PROMISSORY NOTE
                                 ---------------


$2,000,000.00                   Houston, Texas           Effective July 31, 2009

For value received, LAZARUS LOUISIANA REFINERY II, LLC ("Borrower"), promises to
pay to the order of BLUE DOLPHIN ENERGY COMPANY ("Lender") at 801 Travis Street,
Suite 2100, Houston,  Texas 77002, or at such other address as Lender shall from
time to time  specify in writing,  the  principal  sum of TWO MILLION AND NO/100
DOLLARS  ($2,000,000.00),  in legal and  lawful  money of the  United  States of
America,  on the outstanding  principal from the date advanced until paid at the
rate set out below.

1.       Payment  Terms.  This Note is due and  payable as  follows:  The unpaid
principal balance of this Note shall all be due and payable in full on or before
January 31, 2010.

2.       Late  Charge.  Upon  maturity  of  this  Note,  if any  portion  of the
outstanding principal balance (plus all accrued but unpaid interest) is not paid
within 10 days of the  maturity  date,  Borrower  will be charged a  delinquency
charge of 5% of the sum of the outstanding  principal  balance (plus all accrued
but unpaid  interest).  Borrower  agrees  with Lender that the charges set forth
herein  are  reasonable  compensation  to Lender for the  handling  of such late
payments. All past due installments of principal shall bear interest at the rate
of eighteen  percent (18%) per annum,  with no  compounding.  All payments shall
first be applied to accrued  interest,  if any,  with the balance of the payment
reducing the unpaid principal balance hereof.

3.       Prepayment. Borrower shall have the right to prepay, prior to maturity,
all or any part of the principal of this Note without penalty.  All payments and
prepayments  of principal or interest on this Note shall be made in lawful money
of the United States of America in immediately  available  funds, at the address
of Lender indicated herein, or such other place as the holder of this Note shall
designate in writing to Borrower

4.       Default.  The occurrence or existence of any of the following events or
conditions shall constitute an "Event of Default":

                  (a) the  failure  of the  Borrower  to pay when due any of the
principal or interest payable pursuant to this Note;  provided however, an Event
of Default shall not arise  hereunder  until the  expiration of thirty (30) days
after the maturity  date if prior to the  maturity  date,  Borrower  provides to
Lender a written  loan  commitment  from a third  party  lender  evidencing  its
commitment to loan money to Borrower  within thirty (30) days after the maturity
date;

                  (b)  the  assignment  by  the  Borrower  for  the  benefit  of
creditors or the application by the Borrower to any court for the appointment of
a trustee  or  receiver  for any of the  assets of the  Borrower  that have been
pledged  to  secure  the  repayment  of  the  Note  or the  commencement  of any
proceedings  relating  to the  Borrower  under any  bankruptcy,  reorganization,
arrangement,  readjustment of debts or other insolvency law of any jurisdiction,
or the entering of an order  appointing such trustee or receiver or adjudicating
the  Borrower  bankrupt  or  insolvent  or  approving  the  petition in any such
proceedings;




<PAGE>

                  (c) the  breach or  violation  by the  Borrower  of any of its
agreements  or  covenants  contained  in this Note,  other  than the  payment of
principal  or  interest,  or in any other  document  or  agreement  between  the
Borrower  and the Lender  concerning  the  indebtedness  evidenced by this Note,
including,  but not limited to, the Mortgage and Security Agreement described in
Section 13 of this Note.

                  (d) any prepayment of (i) the  indebtedness of the Borrower to
Notre Dame Investors, Inc. ("Notre Dame") existing as of the date hereof or (ii)
the future indebtedness of the Borrower to Rio Vista Energy Partners, L.P. ("Rio
Vista")  or any of its  affiliates,  which  is made out of the  proceeds  of any
future  loan  received  by the  Borrower  or its  affiliates  and is not made in
accordance with the following order of repayment on a proportionate  basis based
on relative principal  balances:  (i) first to Notre Dame and (ii) second to the
Lender and Rio Vista or its applicable affiliate.

If an event of default shall occur,  the holder hereof may, at the option of the
holder,  without  demand,  notice or  presentment,  declare  the  entire  unpaid
principal  balance of this  Note,  together  with all  accrued  unpaid  interest
thereon,  to be due and  payable  immediately.  Upon any such  declaration,  the
principal  of this  Note and any  such  accrued  interest  shall  become  and be
immediately  due and payable,  and the holder  hereof may  thereupon  proceed to
protect and enforce the obligations of the Borrower  hereunder either by suit in
equity or by  action of law or by other  appropriate  proceedings,  whether  for
specific  performance  (to the  extent  permitted  by law)  of any  covenant  or
agreement  contained  herein  or in aid of the  exercise  of any  power  granted
herein,  or proceed to enforce  the payment of this Note or to enforce any other
legal or equitable  right of the holder hereof.  In the event default is made in
the prompt payment of this Note when due or declared due, and the same is placed
in the hands of an attorney for  collection,  or suit is brought on same, or the
same is collected  through  probate,  bankruptcy or other judicial  proceedings,
then the Borrower agrees and promises to pay all costs of collection,  including
reasonable attorney's fees.

