Exhibit 10.1




                                    KANEB LLC

                          2002 LONG TERM INCENTIVE PLAN

                        Amendment Effective June 30, 2003


                             Effective July 18, 2002


<PAGE>
                                    KANEB LLC
                          2002 LONG TERM INCENTIVE PLAN


     WHEREAS,  at the  request  of Kaneb  Pipe Line  Company  LLC,  Kaneb LLC, a
Delaware limited liability company, desires to establish the Kaneb LLC 2002 Long
Term Incentive Plan (the "Plan") for John R. Barnes so as to offer him a further
incentive  to increase the value of Kaneb Pipe Line  Partners,  L.P., a Delaware
limited partnership.

     WHEREAS,  it is intended  that the Plan shall  constitute  a bonus  program
within the meaning of Department of Labor Regulation section 2510.3-2(c) that is
exempt from coverage under the Employee  Retirement Income Security Act of 1974,
as amended;

     NOW, THEREFORE, Kaneb LLC adopts the Plan as follows.



<PAGE>
                                    KANEB LLC
                          2002 LONG TERM INCENTIVE PLAN

                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                                                         Section
ARTICLE I - PLAN PURPOSE AND TERM

<S>                                                                                                         <C>
         Purpose.............................................................................................1.1
         Term of Plan........................................................................................1.2

ARTICLE II - DEFINITIONS

         Adjusted Average Ending Yield.......................................................................2.1
         Adjusted Ending Market Capitalization...............................................................2.2
         Adjusted Ending Price...............................................................................2.3
         Average Ending Yield................................................................................2.4
         Affiliate...........................................................................................2.5
         Board...............................................................................................2.6
         Change of Control...................................................................................2.7
         Change in PMLP Yield................................................................................2.8
         Code................................................................................................2.9
         Distribution........................................................................................2.10
         Employer............................................................................................2.11
         Ending Market Capitalization Value..................................................................2.12
         Ending PMLP Yield  .................................................................................2.13
         Maturity Date.......................................................................................2.14
         Measurement Period..................................................................................2.15
         Participant.........................................................................................2.16
         Partnership.........................................................................................2.17
         Payment Amount..................................................................................... 2.18
         Plan................................................................................................2.19
         Spouse..............................................................................................2.20
         Unit................................................................................................2.21
         PMLP Yield..........................................................................................2.22


ARTICLE III - PARTICIPATION


ARTICLE IV - CALCULATION AND PAYMENT OF BENEFITS

         Amount of Benefit...................................................................................4.1
         Time of Payment.....................................................................................4.2
         Form of Payment.....................................................................................4.3
         No Interest.........................................................................................4.4
         Payment on Death ...................................................................................4.5
         Adjustments Due to Changes in the Partnership's Capital Structure...................................4.6


ARTICLE V - ADMINISTRATION

         Powers of the Board.................................................................................5.1


ARTICLE VI - TERMINATION OF PLAN


ARTICLE VII - FUNDING

         Payments Under the Plan Are the Obligation of the Employer..........................................7.1
         Unfunded Arrangement................................................................................7.2

ARTICLE VIII - MISCELLANEOUS

         No Employment Obligation............................................................................8.1
         Tax Withholding.....................................................................................8.2
         Gender and Number...................................................................................8.3
         Headings............................................................................................8.4
         Other Compensation Plans............................................................................8.5
         Rights of Employer and Affiliates...................................................................8.6
         Nonalienation of Benefits...........................................................................8.7
         No Rights as Unit Owner.............................................................................8.8
         Governing Law.......................................................................................8.9

</TABLE>


<PAGE>
                                    ARTICLE I

                              PLAN PURPOSE AND TERM

1.1  Purpose.  The  Plan  is  intended  to  provide  John  R.  Barnes,  who  has
     substantial responsibility for the management and growth of Kaneb Pipe Line
     Partners,  L.P., with  additional  incentive to increase the value of Kaneb
     Pipe Line Partners, L.P.

1.2  Term of Plan.  The Plan is effective  July 18, 2002,  and shall expire when
     all obligations under the Plan have been satisfied.



                                   ARTICLE II

                                   DEFINITIONS

The words and phrases  defined in this Article shall have the meaning set out in
these definitions throughout the Plan, unless the context in which any such word
or phrase appears reasonably requires a broader, narrower, or different meaning.

