaries or any of the other affiliates of the Company, present and future, and their
respective businesses, which shall have been obtained by the Executive during his employment by the Company, any of its subsidiaries or any of the other affiliates of the Company and which shall not
be or become public knowledge (other than by acts by the Executive or his representatives in violation of this Agreement) provided that the Executive may, (a) while employed by the Company,
disclose such information, knowledge, or data as he in good faith deems appropriate and (b) otherwise comply with legal process, so long as Executive gives prompt notice to the Company of any
required disclosure and reasonably cooperates (without being required to incur any expense or subject himself to sanction or penalty) with the Company if the Company determines to oppose, challenge, or quash the legal
process.

7.NONSOLICITATION:The Executive agrees that during the Term of this Agreement and for a period of
one (1) year following the termination of the Term, he will not, directly or indirectly, knowingly solicit on behalf of any such entity any employee of the Company, any of its subsidiaries or
any of its other affiliates, present or future (while an affiliate), who is being compensated at a rate of Fifty Thousand Dollars ($50,000.00) or more per year as an employee of the Company, any of
its subsidiaries, or any of its other affiliates, present or future, to work for any individual or firm then in competition with the business of the Company, any of its subsidiaries or any other
affiliate of the Company, present or future. The Executive may give references with respect to such employees.

8.SUCCESSORSHIP:This Agreement shall inure to the benefit of and be binding upon the Company and
its successors and permitted assigns and any such successor or permitted assignee shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein,
"successor" and "assignee" shall be limited to any person, firm, corporation, or other business entity which at any time, whether by purchase, merger, or otherwise, directly or indirectly acquires the
stock of the Company or to which the Company assigns this Agreement by operation of law or otherwise in connection with any sale of all or substantially all of the assets of the Company, providedthat
any successor or permitted assignee promptly assumes in a writing delivered to the Executive this Agreement and, in no event, shall any
such succession or assignment release the Company from its obligations thereunder. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

9.ARBITRATION:Any and all controversies, claims, or disputes arising out of or in any way relating
to this Agreement or the termination thereof shall be resolved by final and binding arbitration in Denver, Colorado before a single arbitrator in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA"). The arbitration shall be commenced by filing a demand for arbitration with the AAA
within eighteen (18) months after the occurrence of the facts giving rise to any such controversy, claim, or dispute. The arbitrator shall decide all issues relating to arbitrability. The costs
of such arbitration, including the arbitrator's fees, shall be paid by the Company, except for a filing fee to be paid by Executive not to exceed $150.00. Each party to the arbitration shall be
responsible for the payment of its own attorneys' fees,providedthat, if the Executive prevails as to any matter in any such arbitration, the Company
shall pay the reasonable attorneys' fees incurred by the Executive in connection with those matters on which he prevails, in an amount to be determined by the arbitrator.

10.GOVERNING LAW:The provisions of this Agreement shall be construed in accordance with, and
governed by, the laws of the State of Colorado without regard to principles of conflict of laws.

11.SAVINGS CLAUSE:If any provision of this Agreement or the application thereof is held invalid,
the invalidity shall not affect other provisions or applications of the Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this
Agreement are declared to be severable.

12.WAIVER OF BREACH:No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach.

13.MODIFICATION: No provision of this Agreement may be amended, modified, or waived except by written agreement signed by
the parties hereto.

14.ASSIGNMENT OF AGREEMENT:The Executive acknowledges that his services are unique and personal.
Accordingly, the Executive may not assign his rights or delegate his duties or obligations under this Agreement to any person or entity;provided, however,
that payments may be made to the Executive's estate or beneficiaries as expressly set forth herein.

15.ENTIRE AGREEMENT:This Agreement is an integrated document and constitutes and contains the
complete understanding and agreement of the parties with respect to the subject matter addressed herein, and supersedes and replaces all prior negotiations and agreements, whether written or oral,
concerning the subject matter hereof.

16.CONSTRUCTION:Each party has cooperated in the drafting and preparation of this Agreement. Hence,
in any construction to be made of this Agreement, the same shall not be construed against any party on the basis that the party was the drafter. The captions of this Agreement are not part of the
provisions and shall have no force or effect.

17.NOTICES:Notices and all other communications provided for in this Agreement shall be in writing
and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, or sent by facsimile or prepaid overnight courier to the parties at the addresses
set forth below (or at such other addresses as shall be specified by the parties by like notice). Such notices, demands, claims, and other communications shall be deemed given:



Each
party, by written notice furnished to the other party, may modify the acceptable delivery address, except that notice of change of address shall be effective only upon receipt. In the event that
the Company is aware that the Executive is not at the location when notice is being given, notice shall be deemed given when received by the Executive, whether at the aforementioned location or at
another location.

18.TAX WITHHOLDING:The Company may withhold from any amounts payable under this Agreement such
federal, state, or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

19.REPRESENTATION:The Executive represents that he is knowledgeable and sophisticated as to
business matters, including the subject matter of this Agreement, that he has read this Agreement and that he understands its terms. The Executive acknowledges that, prior to assenting to the terms of
this Agreement, he has been given a reasonable time to review it, to consult with counsel of his choice, and to negotiate at arm's-length with the Company as to its contents. The Executive and the
Company agree that the language used in this Agreement is the language chosen by the parties to express their mutual intent, and that they have entered into this Agreement freely and voluntarily and
without pressure or coercion from anyone.

IN
WITNESS WHEREOF, the Company and the Executive, intending to be legally bound, have executed this Agreement on the day and year first above written.

| |  | PACIFIC ENERGY GP, INC.
| |  | -----------------------
| |  | By:                    
| |  | EXECUTIVE              
| |  | By:                    



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