--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended June 30, 2001

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to

                        Commission File Number 001-05083

                               XANSER CORPORATION
             (Exact name of registrant as specified in its charter)

           DELAWARE                                              74-1191271
(State or other jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                               Identification No.)


                          2435 North Central Expressway
                             Richardson, Texas 75080
          (Address of principal executive offices, including zip code)

                                 (972) 699-4000
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                  Yes    X                                No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

Class of Common Stock                               Outstanding at July 31, 2001
 No par value                                            32,619,281 shares

--------------------------------------------------------------------------------

<PAGE>
XANSER CORPORATION AND SUBSIDIARIES


FORM 10-Q
QUARTER ENDED JUNE 30, 2001
--------------------------------------------------------------------------------


                                                                        Page No.
                           Part I. Financial Information

Item 1.   Financial Statements (Unaudited)

          Consolidated Statements of Income - Three and Six Months Ended
            June 30, 2001 and 2000                                            1

          Condensed Consolidated Balance Sheets - June 30, 2001
            and December 31, 2000                                             2

          Condensed Consolidated Statements of Cash Flows - Six
            Months Ended June 30, 2001 and 2000                               3

          Consolidated Statement of Changes in Stockholders' Equity           4

          Notes to Consolidated Financial Statements                          5

Item 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations                    13


                           Part II. Other Information

Item 6.   Exhibits and Reports on Form 8-K                                   20





<PAGE>
XANSER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(In Thousands - Except Per Share Amounts)
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                          Three Months Ended                  Six Months Ended
                                                               June 30,                         June 30,
                                                     -----------------------------    -----------------------------
                                                          2001           2000              2001           2000
                                                     -------------   -------------    -------------  --------------


<S>                                                  <C>             <C>              <C>            <C>
Revenues:
     Services                                        $      32,223   $      28,733    $      65,107  $       55,739
     Products                                                6,501           4,647            9,509           8,935
                                                     -------------   -------------    -------------  --------------
         Total revenues                                     38,724          33,380           74,616          64,674
                                                     -------------   -------------    -------------  --------------
Costs and expenses:
     Operating costs                                        29,358          24,822           58,638          48,815
     Cost of products sold                                   5,795           4,332            8,472           8,235
     Depreciation and amortization                           1,276           1,114            2,527           2,476
     General and administrative                                907           1,537            2,067           3,018
                                                     -------------   -------------    -------------  --------------
         Total costs and expenses                           37,336          31,805           71,704          62,544
                                                     -------------   -------------    -------------  --------------

Operating income                                             1,388           1,575            2,912           2,130

Other income (expense), net                                   (161)            162             (168)            291
Interest expense                                              (811)           (965)          (1,696)         (1,941)
                                                     -------------   -------------    -------------  --------------
Income from continuing operations
   before income taxes                                         416             772            1,048             480
Income tax benefit (expense)                                   269            (185)              10            (128)
                                                     -------------   -------------    -------------  --------------
Income from continuing operations                              685             587            1,058             352

Income from discontinued operations -
    businesses to be distributed to common
    shareholders, net of income taxes                        2,766           2,947            3,423           5,107
                                                     -------------   -------------    -------------  --------------
        Net income                                           3,451           3,534            4,481           5,459

Dividends and redemption premium
    applicable to preferred stock                             -                136              493             266
                                                     -------------   -------------    -------------  --------------
Net income applicable to common stock                $       3,451   $       3,398    $       3,988  $        5,193
                                                     =============   =============    =============  ==============

Earnings per common share:
   Basic:
     Continuing operations                           $         .02   $         .01    $         .02  $        -
     Discontinued operations                                   .09             .10              .11             .17
                                                     -------------   -------------    -------------  --------------
                                                     $         .11   $         .11    $         .13  $          .17
                                                     =============   =============    =============  ==============
   Diluted:
     Continuing operations                           $         .02   $         .01    $         .02  $        -
     Discontinued operations                                   .08             .09              .10             .16
                                                     -------------   -------------    -------------  --------------
                                                     $         .10   $         .10    $         .12  $          .16
                                                     =============   =============    =============  ==============


</TABLE>
                 See notes to consolidated financial statements.
                                        1


<PAGE>
XANSER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                            June 30,                December 31,
                                                                              2001                      2000
                                                                       -----------------         ------------------
                                                                           (Unaudited)
                   ASSETS
<S>                                                                        <C>                       <C>
Current assets:
    Cash and cash equivalents                                              $      13,724             $       20,517
    Accounts receivable, trade                                                    35,881                     29,198
    Receivable from Kaneb Services LLC                                            30,980                      -
    Inventories                                                                    8,265                      7,641
    Prepaid expenses and other current assets                                      6,352                      6,749
    Current deferred income taxes                                                   -                        36,489
                                                                           -------------             --------------
        Total current assets                                                      95,202                    100,594
                                                                           -------------             --------------
Property and equipment                                                            30,843                     30,585
Less accumulated depreciation and amortization                                    20,186                     20,043
                                                                           -------------             --------------
     Net property and equipment                                                   10,657                     10,542
                                                                           -------------             --------------
Excess of cost over fair value of net assets
     of acquired businesses, net                                                  61,387                     62,470

Deferred income taxes and other assets                                             6,430                     11,215

Net assets of discontinued operations - businesses to
    be distributed to common shareholders                                           -                        41,822
                                                                           -------------             --------------
                                                                           $     173,676             $      226,643
                                                                           =============             ==============
     LIABILITIES AND EQUITY
Current liabilities:
    Current portion of long-term debt                                      $         564             $          595
    Accounts payable                                                               8,793                      5,081
    Accrued income taxes                                                          17,469                        385
    Accrued expenses                                                              10,645                     13,348
                                                                           -------------             --------------
         Total current liabilities                                                37,471                     19,409
                                                                           -------------             --------------
Long-term debt, less current portion:
    Technical services                                                            18,015                     18,197
    Parent company                                                                21,396                     21,396
                                                                           -------------             --------------
         Total long-term debt, less current portion                               39,411                     39,593
                                                                           -------------             --------------
Other liabilities                                                                  1,712                      1,602