2.1  "Adjusted Average Ending Yield" is the Average Ending Yield adjusted by the
     Change in PMLP Yield. If the Change in PMLP Yield is a positive amount, the
     Average  Ending  Yield  shall be reduced by that  amount to  determine  the
     Adjusted  Average  Ending Yield.  If the Change in PMLP Yield is a negative
     amount,  the  Average  Ending  Yield shall be  increased  by that amount to
     determine the Adjusted Average Ending Yield.

2.2  "Adjusted Ending Market Capitalization" is the Ending Market Capitalization
     Value reduced by all proceeds  received by the Partnership from the sale of
     Units (the offering price  multiplied by the number of units issued) during
     the  Measurement  Period and increased by the cost of any Units acquired by
     the Partnership during the Measurement Period.

2.3  "Adjusted   Ending  Price"  is  the  amount  resulting  from  dividing  the
     Distribution by the Adjusted Average Ending Yield.

2.4  "Average  Ending Yield" is the  arithmetic  mean of the yield of a Unit for
     each trading day during the last six months of the Measurement  Period. The
     yield of a Unit for a given trading day will be  calculated by  annualizing
     the  quarterly  distribution  to be paid by  Partnership  as most  recently
     announced  by the  Partnership  as of the close of  trading on that day and
     dividing  that amount by the closing  price of a Unit on the New York Stock
     Exchange  (or such other  exchange  which is the exchange on which Units of
     the Partnership are listed and regularly traded) for that trading day.

2.5  "Affiliate"  means an entity that is treated as a single employer  together
     with the Employer for certain  employee  benefit purposes under section 414
     of the Code.

2.6  "Board"  means the  Board of  Directors  of Kaneb  Pipe  Line  Company  LLC
     ("KPL"), a Delaware limited liability company.

2.7  "Change of Control" means if while a benefit remains  outstanding under the
     Plan (1) Kaneb Services LLC, a Delaware limited  liability  company ("KSL")
     shall not be the  surviving  entity in any merger,  consolidation  or other
     reorganization  (or survives only as an entity that is  wholly-owned  by an
     entity other than an entity that was wholly-owned by KSL immediately  prior
     to such  merger,  consolidation  or other  reorganization),  (2) KSL sells,
     leases  or  exchanges  or  agrees  to  sell,   lease  or  exchange  all  or
     substantially  all of its assets to any other person or entity  (other than
     an entity wholly-owned by KSL), (3) KSL is to be dissolved,  (4) KSL or one
     of its  wholly  owned  direct or  indirect  subsidiaries  is no longer  the
     general partner of Kaneb Pipe Line Partners,  L.P. or (5) KSL is a party to
     any other  similar  transaction  that is not described in clauses (1), (2),
     (3) or (4) of this  sentence  (each such event is  referred  to herein as a
     "Change of  Control").  A "Change of Control"  shall also be deemed to have
     occurred if the following  individuals cease for any reason to constitute a
     majority of the directors of KSL then serving: individuals who, on July 18,
     2002,  constitute the Board of Directors of KSL and any new director of KSL
     (other than a director whose initial  assumption of office is in connection
     with an actual or threatened  election  contest relating to the election of
     directors of KSL) whose  appointment  or election by the Board of Directors
     of KSL or  nomination  for election by KSL's  shareholders  was approved or
     recommended by a vote of at least 2/3 of the directors then still in office
     who either were directors on July 18, 2002 or whose  appointment,  election
     or nomination for election was previously so approved or recommended.

2.8  "Change in PMLP Yield" means Ending PMLP Yield minus 6.91 percent.

2.9  "Code" means the Internal Revenue Code of 1986, as amended.


2.10 "Distribution"  is the  arithmetic  mean of the  annualized  amount  of the
     quarterly  distribution  to be paid  by the  Partnership  as most  recently
     announced by the Partnership as of the close of trading on each trading day
     during the six months ending on the last day of the Measurement Period.

2.11 "Employer" means Kaneb LLC, a Delaware limited  liability  company,  or any
     successor thereof.

2.12 "Ending  Market  Capitalization  Value"  means the  Adjusted  Ending  Price
     multiplied  by the  number  of Units  outstanding  at the close of the last
     trading day of the Measurement Period.

