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Executives

Curt Anastasio – Chief Executive Officer, President and Director

Danny Oliver – Senior Vice President, Marketing and Business Development

Paul Brattlof – Senior Vice President, Trading and Supply

Kyle Oppliger – Vice President and General Manager, Gulf Region Operations

NuStar Energy L.P. (NS) Analyst Day Conference Call September 21, 2011 4:30 PM ET

Curt Anastasio

I’ll just kick it off by saying thank you all for being here. I think you’re really in for a treat. This is one of our, the focus of our operations right now are strategic growth and where our capital is going in the Storage segment. So, glad to have you all here in New Orleans. Let me say before I forget, because I’d probably forget later.

When this presentation is over and the Q&A is over, a lot of time to stick around for questions as long as you like, but we want to meet in the lobby around 6:15, and we’ve got (inaudible) to take you all over to dinner at Emerald. So 6:15 is when we’ll meet in the lobby, in case we forget that later.

All right, so why don’t we get rolling here. Jose at the screen isn’t coordinated with the laptop yet. Have you got that? That looks better. Okay.

Forward-looking statements, I’m not going to read all that, the risk of going to jail. Okay. A little bit of what we’re going to do here today. We’re going to spend about the next I don’t know may be 80 minutes, 90 minutes or so. I’m going to give you a little bit of an overview on NuStar particular emphasize on what we’re really all here to focus on, which is St. James and the growth of St. James.

And then, Danny Oliver our Senior VP on the Marketing Development side is going to get up and talk to you about Storage segment and our pipeline transportation. Paul Brattlof, on the Asphalt & Fuels Marketing Overview, and then Kyle Oppliger, who is our VP and he is our Gulf Coast Regional Manager. So he is the senior guy here in this region that we’re sitting in. He is going to get up and really focus on the start attraction of this meeting, which is St. James and tee up the visit that we’re all going to do tomorrow and the tour we’ll do tomorrow.

And then we’ll finish with closing remarks and Q&A and I’ve got it across the panel here. I’ve got Steve Blank, our CFO; Danny, I’ve mentioned; Paul, I’ve mentioned; Rick Bluntzer, who runs our operations, so I don’t know who is running them right now, but he is there, in a conference here and all we got at the end we got Chris Russell, the IR guy and you could believe everything he says. So you want to talk to him the most.

Okay, let me give you that brief overview and then turn it over to the other guys. Just a June year-to-date we had a really strong first half of this year through June then of course we haven’t done our third quarter earnings call as you all know, so I’m talking about through June. Through June we spend about a $136 million on internal growth projects and most of that spending relates to projects that begin generating EBITDA in the last half of this year, but they are really of course 2012 and later projects for the most part.

We finished six projects with a total spend of $28 million and the projected EBITDA multiples on those projects is four times to the best to about six times multiple for the worst projects. So these are very attractive projects.

We spent, this year, about another $100 million on acquisitions that will yield an annual EBITDA of around $20 million a year. So again those are attractive acquisition multiples. We earned $253 million in EBITDA and we had a record June in the ten and a half year history of NuStar as a public company was our strongest June ever and so that of course obviously contributed to the strong first half.

We increased NuStar and NuStar Holdings distributions in the second quarter, the NuStar distributions is at 3% higher than the second quarter previous year and NuStar Holdings was 8% higher than the second quarter of 2010.

We continue to make an outstanding safety and environmental record. We have from everything I’ve been able to find we have the best safety and environmental record in our industry hands down and that’s a tough priority for us. And in that regard as it relates to safety we obtained VPP Star Site status that’s OSHA’s Occupational Safety and Health Administration highest designation, higher honor for safety that a company can obtain. We’ve gotten that in four locations so far, and we’re going to have it in the entire company in every region and every location I think we’ll probably be the only midstream company that can say that.

2011 EBITDA expected to be I’d say comparable to 2010, we have continued weak economic conditions that are adversely affecting our asphalt operations especially in second half. They had a good first half and much weaker second half. We’ve been saying this beginning of the year that we’d have lower pipeline throughputs this year because our pipeline transportation segment throughputs would generate less income this year than last year although, we’ve actually guided up recently on that and not as negative as we thought it was going to be.

While our distribution growth at NuStar and NuStar Holdings is slower than it was, the first seven or eight years of our existence before the economic collapse of 2008. We do have a lot of good internal growth projects and that’s one reason we brought you here to look at St. James, those projects are going to lead us to higher distribution growth levels over the next several years. So here you see the CAGR since we started April of ’01 of 6.6% for NuStar and about 10% for NuStar Holdings since we started it in 2006.

Some of the, what’s happened over the last couple of years its kind of interesting when you look at it from a capital spending standpoint, about NuStar, and the internal growth projects. When we had the collapse of the Western world in the fall of 2008 and the end of Lehman Brothers and all of that, we’ve really slashed our capital spending including our growth capital. And in 2009, you see the bar graph there $164 million, we very gradually were ramping it up during 2009 as we saw we had greater visibility into the ability of NuStar to continue to access the capital markets and some measure of stability in the financial system. So you see more capital $262 million in 2010, and then we really kicked it up in 2011. Our forecast for 2011 is $435 million of total capital everything considered acquisitions, internal growth and the rest of the items that are listed here.

So we’re back to a more normalized rate. So we’ve had a little bit of a lag in terms of projects returning cash flow to us in the last couple of years, because we slashed our capital investment. Now we are kicking it up, and we look forward to the return in those projects coming in over the next several years.

Safety and environmental I touched on continues to exceed industry benchmarks. Our 2011 total recordable injury rate is 0.27 and we’ve had zero lost-time accidents or injuries. And when you look at whether it’s refining or pipelines or terminals or any aspect of the midstream or downstream sector, we far outperformed anybody operating in this business on safety and environmental. And that’s why we’ve win all these industry and government awards some of which are depicted with drawings of trophies and plaques there on the right hand side of the slide.

So we want to talk about next is key growth area, one of the areas of focus right now. We want to continued development of our strategically located storage terminals. And that what does that mean for us in the current scenario, it’s primarily Texas City, St. James, St. Eustatius in the Caribbean and then in New York Harbor. And you’ll hear more about that when Danny Oliver gets up and talks to you about those development projects and obviously the star attraction is St. James on this, for this meeting.

Eagle Ford and other oil shale plays, that’s going to turn around the hockey stick on our pipeline transportation business. We had a little bit of a low this year in pipeline transportation is about to really kick up because of all these oil shale projects filling up, idle capacity we have in our existing pipelines, which means we have a pipe in the ground, that right now is already cash flowing with oil shale. And we got more projects to come.

So we have really been the first mover, I mean we are first guys moving this oil in our pipelines, because we had assets on the ground already. Expansion of our bunker marketing business, that’s been a consistently profitable business for us and we have been gradually expanding it as each year goes by.

Fuel oil marketing, I mentioned in the first bullet that Texas City is one of our strategic terminal. We invested a lot of money in previous couple of years to expand Texas City and in particular to expand the opportunity to bring blend and market fuel oil and that’s really kicked up the Fuel oil marketing profitability. When you see that segment’s result, you will see them making a lot more money and a lot of that is the by-product of our investment in Texas City.

And then crude oil trading in certain areas and one of those areas the primary one is St. James, where you are going to visit tomorrow, crude oil trading’s profit is sharply up because of their ability to use that location for that purpose. Now because of the continued weakness in the economy and asphalt, we’ve had look at feedstock cost and logistics optimization at our asphalt and fuels refineries. With the weak demand, as high crude cost. Basically we are all self help initiatives I put them in that category. And Paul Brattlof is going to talk about those, when comes up.

And then acquisition opportunities and strategic domestic and international locations, obviously we did a little bit this year at very attractive multiples, but it’s been small, as I told we only did about $100 million of acquisitions at a five multiple, but you know some of the big deals from our standpoint or at least my standpoint it just on way to pricing, people paying 14, 15, 17 time multiples to buy big assets where we can – we can build big assets for four to six times – four to eight times multiples at diverse end of that range.

So it’s been much more attractive to spend capital internally than to go after some of those bigger deals, but there are still opportunities out there and we’ve done a couple of smallest ones this year.

So with that I’m going to turn it over to Danny who is going to start off with the Historic segment overview.

Danny Oliver

Thank you, Curt. I’m going to start off with our Storage segment overview the larger of our two fee-based segments at least today it is. (Multiple Speakers)

Okay I think I can see that good. Okay we will start off with – okay, okay just to start off with just kind of a review of our growth and EBITDA in this segment over the last few years it’s been a very healthy segment in terms of strategic internal growth. You can see how that’s grown there over the years. In 2011, looking into 2011, we expect to see full year of EBITDA from our Mobile Alabama acquisition back in May of last year, and also a full year of our St. Eustatius terminal project that was completed in the fourth quarter of last year. So we’ll see full year benefits in 2011 from both of those.

Also it gives St. James kind of – you’ll hear a lot about that this week but we – the project our Phase 1 project, we do have two phases at St. James began coming into service in July, and it will continue if tanks are completed – continue to come into service throughout the third quarter. So as a result, mostly of those three things we expect our 2011 segment EBITDA to increase 20 to 30 million versus 2010.

I did asked this question a lot about our just contracts in general in this segment, this is kind of an aging of our contracts as you can see about 72% are still multiyear left in the term. Some of those that are greater than five years go all the way out as far as 10 years. We’ve got about 95% of our tankage currently leased out, and we continue to enter into and renew contracts with large creditworthy customers.

And our current customers continue to approach us about supporting new build projects at some of our key locations. So we do continue to look at terminal acquisition opportunities both domestically and internationally although I’ll tell you that in our internal growth plants we can build tanks at four to eight times multiples and you’ve seen some of the recent history in acquisitions, our money much better spent on the internal growth.

So talking about that CapEx a little bit further here is just a bit of history on the CapEx that we’ve spent internal growth CapEx we’ve spent in this segment over the last few years. We’ve mentioned it before in ’09, you can see a little bit of a lag in the CapEx spent here. That was as the economy was in the process of bowing out a bit and recovering from it and the credit markets were in turmoil. We pulled back a bit on the range there, but as you can see we’ve got that machine up and running pretty good here in – since then in 2010 and 2011. And we’re showing some, what we’re seeing out there in 2012 the $120 million, the bottom part of that bar is representative of some projects that are very far along in development they’ve been scoped out their new execution and the red bar, the $220 million are some projects that are in earlier stages of development. And we are evaluating those that I do expect to see a healthy amount of internal growth spending in this segment this year and next.