Commitments and contingencies

Stockholders' equity:
     Preferred stock, without par value                                             -                         5,792
     Common stock, without par value                                               4,260                      4,250
     Additional paid-in-capital                                                  127,661                    203,989
     Treasury stock, at cost                                                     (23,651)                   (31,440)
     Accumulated deficit                                                          (9,323)                   (13,311)
     Accumulated other comprehensive income (loss) -
         foreign currency translation adjustment                                  (3,865)                    (3,241)
                                                                           -------------             --------------
         Total stockholders' equity                                               95,082                    166,039
                                                                           -------------             --------------
                                                                           $     173,676             $      226,643
                                                                           =============             ==============
</TABLE>

                 See notes to consolidated financial statements.
                                        2

<PAGE>
XANSER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                         Six Months Ended
                                                                                              June 30,
                                                                           ----------------------------------------
                                                                                2001                      2000
                                                                           -------------             --------------
<S>                                                                        <C>                       <C>
Operating activities:
   Income from continuing operations                                       $       1,058             $          352
   Adjustments to reconcile income from
     continuing operations to net cash provided
     by operating activities:
       Increase in estimated redemption value
         of Series F Preferred Stock                                                -                           252
       Depreciation and amortization                                               2,527                      2,476
       Deferred income taxes                                                         (60)                         6
       Other                                                                          28                        128
       Changes in working capital components                                      (4,298)                      (766)
                                                                           -------------             --------------
       Operating activities of continuing operations                                (745)                     2,448
       Operating activities of discontinued operations                            59,798                     30,903
                                                                           -------------             --------------
           Net cash provided by operating activities                              59,053                     33,351
                                                                           -------------             --------------

Investing activities:
   Capital expenditures                                                           (2,035)                    (1,256)
   Acquisition                                                                      -                          (175)
   Change in other assets, net                                                      (612)                       393
   Investing activities of discontinued operations                              (128,339)                    (7,142)
                                                                           -------------             --------------
       Net cash used in investing activities                                    (130,986)                    (8,180)
                                                                           -------------             --------------

Financing activities:
   Issuance of debt                                                                1,409                        534
   Payments on debt and capital leases                                            (1,622)                    (2,411)
   Preferred stock dividends and redemption
     premium paid                                                                   (493)                      (266)
   Common stock issued                                                               526                        166
   Purchase of treasury stock                                                       -                        (1,530)
   Redemption of Series A Preferred Stock                                         (5,680)                      -
   Financing activities of discontinued operations                                71,000                    (16,357)
                                                                           -------------             --------------
       Net cash provided by (used in) financing activities                        65,140                    (19,864)
                                                                           -------------             --------------

Increase (decrease) in cash and cash equivalents                                  (6,793)                     5,307
Cash and cash equivalents at beginning of period                                  20,517                     14,516
                                                                           -------------             --------------
Cash and cash equivalents at end of period                                 $      13,724             $       19,823
                                                                           =============             ==============

Supplemental cash flow information:
   Cash paid for interest                                                  $       1,633             $        1,901
                                                                           =============             ==============
   Cash paid for income taxes                                              $         735             $          680
                                                                           =============             ==============
</TABLE>

                 See notes to consolidated financial statements.
                                        3


<PAGE>
XANSER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                         Accumulated
                                                                 Additional                                 Other
                                       Preferred     Common        Paid-In     Treasury    Accumulated  Comprehensive
                                         Stock        Stock        Capital       Stock       Deficit    Income (loss)
                                      -----------  -----------  -----------  -----------  -----------   -------------
<S>                                   <C>          <C>          <C>          <C>          <C>           <C>
Balance at January 1, 2001            $     5,792  $     4,250  $   203,989  $   (31,440) $   (13,311)  $    (3,241)

   Net income for the period                 -             -            -            -          4,481          -
   Gain on issuance of units
     by KPP                                  -             -          6,113          -            -            -
   Redemption of Series A
     Preferred Stock                       (5,680)         -            -            -            -            -
   Repurchase of Series C
     and F Preferred Stock                   (112)         -         (7,725)       7,760          -            -
   Dividends and redemption
     premium applicable to
     preferred stock                         -             -            -            -           (493)         -
   Distribution of Kaneb
     Services LLC shares                     -             -        (75,199)         -            -             640
   Foreign currency
     translation adjustment                  -             -            -            -            -          (1,264)
   Stock options exercised,
     other                                   -              10          483           29          -            -
                                      -----------  -----------  -----------  -----------  -----------   -----------
Balance at June 30, 2001              $      -     $     4,260  $   127,661  $   (23,651) $    (9,323)  $    (3,865)
                                      ===========  ===========  ===========  ===========  ===========   ===========

</TABLE>

                 See notes to consolidated financial statements.
                                        4



<PAGE>
XANSER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------------

1.   NAME CHANGE AND DISTRIBUTION OF KANEB SERVICES LLC

     On August 7, 2001, the  stockholders  of Kaneb Services,  Inc.  approved an
     amendment to its  certificate  of  incorporation  to change the name of the
     Company  from  "Kaneb  Services,   Inc."  to  "Xanser   Corporation"   (the
     "Company").

     On November 27, 2000, the Board of Directors of the Company  authorized the
     distribution of its Pipeline,  Terminaling and Product Marketing businesses
     (the  "Distribution")  to its  stockholders  in the  form of a new  limited
     liability  company,  Kaneb  Services  LLC ("KSL").  On June 29,  2001,  the
     Distribution was completed,  with each shareholder of the Company receiving
     one common share of KSL for each three shares of the Company's common stock
     held on June 20, 2001, the record date for the  Distribution,  resulting in
     the distribution of 10.85 million KSL common shares.

     Pursuant to the  Distribution,  the Company  entered into an agreement (the
     "Distribution  Agreement") with KSL,  whereby,  KSL will pay the Company an
     amount equal to the expenses incurred by the Company in connection with the
     Distribution.  These expenses include  approximately  $6.1 million in costs
     incurred  in  connection  with the  redemption  of the  Company's  Series A
     Preferred Stock and  approximately  $2.0 million in legal and  professional
     and other  expenses  incurred  in  connection  with the  Distribution.  The
     distribution  of common  shares  is  taxable  to the  Company,  which  will
     recognize  taxable income to the extent of the excess of the value of KSL's
     common shares  distributed  over the tax basis of KSL's assets in the hands
     of the Company.  The Company will use all of its  available  net  operating
     loss  carryforwards to reduce that taxable income,  but the total amount of
     taxable income is expected to exceed such net operating loss carryforwards,
     and the  Distribution  Agreement  obligates KSL to pay the Company  amounts
     calculated  based on whatever  tax is due on the net amount of income.  The
     Company  cannot  currently  determine  exactly what this amount will be and
     what  the tax  will  be,  but  the  Company  estimates  that  the tax  will
     approximate $13.6 million, after utilization of all available net operating
     loss  carryforwards  and $4.4 million of  alternative  minimum tax credits.
     Included in Receivable  from KSL at June 30, 2001 is $21.7 million for such
     costs and expenses.