2.13 "Ending PMLP Yield" means the arithmetic mean of the PMLP Yield quoted each
     month during the last six months of the Measurement Period.

2.14 "Maturity  Date" means the earliest to occur of (1) December 31, 2006,  (2)
     the death or disability of John R. Barnes, (3) a Change of Control,  or (4)
     the date of the Board's request to Kaneb LLC to contemporaneously terminate
     the Plan and notify the Participant of such termination

2.15 "Measurement Period" means the period beginning on July 1, 2001, and ending
     six months after the Maturity  Date,  unless the Maturity Date shall be (1)
     the date of death or disability of John R. Barnes, (2) the date of a Change
     of  Control,  or (3)  the  date  of the  Board's  request  that  Kaneb  LLC
     contemporaneously  terminate  the Plan and  notify the  Participant  of the
     Board's  decision to  terminate  the Plan on that date,  in which cases the
     Measurement Period shall end on the Maturity Date.

2.16 "Participant" means John R. Barnes or the person or entity to whom his Plan
     benefits have been transferred pursuant section 8.7.

2.17 "Partnership"  means Kaneb Pipe Line  Partners,  L.P.,  a Delaware  limited
     partnership.

2.18 "Payment Amount" means, if calculated

     a)   at any time on or  after a Change  Of  Control,  the  death of John R.
          Barnes,  or the  disability  of John R. Barnes (as  determined  at the
          discretion of the Board), an amount equal to two percent of the result
          of the Adjusted Ending Market Capitalization Value minus $805,723,775,

     b)   prior to December 31, 2002, $ - 0 -,

     c)   after  December  30,  2002,  but prior to December  31,  2003,  twenty
          percent (20 %) of an amount  equal to two percent of the result of the
          Adjusted Ending Market Capitalization Value minus $805,723,775,

     d)   after December 30, 2003, but prior to December 31, 2004, forty percent
          (40 %) of an amount equal to two percent of the result of the Adjusted
          Ending Market Capitalization Value minus $805,723,775,

     e)   after December 30, 2004, but prior to December 31, 2005, sixty percent
          (60 %) of an amount equal to two percent of the result of the Adjusted
          Ending Market Capitalization Value minus $805,723,775,

     f)   after  December  30,  2005,  but prior to December  31,  2006,  eighty
          percent (80 %) of an amount  equal to two percent of the result of the
          Adjusted Ending Market Capitalization Value minus $805,723,775,

     g)   after  December 30, 2006, an amount equal to two percent of the result
          of the Adjusted Ending Market Capitalization Value minus $805,723,775.

2.19 "Plan" means the Kaneb LLC 2002 Long Term  Incentive  Plan, as set forth in
     this document and as it may be amended from time to time.

2.20 "Spouse" means the person, if any, to whom the Participant is married under
     local law.

2.21 "Unit" means a limited partnership unit in the Partnership.

2.22 "PMLP Yield" means the yield on the  Pipeline MLP  Composite as  determined
     and published monthly by Smith Barney, its affiliates or successors. In the
     event  that  Smith  Barney,   its  affiliates  or  successors   discontinue
     publishing the PMLP Yield during the Measurement  Period, the Board, in its
     sole  discretion,  will adopt a reasonable  replacement for use in all Plan
     calculations.  If a replacement is necessary,  the  replacement  yield will
     initially be calculated  from the same  partnerships  as last used by Smith
     Barney in calculating such yield.

                                  ARTICLE III

                                  PARTICIPATION


Mr. Barnes became a Participant  when he was selected for  participation  in the
Plan.  This  document  shall  serve to notify Mr.  Barnes,  in  writing,  of his
selection for participation in the Plan and his acceptance of its terms.



                                   ARTICLE IV

                       CALCULATION AND PAYMENT OF BENEFIT

4.1  Amount of  Benefit.  The  Employer  shall pay the  Participant  the Payment
     Amount,  unless the  Maturity  Date is the day on which a Change of Control
     occurs.  If the  Maturity  Date is the date on which a  Change  of  Control
     occurs,  the Employer shall pay the  Participant the greater of (a) or (b),
     where (a) is the Payment Amount,  and (b) is the Payment Amount  calculated
     pursuant to Article II, section 2.18 a), with the following  changes to the
     definitions in Article II:

     (i)  "Average  Ending  Yield" shall mean the closing yield of a Unit on the
          Maturity Date, calculated by annualizing the quarterly distribution to
          be paid by the  Partnership  as most recently  announced  prior to the
          Maturity  Date and dividing that amount by the closing price of a Unit
          on the New York Stock  Exchange (or such other exchange on which Units
          are listed and regularly traded) on the Maturity Date. If the Maturity
          Date is not a  trading  day,  then for  purposes  of  calculating  the
          Average Ending Yield, the Maturity Date shall be deemed to be the last
          trading day prior to the Maturity Date.