These, I listed some of the projects that are included in that $120 million here and I will go into those in detail here in the next few slides.

So Phase I of our St. James expansion. We are expecting to complete that fully in the third quarter of 2011. We started some tanks as I mentioned before coming online as early as July. Its 3.2 million barrels of crude oil storage. This is for trading companies, but there is also – there is also a national oil company involved in that and a little bit of tankage for our own crude trading. We do have a Phase 2 that is in earlier stages of development. We expect that to be similar in size and cost of Phase 1 as kept over the cost, Phase 1 was about $130 million on that part of the project.

The Phase 2 should be very similar. It should be mostly crude storage. We do have some interest and some fuel oil storage there, but where the crude differentials where they are, everyone seems to be focused on crude at the moment. We expect that Phase 2 to go into service in late 2012 or early 2013.

In addition to that, we’re in the process of constructing a million barrels of distillates storage at our St. Eustatius terminal, down in the Caribbean that is already leased long-term to a large national oil company. It’s a $50 million project and we expect that to be in service in fourth quarter of 2012.

We’re also currently evaluating and this would be up in kind of the red bar that CapEx, a major expansion at the St. Eustatius terminal. Supporting some of the E&P that you’ve seen going on in the off the coast of Brazil. We've got a lot of interest in some crude oil storage to help move that crude to market.

We also have a project at our Linden – Linden, New Jersey terminal, it's the bulk terminal that we have there is about 4.1 million barrel terminal. It's all Merck deliverable storage, highly sought after storage. Adjacent to that terminal we have a small Truck Rack terminal and we are working a project to convert that terminal to bulk storage.

This project would add 850,000 barrels of storage to that facility it would all be Merck deliverable storage. So that Truck Rack facility would become a 1.2 million barrel bulk facility. We expect that to costs about $60 million and should be on the service in the third quarter of 2013.

Again back to St. James, you probably all recently saw our announcement of executing a deal with EOG for a unit train of that facility. I am sure you all know fairly familiar with EOG, but they are large independent oil and natural gas company with proven reserves here in the states and other countries, but more importantly a first mover in the shale oil development certainly in the Bakken.

This project would we are installing a unit train facility, which is capable of unloading at least 170,000 barrels train per day. So, very similar in size to a pipeline, and also we’re building two new storage tanks to catch that crude is it comes off the rail. We expect the project to be in the service early third quarter, mid year 2012, and our share of those costs to joint thing would be about $30 million.

I won’t spend a lot of time on these, but these were just kind of our some other projects that we had that were less than $10 million didn’t make the earlier list. I think in total they all add up to about $20 million in CapEx, but all supported by long-term commitments from our customers.

Now, I’ll move soon to the Transportation segment, start off the same way with a bit of a review on our EBITDA growth over the last few years. What I would say about the top line transportation segment, this has been a very, very reliable steady segment of business, but pretty quite in terms of internal growth opportunities in the past that is definitely not the case this year, and it will definitely not be the case next year with some of the shale developments and more specifically as it relates to NuStar that Eagle Ford Shale development.

Looking ahead into 2011 for the rest of 2011, we completed earlier this year a pipeline deal to carry Eagle Ford into the Corpus area with Koch Pipeline. That went into service in June of 2011, we have a T&D agreement with them for take a T&D agreement for 30,000 barrels a day. They’ve actually been operating at while between 30 and above 45,000 barrels a day, which is the full capacity of that line. So we’ve been very pleased in what we’ve been seeing there.

But aside from that the overall segment for 2011, as Curt mentioned earlier we’ll see a slight decrease in throughput, basically because of two isolated incidence. One was a heavy turnaround schedule are heavy versus 2010 at the hard refinery where we supply the crude to that refinery.

And the second is, we have a products pipeline that runs from Corpus to Houston and export economics in a refined product service gasoline and diesel. And export economics have prompted those refiners in the Corpus area to export those barrels and not ship them to Houston. So our volumes on that line have come off significantly.

The good news is that’s one of the underdeveloped or underutilized pipelines that we are working a project to convert into Eagle Ford service and I’ll tell you a little bit more about that in just a minute. But, the result of those decreases in throughputs were expecting our full year 2011 EBITDA to be slightly lower than 2010.

So just a little bit about the shale oil developments going on at least as it relates to us. We have been fortunate to have a lot of assets laid across, especially the Eagle Ford development, but also some other developments up in Barnett, Niobrara and other place where we have some pipeline assets. So we are well positioned to capitalize on the development of these builds and convert many underutilized and even some idle pipelines into shale development or some of the shale service.

So as that translates into CapEx spending, in the future you can see what I was talking about in those first three years shown that it's been a pretty quite segment in terms of growth capability and opportunities, but as you can see in 2011 as we start ramping up our projects mostly in the Eagle Ford, you can see how that's growing substantially and will continue to do so in 2012. And I fully expect to see more projects in 2012. They are just in very early stages of development.

Just like the storage segment, I've listed some of our larger projects that are included in the 2011-2012 CapEx numbers and I'll talk about them in more detail in the following slides. Our most recent announcement was some Eagle Ford deals with Valero, just a few weeks ago, I believe. There's two parts to this agreement. So the first would be taking an 8-inch pipeline that runs from Corpus up to near their Three Rivers refinery.

It used to be in product service, actually moved a very, very small amount of LPGs up that way. We are reversing that pipeline, putting it into crude oil service and it took very little capital, we didn’t need to do much to the line just make a couple of connections. And that actually went into service this week September 15, which was Tuesday I believe, they are already shipping higher than their T&D commitment and up near the full capacity of that line.

The second part of that agreement was to build 55 miles of new 12-inch pipeline from Corpus up to Three Rivers, and we are also utilizing some small segment of some existing pipe in that part of the project. So this pipeline will be used to deliver crude waterborne crude from the Corpus area to their Three Rivers refinery. They can’t run a full slide of Eagle Ford they still have to supplement from those waterborne markets. So that’s the purpose of this line. It is about $60 million pipeline should be in service by the second quarter of 2012.

This is just a map view of those two piece of pipe the solid black line, the 8-inch line that will be bringing Eagle Ford crude down to their Corpus refinery and then if the waterborne crudes the other line the waterborne crude supply up into Three Rivers.

But so important about that Valero agreement is that freed us up to develop a larger diameter pipeline that’s been in that service going from taking the waterborne crude to Three Rivers. Now we can reverse that pipeline and bring much larger volumes of the Eagle Ford crude down to Corpus. So earlier this year, we announced two LOIs that we signed with TexStar and Velocity to put the Eagle Ford crude on that larger diameter pipeline going to Corpus.

Those projects, they are both building, gathering lines up in the Eagle Ford and they will bring that crude, they will gather and bring that crude into a new facility at Oakville, which is near the Three Rivers area where we’ll build a terminal to both receive off those gathering lines and also re-originate that crude into our 16-inch line to Corpus. Where in Corpus it can either be loaded through our existing crude oil terminal at North Beach loaded onto the water onto ships or it can be delivered to local refiners.

We expect this project to be in service in 2Q of next year. And again, this is just kind of a map of that project. You can see the two gathering lines coming from different areas of the Eagle Ford development and into this new terminal at Oakville and then our existing 16-inch line with the capacity of about 200,000 barrels a day down to our North Beach terminal.

I want to talk about two projects that are not in our CapEx number that you saw before. So they are in the early stages of development, but there are two specific projects with two specific customers. One would be to and when you look up there at that Pettus line going over to Oakville, we actually have an idle blind that runs from Pettus to Three Rivers. The plan there is that our customer would gather crude in the Pettus area, ship on the Pettus line, they will have to make a short connection into our Oakville facility and then those barrels too would go down the 16-inch to the North Beach terminal and local Corpus refiners.

The other line you see heading up towards Huston is the products line I talked about earlier that we’ve lost a lot of volume to export economics on refined products, but that line we’re working a project to move Eagle Ford production up to the Huston area and we are hopefully will have an announcement on that one pretty soon as well. But I expected that line would be back close to capacity once that gets done.

And we’re also planning to build a new 8-inch pipeline to supply crude to our San Antonio refinery. We’ll build a three-bay truck rack there to receive trucks of crude oil into our Elmendorf storage facility and then build this line to make deliveries to the refinery. This project is tended to reduce transportation costs as its right now the refinery is fed solely by truck supply where it has to go in through San Antonio and that creates some ratability issues and also its hard to judge what kind of quality issues you might have when you’re receiving so many different shipments of crude per day. That project should cost about $20 million, and we expect that to be in service first quarter of 2012.

We’ve also got a customer who has asked us to expand our capacity to deliver refined products into San Antonio market. We have two refined product terminals that supply San Antonio and two different pipelines that deliver refined products into the San Antonio market and we’re moving ahead with that project. The CapEx should be about $13 million and we expect that to go into service in the fourth quarter of 2012.

And I think that about wraps it up. I think the only other thing I would add is on the Eagle Ford we obviously get a lot of questions about the Eagle Ford. I think the thing I’m proudest of is now we have two pipelines that we’ve put into service we’ve executed our T&D Agreements they’re in service and that’s the two first pipelines to go into service in Eagle Ford and first move or status in these shale developments is extremely important for us and helps us continue develop our other projects and gives us credibility on those other projects. So we’re very proud to have the first two lines in that service and expect to see a lot more positive news on that.

Question-and-Answer Session

Unidentified Analyst

(Inaudible)

Danny Oliver

Yeah. Well, we haven’t completed it. So I can’t announce everything now, but I’ll tell you that their long-term meaning, I would say long-term to me is five years or more. Any one of those deals would pay for the project, but with all the deals that we’re looking at I think we’ve, for successful in executing all of those, I think we’re probably looking at about 75% of that line being full. I think they’re kind of in different stages of development. I think one of them is very near, I would say in the next month or two. We would have a definitive agreement done. The other just hopefully, sometime by near the end of the year we have more of those deals executed. So we’re very close

Unidentified Analyst

(Inaudible)

Curt Anastasio

Well, we…

Danny Oliver

I wonder where we spend the money.

Curt Anastasio

Right.

Danny Oliver

I mean we have a reimbursement agreement.

Curt Anastasio

Right.

Unidentified Analyst

(Inaudible)

Curt Anastasio

They don’t want to slow it down. So they’ve guaranteed to pay us back if the project is not, ends up not fully executed. So they are in it to finish it so.

Unidentified Analyst

Okay, since I now have the mic, I can ask the second question.

Danny Oliver

All right.