     As the  Distribution was recorded at carrying value and did not result in a
     gain or loss for financial reporting purposes, previously recorded deferred
     tax assets  relating  to net  operating  loss and  alternative  minimum tax
     credit carryforwards which were utilized in the Distribution (approximately
     $39 million) have been charged to additional paid-in capital.

     On March 30, 2001, the Company's  Series A Preferred Stock was redeemed for
     cash at the stated  redemption price of $10.67 per share,  plus accrued and
     unpaid  dividends,  for a total cost of  approximately  $6.1  million.  The
     redemption  cost  includes a $0.4  million  redemption  premium,  which was
     recognized   as  preferred   dividends  in  the  first   quarter  of  2001.
     Additionally,  on  June  12,  2001,  the  Company  exchanged,  in  non-cash
     transactions, 1,356,777 shares of the Company's common stock for all Series
     C Preferred and Series F Preferred shares outstanding.

     The  Distribution  Agreement also requires KSL to pay the Company an amount
     calculated  based on any income tax  liability  of the Company  that (i) is
     attributable  to  increases  in income tax from past years  arising  out of
     adjustments  required by Federal and state tax  authorities,  to the extent
     that  such  increases  are  properly  allocable,  in the  judgement  of the
     Company, to the businesses that became part of KSL, or (ii) is attributable
     to the  distribution  of KSL's common  shares and the  operations  of KSL's
     businesses in the current year and the preceding  years. In the event of an
     examination of the Company by Federal or state tax authorities, the Company
     will have unfettered control over the examination,  administrative  appeal,
     settlement or litigation that may be involved, notwithstanding that KSL has
     agreed to pay any additional tax.

     On June 28,  2001,  the Company  entered into a credit  agreement  with KSL
     which  provides the Company with a $25 million  revolving  credit  facility
     through June 2008. The credit facility, which is unsecured,  bears interest
     at variable rates, has a variable  commitment fee on unutilized amounts and
     contains certain operational  covenants.  No amounts were outstanding under
     the credit agreement at June 30, 2001.

     The Company has entered into an agreement with KSL whereby the Company will
     provide  certain  administrative  services,  including  treasury  and  cash
     management,  insurance  and risk  management,  legal,  investor  relations,
     facilities,  human resources,  accounting and information  services to KSL.
     The administrative services agreement,  which expires on December 31, 2005,
     provides  that  KSL pay the  Company  a  monthly  fee of  $25,000  for such
     services and reimburse the Company for any out-of-pocket  expenses incurred
     by the Company for the sole benefit of KSL.


2.   SIGNIFICANT ACCOUNTING POLICIES

     The consolidated  financial  statements include the accounts of the Company
     and its  subsidiaries.  As a result of the  Distribution,  the accompanying
     financial  statements  reflect the operations of the Pipeline,  Terminaling
     and Product  Marketing  businesses of the Company prior to June 30, 2001 as
     "Discontinued   operations  -  businesses  to  be   distributed  to  common
     shareholders".  All significant intercompany  transactions and balances are
     eliminated in consolidation.

     The unaudited condensed  consolidated  financial  statements of the Company
     for the three and six month periods ended June 30, 2001 and 2000, have been
     prepared in  accordance  with  generally  accepted  accounting  principles.
     Significant  accounting  policies  followed by the Company are disclosed in
     the  notes  to  the  consolidated  financial  statements  included  in  the
     Company's  Annual Report on Form 10-K for the year ended December 31, 2000.
     In the opinion of the  Company's  management,  the  accompanying  condensed
     consolidated  financial  statements contain the adjustments,  consisting of
     normal  recurring  accruals,  necessary to present fairly the  consolidated
     financial position of the Company and its consolidated subsidiaries at June
     30, 2001 and the  consolidated  results of their  operations and cash flows
     for the  periods  ended June 30, 2001 and 2000.  Operating  results for the
     three and six months ended June 30, 2001 are not necessarily  indicative of
     the results that may be expected for the year ending December 31, 2001.


3.   COMPREHENSIVE INCOME

     Comprehensive  income for the three and six months  ended June 30, 2001 and
     2000 is as follows:
<TABLE>
<CAPTION>

                                                          Three Months Ended                Six Months Ended
                                                                  June 30,                      June 30,
                                                     -----------------------------    -----------------------------
                                                          2001            2000             2001           2000
                                                     -------------   -------------    -------------  --------------
                                                                             (in thousands)

<S>                                                  <C>             <C>              <C>            <C>
     Net income                                      $       3,451   $       3,534    $       4,481  $        5,459
     Other comprehensive income (loss)
        - foreign currency translation
        adjustment                                            (393)           (540)          (1,264)           (583)
                                                     -------------   -------------    -------------  --------------
     Comprehensive income                            $       3,058   $       2,994    $       3,217  $        4,876
                                                     =============   =============    =============  ==============
</TABLE>


4.   EARNINGS PER SHARE

     The following is a  reconciliation  of Basic and Diluted earnings per share
     (in thousands, except for per share amounts):

<TABLE>
<CAPTION>
                                                                                   Weighted
                                                                                    Average
                                                                   Net              Common            Per-Share
                                                                  Income            Shares              Amount
                                                              --------------     ------------       ------------
<S>                                                           <C>                <C>                <C>
       Three Months Ended June 30, 2001
       ---------------------------------------------
           Income from continuing operations                  $          685
           Dividends applicable to preferred stock                     -
                                                              --------------
           Basic earnings per share -
              Income applicable to common stock                          685           31,175       $       .02
                                                                                                    =============

           Effect of dilutive securities -
              Common stock options, Series F
                Preferred and DSUs                                     -                2,887
                                                              --------------     ------------
           Diluted earnings per share -
              Income applicable to common stock,
              Series F Preferred, DSUs and
              assumed options exercised                       $          685           34,062       $         .02
                                                              ==============     ============       =============

