<PAGE>
                                                                    EXHIBIT 10.9


DISPUTES RELATING TO THIS AGREEMENT ARE REQUIRED TO BE SETTLED PURSUANT TO
CERTAIN DISPUTE RESOLUTION PROCEDURES AS PROVIDED IN ARTICLE 7 AND APPENDIX A OF
THIS AGREEMENT.


                              EMPLOYMENT AGREEMENT

         This Employment Agreement (this "Agreement") is entered into effective
as of the 13th day of May, 2003, between Richard Shore, Jr. ("Employee"), and
Penn Octane Corporation, a Delaware corporation (the "Company"), whose principal
executive offices are located in Palm Desert, California.

         WHEREAS, the Company desires to employ Employee, and Employee desires
to be employed by the Company, on terms hereinafter set forth;

         WHEREAS, Shore Capital LLC ("Shore Capital"), an entity wholly owned by
Employee, and Penn Octane Corporation are parties to a letter agreement dated
November 29, 2002 (the "Shore Agreement"); and

         WHEREAS, Shore Capital, Employee and the Company desire to terminate
the Shore Agreement and release and terminate their respective rights and
obligations thereunder as provided in this Agreement;

         NOW, THEREFORE, in consideration for the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

                                    ARTICLE 1
                                     DUTIES

         1.1 Employment. During the term of this Agreement, the Company agrees
to employ Employee in the capacity as President, and Employee accepts such
employment, on the terms and conditions set forth in this Agreement.

         1.2 Extent of Service. During the term of this Agreement, Employee
shall devote his full-time business time, energy and skill to the affairs of the
Company and its affiliated companies, including, without limitation, Rio Vista
Energy Partners L.P., a Delaware limited partnership to be formed by the Company
("Rio Vista"). The provisions of this Section 1.2 shall not prevent Employee
from making monetary investments in businesses so long as such business does not
directly compete with the Company, Rio Vista or any other entity controlled by
Rio Vista; provided, however, the foregoing shall not, in any event, prohibit
Employee from purchasing and holding as an investment not more than one percent
(1%) of any class of publicly-traded securities of any entity (other than the
Company or Rio Vista) which conducts a business in competition with the business
of the Company or Rio Vista or any entity controlled by Rio Vista, so long as
Employee does not participate in any way with the management, operation or
control of such entity.



<PAGE>



         1.3 Duties. Employee's duties hereunder shall include such duties as
may be prescribed from time to time by the Board. Employee shall also perform,
without additional compensation, such duties for the Company's affiliated
companies.

                                    ARTICLE 2
                               TERM OF EMPLOYMENT

         The term of this Agreement shall commence on the date hereof and
continue for a period of two years unless earlier terminated pursuant to Article
4 hereof.

                                    ARTICLE 3
                                  COMPENSATION

         3.1 Monthly Base Salary and Per Annum Payment. As compensation for
services rendered under this Agreement, Employee shall be entitled to receive
from the Company a monthly base salary (before standard deductions) equal to
$30,000, subject to periodic review and upward adjustment by the Board in its
sole discretion (downward adjustment shall not be permitted). Employee's monthly
base salary shall be payable at regular intervals (at least semi-monthly) in
accordance with the prevailing practice and policy of the Company.

         3.2 Stock Options. As additional compensation for services rendered
under this Agreement, Employee or his designees shall receive options (the
"Options"), exercisable after the date of the distribution of common units of
Rio Vista to the stockholders of the Company, to purchase 97,415 common units of
Rio Vista at a per unit exercise price of $8.47, to purchase 723,684 shares of
common stock of the Company at a per share exercise price of $1.14 and to
purchase 25% of the limited liability company interests of Rio Vista GP LLC, a
Delaware limited liability company to be formed by the Company as the general
partner of Rio Vista, at an exercise price equal to the pro rata portion of the
tax basis capital of Rio Vista immediately after the distribution of common
units of Rio Vista to the stockholders of the Company pursuant to the option
agreements in the forms attached hereto as Exhibit A, Exhibit B and Exhibit C,
respectively (collectively, the "Option Agreements").

         3.3 Benefits. Employee shall, in addition to the compensation provided
for herein, be entitled to the following additional benefits:

                  (a) Medical, Health and Disability Benefits. Employee shall be
entitled to receive all medical, health and disability benefits that may, from
time to time, be provided by the Company to all employees of the Company as a
group.

                  (b) Other Benefits. Employee shall also be entitled to receive
any other benefits that may, from time to time, be provided by the Company to
all employees of Company as a group.