Unidentified Analyst

You said that 72% of your storage is contracted beyond one year, back in the storage area, what is the reason, what is the current market for storage and has contract come off of contracts when you renew what would be the change in rates there?

Danny Oliver

Well, rates are not going down.

Unidentified Analyst

Right.

Curt Anastasio

They’re either staying the same or they’re going up and it kind of depends on where you are.

Unidentified Analyst

I guess I’m asking that some of these old contracts coming off are at low rates that would have a jump?

Curt Anastasio

There is some of that. I mean we’ve been in such a healthy storage environment for the last few years that you are not seeing a lot of those that are doubling in rate, which we did see for a few years. There are some of the longer term contracts that probably are due for a little bit of an increase but we’ve picked up a lot of that over the last four years.

Unidentified Analyst

And when you signings new contracts now, what terms are you trying to get?

Danny Oliver

As long as we can possibly go, we like the long-term contracts, but again it kind of depends on where you are and how tankage is. We generally, for example we generally don’t have a problem in the New York Harbor signing someone up for three years. And when we’re looking at a new build project, we’re typically looking for a bare minimum of three years and usually five plus.

Curt Anastasio

And as you know Dave, they are inflation adjusted. They are CPI or PPI. So you have an inflation hedge.

Unidentified Analyst

Right there

Curt Anastasio

I think Danny said it, while we seen a lot of renewals at higher rates already and as you can tell from this like when we told you about our capital investment, we’re really focusing a lot of money on a few locations and those are the ones that we think really have not just short-term but long-term value.

Unidentified Analyst

As a follow-up to Dave and to a certain extend, the tankage that’s going into, we’re going to see tomorrow at St. James, the Phase I, a lot of was it to marketers. Just curious are those all one-year contracts or have you been able to sign those guys up for multi-year contract?

Curt Anastasio

Multi-year contracts absolutely. I can’t think of a time that we built the tank for somebody on a one year contract. I don’t think we haven’t done it since I have been here, but they are generally three years bare minimum and more likely five and more.

Unidentified Analyst

Okay. Second question and I’m not going to ask you to speak to Valero, well may be just your impression, when you look at the picture for the one pipe that’s done and the other one that you are describing about shipping of the oil. It seems like you are shipping oil for them in both directions instead just them staying local sort of great (inaudible) is that they because they need different mixes at both refineries?

Danny Oliver

Absolutely, its different grades and they’ve made public announcement. So based on their own announcements, they like the Eagle Ford, it’s local, they are advantaged at their location, but their refinery doesn’t allow them to run a full slate of Eagle Ford. So they have to supplement with the water borne grades.

Unidentified Analyst

Great and I guess a question now or we could defer to when Steve talks, but I guess the question is a lot of growth, lot of spending looks like over the next six to 12 months, just curious how you guys looking to finance it right now?

Curt Anastasio

Yeah, that’s definitely (Inaudible). Yeah, well the good news for you is I’m not presenting formally today. So, I think you guys are tired with me after the Barclays and the Citibank conference. But, yeah the revolver we have is about 350, I think still available to us. A good part of the revolver is actually tied up between LCs for these GO Zone financings that we’ve raised for St. James.

We’ve got approval from the Board to do a bond deal up to $400 million. So that would provide liquidity under the revolver, which takes kind of the pressure off if you will on liquidity side of that revolver, which comes during December of 2012. And that the pricing is LIBOR plus 50 basis points.

So we’re borrowing at about 1%, so it’s very attractive to play that cheap money game as long as we can. And yeah, we’ve got GO Zone money; we’ve raised $375 million of GO Zone company in five separate trashes. So we’ve been very successful at St. James using the good services of John, who is our manager, our Plant Manager or Terminal Manager rather, he speaks (Inaudible) getting us a lot of cheap money because this GO Zone money, you don’t – it’s not subject to any state or federal tax. So it’s incredibly cheap floating rate money with a 30 year tenant.

On the equity side, we’ve put in place up to $200 million continuous equity offering program with Citibank and do plan to dribble out equity under that. But there is a good chance we will need to do in overnight, because as you’re going to continue to here with all the CapEx that Danny has just alluded to, we are going to need to help the debt to EBITDA ratio. It’s just a question of when not if, that we’re going to have to take that some equity. We have not raised equity since I think May of 2010.

Yeah, so Fitch recently came out with a firmed our rating, but said negative outlook because of the debt level. We’ve talked to S&P and Moody’s they’re more let me say relaxed than Fitch about that, I know since the Fitch but I think they were telling us something we already knew, that it’s a time that we will have to raise equity at sometime.

So it was kind of silly my mind for them saying negative when a quick overnight deal could fix their problem if you will and all things being equal we would presume put us back to stable. Because they had no problem with the business, they just decided our lack of equity since May. And how much our debt has risen because they recognized we tell them or planned it despite design, we are paying 1% and look at the yield on our equity. And we just hate to dilute shareholders until we have to. So that was a long answer, but I hope it covered all the basis.

Unidentified Analyst

It is too good. If I may just a follow up. Real quick just any sense of indication obviously your 18 months, 15 months where you really having to have it rolled over. What kind of sense clearly nothing your LIBOR plus 50, but what kind of spread you think you might be talking about when you roll that…

Curt Anastasio

Yeah, the market right now the market is about one and five days over. Okay, we’ve had very recent conversations with several the bank syndication people of banks, banks (Inaudible) on us in this room. Actually, so I think that’s the market the covenant packages are very similar, most of the MLP still have a debt-to-EBITDA covenant, five times tends to be the limit for a stronger company like ourselves. We are one of the fewer investment grade rated MLPs now. And then the upfronts will be a little bit more than historically we paid. But that's for a five year deal. If we do a shorter deal, the spread would be a little bit less.

Yeah, right. I mean the spreads have continued to come down. Our Bank Group is very strong, very supportive to us. We'll probably increase the size of the revolver from $1.2 billion to $1.5 billion when we do it.

Unidentified Analyst

On 2012 expansion CapEx in the storage segment, can you give us a little more color as to the $220 million, you mentioned St. Eustatius as one of the projects. Is that most of the money or there are other, what are the projects you're looking at?

Curt Anastasio

It's most.

Danny Oliver

It's probably the same. I think St. Eustatius is the biggest single project by far, but now we haven't – we're just in early stages of looking at our 2012 budgets, so we don't really have capital details, absolutely St. Eustatius (Inaudible) that's 2020, if not even all of the St. Eustatius spending (Inaudible)….

Curt Anastasio

Just the 2012 spend for it.

Danny Oliver

2012 spend on that project

Unidentified Analyst

How likely do you think the St. Eustatius expansion would take place?

Danny Oliver

Tell you more in a few weeks. You know, it's an excellent project, this isn't just an (Inaudible) I now got an idea, it is customer interest, (Inaudible) engineering work done, but we're still evaluating, we've not committed to build.

Curt Anastasio

Part of the complexity and we talked a bit about this at the recent MLP Conference is St. Eustatius is just no longer part of Netherlands Antilles, it's part of the Netherlands. So the tax situation is a little bit more complex, it's new. Okay, so we are working, we are working to figure all of that out. And of course our customers are interested before they would commit. We need to know what it is before we could commit. So we are working through those issues.

Unidentified Analyst

When do you expect that tax issue to be resolved?

Danny Oliver

I never like to handicap governments with the taxes. I mean we are actively working with the government.

Unidentified Analyst

Just one final question…

Danny Oliver

That’s why we showed in red candidly.

Unidentified Analyst

Yeah, just one final question on the storage, obviously a lot of projects whether this thing (inaudible) goes ahead or not in any primarily guidance in EBITDA on 2012?

Curt Anastasio

Not yet. Not at this meeting.

Danny Oliver

We were just doing too much work on our 2012 budget. – almost everyday so,

Curt Anastasio

I think the only thing we referred to here was you know on the CapEx that we are seeing in a multiples, EBITDA multiples of four to eight times depending on…

Danny Oliver

Yeah, but we are not given in that matter.

Curt Anastasio

But we will have the budget to the Board in early November and after that we would be happy to communicate, what we think it will be…

Curt Anastasio

All right. Mr. Brattlof.

Paul Brattlof

All right, I want to go over our asphalt and fuels marketing segment quickly. In 2010, we had about $111 million of EBITDA and kind of walk you through a little bit of a high level summary of what’s going on in 2011.

Currently, we’re seeing asphalt demand just with the economy. Asphalt demand is lower and we’re also seeing some of our feedstock cost go up with some of the Brent [spreads]. Right now we’re staying that segment of the business to asphalt will be a little bit lower than our 2010 results. And then also our acquisition of our San Antonio refinery is contributing to earnings, but we’re also seeing a little bit higher crude cost there.

So it’s just a little bit down from what we were expecting when we bought that. But then we are seeing some very strong results in our sales and marketing segment, which Curt mentioned earlier is really due to our crude trading around some of the assets that Danny was talking about in South Texas and then here in St. James. I’ll talk to you a little bit more. And then also our bunker fuels marketing is done with volumes are way up in that side of the business. But for 2011, we’re seeing our results going to be slightly less than in 2010.

So I’ll walk through just a high level look at our San Antonio refinery, it’s about a 14,500 barrels per day, a small refinery. We paid $41 million plus working capital. It runs a lot of the local crudes in the area, the Eagle Ford from the South Texas area. And it makes, it sells jet fuel, ULSD or ultra-low sulfur diesel, naphtha, reformate and LPG’s.

And one interesting little comment that jet fuel we do so we’re one of the few the only refinery in the U.S. that makes the jet fuel for some of these pipelines. This is the real low free jet fuel. So it’s an interesting pit there is not a whole lot, but it’s an interesting pit that comes out of this refinery.

We have hedged about 70% of the production that comes off that it’s tied to the gasoline and diesel and we’ve hedged that as a spread between the light products and also the TWI. And those go out for about 2.5 to 4.5 years.

As Danny mentioned, we also have the crude oil pipeline that will be commenced about a 12 mile pipeline that will help us reduce some of our transportation costs from the standpoint of just trucks moving back so fast if you can turn them quicker by building this pipeline and deliver the end to plant and then also help the reliability of the plant from the standpoint of knowing what crudes are coming and what you are going to be running will really help us with the reliability there, but, we expect the refinery to generate about $15 million this year.

Next page, our bunker marketing group; this looks to be our best year ever in this side of the business. We’re currently marketing out of four NuStar locations; one, St Eustatius down in the Caribbean, Point Tupper, which is up in Canada, and then Texas City and Los Angeles and our volume since 2009 when we started are up about just slightly under 100%. So, we have done very well, growing these areas by adding mainly the Texas City and Los Angeles markets.