      Three Months Ended June 30, 2000
      ---------------------------------------------
           Income from continuing operations                  $          587
           Dividends applicable to preferred stock                      (136)
                                                              --------------

           Basic earnings per share -
              Income applicable to common stock                          451           31,151       $         .01
                                                                                                    =============

           Effect of dilutive securities -
              Common stock options, Series F
                Preferred and DSUs                                     -                1,782
                                                              --------------      -----------
           Diluted earnings per share -
             Income applicable to common stock,
             Series F Preferred, DSUs and
             assumed options exercised                        $          451           32,933       $         .01
                                                              ==============     ============       =============

      Six Months Ended June 30, 2001
      ---------------------------------------------
           Income from continuing operations                  $        1,058
           Dividends and redemption premium
              applicable to preferred stock                             (493)
                                                              --------------
           Basic earnings per share -
              Income applicable to common stock                          565           31,159       $         .02
                                                                                                    =============

           Effect of dilutive securities -
              Common stock options Series F
                Preferred and DSUs                                     -                2,871
                                                              --------------     ------------
           Diluted earnings per share -
             Income applicable to common stock,
             Series F Preferred, DSUs and
             assumed options exercised                        $          565           34,030       $         .02
                                                              ==============     ============       =============

      Six Months Ended June 30, 2000
      ---------------------------------------------
           Income applicable to common stock                  $          352
           Dividends applicable to preferred stock                      (266)
                                                              --------------
           Basic earnings per share -
              Income applicable to common stock                           86           31,206       $       -
                                                                                                    =============
           Effect of dilutive securities -
              Common stock options, Series F
                Preferred and DSUs                                     -                1,759
                                                              --------------     ------------
           Diluted earnings per share -
             Income applicable to common stock,
             Series F Preferred, DSUs and
             assumed options exercised                        $           86           32,965       $       -
                                                              ==============     ============       =============
</TABLE>


     Options to purchase  131,557  shares of common stock at a weighted  average
     price of $5.56, were outstanding at June 30, 2000, but were not included in
     the computation of diluted earnings per share because the options' exercise
     price was greater than the average market price of the common stock.  Since
     the average  market prices of the Company's  common stock for the three and
     six month periods ended June 30, 2001 were in excess of outstanding  option
     exercise prices, all outstanding  options were considered  dilutive at June
     30,  2001.  Additionally,  the  Company's  8.75%  convertible  subordinated
     debentures were excluded from the computation of diluted earnings per share
     because the effect of assumed conversion is anti-dilutive.


5.   CONTINGENCIES

     The Company has contingent  liabilities  resulting from litigation,  claims
     and  commitments  incident to the ordinary  course of business.  Management
     believes that the ultimate resolution of such contingencies will not have a
     materially   adverse  effect  on  the  financial  position  or  results  of
     operations of the Company.


6.   BUSINESS SEGMENT DATA

     The Company provides  technical  services to an  international  client base
     that includes refineries, chemical plants, pipelines, offshore drilling and
     production  platforms,  steel mills, food and drink processing  facilities,
     power generation, and other process industries. Additionally, the Company's
     information  technology  services  segment  provides  consulting  services,
     hardware  sales and other related  information  management  and  processing
     services to  governmental,  insurance and financial  institutions.  General
     corporate includes compensation and benefits paid to officers and employees
     of the Company,  insurance premiums,  general and administrative costs, tax
     and  financial  reporting  costs and legal  and audit  fees not  reasonably
     allocable to specific business  segments.  General corporate assets include
     cash,  deferred  taxes  and  other  assets  not  related  to the  Company's
     segments.  Effective January 1, 2001, the compensation and benefit costs of
     certain  officers of the  technical  services  and  information  technology
     services   segments  were  transferred  from  general  corporate  to  their
     respective  segments.  Such costs  approximated  $0.1  million for each the
     first and second quarter for each of these segments.

     The Company measures segment profit as operating  income.  Total assets are
     those  assets,  including  excess  of cost  over  fair  value  of  acquired
     businesses, controlled by each reportable segment. Business segment data is
     as follows:

<TABLE>
<CAPTION>
                                                         Three Months Ended                Six Months Ended
                                                              June 30,                         June 30,
                                                     -----------------------------    -----------------------------
                                                          2001           2000              2001           2000
                                                     -------------   -------------    -------------  --------------
                                                                             (in thousands)
<S>                                                  <C>             <C>              <C>            <C>
     Business segment revenues:
        Technical services                           $      24,105   $      24,351    $      48,666  $       47,310
        Information technology services                     14,619           9,029           25,950          17,364
                                                     -------------   -------------    -------------  --------------
                                                     $      38,724   $      33,380    $      74,616  $       64,674
                                                     =============   =============    =============  ==============
      Technical services segment revenues:
        Underpressure services                       $      10,052   $      10,243    $      19,596  $       19,617
        Turnaround services                                 12,405          11,923           24,907          22,791
        Other services                                       1,648           2,185            4,163           4,902
                                                     -------------   -------------    -------------  --------------
                                                     $      24,105   $      24,351    $      48,666  $       47,310
                                                     =============   =============    =============  ==============
     Business segment profit:
        Technical services                           $       1,200   $       1,972    $       2,513  $        2,896
        Information technology services                      1,095           1,140            2,466           2,252
        General corporate                                     (907)         (1,537)          (2,067)         (3,018)
                                                     -------------   -------------    -------------  --------------
           Operating income                                  1,388           1,575            2,912           2,130
        Other income (expense), net                           (161)            162             (168)            291
        Interest expense                                      (811)           (965)          (1,696)         (1,941)
                                                     -------------   -------------    -------------  --------------
        Income from continuing operations
           before income taxes                       $         416   $         772    $       1,048  $          480
                                                     =============   =============    =============  ==============

</TABLE>
<TABLE>
<CAPTION>
                                                                                         June 30,      December 31,
                                                                                           2001           2000
                                                                                      -------------  --------------
                                                                                             (in thousands)
<S>                                                                                   <C>            <C>
     Total assets:
        Technical services                                                            $     104,234  $      103,817
        Information technology services                                                      26,791          20,086
        General corporate                                                                    42,651          60,918
        Discontinued operations, net                                                           -             41,822
                                                                                      -------------  --------------
                                                                                      $     173,676  $      226,643
                                                                                      =============  ==============
</TABLE>