                  (c) Vacation. Employee shall be entitled to an annual vacation
as determined in accordance with the prevailing practice and policy of the
Company.

                  (d) Holidays. Employee shall be entitled to holidays in
accordance with the prevailing practice and policy of the Company.



                                       2
<PAGE>



                  (e) Reimbursement of Expenses. The Company shall reimburse
Employee for all expenses reasonably incurred by Employee in conjunction with
the rendering of services at the Company's request, provided that such expenses
are incurred in accordance with the prevailing practice and policy of the
Company and are properly deductible by the Company for federal income tax
purposes. As a condition to such reimbursement, Employee shall submit an
itemized accounting of such expenses in reasonable detail, including receipts
where required under federal income tax laws.

                                    ARTICLE 4
                                   TERMINATION

         4.1 Termination by the Company Without Cause. Subject to the provisions
of this Article 4, this Agreement may be terminated by the Company without cause
upon 30 days prior written notice thereof given to Employee. In the event of
such termination, the Company shall pay Employee his monthly base salary
(subject to standard deductions) and per annum payment (subject to standard
deductions) through the remainder of the term of this Agreement and Employee
shall be entitled to continue to be covered under the Company's group health
insurance program pursuant to benefit continuation as prescribed in the COBRA.
Such COBRA benefits shall commence on the date of termination and the Company
shall pay, on Employee's behalf, any and all costs associated with extending
such group health benefits under COBRA for a period of 12 months following the
termination date. Payment or performance by the Company in accordance with this
Article 4 shall constitute Employee's full severance pay and the Company shall
have no further obligation to Employee arising out of such termination.

         4.2 Termination For Cause. This Agreement may be terminated by the
Company for "Cause" (as defined in Section 8.2 herein) upon written notice
thereof given by the Company to Employee. In the event of termination pursuant
to this Section 4.2, the Company shall pay Employee his monthly base salary
(subject to standard deductions) earned pro rata to the date of such termination
and the Company shall have no further obligations to Employee hereunder.

         4.3 Termination Upon Death or Disability. In the event that Employee
dies, this Agreement shall terminate upon Employee's death. Likewise, if
Employee becomes unable to perform the essential functions of his duties
hereunder, with or without reasonable accommodation, on account of illness,
disability or other reason whatsoever for a period of more than 180 consecutive
or nonconsecutive days in any 12-month period, the Company may, upon notice to
Employee, terminate this Agreement. In the event of termination pursuant to this
Section 4.3, Employee (or his legal representatives) shall be entitled only to
his monthly base salary earned pro rata for services actually rendered prior to
the date of such termination; provided, however, to the extent to which Employee
has received short-term or long-term disability benefits under employee benefit
plans maintained from time to time by the Company, such benefits shall be
deducted from his monthly base salary.

         4.4 Voluntary Termination by Employee for Good Reason. Employee may at
any time voluntarily terminate his employment for "good reason" (as defined
below) upon 30 days prior written notice thereof to the Company. In such event,
the Company shall pay Employee his monthly base salary (subject to standard
deductions) and per annum payment (subject to standard



                                       3
<PAGE>



deductions) through the remainder of the term of this Agreement. For purposes of
this Agreement, "good reason" shall mean the occurrence of any of the following
events:

                  (a) Removal from the offices Employee holds on the date of
this Agreement or a material reduction in Employee's authority or
responsibility, but not including termination of Employee for "cause," as
defined in Section 8.2 herein; or

                  (b) The Company otherwise commits a material breach of this
Agreement.

         4.5 Termination by Employee. This Agreement may be terminated by
Employee, without cause, upon 30 days' prior written notice thereof given by
Employee to the Company. In the event of termination pursuant to this Section
4.5, the Company shall pay Employee his monthly base salary (subject to standard
deductions) earned pro rata to the date of such termination and the Company
shall have no further obligations to Employee hereunder.

         4.6 Survival of Provisions. The covenants and provisions of Articles 5,
6 and 7 hereof shall survive any termination of this Agreement and continue for
the periods indicated, regardless of how such termination may be brought about.

         4.7 Options. Termination under this Article 4 shall affect the Options
in accordance with the provisions of the Option Agreements.