And the key to this business is really having a dependable supply of bunkers and right now we have, through term purchases, mainly in the St Eustatius area, about 55% of our bunker field is on term purchases, but what we are also doing are buying opportunistically, especially in Texas City from our fuel oil group well I’ll mention that in just a minute and go through that, but we are buying those products and we are also buying down at St Eustatius little bit of barrel, as the economics move around and we are able to capture bigger returns on those.

So, some of the things we are looking for 2012 is really is just see where we can expand, maybe in the Gulf Coast and the East Coast to try to replicate what we’re doing in that, in these markets.

Our Asphalt operations, right now through June, the data shows that the demand is down about 1.5% on an annualized basis, but some of things that we are seeing is the East Coast rack prices, you’ll see average quite a bit over the Mid-Continent to Gulf Coast racks and that’s a good thing, but it also invites some of the Mid West refiners in the low demand environment, they are moving and importing some of their barrels into our market, so we’re seeing a little bit of erosion there. And as a result, we’re expecting the Asphalt results to be a little bit lower this year.

Some of the things that we’re doing in 2012 to improve our profitability, since we’ve been into a new crude contract, it’s a Peregrino Crude coming from Statoil, its off the coast to Brazil. We think that that will significantly lower our – some of our crude cost and then it starts here in December of this year. We’ll start running it next year.

We’re also pursuing some of Heavy Canadian rail crude that’s, we’re trying to get that into our Paulsboro and Savannah refineries. We’re in the beginning stages of that. We have bought some of that crude to start bringing down in testing, but we expect to expand on that in 2012.

And then also some of the things that we’re doing is we’re increasing our ability to buy finished products. As economics change we want to buy some of those barrels to come into our systems whether advantaged over a production economics and what’s the real key right now is really flexibility. As we’re going through this transition of the economy down and turning back around hopefully, the – we want to have the flexibility to buy the cheapest feedstock we can and so we’re doing a lot to try to create that flexibility.

In our heavy oil trading group out of Texas City, has become a very dependable outlook for the Midwest refiners, and its volumes are we are thinking in 2010 are going to up about 50% over 2010, it’s some of the drivers here, if you look when we started in 2009 the PADD II utilization rates were down below 86% in on a yearly average basis they’re approaching 90%, but currently they are up over 93%, and what that’s allowing that’s creating plenty of ample supplier the VTBs that we buy for this market and what we do here as we gather all through the mid-continent, roll the barrels down, the heavy oils and we blend in to either a bunker fuel market which is our Bunker Marketing Group or we will blend the fuel oil, sell that if we have to if economics did take our Asphalt, so we are creating the ability to really market that bottom of the barrel very well.

But most of our product that is brought in, goes to our Bunker Marketing Group that’s where most of the economics go some of the things, we’re trying to do is create some more locations where we can do this, we’re trying to go into may be Mobile or in the California to try to gather more barrels that we’re not able to get just because they just all don’t work to Texas City.

Last thing is the crude oil trading group, and as Danny mentioned Texas City and St. James where we gather barrels there and what the drivers are there if you see the Brent-WTI spread is very wide but LLS spread is wide too, its up over I think this is $28 just few days ago. And that is really created an opportunity to bring the Bakken crudes and to a certain extent the Eagle Ford crude to the Gulf Coast markets where they can weaken end market to close to the LLS type prices, and it’s really been a good opportunity because it's really who can get to the market the quickest and we’ve been able to – Rick is done a good job and [Paul] has done a good job with these places helping us get setup very quick to be able to hit the market before some of the other logistics get put in place.

Currently, St. James, we can bring in about 10,000 barrels a day, and of manifest rail and in Texas City between rail and truck, we're bringing in about three a day there. So some of the things we’re looking at in 2012 is really can we just increase the volumes at these locations, bring unit trains if we can or adding new lanes at Texas City to bring more volumes through there.

Question-and-Answer Session

Paul Brattlof

Yes, Sir.

Unidentified Analyst

I appreciate that you're trying to talk about through the second quarter and the weak – weakness in Asphalt through the second quarter, and yet I guess – I’m, wondering how much you can help us if only subjectively given that we now are almost three months past the second quarter and that you had hope for incremental benefit in the second half of this year, some improvement as the Wood River, coker came on, how has that changed the supply demand balance, although you've indicated the demand wasn’t there and more supply was coming from Midwest, if you could just maybe without hard numbers that you can’t give us, help us understand how much worse the third quarter might be or not be than that first quarter trend – first half trend.

Curt Anastasio

Well yeah I mean that is another way to try to give some guidance, but let me put it at this way actually – maybe clarify a few other things you said. Paul hasn’t talked so much about weakness in the second quarter, actually the first half of year the company including Asphalt had a strong first half including a strong second quarter. So the things he identified.

Unidentified Analyst

He talked about the demand being down.

Curt Anastasio

Yes. The demand and the – what’s happened to us in the second half of the year are the things he identified. First of all, you’ve got a relatively high crude cost, because our Venezuela crude which is our base load crude, and its a large majority of what we’re running almost all of the 100% is really the pricing formally is based on fuel oil.

So I mean, it’s a little different from that if you look at the formula. But basically you can think of it as moving with fuel like a Maya contract would, heavy crude oil contract with the Mexican. So fuel oil now Gulf Coast fuel oil 3% is what like $95, $100 a barrel or something I don’t know. Somewhere up in that range and TI is what like 87, 85, so those who follow this business know that that has not been the case historically very much.

You’ve got fuel oil and a big premium to WTI and it’s kind of analogues to the same thing, why did big complex refiners lose money for the last two and half years is because all these water born crudes have gotten relatively expensive, and the guys who can attack says inland or Canadian are doing better.

So little bit of analogues thing going on in our Asphalt business, but on top of that you’ve been hit with those, as Paul said you got lower demand. Now what are we doing about this. What we’re doing is we signed – we’re backing out Venezuela by running more Peregrino, Peregrino is cheaper and it has a better yield, but it’s still an Asphalt dCrude that’s one thing we got to look for here is we have to have Asphalt dCrudes that we could run in this plant and be able to handle the crude. Then the other thing is the Canadian.

Unidentified Analyst

That starts in December you said

Paul Brattlof

Well we just did (inaudible) 100,000 barrels, it went very well to see if all the things we’re assuming about were trailing and looks like they are. So we’re going to be able to handle it and it will be cheaper.

Unidentified Analyst

How much cheaper?

Paul Brattlof

That is 10,000 barrel a day contract.

Unidentified Analyst

How much cheaper for barrel would that they…

Paul Brattlof

I don’t know how we said I don’t know how we said. But it’s cheaper. And it has a better yield so some more valuable crude. And then he also just mentioned the Canadian and we’ve got people very interested in Canadian producers railing Canadian crude at a discount to what we bought from the Venice railings to Paulsboro, which is the big plant of the two. Paulsboro is a much larger refinery of the two asphalt plants.

But this business is really separate in the second half of this year, and it’s not just because of crude and not just because of the national figures on demand and States and municipalities are in a shambles. I was on a – I'm serving a term as on the service reserve board for the Dallas region, I’ll sit next to the guy, the CEO of CEMEX, one of the world’s largest cement and aggregate companies, and his business is a disaster.

You remember all those (inaudible) ready projects well, he is very exposed to United States, Spain, you all know about Spain. And it’s just an absolute disaster. So it’s kind of analogous on the road and infrastructure business that we have to look at when we talk about producing asphalt for hot-mix plants that we have. So it’s a lot weaker in the second half of this year for all those reasons.

Now we’ve compensated for that. The reason we could say that the Asphalt & Fuels Marketing segment, the third business segment of the three we have that we talked about today is really not far off from last year. It’s pretty comparable, just slightly down, it’s because we compensated for asphalt’s weakness within that business segment with the other stuff while I talked about, the bunkers and is up, the crude oil trading is up, the fuel oil trading is up. And then we had at the San Antonio refinery, which is bringing profit to the bottom line. So these were compensatory measures that have made up for weakness in asphalt very substantially. But there is no question the asphalt piece has been very, very weak.

Now, the other thing you said on the ConocoPhillips, the Wood River coker is next year, okay, that’s a 2012 effect for us. And so, 2012 has always been the year, we said you see the impact of the coker is really shrinking asphalt supply. But very honestly, that alone is not going to save the day. We’ve got to take the cellphone measures that Paul say, we got to reduce our crude cost. We got to improve the logistics efficiencies that you mentioned. And all those things are what we’re going to need to get through this.

This is a business at some point, I believe anyway is really going to take off. I think our management team believes that, because you can’t live like this in a fast world country, very quickly. I saw a thing, I think it was in international just one of the World Trade Organizations ranked, the United States on infrastructure including road. And five years ago, the United States was number one arguably number two in the world, in terms of quality or infrastructure.

Now, we are now five years later number 16 behind Malaysia. So the United States infrastructure is rapidly deteriorating. And you can read anything any independent engineering study anything you want. There is going to be a huge catch up here, because you can’t defer that indefinitely. So that’s going to help us at some point and I don’t think this that’s may doubt about that. But in the mean time, we’re going through a real patch week this year and we’ve got do things to help ourselves and that’s what we’ve done this year, that’s what we are able to say that business segment is really not going to be up hardly in all this year despite a big decline in the asphalt we sell.

Unidentified Analyst

I will let you just follow up on answer that was given last conference call regarding the Asphalt. It seem to me that there was an indication that depending how things go, one option they have it to shutdown the Savannah asphalt facility. Just curious on your current thinking there how that’s playing out, what you think the likelihood would be and so, what kind of a turnaround close would be, to bring it back up to operations if this shutdown, I think two, three years down the road, when we were number 50 on the list Curt and we do have a new transportation built on…

Curt Anastasio

We will take it by donkey over to the facility later tonight. We have not decided to do that, okay. But with all options around the table. I mean, we put everything on the table and if it’s more valuable to the company to make that a terminal, instead of running it as a refinery, we will look at it. I am not too worried about starting to backup, we have to do that, because we wouldn’t shut it down totally, ideally. I mean that property has valued…

Paul Brattlof

The startup costs would be just minimal.

Curt Anastasio

So that that’s not really the obstacle for doing it, just a matter of the economics. And right now it makes sense to run as we have, but as you see we really cutback on our crude tripling.

Paul Brattlof

I think it’s going to provide a lot of help in the transition as we transition to some of these other crudes to be able to swing different crudes to different refineries. I think it will help us in that transition and where the economics ultimately shake out, that would be down to road, but I think it will provide us some flexibility during that – during this transition phase.