7.   DISCONTINUED OPERATIONS - BUSINESSES TO BE DISTRIBUTED
     TO COMMON SHAREHOLDERS

     The  results  of  operations  for the  Pipeline,  Terminaling  and  Product
     Marketing  businesses  are  reflected  in  the  accompanying   consolidated
     statements  of  income  as  "Discontinued  operations  -  businesses  to be
     distributed  to  common   shareholders".   The  Pipeline  and   Terminaling
     operations are conducted through Kaneb Pipe Line Partners, L.P. ("KPP"), in
     which the Company  owned an effective 2% general  partner  interest and 25%
     limited partner interest prior to the Distribution  (See Note 1). A summary
     of  operating  results  of  discontinued  operations  for the three and six
     months ended June 30, 2001 and 2000 is presented below (in thousands):


<TABLE>
<CAPTION>

                                                         Three Months Ended                Six Months Ended
                                                              June 30,                         June 30,
                                                     -----------------------------    -----------------------------
                                                          2001           2000              2001           2000
                                                     -------------   -------------    -------------  --------------
<S>                                                  <C>             <C>              <C>            <C>
       Revenues:
         Pipeline and terminaling services           $      52,952   $      38,438    $     101,021  $       75,118
         Product marketing services                         98,879          97,097          187,231         177,486
                                                     -------------   -------------    -------------  --------------
                                                     $     151,831   $     135,535    $     288,252  $      252,604
                                                     =============   =============    =============  ==============
       Operating profit:
         Pipeline and terminaling services           $      21,602   $      14,930    $      39,896  $       27,830
         Product marketing services                            511           1,680             (264)          2,639
         Distribution expenses                              (1,529)          -               (1,779)          -
                                                     -------------   -------------    -------------  --------------
                                                     $      20,584   $      16,610    $      37,853  $       30,469
                                                     =============   =============    =============  ==============

       Income before income taxes, interest
         of outside non-controlling partners
         in KPP's net income and
         extraordinary item                          $      20,365   $      13,473    $      32,797  $       24,192
       Income taxes                                         (1,890)         (2,036)          (3,148)         (3,761)
       Interest of outside non-controlling
         partners in KPP's net income                      (15,709)         (8,490)         (25,367)        (15,324)
       Extraordinary loss on KPP debt
         extinguishment, net of income
         taxes and interest of outside non-
         controlling partners in KPP's
         net income                                           -              -                 (859)          -
                                                     -------------   -------------    -------------  --------------
       Income from discontinued operations,
         net of income taxes                         $       2,766   $       2,947    $       3,423  $        5,107
                                                     =============   =============    =============  ==============

</TABLE>

     On January 3, 2001, KPP, through a wholly-owned subsidiary,  acquired Shore
     Terminals  LLC ("Shore") for $107 million in cash and 1,975,090 KPP limited
     partnership units (valued at $56.5 million on the date of agreement and its
     announcement).  Financing  for the cash portion of the  purchase  price was
     supplied under a new KPP $275 million unsecured  revolving credit agreement
     with a group of banks.  The  acquisition  has been  accounted for using the
     purchase method of accounting.  As a result of KPP issuing additional units
     to unrelated  parties,  the Company's  pro-rata  share of net assets of KPP
     increased by $9.9 million. Accordingly, the Company recorded a $9.9 million
     increase in additional  paid-in  capital,  before  deferred income taxes of
     $3.8 million, in the first quarter of 2001.

     In  March  of 2001,  a  wholly-owned  subsidiary  of KPP  entered  into two
     contracts  for the purpose of locking in interest  rates on $100 million of
     anticipated ten-year public debt offerings. As the interest rate locks were
     not  designated  as hedging  instruments  pursuant to the  requirements  of
     Statement of Financial  Accounting Standards ("SFAS") No. 133, increases or
     decreases  in the fair  value of the  contracts  are  recognized  by KPP in
     results of operations on a current  basis.  On May 22, 2001,  the contracts
     were settled resulting in an aggregate gain to KPP of $3.8 million.


8.   DERIVATIVE INSTRUMENTS

     Effective  January 1, 2001, the Company  adopted the provisions of SFAS No.
     133, "Accounting For Derivative Instruments and Hedging Activities",  which
     establishes  the  accounting and reporting  standards for such  activities.
     Under SFAS No. 133, companies must recognize all derivative  instruments on
     their  balance  sheet at fair  value.  Changes  in the value of  derivative
     instruments,  which are considered hedges, are offset against the change in
     fair value of the hedged item  through  earnings,  or  recognized  in other
     comprehensive  income  until the hedged  item is  recognized  in  earnings,
     depending on the nature of the hedge.  On January 1, 2001,  the Company was
     not a party to any derivative contracts;  accordingly, adoption of SFAS No.
     133 at that  date did not have  any  effect  on the  Company's  results  of
     operations or financial position.  See Note 7 regarding interest rate locks
     entered into in March of 2001 by a wholly-owned subsidiary of KPP.



<PAGE>
XANSER CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition
and Results of Operations
--------------------------------------------------------------------------------

     This  discussion  should  be  read in  conjunction  with  the  consolidated
     financial  statements  of  Xanser  Corporation  (the  "Company")  and notes
     thereto included elsewhere in this report.

     Operating Results:


     Technical Services

     This business segment provides specialized  industrial services,  including
     underpressure  leak  sealing,  on-site  machining,  safety and relief valve
     testing  and  repair,   passive  fire  protection  and  fugitive  emissions
     inspections to the process and power industry worldwide.

<TABLE>
<CAPTION>
                                                     Three Months Ended                  Six Months Ended
                                                            June 30,                           June 30,
                                                   ---------------------------      ------------------------------
                                                      2001             2000             2001            2000
                                                   -----------     -----------      -------------   --------------
                                                                          (in thousands)

<S>                                                <C>             <C>              <C>             <C>
     Revenues:
         United States                             $     9,298     $     8,888      $      19,032   $       16,732
         Europe                                         12,337          13,059             24,069           25,622
         Asia-Pacific                                    2,470           2,404              5,565            4,956
                                                   -----------     -----------      -------------   --------------
              Total Revenues                       $    24,105     $    24,351      $      48,666   $       47,310
                                                   ===========     ===========      =============   ==============