5.       Joint and Several  Liability;  Waiver.  Each borrower,  maker,  signer,
surety  and  endorser  hereof,  as  well  as all  heirs,  successors  and  legal
representatives  of said parties,  shall be directly and primarily,  jointly and
severally,  liable for the  payment of all  indebtedness  hereunder.  Lender may
release or modify the  obligations of any of the foregoing  persons or entities,
or  guarantors  hereof,  in  connection  with this loan  without  affecting  the
obligations of the others.  Except as  specifically  provided  herein,  all such
persons or entities  expressly waive presentment and demand for payment,  notice
of default,  notice of intent to accelerate maturity,  notice of acceleration of
maturity,  protest, notice of protest, notice of dishonor, and all other notices
and demands for which  waiver is not  prohibited  by law,  and  diligence in the
collection hereof; and agree to all renewals, extensions,  indulgences,  partial
payments,   releases  or  exchanges  of  collateral,  or  taking  of  additional
collateral,  with or  without  notice,  before  or after  maturity.  No delay or
omission of Lender in exercising any right  hereunder  shall be a waiver of such
right or any other right under this Note.

6.       No Usury  Intended;  Usury Savings  Clause.  In no event shall interest
contracted  for,  charged  or  received  hereunder,  plus any other  charges  in
connection  herewith  which  constitute  interest,  exceed the maximum  interest
permitted  by  applicable  law.  The amounts of such  interest or other  charges
previously paid to the holder of the Note in excess of the amounts  permitted by
applicable  law  shall  be  applied  by the  holder  of the Note to  reduce  the
principal of the  indebtedness  evidenced by the Note,  or, at the option of the
holder of the Note,  be refunded.  To the extent  permitted by  applicable  law,
determination of the legal maximum amount of interest shall at all times be made
by  amortizing,  prorating,  allocating  and spreading in equal parts during the

                            Promissory Note - Page 2

<PAGE>

period of the full stated term of the loan and indebtedness, all interest at any
time contracted for,  charged or received from the Borrower hereof in connection
with the loan and  indebtedness  evidenced  hereby,  so that the actual  rate of
interest on account of such indebtedness is uniform throughout the term hereof.

7.       Texas  Finance Code. In no event shall Chapter 346 of the Texas Finance
Code (which regulates  certain  revolving loan accounts and revolving  tri-party
accounts)  apply to this  Note.  To the  extent  that  Chapter  303 of the Texas
Finance  Code and/or  Articles  1D.002 and 1D.003 of the Texas  Credit Title are
applicable to this Note, the "weekly  ceiling"  specified in such article is the
applicable  ceiling;  provided  that,  if any  applicable  law  permits  greater
interest, the law permitting the greatest interest shall apply.

8.       Governing Law, Venue. This Note is being executed and delivered, and is
intended to be  performed  in the State of Texas.  Except to the extent that the
laws of the United States may apply to the terms hereof, the substantive laws of
the State of Texas shall  govern the  validity,  construction,  enforcement  and
interpretation  of this Note. In the event of a dispute  involving  this Note or
any  other  instruments  executed  in  connection   herewith,   the  undersigned
irrevocably  agrees  that  venue  for such  dispute  shall  lie in any  court of
competent jurisdiction in Harris County, Texas.

9.       Captions.  The captions in this Note are inserted for convenience  only
and are not to be used to limit the terms herein.

10.      Notices.  All  notices,  requests,  demands  and  other  communications
required or permitted  hereunder shall be in writing,  and shall be deemed to be
given or delivered when actually received by the party to whom directed,  or, if
earlier and regardless of whether actually received, upon deposit in a regularly
maintained  receptacle  for the United  States mail,  registered  or  certified,
postage  fully  prepaid,  addressed to the party to whom directed at its address
set forth  below or at such  other  address  as such  party may have  previously
specified by notice actually received by the other party:

         If to Borrower:            Lazarus Louisiana Refinery II, LLC
                                    801 Travis Street, Suite 2100
                                    Houston, Texas  77002

         If to Lender:              Blue Dolphin Energy Company
                                    801 Travis Street, Suite 2100
                                    Houston, Texas 77002