Unidentified Analyst

The fuel's marketing is coming more bigger and more important part of the business and it's growing. Can you talk a little bit more about, maybe this is just the nuts and bolts of the business, but what are the risks in the business? Are you taking [tighter] when you talk about growing the business? Are you talking about adding people, supply contracts, assets? And how do you think about the sustainability of the cash flow from that business?

Paul Brattlof

What we're doing is we're trying to grow in certain areas where we have terminals where we can gather. We want to be very diligent in how we go through that process, but we are going to try to gather, because we know when we are in the business at Texas City, we are having to turn away barrels or we're losing out on barrels that we would normally buy at a discount, just because we're not situated where those barrels would naturally go, somebody else can compete better against us.

If we move in some of these other locations, we'll be able to compete for those barrels better. And so we kind of have a good feel for what those economics are that we're passing on in effect. So if we go into those locations, we think we'll be able to grow. Then what that does is that creates a floor or a platform for us to grow our bunker side, because the key to the bunker side is having dependable good supply.

So we got to go create that supply, gathering first, make sure we know what that is and get that work and then we can go develop our bunker marketing side that just gives us the raft or the retail uplift if you want to call it that on the fuel loss. So it's really a stage process that we have to go through and we want to…

Curt Anastasio

The incremental, the expense for us has been in the capital, like the investments we had to make in Texas City. It's really not so much the people, I mean you double the business and with what, you've added one headcount?

Paul Brattlof

One, yeah.

Curt Anastasio

And a headcount one and double the volume. But so when you say like what resources are I thought your questions really get why resources have to keep expanding this business. I don't see as much on the people side. It's really more on – Rick and his guys getting the facility, capable, if need a tank, if you need segregated lines, if you need better loading arrangements that kind of thing is gaining the facility in a position to do that.

Now fortunately, Texas City was great for this because we needed to do something in Texas City anyway. Texas City is a big success story for us. I'm not hearing and talking much about it today because really we’re talking about St. James that was a really challenged facility when we bought [Cana] pipeline company 2005, profitability was going down every single year for the previous 10 years. There was absolutely no strategy as we do anything about it.

So we came up with the strategy that said, forget about all this stuffs that they were doing. They’re always little chemicals company. They had in the last (Inaudible). We are going to focus on heavy oil in Texas City, because we had the people who can capitalize, on having an asset like that and we had a credible strategy around the feedstock that we can bring down from Mid-Continent refiners and between Rick’s guys making sure that the projects stayed on budget and on time, and then Paul’s guys being able to capitalize on it.

They have the access story. So they proved that Texas City if they could do it from the operations and the commercial standpoint that gave us confidence to say, all right, what else can you guys do and that's why you see some of this branching out in Los Angeles and other places.

But they prove, they can make money it’s just like the Bunker guys. It’s so close to fuel all on the bunkers and sometimes one business trades with the other. But that's why we've had the confidence to expand it. And we're doing it in a very low cost way – and the low risk way, sorry. I mean we’re not carrying a lot of inventory. The purchase and the sale are in close proximity in time and location to each other.

People have gotten in trouble in the bunker business when they tried to have some kind of worldwide global bunker business where they are buying barrels in Singapore and they are selling them in Illinois and all that stuff. That’s when you can go bankrupt trying to do that. You’re carrying huge working capital, you’re taking huge price risk, you get into all of these complicated hedging programs. We are just focusing it down on a very low risk, low capital business we know what our supply cost is, we know our sales prices we know with customers, we have lined up to take it. And that’s every time that we can fitted into that model, we are expanding it.

Paul Brattlof

The capital hasn’t been that significant. If you look at the chart on page eight of the presentations I mean in ’09 we spend $14 million in that segment of CapEx in 10, 20 and 30 in ’11. And the operating income from that business has averaged about 20% of total operating income. And the capital is probably a little bit less than 20% overwhelmingly it would be represented by the condo acquisition, which was 450 plus working capital. So counting all the work in capital to that whole segment, I am sure you will – you are under billion. And we’ve got five assets. So it’s generating about portion hit to be other business.

Unidentified Analyst

Next to the cargo.

Curt Anastasio

Yeah.

Unidentified Analyst

If you talk about just a bunker in the fuel (Inaudible)

Curt Anastasio

Yeah.

Unidentified Analyst

Yeah in terms of percentage…

Curt Anastasio

Yeah, which would be represented by the numbers, you pretty much see on page eight, which is ’09 so anyway, I can tell you the agencies don’t want to see that, seasonal cyclical business being more than 25%. So we managed business very much with that in mind. Because one of our principal tents is to be investment and that’s been great. So we are very cognizant of talking this way to them about, and if you can see from the CapEx chart, I mean really most of it’s going by far into storage and the pipeline business (Audio Gap) Kyle?

Kyle Oppliger

Hey, good afternoon, and thank you. I am Kyle Oppliger, I oversee NuStar’s gulf region. And I am pleased to have the opportunity to provide a brief history and an overview of our St. James terminal. It will be the site that we tour tomorrow. Okay, perfect. Since acquisition from coke in December 2006, St. James has been an exciting asset for NuStar. From the great team of personnel who fit lockstep with our corporate culture to the business opportunities that fit well our acquisition growth strategies. Current storage capacity is right at $8 million barrels among 28 storage tanks. Later on the presentation, I will speak to our growth projects at a more than double that storage capacity since acquisition.

St. James is a crude storage and blending facility consisting of over 900 acres located on the West Bank of the Mississippi river, with key access to crude supply and distribution logistics. Crude received in redelivery modes include marine capabilities both ship and barge. Access to a number of pipelines, truck gathered supply, as well as a 20 car crude manifest and loading facility. Logistics capabilities and flexibility are key for St. James, this commenting provides an overview as a supply and distribution alternatives that make St. James sort after by our customer base.

On the right of diagram, our marine capabilities are identified three docks, two of those are providing ship access and then inland barge dock. On the top center, the truck and rail facilities represented. And in the left hand bottom, you can see the flexibility in pipeline connectivity including Calpine, two Exxon lines, Ship Shoal, Houma and access to the Loop in Locap systems and that’s where, between these key logistics is our St. James terminal. If you hadn’t visited a large crude terminal before, I believe you will be impressed with the scale of these assets.

NuStar’s vision and strategy for St. James is simply involve alining the right people with the right assets and the right business plan and if you have followed NuStar at all, I’m certain you are accustomed to our expectations of excellence and stewardship of HSC and community involvement, while providing the highest levels of customer services. I will elaborate later in the presentation, but the St. James team clearly demonstrates these qualities.

From a growth perspective, NuStar has continued to develop the St. James terminal into an integrated light, sweet and heavy crude blending hub. Capitalizing on the advantages, the terminal’s location as well as logistics create, this growth includes additional storage, but also further enhancing the strong logistics of the terminal. While our foundation is based on our third-party business and our partners, we also capture margin based opportunities by providing access to niche markets and trading partners.

Everything we do, we first focus on the safety of our people, our contractors and our community and our commitment is not just a slogan, but a mindset somewhat of a way of life in the operating world at NuStar. St. James has gone 20 years without a lost time incident is evident of that commitment. Strong performance though just doesn’t happen by accident, but, with good people, NuStar’s culture and our safety and operating programs founded on process safety management.

I am very pleased that St James facility has one of the four that Curt mentioned has obtained recognition as an OSHA VPP Star Site. Facility personnel are also very active in there area of communities. They continue the leadership role through volunteering, constructing parks, as well as record breaking United Way Charitable Giving.

The same commitments and disciplines we demonstrate in safety applies also to environmental stewardship. We have a highly automated facility, operator and contractor training and growth of our integrity management programs is continuous at NuStar. All of these efforts just to mention a few allow us to understand our risk mitigate, manage successfully our environmental stewardship.

As I reviewed earlier, the access to crude supply and distribution are key to the St. James terminal. We have well equipped dock facilities, two ship docks equipped with 16-inch loading arms that maximize our ability for unloading crude. St. James also has a barge dock capable of crude unloading and loading with vapor destruction capabilities. Two truck receipt skids allow our customer to purchase production gathered by truck also. And lastly, we have an existing 20 car rail manifest facility that quickly became maximize due to opportunities created from the emerging crude supplies.

Looking at our customer base, high demand is about NuStar to attract and enter into agreements with large reputable customers. The existing customer slide includes Valero Refining Company, Trafigura, Statoil, EOG Resources, as well as our own NuStar Marketing Supply and Trading Group.

Implementing our strategy a review of our completed projects, St. James has been a success story since day 1. In 2007 immediately after requiring the terminal, NuStar secured commercial agreements with the customer for our first 1.5 million barrel expansion. Our project engineering group designed and executed a terminal expansion with large-diameter piping in manifold systems resulting in an integrated design that maximized our flexibility, which is very valuable for our customers, as well as add the feature in mine with capacity for further expansion all on-time and on-budget.

2008 through 2010 saw further enhancements of our logistics and additional storage with the projects to upgrade the Ship Shoal Pipeline Connection and reactivate and expand an idle rail spur for Bakken crude and ports creating a margin-based opportunity for our own marketing supply and trading group.

Growth in St. James has been continuous and we have several additional projects that are near completion underway are in development. Concurrent to our logistics enhancements, we also executed the first phase of our third-party crude expansion project. This project consisted of seven tanks with a total of $3.1 million, $3.2 million barrels of additional storage. This additional storage was for our existing customers, who are growing their blending programs, as well as new storage for heavy crude.

Not losing side of preserving, our logistics advantages, this project also reactivated an idled marine ship dock and upgraded our pipeline connectivity to increase our delivery in receipt rates to several of our key connections. These tanks went into service in July and August of this year as mentioned earlier and logistics upgrades continue coming online. With the first phase of the third-party expansions, we’ve increased the terminal storage capacity, excuse me, approximately $4.7 million barrels growing from just over $3 million barrels of acquisition today at $8 million barrels.

For the future of St. James, we continue to have high customer interest for crude oil storage, excuse me, it looks like I clipped the wrong direction there. Here we are. We continue to have high customer interest for crude oil storage unit train crude handling, but we are also evaluating interest in fuel storage as well. Concurrently, we’re in development of our second phase of the third-party expansion.