     Operating income:
         United States                             $       365     $       997      $         976   $        1,484
         Europe                                          1,874           1,547              3,385            2,497
         Asia-Pacific                                      (70)            232                 87              495
         Headquarters                                     (495)           (309)              (987)            (590)
         Amortization of excess of cost
            over fair value of net assets
            of acquired businesses                        (474)           (495)              (948)            (990)
                                                   -----------     -----------      -------------   --------------
              Total operating income               $     1,200     $     1,972      $       2,513   $        2,896
                                                   ===========     ===========      =============   ==============

     Capital expenditures,
         excluding acquisitions                    $       935     $       536      $       1,740   $          943
                                                   ===========     ===========      =============   ==============
</TABLE>

     For the three  months  ended  June 30,  2001,  revenues  for the  technical
     services business decreased slightly when compared to the same 2000 period.
     In the United States, revenues increased by 5%, compared to the same period
     in 2000, due to the increases in leaksealing  and turnaround  services.  In
     Europe,  revenues  decreased by 6%, when compared to the second  quarter of
     2000,  due to  devaluations  of  foreign  currencies  and a decline in fire
     protection  services  provided  in the United  Kingdom.  For the six months
     ended June 30, 2001,  revenues  increased by 3%, when compared to 2000, due
     to increases in the United  States and  Asia-Pacific,  partially  offset by
     declines  in  Europe.  Revenues  in the  United  States  increased  by 14%,
     compared to 2000, due to increases in turnaround and leaksealing  services.
     In Europe,  revenues  declined by 6%, compared to 2000, due to devaluations
     of foreign  currencies  and the decline in United  Kingdom fire  protection
     services.  Six  month  2001  revenues  in  Asia-Pacific  increased  by 12%,
     compared to 2000, due to overall increases in product sales.

     Overall,  technical services operating income decreased by $0.8 million, or
     39%, for the three months ended June 30, 2001,  and $0.4  million,  or 13%,
     for the six months  ended June 30,  2001,  when  compared  to the same 2000
     periods,  due to  declines  in  operating  income in the United  States and
     Asia-Pacific,  partially offset by increases in Europe.  The decline in the
     United  States is primarily the result of the  completion  of  lower-margin
     turnaround  services in the second  quarter,  when  compared  to 2000.  The
     decline in Asia-Pacific is the result of declines in leaksealing  services,
     partially offset by increases in product sales. In Europe, decreases due to
     devaluations  of  foreign  currencies  were more than  offset by  favorable
     adjustments to pension costs.

<PAGE>
     Information Technology Services

     The information  technology  services group provides  knowledge  management
     services to the  commercial  sector  (financial,  insurance and  healthcare
     industries)  and to the  government  sector  (federal,  state,  county  and
     local). The group provides  customers with design and deployment  solutions
     to better leverage their people, processes and technology systems. Services
     are tailored to the specific  needs of the customers  and include  hardware
     integration,  third-party  vendor  software  integration,  custom  software
     development and implementation, hardware and software maintenance, employee
     training and on-going customer service.

<TABLE>
<CAPTION>
                                                     Three Months Ended                   Six Months Ended
                                                            June 30,                           June 30,
                                                   ---------------------------      ------------------------------
                                                      2001             2000             2001            2000
                                                   -----------     -----------      -------------   --------------
                                                                          (in thousands)

<S>                                                <C>             <C>              <C>             <C>
     Revenues                                      $    14,619     $     9,029      $      25,950   $       17,364
                                                   ===========     ===========      =============   ==============
     Operating income                              $     1,095     $     1,140      $       2,466   $        2,252
                                                   ===========     ===========      =============   ==============
     Capital expenditures,
         excluding acquisitions                    $       236     $        77      $         295   $          313
                                                   ===========     ===========      =============   ==============
</TABLE>


     In November 2000, the Company, through a wholly-owned subsidiary,  acquired
     Double Eagle  Communications  and Cabling,  Inc. ("Double  Eagle").  Double
     Eagle is a full  service  provider  of voice and data  cabling  and network
     support services.

     For the three and six months  ended June 30,  2001,  revenues  increased by
     $5.6 million, or 62%, and $8.6 million, or 49%, respectively, when compared
     to the same 2000 periods, due to increases in service revenues, largely due
     to the Double Eagle acquisition, and increases in equipment sales. Revenues
     from  equipment  sales,  furnished  at the request of  selected  customers,
     increased in the first half quarter of 2001,  when compared to 2000, due to
     normal  fluctuations in customer needs. For the three months ended June 30,
     2001,  operating income decreased slightly,  when compared to the same 2000
     period, due to increases in administrative  costs which offset increases in
     service  operating  results from the Double Eagle acquisition and increases
     in  equipment  sales.  For the six months  ended June 30,  2001,  operating
     income  increased by $0.2 million,  or 10%, when compared to 2000, due also
     to the Double Eagle acquisition and increases in professional  services, as
     well as increases in equipment sales.


     Income Taxes

     Income taxes for the three and six months  ended June 30,  2001,  include a
     $0.6 million  benefit related to favorable  developments  pertaining to the
     resolution of certain federal income tax matters.


     Discontinued Operations - Businesses to be Distributed to Common
     Shareholders

     The pipeline and  terminaling  segment  includes the operations of KPP. KPP
     provides  transportation  services of refined petroleum  products through a
     pipeline system that extends  throughout the Midwestern states and provides
     terminaling  and  storage  services  for  petroleum   products,   specialty
     chemicals and other liquids.  Prior to June 30, 2001, the Company operated,
     managed and  controlled  the pipeline  and  terminaling  operations  of KPP
     through an effective 2% general partner  interest and a 25% limited partner
     interest in KPP. The products marketing business segment provides wholesale
     motor fuel marketing services throughout the Great Lakes and Rocky Mountain
     regions.
<PAGE>
<TABLE>
<CAPTION>
                                                     Three Months Ended                    Six Months Ended
                                                            June 30,                           June 30,
                                                   ---------------------------      -------------------------------
                                                      2001             2000             2001               2000
                                                   -----------     -----------      -----------         -----------
                                                                           (in thousands)
<S>                                                <C>             <C>              <C>                 <C>
       Revenues:
         Pipeline and terminaling services         $    52,952     $    38,438      $   101,021         $    75,118
         Product marketing services                     98,879          97,097          187,231             177,486
                                                   -----------     -----------      -----------         -----------
                                                   $   151,831     $   135,535      $   288,252         $   252,604
                                                   ===========     ===========      ===========         ===========
       Operating income:
         Pipeline and terminaling services         $    21,602     $    14,930      $    39,896         $    27,830
         Product marketing services                        511           1,680             (264)              2,639
         Distribution expenses                          (1,529)            -             (1,779)               -
                                                   -----------     -----------      -----------         -----------
                                                   $    20,584     $    16,610      $    37,853         $    30,469
                                                   ===========     ===========      ===========         ===========
</TABLE>