                                    ARTICLE 5
                 PROPRIETARY PROPERTY; CONFIDENTIAL INFORMATION

         5.1 Proprietary Property; Confidential Information. Employee
acknowledges that in and as a result of Employee's employment hereunder,
Employee will be making use of, acquiring and/or adding to Confidential
Information. As a material inducement to the Company to enter into this
Agreement and to pay to Employee the compensation and benefits stated herein,
Employee covenants and agrees that Employee shall not, at any time during or
following the term of Employee's employment, directly or indirectly, divulge or
disclose for any purpose whatsoever any Confidential Information or proprietary
information of the Company. Upon termination of this Agreement, regardless of
how such termination may be brought about, Employee shall deliver to the Company
any and all documents, instruments, notes, papers or other expressions or
embodiments of confidential information which are in Employee's possession or
control.

         5.2 Publicity. During the term of this Agreement and for a period of
ten years thereafter, Employee shall not, directly or indirectly, originate or
participate in the origination of any publicity, news release or other public
announcements, written or oral, whether to the public press or otherwise,
relating to this Agreement, to any amendment hereto, to Employee's employment
hereunder or to the Company, without the prior written approval of the Company.

                                    ARTICLE 6

                             [INTENTIONALLY OMITTED]



                                       4
<PAGE>



                                    ARTICLE 7
                                   ARBITRATION

         Except for the provisions of Article 5 of this Agreement dealing with
proprietary property and confidential information, with respect to which the
Company expressly reserves the right to petition a court directly for injunctive
and other relief, any claim, dispute or controversy of any nature whatsoever,
including but not limited to tort claims or contract disputes between the
parties to this Agreement or their respective heirs, executors, administrators,
legal representatives, successors and assigns, as applicable, arising out of or
related to Employee's employment or the terms and conditions of this Agreement,
including the implementation, applicability or interpretation thereof, shall be
resolved in accordance with the dispute resolution procedures set forth in
Appendix A attached hereto and made a part hereof.

                                    ARTICLE 8
                                   DEFINITIONS

         8.1 "Board" shall mean the Board of Directors of the Company.

         8.2 "Cause" shall be exclusively limited to the following, as
determined by the Board in its sole judgment: (i) Employee breaches any material
terms of this Agreement; (ii) Employee is convicted of a felony; (iii) Employee
fails, after at least one warning, to perform duties assigned under this
Agreement (other than a failure due to death or physical or mental disability);
(iv) Employee intentionally engages in conduct which is demonstrably and
materially injurious to the Company; (v) Employee commits fraud or theft of
personal or Company property from Company premises; (vi) Employee falsifies
Company documents or records; (vii) Employee engages in acts of gross
carelessness or willful negligence to endanger life or property on Company
premises; (viii) Employee uses, distributes or is under the influence of illegal
drugs, alcohol or other intoxicant on Company premises; (ix) Employee possesses
or stores hand guns on Company premises; or (x) Employee intentionally violates
state, federal or local laws and regulations in the course and scope of his
employment.

         8.3 "COBRA" means the Consolidated Omnibus Budget Reconciliation Act.

         8.4 "Confidential Information" means that information and proprietary
property belonging to the Company or its affiliates of a special and unique
nature and value relating to such matters as the Company's trade secrets,
systems, procedures manuals, financial data, confidential reports, business
strategies and list of customers.

                                    ARTICLE 9
                                  MISCELLANEOUS

         9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by an overnight
delivery service with tracking procedures or by facsimile to the parties at the
following addresses or at such other addresses as shall be specified by the
parties by like notice: If to Employee, at the address set forth below his name
on the signature page hereof; and if to the Company, at 77-530 Enfield Lane,
Building D, Palm Desert, California 92211, Attention: Chairman of the Board and
Chief Executive Officer.



                                       5
<PAGE>



         9.2 Equitable Relief. In the event of a breach or a threatened breach
by Employee of any of the provisions contained in Article 5 of this Agreement,
Employee acknowledges that the Company will suffer irreparable injury not fully
compensable by money damages and, therefore, will not have an adequate remedy
available at law. Accordingly, the Company shall be entitled to obtain such
injunctive relief or other equitable remedy from any court of competent
jurisdiction as may be necessary or appropriate to prevent or curtail any such
breach, threatened or actual. The foregoing shall be in addition to and without
prejudice to any other rights that the Company may have under this Agreement, at
law or in equity, including, without limitation, the right to sue for damages.

         9.3 No Rights in Contracts. Employee acknowledges and agrees that he or
she shall not have any rights in or to any contracts entered into with clients
or customers of the Company in connection with services provided by Employee
hereunder (including those in which Employee may be specifically named with the
Company), unless otherwise agreed to in writing by the Company.

         9.4 Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company. Employee's rights under this Agreement are not
assignable and any attempted assignment thereof shall be null and void.