In the latest project, we’ve kicked off further enhancing the alternatives for crude supply is the crude unit train unloading facility I was mentioned earlier also designed to unload at least one 70,000 barrel unit train a day for EOG Resources. With 900 acres and high customer interest in storage, our intend is to continue our strategic expansion of the terminal. In order to gather better understanding or better picture of the terminal, this slide to include an aerial view of the facility, current storage is indicated in white and yellow on that slide, future opportunity of storage expansion is indicated in blue and red. The red storage tanks there potentially lay out if we pursue a fuel well strategy is secondary to our crude oil storage.

Additionally, you can see the footprint of the rail train unloading facility, when it’s completed which began that the far left side of the aerial and extends nearly the length of the entire terminal. Financially, St. James was a solid immediately accretive acquisition, from the graphical representation, you can see the step changes in the terminal EBITDA contributions as our expansion projects have come online based on 2011 forecast we expect to nearly double the EBITDA since acquisition, and 2012 has a potential to even double again the 2011 results.

Offering a quick summary, of our efforts, since acquisition first we have the right people, second we have the right business plan. So in closing, St. James has been an exciting strategic growth asset for NuStar and the future remains bright, as we continue our storage expansion and construction of crude unit train facility, and this will complete my presentation, we do look forward showing off the St. James facility tomorrow on our tour, and I did want to make one note there address this casual for the store, we will out in the facility, we will stay in advance but we want you guys to be comfortable. Are there any questions?

Unidentified Analyst

I have one, that have questions of everything but, could we go back to the overhead picture, it help us appreciate I think tomorrow we are driving two at least. I am just trying to get a sense of I see where you laid out the current construction in the new or potential future construction in red. it looks like there’s a lot of vacant land up and around if you go from right to left beyond those tanks. I’m just curious if you can comment what if they need that additional land NuStar owns or who owns it. What the ability is to acquire it and assess and get to more land for future development beyond what’s been laid out there.

Kyle Oppliger

Okay I don't have a pointer. I'm not certain the best way to identify existing boundary. (Multiple Speakers).

Curt Anastasio

Yeah, that's been one hasn’t worked out I’ll say. So…

Unidentified Analyst

Okay.

Kyle Oppliger

Well I will tell you what. I am going to speak less. (inaudible) excuse me, the line here all the way back to the tracks as well as a section of land behind there. Now I guess what was your question again in terms of (inaudible) that’s correct there are a couple of strips, that’s correct. So there are a couple of small parcels of land that are owned by some of the homes there in the front of the facility.

Unidentified Analyst

(Inaudible). How many acres?

Kyle Oppliger

I believe it’s 940. Is that correct John?

Curt Anastasio

940 acres.

Unidentified Analyst

Yeah. We still have room to build and I would tell you with the interest that we’ve had, we sit down with our design guys and you really have to look at how we want to maximize that existing further remaining land of the facility. So it’s very exciting. Are there going to be five 5 miles of tracks on the facility?

Kyle Oppliger

Yeah. It’s hard to imagine I guess to – the scale of that unit train facility is approximately roughly five miles of linear feet of rail track, a lot of track to accomplish that.

Is there any other questions? Well, good, I'll turn it back over to Curt. I appreciate your time.

Unidentified Analyst

A quick follow-up, whose the tank this out?

Kyle Oppliger

That's Capline.

Unidentified Analyst

Okay.

Kyle Oppliger

Thank you, guys.

Curt Anastasio

Okay. So I think that's probably the conclusion of our prepared remarks for now. We've gone maybe a little over an hour. We see about as much as most people can stand I think, before wanting a break or at least getting a common question period going. We've been asking the questions along the way obviously, but is there anything else that any of these people up here in the senior management team or myself can answer. You're going to have access to us for the next day and half anyway. So if you can think of one right now, there's no sweat. Yeah, David.

Unidentified Analyst

I just wanted to give Steve a chance to pay for his dinner.

Kyle Oppliger

I did already.

Unidentified Analyst

You thought you're having for dinner, but not that we thought, I think we're going to have.

Kyle Oppliger

(Inaudible)

Unidentified Analyst

Can you give all of what's going on with interest rates? Give us step back and tell us how you think now about the advantage which you pointed to of short-term rates versus the other advantage for an investment grade company of being able in today's world and for some time until you can't walk in really good rates for ten years or 30 years?

Kyle Oppliger

Yeah. Well, I mean obviously it's a pretty good period to issue long-term money. The spreads are wider than some times, but you get more than that back below treasury rates, right. So depending upon the day, we are told from various banks who know we got Board approval to a do a deal. So I'm getting a lot of calls that we can issue at a coupon anywhere from four in a quarter if it’s a great day to maybe 5% if it’s a sloppy day. So pretty attractive coupons I mean we issued.

Unidentified Analyst

10 years

Danny Oliver

10 year.

Unidentified Analyst

Are you thinking of doing 30 years?

Danny Oliver

Yes. We are. There’s – that’s candidly a harder deal to get done, most of the bankers would tell you because people aren’t willing to put money to work for 30 years at these levels. So the sweet spot has tended to be more 10 years, okay. So that’s the advice we’ve been getting.

Last time we issued a bond which was August of last year our oil in coupon was 480 that was exactly 2% over the [then] 10 year treasury. That looked like a great deal. But lately we’ve heard four in a quarter on a great day like I’ve said. So clearly we’ve got our eye on it, because we took it to the Board in July and got approved to do so and are monitoring the situation.

We still might elect to swap some of that back into floating to minimize the fact that we’re going could at least in the short-term from 1% under the revolver to say 5%. We could cut that differential in half by swapping back to floating. And since the proceeds would be used to pay down floating debt if you swapped all of that back to floating you would be at the same mix of fixed floating. Okay. So that’s something we are considering. Right now, and we have been for most of our history about 50% floating, 50% fixed in terms of the exposure to a rate, okay.

And the logic there initially was at the time 100% of our business was storage and pipeline an index two inflation. So we thought it made sense to be at least 50% floating. It’s worked out terrifically because of recessions, 9/11 all of that. We’ve made a lot of money on our fixed floating swaps. I think taking down some debt now on the fixed-rate side positions us, as I mentioned earlier very well in the revolver negotiations too. We won't have a gun to our head. We do have 250 coming due in February of next year and another 100, I think its July or June of next year. So I think we'll go before that and – but the approval we got for the board for up to 400 could stretch all the way to authority to just refinance those. But I think we’ll go before that.

Unidentified Analyst

You and I probably have had this conversation once a year for the last 10 years and you’ve always emphasized this the benefit of low cost money…

Danny Oliver

Yeah.

Unidentified Analyst

And as long as rates are in low as – or going down it has been the right strategy, but if and when the market changes and rate start going up, the other strategy of walking in …

Danny Oliver

Sure.

Unidentified Analyst

In more debt long-term makes sense?

Danny Oliver

Two, yeah.

Unidentified Analyst

What are your thoughts about that and timing that and or do not agree with that, you just provided during the cycles 50-50?

Danny Oliver

No, I think we’ve – I've been cognizant and warning probably for the last two years and the budget cycle that the cheap money is not going to last forever, but it seems like it is. Let me particularly (Inaudible) now coming out and say they are going to keep rates slow for low for two years.

So I hear, which you’re saying. I mean we’re exposed to rising interest rates being 50% floating more than somebody who is 75% fixed. And at some point that trade may not make sense, but it certainly still buzz, but I mean we put on swaps just a year ago when we did those bonds and already $25 million in the money on them. And we’ve you know that’s just a buyout value that’s $20 million. $20 million today, but we probably made I don’t know [Chris] do you any idea.

Unidentified Company Representative

We probably made $10 million on that trade just this last year in the 12 months. So its worth probably better than any of us thought it would. But it will change you know right. It will change.

Unidentified Analyst

Curt maybe just a macro question, if you look at your assets and look at fairly storage internally generated projects are great way to go if you could do, not for those and nothing but those that low risk moderately work do it all day. As you look at your company though with pipelines that arguably don’t have a lot of growth something in your other pipelines. The asphalt, step back and tell us that you look at over the next five years. You know what your company should look like and be different or is it all just going to be opportunistic?

Curt Anastasio

I think, yeah we’re doing our five-year plan right now. So I will have better answer after November but not to be quite about it. I think will be in these three businesses. You look at the pipelines. It’s been extremely stable business for us as Danny said without a lot of growth opportunities.

Now over the next three to five years. We are going to have a lot of growth opportunity in the pipelines causing these oil shale plays. So that’s a keeper and so I think you will see us filling up spare capacity in our pipelines over the next few years and building some new ones too, like we mentioned this one we’re doing for (inaudible) I think there will be more new built pipeline projects. Because of the shale oil and condensates, liquids pipelines around those development. And everybody I talk to thinks production is going up, and up in these oil shale. And even some of the regulators we talk to the Texas railroad commissioners that come through and we ask them all the questions. What’s going to limit this, what can blow this up, is it the water, I don’t mean groundwater contamination, I mean the water they need for fracing and all of that, nobody really see that as a major issue. So I think you’re going to see more production and the people in the business, the producers are investing, they’re all ramping up their capital investment program for these oil shale developments, not even just in Texas and Oklahoma and Colorado, but around the world. Everybody is turning over every rock, how can the U.S. can do this, why can’t we? So I think it’s the real deal and that will help our pipeline business. Could you ask me what’s going to happen over the next few years? That’s one. In the storage business, you have to have enough really good location with that long-term strategic value that have good internal growth program we did. We mentioned these four or five kind of mega terminals for us, that are going to grow more.

So I think you will see that over the next few years in places like St. James, St. Eustatius, Texas City and London will grow beyond what they are today, so we will be putting money into that. And then on the asphalt and fuels marketing side, leaving aside asphalt just for the moment, all those other businesses and they have growth opportunity. They have the oil trading and the bunkers, we’re going to be doing more of that. They’ve been reliably profitable, we know the model that works to make money in those keep it low risk, keep quick turnover, you’re not investing, you’re not tying up a lot of working capital doing it. So we know how to do that in a low risk way that makes money, we’ll do more of that.

And then, the Asphalt until it bounces back which you will at some point, we’re going to reduce the cost in that business, be more cost efficient, have a greater variety of crude oils to run at a lower cost, more alternatives to the Venezuela at a lower cost and improve our logistical efficiency on it. And I think you will see, I don’t think if we do that our problem right now is not that we don’t have growth ideas. We have a big and growing pipeline as you can see from those bar graphs of the capital of internal growth ideas that have very attractive returns. So, we’re not compelled to say oh god what do we do, we go into a new line of business or we know we have to reach for some acquisition. And we’re not there over the next three to five years. But we want to improve our balance sheet and we are going to stay investment grades, and we can be opportunistic about acquisitions. And as I said just be in a position to capitalize on things like that, but I really see us as growing the businesses that I mentioned where we proven we can make money on in a low risk way.