     On January 3, 2001, KPP, through a wholly-owned subsidiary,  acquired Shore
     Terminals  LLC ("Shore") for $107 million in cash and 1,975,090 KPP limited
     partnership units (valued at $56.5 million on the date of agreement and its
     announcement).  Financing  for the cash portion of the  purchase  price was
     supplied under a new KPP $275 million unsecured  revolving credit agreement
     with a group of banks.  See "Liquidity and Capital  Resources".  Shore owns
     seven terminals,  located in four states,  with a total tankage capacity of
     7.8 million barrels.  All of the terminals  handle petroleum  products and,
     with the exception of one, have deep water access.

     For the three  months  ended June 30,  2001,  revenues for the Pipeline and
     Terminaling  business increased by $14.5 million when compared to 2000, due
     to a $13.2  million  increase in revenues in the  terminaling  business and
     $1.3 million increase in pipeline  revenues.  For the six months ended June
     30, 2001,  Pipeline and  Terminaling  revenues  increased by $25.9 million,
     compared to 2000, due to a $23.7 million  increase in terminaling  revenues
     and a $2.2  million  increase in  pipeline  revenues.  Terminaling  revenue
     increases are a result of the Shore  acquisition  and overall  increases in
     utilization  at  existing  locations,  the result of  relatively  favorable
     market conditions. Average annual tankage utilized for the six months ended
     June 30, 2001  increased  to 30.1  million  barrels,  up from 20.8  million
     barrels for the comparable prior year period. For the six months ended June
     30,  2001,  average  annualized  revenues  per barrel of  tankage  utilized
     increased  to $4.42 per  barrel,  compared to $4.10 per barrel for the same
     prior year period,  also the result of favorable  market  conditions,  when
     compared to the first six months of 2000.  Pipeline  revenue  increases for
     the three and six months ended June 30, 2001,  compared to 2000, are due to
     increases in barrel miles  shipped and  increases in  terminaling  charges.
     Pipeline  barrel miles shipped  totaled 4.8 billion and 4.5 billion for the
     three month  periods  ended June 30, 2001 and 2000,  respectively,  and 8.9
     billion and 8.4  billion  for the six months  ended June 30, 2001 and 2000,
     respectively.

     The increase in Pipeline and Terminaling  operating  income of $6.7 million
     and $12.1  million,  for the  three and six  months  ended  June 30,  2001,
     respectively,  when  compared to 2000,  is due  primarily to an increase in
     Terminaling  operating  income,  a result of the Shore  acquisition and the
     increase in utilization at existing locations.

     The  interest of outside  non-controlling  partners in KPP's net income was
     $25.4  million and $15.3 million for the six months ended June 30, 2001 and
     2000,  respectively.  Distributions  paid  to the  outside  non-controlling
     unitholders of KPP aggregated approximately $21.3 million and $18.5 million
     for the six month periods ended June 30, 2001 and 2000, respectively.

     Capital  expenditures  of $6.2  million and $2.9  million for the six month
     periods  ended June 30,  2001 and 2000 relate to the  maintenance  of KPP's
     existing operations.

     For the three and six month periods  ended June 30, 2001,  revenues for the
     Product  Marketing  business  increased  by $1.8  million,  or 2%, and $9.7
     million, or 5%,  respectively,  when compared to the same 2000 periods, due
     to an increase in sales  price,  partially  offset by a decrease in volumes
     sold.  Total gallons sold totalled 94 million and 102 million for the three
     month periods ended June 30, 2001 and 2000,  respectively,  and 191 million
     and 197  million  for  the  six  months  ended  June  30,  2001  and  2000,
     respectively.  For the six months  ended June 30, 2001,  the average  price
     realized per gallon of product sold  increased to $0.98,  compared to $0.90
     for the same period in 2000.  Product marketing  operating income decreased
     by $1.2 million for the three months ended June 30, 2001,  and $2.9 million
     for the six months ended June 30, 2001,  compared to the same 2000 periods,
     due to  unusually  sharp  fluctuations  in prices,  which more than  offset
     normal operating margins in the first half of 2001.


     Liquidity and Capital Resources

     During  the  first  six  months  of 2001,  the  Company's  working  capital
     requirements  for operations and capital  expenditures  were funded through
     the use of existing cash and internally generated funds.

     Cash provided by (used in) operating activities from continuing  operations
     was ($.7)  million and $2.4  million for the six months ended June 31, 2001
     and 2000,  respectively.  Capital  expenditures from continuing  operations
     were $2.0 million for the six months ended June 30, 2001,  compared to $1.3
     million in 2000. Routine maintenance capital expenditures in 2001 have been
     funded by internally generated funds.

     On November 27, 2000, the Board of Directors of the Company  authorized the
     distribution of its Pipeline,  Terminaling and Product Marketing businesses
     (the  "Distribution")  to its  stockholders  in the  form of a new  limited
     liability  company,  Kaneb  Services  LLC ("KSL").  On June 29,  2001,  the
     Distribution was completed,  with each shareholder of the Company receiving
     one common share of KSL for each three shares of the Company's common stock
     held on June 20, 2001, the record date for the  Distribution,  resulting in
     the distribution of 10.85 million KSL common shares.

     Pursuant to the  Distribution,  the Company  entered into an agreement (the
     "Distribution  Agreement") with KSL,  whereby,  KSL will pay the Company an
     amount equal to the expenses incurred by the Company in connection with the
     Distribution.  These expenses include  approximately  $6.1 million in costs
     incurred  in  connection  with the  redemption  of the  Company's  Series A
     Preferred Stock and  approximately  $2.0 million in legal and  professional
     and other  expenses  incurred  in  connection  with the  Distribution.  The
     distribution  of common  shares  is  taxable  to the  Company,  which  will
     recognize  taxable income to the extent of the excess of the value of KSL's
     common shares  distributed  over the tax basis of KSL's assets in the hands
     of the Company.  The Company will use all of its  available  net  operating
     loss  carryforwards to reduce that taxable income,  but the total amount of
     taxable income is expected to exceed such net operating loss  carryfowards,
     and the  Distribution  Agreement  obligates KSL to pay the Company  amounts
     calculated  based on whatever  tax is due on the net amount of income.  The
     Company  cannot  currently  determine  exactly what this amount will be and
     what  the tax  will  be,  but  the  Company  estimates  that  the tax  will
     approximate $13.6 million, after utilization of all available net operating
     loss  carryforwards  and $4.4 million of  alternative  minimum tax credits.
     Included in Receivable  from KSL at June 30, 2001 is $21.7 million for such
     costs and expenses.