         9.5 Governing Law. This Agreement shall be subject to and governed by
the laws of the State of Texas.

         9.6 Entire Agreement; Release; Amendments. This Agreement constitutes
the entire agreement between the parties and supersedes all other agreements
between the parties which may relate to the subject matter contained in this
Agreement. Without limiting the foregoing, the Shore Agreement is heareby
terminated in its entirety, the parties thereto hereby waive and release all of
their respective rights and obligations under the Shore Agreement, and Shore
Capital LLC and Employee hereby release the Company and its employees, directors
and affiliates from any and all claims arising under or related to the Shore
Agreement. This Agreement may not be amended or modified except by an agreement
in writing which refers to this Agreement and is signed by both parties.

         9.7 Headings. The headings of sections and subsections of this
Agreement are for convenience only and shall not in any way affect the
interpretation of any provision of this Agreement or of the Agreement itself.

         9.8 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

         9.9 Waiver. The waiver by any party of a breach of any provision hereof
shall not be deemed to constitute the waiver of any prior or subsequent breach
of the same provision or any other provisions hereof. Further, the failure of
any party to insist upon strict adherence to any



                                       6
<PAGE>



term of this Agreement on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement unless such party expressly waives
such provision pursuant to a written instrument which refers to this Agreement
and is signed by such party.


                         (Signatures on following page.)



                                       7
<PAGE>



         IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.

                                     PENN OCTANE CORPORATION



                                     By:
                                        ----------------------------------------
                                     Name:
                                          --------------------------------------
                                     Title:
                                           -------------------------------------


                                     EMPLOYEE:


                                     -------------------------------------------
                                     Richard Shore, Jr.

                                     Address: 12 Green Valley Dr.
                                              Lafayette, CA 94549



ACCEPTED AND AGREED TO FOR
PURPOSES OF THE WAIVER AND
RELEASE UNDER SECTION 9.6:

SHORE CAPITAL LLC


By:
   ---------------------------------
    Richard Shore, Jr., President




                                       8
<PAGE>



                                   APPENDIX A

                          DISPUTE RESOLUTION PROCEDURES

         Re: Employment Agreement effective May 13, 2003 (including any
amendments, the "Agreement"), between Penn Octane Corporation, a Delaware
corporation (the "Company"), and Richard Shore, Jr. ("Employee"). Unless
otherwise defined in this Appendix A, terms defined in the Agreement and used
herein shall have the meanings set forth therein.

         A. Negotiations. If any claim, dispute or controversy described in
Article 7 of the Agreement (collectively, the "Dispute") arises, either party
may, by written notice to the party, have the Dispute referred to the persons
designated below for attempted resolution by good faith negotiations within 45
days after such written notice is received. Such designated persons are as
follows:

                  1. Company. The Chairman of the Board and Chief Executive
Officer or his designee; and

                  2. Employee. Employee or his designee.

Any settlement reached by the parties under this paragraph A shall not be
binding until reduced to writing and signed by both parties. When reduced to
writing, such settlement agreement shall supersede all other agreements, written
or oral, to the extent such agreements specifically pertain to the matters so
settled. If the above-designated persons are unable to resolve such dispute
within such 45-day period, either party may invoke the provisions of paragraph B
below.

         B. Arbitration. All Disputes shall be settled by negotiation among the
parties as described in paragraph A above or, if such negotiation is
unsuccessful, by binding arbitration in accordance with procedures set forth in
paragraphs C and D below.

         C. Notice. Notice of demand for binding arbitration by one party shall
be given in writing to the other party pursuant to the Agreement. In no event
may a notice of demand of any kind be filed more than one (1) year after the
date the Dispute is first asserted in writing to the other party pursuant to
paragraph A above, and if such demand is not timely filed, the Dispute
referenced in the notice given pursuant to paragraph A above shall be deemed
released, waived, barred and unenforceable for all time, and barred as if by
statute of limitations.

         D. Binding Arbitration. Upon filing of a notice of demand for binding
arbitration by either party, arbitration shall be commenced and conducted as
follows:

                  1. Arbitrators. All Disputes and related matters in question
shall be referred to and decided and settled by a panel of three arbitrators,
one selected by the Company, one selected by Employee and the third selected by
the two arbitrators so selected. Selection of the arbitrators to be selected by
the Company and Employee shall be made within ten (10) business days after the
date of giving of a notice of demand for arbitration, and the two arbitrators so
appointed shall appoint the third within 10 business days following their
appointment.