Unidentified Analyst

But the one area just asking just anything else you could say in asphalt there is that’s the one segment that has risk, that you actually trying to manage some of those risks. But risks that you can control and there is half that you have to put into the crude in the asphalt and advance the market.

Curt Anastasio

Yes.

Unidentified Analyst

And their prices are determine later, and so what can you incrementally, what other things can you do?

Curt Anastasio

Okay.

Unidentified Analyst

You manage.

Curt Anastasio

We focus on the things we can control like we can ramp down on the relatively expensive Venezuelan, we can reduce our Venezuelan risk exposure by diversifying our sources within new regions and with the Canadians. We focus on the things you can control, we don’t control the Brent WTI spread. We don’t control the worldwide cost of the heavy oils versus other oil. We can’t control that, so we are going to focus on the things we can control like I mentioned we diversify the sources of crude buy them cheaper with the better product value. And on logistics there is things we can do, one of the things for example we’re looking at the 2012 budget is focus on a few distribution hub terminals in Asphalt rather than having terminals scattered around, try to do more volume through fewer terminal that are, how can I put it? Flexible terminals.

In other words, they have a lot of options in and out then they have a lot of options switching to fuel oil if the Asphalt is not working and so you will see that coming through in our 2012 budget. And just control the cost of the business as best we can, because we can’t control the rest of it. But, what happened in Asphalt is and under the plan of course we’re on, becomes less and less significant to the overall company, because we’re putting so much of our future growth into the pipelines of the storage, it becomes a smaller proportional part of the company and if it comes back, it will be a bonus.

Unidentified Analyst

Do you continue to believe that Asphalt is a good business for an MLP and I presume you are going to say yes, but if in either case, are you going to limit the size and not making growing investments there?

Curt Anastasio

Yeah. I think it is a good business. I mean it has made money every year we have had it. Have it lived up to our expectations? No, it hasn’t made the profit that we thought it would when we bought it in March of ’08. We didn’t foresee the collapse of the U.S. economy in the fall of ’08 to the extent that they collapsed, we honestly didn’t see that, I’d have to admit and that’s really hurt the demand side compared to where we thought we would be right now.

The impact of the demand was tremendous. You look, at 2007 the U.S. demand for Asphalt is running around 450,000 barrels a day plus, it’s currently less than 350. So you talk about demand destruction, I mean that is real demand destruction, that’s not the 1% that you see like gasoline nationwide, that’s a much bigger percent obviously.

So, that economic collapse really, really hurt. We do think it will turn around, we do think that coker projects coming on 2012 and 2013 necessarily reduce the supply of Asphalt that you would otherwise see in the market. So that’s constructive for the business. But in the meantime, we can’t wait around for that. We got to do everything we can help ourselves.

But the company is really growing more in the other areas. The company as you can see from this overview, it’s growing more in the pipelines, in the storage and then the other businesses in the Asphalt & Fuels Marketing segment than it is a National. So National necessarily becomes a small (Audio Gap) of the overall. But you asked before like sort of a view what our business looks like in the next five years and that’s what I see, I think they’re going to be a smaller part of our overall business. But doing better than it’s doing today.

Unidentified Analyst

One of the areas that we didn’t touch on was what you’re seeing in the international markets and we still have the Turkey project out there, I know the geopolitics in that area…

Curt Anastasio

Yes.

Unidentified Analyst

And there is a lot of saber-rattling by Turkey right now. But also – there is also lot of talk on [Capitol Hill] about ways to now deficit and repatriation, maybe there is a holiday or anything. Just curious two fold, a) what is all the saber-rattling make you feel about Turkey right now and other international opportunities that you might be seeing? And then second one, is there an opportunity to bring some money back that might be locked up offshore or does that not really affect you, because the partnerships that would be in a entity level tax on the repatriation?

Curt Anastasio

The political risk in Turkey is really not concerning to me. When I – actually Turkey when you stake it up in terms of its political risk rating against other places in the world in which I’ll include the United States under the current administration. It’s actually a pretty low risk place to be politically. The challenge we have in Turkey is getting those expansion projects off the ground, that really make that a good acquisition. And so that’s our challenge for the 2012 budget is to really get that business moving.

So I’m not – I’m overly concerned about political risk there. It’s one of the fastest growing countries in the world in terms of its GDP, it’s in a fast growing region, middle – sort of the Middle East, North Africa region. So we’ll – that business is going to come around would be a very good contributor to our bottom-line.

But the rest of what you said about international business, I mean we do have to factor in tax leakage, you mentioned political risk, repatriation that limitations that that are imposed upon repatriating cash back to the U.S., we have to assess all that when we do an international deal. And the areas that are attracted to is right now besides kind of Mediterranean that we’re already in Europe is Latin America. Latin America selected areas are still very fast growing relative to most of the rest of the world. You heard Danny talk about how the (inaudible) stages expansion is really not depended and what happening in U.S. because that's a great place where you can see a change in the global trade patterns.

So St. Eustatius used to be (inaudible) delivering crude’s to the United States, meaning a great application, not completing it the other way. It’s the Latin America like Petrobras meaning a bill book location for other destination and oil not limited to the United States. But it still a great location for that, but the whole business model change because the trade floods to change.

And – but Latin America is another one, where we really need to look at we’re doing international acquisition. Latin America have to be in our radar screen, whether it’s Mexico or Panama, or Brazil, you’ve got a look at what's down there. But may be [Steve] want to comment further on the issue to your rates with regard to taxation and repatriation.

Kyle Oppliger

Well, Curt really covered what the list is essential point there, which is we study the tax regimes and with holding taxes on repatriation fully burden it for any local tax because while it’s qualified income that doesn’t mean they recognize a partnership structure and don’t tax here. So you’re paying your income tax and when you repatriate a dividend, you can help with holding tax. Now that tax paid, our limited partners get the credit of that in their file tax return in the states. So there is a recapture there, but the key is it just be aware of those taxes, both income tax and withholding.

Unidentified Analyst

(Inaudible) tax department looks at are there international tax trees available where we can mitigate the impact of that you know to the business.

Kyle Oppliger

No, no that’s exactly right. And so obviously we deal with PwC or Deloitte whoever has the best expert for the country. We don’t just throw dots at a map and then you know say let’s go to Latin America, most of why we are placed is because customers we do business with some place say if you can get me tankage here I’ll be interested in signing a five-year contract and you can build from me, but you want to buy into an existing business typically to have that local expertise. And so in no case have we just blindly gone into an area either from the point of view so let’s figure it out once we’re there from tax or from the customer situation.

Unidentified Analyst

While we’re on the subject of acquisitions, you guys have any interest in saying re-transportation either locally in the Caribbean or internationally?

Kyle Oppliger

It’s not really a focus for us, we’re a user of marine transportation, but really, as I was saying earlier, we see ourselves when I was asked the question about where is the company going over the next five years. We really see ourselves developing further businesses that we have. We don’t really feel pressure to reach out and say let’s go into re-transportation or let’s go into something else. Not to say, we never would, if we meet our financial criteria and there is a synergy with what we’re doing, and we could look at that. I never say never to anything. But that’s not really the focus that’s I highly doubt that when we talk to you about, what we decided to do in our 2012 budget, in our five year plan that we’re going to tell you that we need to diversify into in any meaningful way into Marine services.

Unidentified Analyst

I just had a couple of questions, Danny a technical question for you on page 28, just looking at this 12-inch line that you guys were talking about. And that’s the one that had the poor export economics I believe, what was the previous capacity on that line just for curiosity?

Danny Oliver

It’s actually a 16-inch line

Unidentified Analyst

Oh it is

Danny Oliver

We’re building a 12-inch line for Valero in the deal that we just recently announced to take them off of this 16-inch line for greater capacity

Curt Anastasio

It looks like 12-inch line to Houston that was adversely impacted by product export

Danny Oliver

Yeah

Unidentified Analyst

Okay, okay I’m sorry that aren’t 12.

Danny Oliver

Yeah

Curt Anastasio

I was looking at the other one

Unidentified Analyst

What’s the full capacity on outline?

Curt Anastasio

The previous capacity was 100,000 barrels a day, 100,000 and its dropped from it was like 90 kind of every year until a year ago and now it’s below 10. So that’s bad news and it huts us this year, the good news is, it can play into the Eagle Ford as Danny outlined.

Unidentified Analyst

Okay, great. And then on as far as you’re talking earlier Curt about how lot of your spread capacity is going to be build out and utilized over the coming years? You guys have the figure on that full spread capacity at the moment or is that something you could….

Curt Anastasio

Do you want to address it?

Kyle Oppliger

Capacity that’s – is going to be filled up.

Danny Oliver

On this, I don't have the numbers in front of me, but there is roughly half a dozen pipelines that we are working current projects on, and doing the volume, but

Curt Anastasio

Let's say, we're going to do we think ultimately, we're not on the Eagle Ford and we are not down on these on the liquid, we're going to do maybe 200,000 to 250,000 barrels a day we think. And this is now they’re talking about maybe 900,000 a day or north of that for liquids in the oil shale, okay.

So we're getting – we're not getting anywhere near all of it, but we're getting it a darn good chunk of it. If we get that, we fill up our spare capacity. And that's the spare capacity we're talking about, filling up if we were able to capture what we, now already have in the bank, what 60 or something?

Danny Oliver

50 to 75 on the…

Curt Anastasio

50 to 75 of that, what I just told you our goal is 200 to 250 of it, we're doing 50 to 75 already with more to come.

Danny Oliver

And that's with the – that's with the – all that crude stuff and you add in that 12 [inch] there is another 100, you could be talking as high as 350 and today if you look at the utilization today, you probably – well you're certainly less than a 100,000 barrels a day. So it's a significant increase.

Unidentified Analyst

Okay, great. Thank you so much for the color on that. And then, just wanted to get your thoughts on, I realized right now that the crude differential is really going to blowing out over the past year, that's really been the case, and it's historically unprecedented if you will. As you look at your business, one should say that those crude differentials come more inline with what we've seen on a historical basis. What types of impacts would you see to your business if that were to happen?

Curt Anastasio

And as you know why differential, Paul should jump in on this more than – more so. The wide differential has actually helped our crude trading business you know it’s helped fuel oil blending in trading business. As people want to get to the water where there is more valuable option than being you know that once you can get inland. So it helped those things while it has hurt our refining business like the (ex-CITGO) asphalt business. So there is a little bit of a hedge there going on that’s one of the reasons ultimately we could say what I said earlier the asphalt fuel marketing business as you are in 2011, its going to do pretty similar to what it did last year. Even the asphalt has been really, really hurt by that differential.