     (ii) "Distribution"   means  the   annualized   amount  of  the   quarterly
          distribution to be paid by the Partnership as most recently  announced
          prior to the Maturity Date.

     (iii)"Ending  PMLP Yield" means the PMLP Yield at the close of the day that
          is or is deemed to be the Maturity  Date for  purposes of  determining
          the Average  Ending Yield,  or if PMLP Yield is not calculated on that
          date, the arithmetic  mean of yields  calculated on the Maturity Date,
          for the partnerships last used in calculating PMLP Yield.

4.2  Time  of  Payment.  The  Employer  shall  pay  the  Participant  as soon as
     practicable  (and in no  event  later  than 10 days)  after  the end of the
     Measurement Period.

4.3  Form of  Payment.  All  payments of Plan  benefits  shall be in the form of
     cash.

4.4  No Interest.  No interest  shall be credited with respect to any benefit or
     any payment under the Plan.

4.5  Payment on Death.  If the Participant has not been paid the entire benefits
     due  under  the Plan  previously,  upon the  death  of John R.  Barnes  the
     Participant  shall be paid the entire  benefits due unless the  Participant
     shall be John R. Barnes, in which case the benefits under the Plan shall be
     paid to the Participant's Spouse if the Spouse survives the Participant, or
     to the Participant's  estate if the  Participant's  Spouse does not survive
     the  Participant.  Any payment  under this Section 4.5 shall be made at the
     time specified in Section 4.2.

4.6  Adjustments Due to Changes in the Partnership. If the Partnership shall (i)
     effect  a  subdivision   or   consolidation   of  Units  or  other  capital
     readjustment,  or  other  increase  or  reduction  of the  number  of Units
     outstanding,  without receiving  compensation for it in money,  services or
     property,  or (ii) effect a  distribution  of cash or property other than a
     distribution of Available Cash  constituting  Cash from Operations (as such
     terms  are  defined  in the  Amended  and  Restated  Agreement  of  Limited
     Partnership  of the  Partnership),  then the amount  payable under the Plan
     shall be appropriately adjusted by the Board in such a manner as to entitle
     a Participant to receive the equivalent  payment the Participant would have
     received had there been no event requiring the adjustment.

                                   ARTICLE V

                                 ADMINISTRATION

5.1  Powers of the Board. Kaneb LLC shall have exclusive  responsibility for the
     general administration of the Plan according to the terms and provisions of
     the Plan.  Kaneb LLC  appoints  and  delegates  to the Board the  exclusive
     right, power and authority to:

     (a)  with the consent of the  Participant,  correct any defect,  supply any
          omission or reconcile any inconsistency that may appear in the Plan in
          the manner and to the extent it deems expedient to carry the Plan into
          effect for the greatest benefit of all parties at interest; and

     (b)  to terminate the Plan.
<PAGE>
                                   ARTICLE VI

                               TERMINATION OF PLAN

The  Board  may  terminate  the  Plan at any  time,  in its  sole  and  absolute
discretion,  by  giving  notice  to Kaneb  LLC of its  request  that the Plan be
terminated and delivering  confirmation to Kaneb LLC that the  termination  will
not result in the termination of any  reimbursements  from the Partnership under
section 6.4 of the Amended and  Restated  Agreement  of Limited  Partnership  of
Kaneb Pipe Line Partners,  L.P. dated July 23, 1998. Upon receipt of such notice
and confirmation,  Kaneb LLC shall immediately give notice to the Participant of
the Plan termination. No termination of the Plan may, without the consent of the
Participant,  reduce the Participant's right to a payment under the Plan that he
is  entitled  to  receive  under the  terms of the Plan in  effect  prior to the
termination.