<PAGE>



                  2. Cost of Arbitration. The cost of arbitration proceedings,
including without limitation the arbitrators' compensation and expenses, hearing
room charges, court reporter transcript charges etc., shall be borne by the
parties equally or otherwise as the arbitrators may determine. The arbitrators
may award the prevailing party its reasonable attorneys' fees and costs incurred
in connection with the arbitration. The arbitrators are specifically instructed
to award attorneys' fees for instances of abuse in the discovery process.

                  3. Location of Proceedings. The arbitration proceedings shall
be held in Houston, Texas, unless the parties agree otherwise.

                  4. Pre-hearing Discovery. The parties shall have the right to
conduct and enforce pre-hearing discovery in accordance with the then current
Federal Rules of Civil Procedure, subject to these limitations:

                           (a) Each party may serve no more than one set of
interrogatories limited to 30 questions, including sub-parts;

                           (b) Each party may depose the other party's expert
witnesses who will be called to testify at the hearing, plus two fact witnesses
without regard to whether they will be called to testify (each party will be
entitled to a total of no more than 24 hours of deposition time of the other
party's witnesses), provided however, that the arbitrators may provide for
additional depositions upon showing of good cause; and

                           (c) Document discovery and other discovery shall be
under the control of and enforceable by the arbitrators.

                  5. Discovery disputes. All discovery disputes shall be decided
by the arbitrators. The arbitrators are empowered;

                           (a) to issue subpoenas to compel pre-hearing document
or deposition discovery;

                           (b) to enforce the discovery rights and obligations
of the parties; and

                           (c) to otherwise to control the scheduling and
conduct of the proceedings.

Notwithstanding any contrary foregoing provisions, the arbitrators shall have
the power and authority to, and to the fullest extent practicable shall,
abbreviate arbitration discovery in a manner which is fair to all parties in
order to expedite the conclusion of each alternative dispute resolution
proceeding.

                  6. Pre-hearing Conference. Within fifteen (15) days after
selection of the third arbitrator, or as soon thereafter as is mutually
convenient to the arbitrators, the arbitrators shall hold a pre-hearing
conference to establish schedules for completion of discovery, for exchange of
exhibit and witness lists, for arbitration briefs and for the hearing, and to
decide procedural matters and address all other questions that may be presented.



<PAGE>



                  7. Hearing Procedures. The hearing shall be conducted to
preserve its privacy and to allow reasonable procedural due process. Rules of
evidence need not be strictly followed, and the hearing shall be streamlined as
follows:

                           (a) Documents shall be self-authenticating, subject
to valid objection by the opposing party;

                           (b) Expert reports, witness biographies, depositions
and affidavits may be utilized, subject to the opponent's right of a live
cross-examination of the witness in person;

                           (c) Charts, graphs and summaries shall be utilized to
present voluminous data, provided (i) that the underlying data is made available
to the opposing party thirty (30) days prior to the hearing, and (ii) that the
preparer of each chart, graph or summary is available for explanation and live
cross-examination in person;

                           (d) The hearing should be held on consecutive
business days without interruption to the maximum extent practicable; and

                           (e) The arbitrators shall establish all other
procedural rules for the conduct of the arbitration in accordance with the rules
of arbitration of the Center for Public Resources.

                  8. Governing Law. This arbitration provision shall be governed
by, and all rights and obligations specifically enforceable under and pursuant
to, the Federal Arbitration Act (9 U.S.C. Section 1, et seq.)

                  9. Consolidation. No arbitration shall include, by
consolidation, joinder or in any other manner, any additional person not a party
to the Agreement, except by written consent of both parties containing a
specific reference to these provisions.

                  10. Award. The arbitrators are empowered to render an award of
general compensatory damages and equitable relief (including, without
limitations, injunctive relief), but are not empowered to award exemplary,
special or punitive damages. The award rendered by the arbitrators (a) shall be
final, (b) shall not constitute a basis for collateral estoppel as to any issue
and (c) shall not be subject to vacation or modification.

                  11. Confidentiality. The parties hereto will maintain the
substance of any proceedings hereunder in confidence and the arbitrators, prior
to any proceedings hereunder, will sign an agreement whereby the arbitrators
agree to keep the substance of any proceedings hereunder in confidence.



<PAGE>



                                    EXHIBIT A

                         RIO VISTA ENERGY PARTNERS L.P.

                                     OPTION



<PAGE>


                                    EXHIBIT B

                             PENN OCTANE CORPORATION

                                     OPTION



<PAGE>


                                    EXHIBIT C

                                RIO VISTA GP LLC

                                     OPTION