11.      No Shop.  Until this Note has been paid in full,  Borrower  agrees that
neither it nor any of its affiliates or members will enter into any  discussions
or  negotiations,  or  solicit,  encourage  or make any offer,  relating  to the
acquisition of any equity  interest or any material assets of Borrower or any of
its affiliates  (other than with respect to the Longview,  Texas  facility,  the
Church Point,  Louisiana facility,  and any transaction with Rio Vista or any of
its affiliates  involving the Regional facility),  or provide any information to
any party to facilitate or otherwise in connection with the same.  Lender agrees
that neither it nor any of its  affiliates  will enter into any  discussions  or
negotiations,  or  solicit,  encourage  or  make  any  offer,  relating  to  the
acquisition  of any equity  interest or any material  assets of Lender or any of
its  affiliates,  or  provide  any  information  to any party to  facilitate  or
otherwise  in  connection  with  the  same,  until  the  first  to  occur of the
following:  (i) an Event of Default pursuant to this Note or (ii) the failure of
the Bridge Loan Closing to occur on or before July 15, 2009,  regardless  of the

                            Promissory Note - Page 3

<PAGE>

reason for the failure to close a transaction. Nothing set forth in this Section
shall be construed to mean that the parties have agreed to close any transaction
other than the loan  evidenced by this Note,  or agreed to agree with respect to
any such other transaction.

12.      Original Note. Lazarus Energy Holdings, LLC has previously executed and
delivered  to Lender a  Promissory  Note  dated June 2,  2009,  in the  original
principal  amount of $100,000  (the  "Original  Note").  This Note  replaces the
Original Note with respect to the  indebtedness  represented  thereby,  and also
evidences the obligation to repay the loan of $200,000 made by the Lender to the
Borrower on July 1, 2009,  and the  additional  loan of  $1,700,000  made by the
Lender to the Borrower on the date hereof.  This Note shall not be  considered a
novation or discharge of the Original Note.

13.      Mortgage and Security Agreement.  The indebtedness  represented by this
Note  is  secured  pursuant  to  (i) a  Mortgage  dated  the  date  hereof  (the
"Mortgage")  granting  to  Lender a prior  and  perfected  first  lien  security
interest to secure the  payment of this Note  against  the  approximately  3.673
acres of real property located in Jefferson Davis Parish, Louisiana owned by the
Borrower  ("Disposal  Well Property") and a second lien to secure the payment of
this  Note  against  the  approximately  38 acres of real  property  located  in
Jefferson Davis Parish,  Louisiana owned by the Borrower ("Refinery  Property"),
and (ii) a Security  Agreement dated the date hereof (the "Security  Agreement")
granting to Lender a prior and perfected first lien security  interest to secure
the payment of this Note against the tangible personal property  associated with
the  Disposal  Well  Property  and owned by the  Borrower,  and a second lien to
secure  the  payment  of  this  Note  against  the  tangible  personal  property
associated with the Refinery Property and owned by the Borrower. As set forth in
the Mortgage and Security  Agreement  and further  acknowledged  herein,  in the
event that the  Borrower  grants to Rio Vista or any of its  affiliates a future
security  interest in the Refinery  Property and  associated  tangible  personal
property owned by the Borrower ("Rio Vista Security Interest"),  as security for
a loan not in excess of the total aggregate amount of  $4,000,000.00  (including
but not limited to all principal advances, interest, default interest, attorneys
fees,  costs,  collection  costs  and  expenses),  then the Rio  Vista  Security
Interest  shall be treated  pari passu  with the  Lender's  rights in and to the
Refinery  Property and associated  personal  property owned by the Borrower,  as
granted in the Mortgage and Security Agreement.


                            Promissory Note - Page 4

<PAGE>




                                        BORROWER:


                                        By: LAZARUS LOUISIANA REFINERY II, LLC


                                        By:____________________________________
                                                     Jonathan P. Carroll
                                                     Director / Manager





THE STATE OF TEXAS   ss.
                     ss.
COUNTY OF HARRIS     ss.

         BEFORE ME, the undersigned  authority,  on this day personally appeared
JONATHAN P. CARROLL,  known to me to be the person(s) whose names are subscribed
to the foregoing instrument,  and acknowledged to me that they executed the same
for the purposes and consideration therein stated.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of July, 2009.


         [SEAL]


                                                 Notary Public in and for the
                                                 State of Texas


                                                 Printed Name of Notary

                                                 My Commission Expires:




E:\BUSLAW\Casey\BlueDolphin.General\Lazarus\$300,000.Note.v3.doc


                            Promissory Note - Page 5
<PAGE>