                                  ARTICLE VII

                                     FUNDING

7.1  Payments  Under the Plan Are the  Obligation of the Employer.  Benefits due
     under the Plan will be paid by the Employer. Any person to whom amounts are
     payable under the Plan shall have rights as a third party beneficiary under
     section 6.4 of the Amended and Restated Agreement of Limited Partnership of
     Kaneb Pipe Line Partners,  L.P.  dated July 23, 1998, and under  agreements
     between KPL and Kaneb LLC effective July 18, 2002.

7.2  Unfunded  Arrangement.  It is intended  that the Plan shall be unfunded for
     tax purposes and for  purposes of Title of the Employee  Retirement  Income
     Security Act of 1974, as amended.

                                  ARTICLE VIII

                                  MISCELLANEOUS

8.1  No Employment Obligation. Participation in the Plan shall not constitute an
     employment  contract,  express or implied,  nor impose upon the Employer or
     any  Affiliate  any   obligation  to  employ  or  continue  to  employ  the
     Participant.  The right of the Employer or any  Affiliate to terminate  the
     employment  of any person shall not be  diminished or affected by reason of
     the fact that the person has been selected for participation in the Plan.

8.2  Tax Withholding.  The Employer shall be entitled to deduct from the benefit
     or other amount  payable to the  Participant  any sums required by federal,
     state,  or local tax law to be withheld with respect to payments  under the
     Plan.

8.3  Gender and Number. If the context  requires,  words of one gender when used
     in the Plan  shall  include  the other and words  used in the  singular  or
     plural shall include the other.

8.4  Headings. Headings of Articles and Sections are included for convenience of
     reference only and do not constitute part of the Plan and shall not be used
     in construing the terms of the Plan.

8.5  Other  Compensation  Plans.  The adoption and maintenance of the Plan shall
     not  affect  any  other  compensation  or  benefit  plans in  effect of the
     Employer or any  Affiliate or preclude the Employer from  establishing  any
     other  forms  of  incentive  or other  compensation  for  employees  of the
     Employer or any Affiliate.

8.6  Rights of Employer  and  Affiliates.  The  existence  of the Plan shall not
     affect in any way the right or power of the Employer or an Affiliate to (a)
     make   or   authorize   any   or   all   adjustments,    recapitalizations,
     reorganizations  or  other  changes  in the  Employer's  or an  Affiliate's
     structure  or  business,   (b)  approve  and   consummate   any  merger  or
     consolidation of the Employer or an Affiliate with or into any entity,  (c)
     issue any bonds, debentures or interests of Employer or Affiliate(s) of any
     nature whatsoever to any person, (d) approve and consummate the dissolution
     or  liquidation  of the Employer or an Affiliate or any sale or transfer of
     all or any part of the Employer's or an  Affiliate's  assets or business or
     (e) approve and consummate any other act or proceeding whether of a similar
     character or otherwise;  provided however, that no such action shall affect
     the  obligation  of the  Employer  or its  successors  to make  payments to
     Participants when due under this Plan.

8.7  Nonalienation  of  Benefits.  No benefit  provided  under the Plan shall be
     transferable by the Participant except to an entity created for the benefit
     of Mr.  Barnes' family or members of Mr.  Barnes'  family,  or as otherwise
     authorized  by the  Board.  No right or  benefit  under  the Plan  shall be
     subject to anticipation,  alienation, sale, assignment, pledge, encumbrance
     or charge except as specified above. Except as specified above, any attempt
     to anticipate, alienate, sell, assign, pledge, encumber or charge any right
     or benefit under the Plan shall be void unless  authorized by the Board. No
     right or benefit  under the Plan  shall,  in any  manner,  be liable for or
     subject  to any  debts,  contracts,  liabilities  or torts of the person or
     entity entitled to the right or benefit.

8.8  No Rights as Unit  Owner.  No  Participant  shall have any rights as a Unit
     owner as a result of his participation in the Plan.

8.9  Governing   Law.   The   validity,    interpretation,    construction   and
     enforceability  of the Plan shall be  governed  by the laws of the State of
     Texas.


     IN WITNESS  WHEREOF,  Kaneb LLC has caused this Agreement to be executed by
its authorized officer, effective as of July 18, 2002.

ACCEPTED BY THE PARTICIPANT              KANEB LLC

                                        By:
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John R. Barnes                          Title:
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