     On March 30, 2001, the Company's  Series A Preferred Stock was redeemed for
     cash at the stated  redemption price of $10.67 per share,  plus accrued and
     unpaid  dividends,  for a total cost of  approximately  $6.1  million.  The
     redemption  cost  includes a $0.4  million  redemption  premium,  which was
     recognized   as  preferred   dividends  in  the  first   quarter  of  2001.
     Additionally,  on  June  12,  2001,  the  Company  exchanged,  in  non-cash
     transactions, 1,356,777 shares of the Company's common stock for all Series
     C Preferred and Series F Preferred shares outstanding.

     The  Distribution  Agreement also requires KSL to pay the Company an amount
     calculated  based on any income tax  liability  of the Company  that (i) is
     attributable  to  increases  in income tax from past years  arising  out of
     adjustments  required by Federal and state tax  authorities,  to the extent
     that  such  increases  are  properly  allocable,  in the  judgement  of the
     Company, to the businesses that became part of KSL, or (ii) is attributable
     to the  distribution  of KSL's common  shares and the  operations  of KSL's
     businesses in the current year and the preceding  years. In the event of an
     examination of the Company by Federal or state tax authorities, the Company
     will have unfettered control over the examination,  administrative  appeal,
     settlement or litigation that may be involved, notwithstanding that KSL has
     agreed to pay any additional tax.

     On June 28,  2001,  the Company  entered into a credit  agreement  with KSL
     which  provides the Company with a $25 million  revolving  credit  facility
     through June 2008. The credit facility, which is unsecured,  bears interest
     at variable rates, has a variable  commitment fee on unutilized amounts and
     contains certain operational covenants.
     No amounts were outstanding under the credit agreement at June 30, 2001.

     The Company has entered into an agreement with KSL whereby the Company will
     provide  certain  administrative  services,  including  treasury  and  cash
     management,  insurance  and risk  management,  legal,  investor  relations,
     facilities,  human resources,  accounting and information  services to KSL.
     The administrative services agreement,  which expires on December 31, 2005,
     provides  that  KSL pay the  Company  a  monthly  fee of  $25,000  for such
     services and reimburse the Company for any out-of-pocket  expenses incurred
     by the Company for the sole benefit of KSL.

     Additional information related to the sources and uses of cash is presented
     in the financial statements included in this report.


     Recent Accounting Pronouncements

     In July of 2001,  the  Financial  Accounting  Standards  Board (the "FASB")
     issued  Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  141
     "Business  Combinations",  which  requires  that all business  combinations
     initiated  after June 30, 2001 be accounted  under the  purchase  method of
     accounting.

     Additionally,  in July of 2001,  the FASB issued SFAS No. 142 "Goodwill and
     Other  Intangible  Assets",  which  requires  that  goodwill  no  longer be
     amortized to earnings, but instead be reviewed for impairment.  The Company
     is currently assessing the impact of SFAS No. 142, which must be adopted in
     the first quarter of 2002.

     Also,  the FASB has  voted to issue  SFAS No.  143  "Accounting  for  Asset
     Retirement   Obligations",   which   establishes   requirements   for   the
     removal-type  costs  associated  with  asset  retirements.  The  Company is
     currently  assessing  the impact of SFAS No. 143,  which must be adopted in
     the first quarter of 2003.




<PAGE>
XANSER CORPORATION AND SUBSIDIARIES


--------------------------------------------------------------------------------


                           PART II - Other Information

Item 6.   Exhibits and Reports on Form 8-K

         (a)       Exhibits.

               10.1 Distribution  Agreement by and between the Company and Kaneb
                    Services LLC, dated June 28, 2001.
               10.2 Administrative Services Agreement by and between the Company
                    and Kaneb Services LLC, dated June 28, 2001.
               10.3 Employee  Benefits  Agreement by and between the Company and
                    Kaneb Services LLC, dated June 28, 2001.
               10.4 Credit  Agreement  by and  between  the  Company  and  Kaneb
                    Services LLC, dated June 28, 2001.
               10.5 Kaneb  Services,  Inc. 1994 Stock Incentive Plan, as amended
                    and restated.
               10.6 Kaneb Services, Inc. Deferred Stock Unit Plan, as amended.
               10.7 Kaneb Services,  Inc. Non-Employee  Directors Deferred Stock
                    Unit Plan, as amended.
               10.8 Kaneb Services, Inc. 1996 Supplemental Deferred Compensation
                    Plan, as amended.

         (b)      Reports on Form 8-K

                  Current  Report on Form 8-K regarding the pro forma  financial
                  statements  for  the  Company's  distribution  of  KSL  to the
                  holders of the Company's common stock, filed July 16, 2001.


                                    Signature


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned.



                                       XANSER CORPORATION
                                       (Registrant)


Date:  August 14, 2001                          //s//
                                        Michael R. Bakke
                                        Controller


<PAGE>

                               Xanser Corporation
                                  Exhibit Index


Exh. No.              Description

   10.1         Distribution Agreement by and between the Company and Kaneb
                Services, Inc., dated June 28, 2001.

   10.2         Administrative  Services Agreement by and between the Company
                and Kaneb Services,  Inc., dated June 28, 2001.

   10.3         Employee  Benefits  Agreement by and between the Company and
                Kaneb Services,  Inc., dated June 28, 2001.

   10.4         Credit Agreement by and between the Company and Kaneb Services,
                Inc., dated June 28, 2001.

   10.5         Kaneb Services, Inc. 1994 Stock Incentive Plan, as amended and
                restated.

   10.6         Kaneb Services, Inc. Deferred Stock Unit Plan, as amended.

   10.7         Kaneb Services, Inc. Non-Employee Directors Deferred Stock Unit
                Plan, as amended.

   10.8         Kaneb Services, Inc. 1996 Supplemental Deferred Compensation
                Plan, as amended.