Unidentified Analyst

I think that you said it very well, I mean those businesses have really I mean when those spreads wide now they just creates opportunities as it hurts you know some of our crude costs. But you know the – until those things correct back in we’re going to be pushing hard to try to capture some of those odds that are created in that way?

Danny Oliver

It’s another reason why we can fill up those pipeline capacity to U.S. does about. You know that we can fill up that 200, 250,000 spare capacity because you got guys like Valero, refineries like Valero are all of a sudden looking at huge margins in plants like Three Rivers, Corpus Christi it’s been a good plant, but I mean Three Rivers, at one point I would assume they were seriously consider shutting it down or selling it. Now it’s a cash machine. You know that phenomenon is what has really helped us, helping us over the couple of years on the pipeline side of the business. They got to get their crude into the plan.

Curt Anastasio

But I think one of the key things that we’re working on this year is creating flexibility within our system to as the spreads move around and the volatility is created that just creates more opportunities for us to try to pivot between one strategy to other. So that flexibility is a real key that will put building into the system this year to be able to take advantage of it.

Danny Oliver

The key is another one, where we have a lot of assets in and around the key crude in and the products out. And the key is we had some challenging times over the last couple of years, very challenging, that’s a money machine right now, which is good for us.

They are going to want to maximum or are they running the key 170 a day or something like that. It hasn’t been anywhere near that for a long time, if you look at the last couple of years. And they did Valero say publicly, how much they thought they are going to make the key this year I don’t know if they said it publicly. It’s lot more money than they made in a long time that is the key, because it’s benefiting from those inland economics. Now look, another question we guess, we have this hedging going on, that differential turning point of our business and help environment business.

Unidentified Analyst

How long is it going to last?

Curt Anastasio

I don’t think it will last. Nothing with that anomalies rationally long in this business. But lot of people are here, talking, they say two years, three years, it depends on Keystone or whatever. I am not so sure, how much it really depends on Keystone, because it create Paul said. If we see a profit opportunity to try to capture some of that differential – multiply that by 100 times, there are 100 other guys out there, who see that profit opportunity and that tends to reduce the differentials. So, I’m not so sure how dependent it is on Keystone going in for that differential to reduce. If you look at the Future’s markets though, that differential really doesn’t come in much for a few years right about 2015, 2016.

Unidentified Analyst

(Inaudible).

Curt Anastasio

Right, now people at least who are involved in the Future’s market are betting that, this is going to last like three, four, five years. I doubt it, I just have a sixth sense about it. I doubt it’s going to last that long.

Danny Oliver

But let me just add there. These pipeline projects to move Eagle Ford crude, it doesn’t matter what that spread is, there is no other way to clear that crude to market. So that that differential has nothing to do with the demand from those assets.

Unidentified Analyst

Okay.

Curt Anastasio

It is – it has to be with the profitability of those refineries though you know…

Unidentified Analyst

Right.

Curt Anastasio

It’s really helpful.

Unidentified Analyst

And then one last thing on that 70,000 barrel rail offloading facility. How much of that crude coming through there from the Bakken or is that all Bakken crude?

Curt Anastasio

That’s the plan it could – they could bring something from some other place they wanted to if it Eagle Ford crude but the current plan is to bring Bakken.

Unidentified Analyst

Great thank you guys.

Curt Anastasio

(inaudible)

Unidentified Analyst

Curt or Paul either one of you, if you could talk just in general about what is going over the dynamics between Venezuelan supplies, Brazilian and how is it the fact that WTI is so cheap that feed stocks coming out of U.S. refineries since low relative to what we’re getting out of Venezuela right now if you can just spend a little bit of time talking about that from a 20,000 foot view?

Paul Brattlof

I think Venezuela they publically said they got opportunities to take crude different places. We have a contract with them and we worked very well with them to mutually find ways that we can to benefit. But we are still that’s a crude that we that fit our refineries very well, so that’s when – when I was talking part of this transition we want to make sure that we try – to try to find ways to fit all this flexibility in, but they have I think they see some of the other opportunities to take this crude to other places and they’ve worked with us very well, so we haven’t had any issues with them on that. So I don’t feel…

Unidentified Analyst

(inaudible).

Paul Brattlof

But I mean you can, you can go into may be more U.S. asphalt supply dynamic (inaudible) Yeah let’s – and in the crude imports or asphalt, I just want to make sure, you answer the right question.

Curt Anastasio

Well, in crude it’s goes into (inaudible).

Unidentified Analyst

Okay, okay. Yeah, what I mean Paul…

Curt Anastasio

I think, Paul covered it really, really well in his presentation. When he said, you’ve got the Mid-Continent refiners all of a sudden it become really profitable. If you follow this business and part of the reason for that is they can run the Canadian crude and the inland crudes are relatively cheap compared to the water-borne crudes.

So they’re running flat. They're making hay while the sun shines, they’re running flat out and a lot of those plants when they do that lease-to-lease cokers come in and make a lot asphalt when they do that.

And [arbitral] he mentioned the rack price has been and the East Coast been so much higher than our Mid-Continent. The arbitrage is open for them to move asphalt to East Coast. So what we’ve tried to do is buy that asphalt and cut back on our production. Okay, how much can we buy? And we can buy a lot. But it’s somewhat logistics constrain, how much we can buy.

And not only it is in our end, I mean you got to have a (inaudible) of railcars to do it and get them through switching stations and all that stuff. And you have to have enough terminals that receive locations that can do it in enough volume to make worthwhile the shipping by rail to the East Coast.

So part of what we're doing in the 2012 budget is, a big component as we want to buy finished asphalt and we want to have the logistics to rails and terminals in the right locations, where we can really make that a sensible, profitable operation for us. And then have the place – all that flexibility, have that flexibility to buy from the Mid-Continent or buy less and produce more. And if we're going to produce more, we want – although we are crude costs and that’s where that rail – rail and Canadian Paulsboro comes in and where the [Peregrine] comes in. So it’s really all about keeping your options open and blend into fuel oil when the fuel oil market is better and asphalt having the terming locations to do that. Again, in the right location with the right assets so that you can do that profitably when that’s a better market to tap than the asphalt market. So all of this is getting us through to the period where asphalt demand comes back, which it will, I mean inevitably will at some point it’s just a matter of when, there is no question that it will. I don’t think we’re going to become Nigeria overnight anyway.

Unidentified Analyst

Curt

Curt Anastasio

Yeah.

Unidentified Analyst

You’re weighted to the hot mix asphalt as opposed to the motion project.

Curt Anastasio

Right, and we do make something called warm mix just to finish out the picture for you, which is high margin, small volume. I mean we’ve been working with the State Department of Transportation to develop this so called warm mix market a little better, so to specialize.

Unidentified Analyst

But my question really is, isn’t your mix more weighted towards the private type projects as opposed to the highway projects or you change in that.

Curt Anastasio

No, no, it’s really both.

Unidentified Analyst

I think it’s both, but also you’re seeing a lot of the states go to more of a maintenance mode and, so we’re switching our production to make more of the maintenance products where we can. So what is, maybe you can explain that better because I thought you were much more weighted towards that hot mix asphalt which is not the maintenance type product? Are you able to shift that around? Is that what you’re doing?

Curt Anastasio

We’re able to shift a little bit. But you’re right. It is, what you’re seeing is a lot of the hot mix goes, I mean some of the guys that are making the roads are switching to the more the maintenance and in certain locations we can but not all the locations. We are tied more to the hot mix type business, the majority of it.

Unidentified Analyst

Right, and that which says that you’re leaving in an area that could actually be multiple years and coming back unless you are able to shift over to the public or to the maintenance side.

Curt Anastasio

And I think more of it is more to the roads of the highway construction and they come back in and they put in a thick layer on that. A lot of the, maybe Mike can help me on this, a lot of the barrels, I’ve heard the demand is out in the rural areas but they still use the lot of the hot mix in the major (Inaudible) they come in put a thick layer on that.

Unidentified Analyst

Okay. If I can just a question a lot of projects here in the Eagle Ford and related to it and lot of things happening very quickly, I had to reread the press release when I saw that this 8-inch line was going to be online at the end of September I couldn’t believe how fast that happened. You and a lot of others are pursuing projects any right up ways or regulatory issues to think about here as new pipe is going into the ground?

Curt Anastasio

Well the answer to that is yes but the advantage we have and Danny tried to emphasize this in his presentation. We have pipe in the ground underutilized that traverses the Eagle Ford construction areas. That’s why we are able to do that at 8-inch line by the end of September that is why we are able to have two projects already flowing oil with several more to come in rapid succession.

So we had that advantage, we had the disadvantage for a while of underutilized assets but long behold, they are in the right place to get filled up, so that’s where we are going to be going through over the next couple of years, is filling up underutilized assets with some new construction and sometimes it is third party construction like Danny showed you on the map the TexStar and the Velocity people building new lines to our origin point, our terminal at Oakfield that we’re building to origin Three Rivers barrel. So that’s the advantage we had is that we can get going with this fast. A lot of people announced projects that are way off before they’re actually flowing oil. And again, we’re not pretending we’re going to get a million barrels a day of Eagle Ford likewise we’re not. We think we’re going to get that 200 to 250,000 range. I think I’m ready for a cocktail. Yeah. The good thing is you know we are all here for the next day too. And so you’ll have full access to ask us anything at anytime and be happy to talk to you about it. And we have some other executives in the audience here. We should have introduced, we have Mike Hoeltzel who is a part of our Strategic Direction, and then we have Brad Barron, our General Counsel, and we’ve got Gulf Coast guys here and who else…

Paul Brattlof

Todd is in the back.

Curt Anastasio

Todd Denton who is over Operation.

Danny Oliver

And then John who runs St. James is there.

Curt Anastasio

We’ve got plenty of people that you can pick on. So, Julie we’re going to probably adjourn this session. We don’t need to meet in the lobby till 6:15.

Unidentified Company Representative

That’s right, if everyone wants to take a little break, be in the lobby at 6:15.

Curt Anastasio

We’ll be in our room or meet us at the bar.

Unidentified Company Representative

We’ll move certainly over to Emerald for dinner and its business casuals, smart casuals, coat and tie is not required in the lobby.

Curt Anastasio

Okay. Thank you.

Unidentified Company Representative

So in the lobby. Sure.

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