1178575--9/6/2006--K-SEA_TRANSPORTATION_PARTNERS

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Risks Inherent in Our Business Marine transportation is an inherently risky business. A decline in demand for, and level of consumption of, refined petroleum products could cause demand for tank vessel capacity and charter rates to decline, which would decrease our revenues and profitability. Our business would be adversely affected if we failed to comply with the Jones Act provisions on coastwise trade, or if those provisions were modified, repealed or waived. We may not be able to grow or effectively manage our growth. Increased competition in the domestic tank vessel industry could result in reduced profitability and loss of market share for us. We rely on a limited number of customers for a significant portion of our revenues. The loss of any of these customers could adversely affect our business and operating results. Voyage charters may not be available at rates that will allow us to operate our vessels profitably. We may not be able to renew time charters, consecutive voyage charters, contracts of affreightment and bareboat charters when they expire. We must make substantial expenditures to maintain the operating capacity of our fleet, which will reduce our cash available for distribution. Capital expenditures and other costs necessary to operate and maintain a vessel vary depending on the age of the vessel and changes in governmental regulations, safety or other equipment standards. Our purchase of existing vessels carries risks associated with the quality of those vessels. We are subject to complex laws and regulations, including environmental regulations, that can adversely affect the cost, manner or feasibility of doing business. Our insurance may not be adequate to cover our losses. Because we obtain some of our insurance through protection and indemnity associations, we also may be subject to calls, or premiums, in amounts based not only on our own claim records, but also the claim records of all other members of the protection and indemnity associations. Terrorist attacks have resulted in increased costs and have disrupted our business. Continued hostilities in the Middle East or other sustained military campaigns may adversely impact our results of operations. We depend upon unionized labor for the provision of our services in certain geographic areas. Any work stoppages or labor disturbances could disrupt our business in those areas. Our employees are covered by federal laws that may subject us to job-related claims in addition to those provided by state laws. We depend on key personnel for the success of our business. Due to our lack of asset diversification, adverse developments in our marine transportation business would reduce our ability to make distributions to our unitholders. Changes in international trade agreements could affect our ability to provide marine transportation services at competitive rates. Risks Related to Our Common Units We may not have sufficient cash from operations to enable us to pay the minimum quarterly distribution following establishment of cash reserves and payment of fees and expenses, including payments to our general partner. K-Sea General Partner L.P. and its affiliates have conflicts of interest and limited fiduciary duties, which may permit them to favor their own interests to the detriment of our unitholders. Even if unitholders are dissatisfied, they cannot remove our general partner without its consent. Our general partner s discretion in establishing cash reserves may reduce the amount of cash available for distribution to unitholders. In calculating our available cash from operating surplus each quarter, we are required to deduct estimated maintenance capital expenditures, which may result in less cash available for distribution to unitholders than if actual maintenance capital expenditures were deducted. We may issue additional common units without the approval of unitholders, which would dilute unitholders ownership interests. Our partnership agreement currently limits the ownership of our partnership interests by individuals or entities that are not U.S. citizens. This restriction could limit the liquidity of our common units. Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price. Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units. Cost reimbursements due our general partner and its affiliates will reduce cash available for distribution to unitholders. Unitholders may not have limited liability if a court finds that unitholder action constitutes control of our business. Restrictions in our debt agreements may prevent us from engaging in some beneficial transactions or paying distributions. The control of our general partner may be transferred to a third party without unitholder consent. Our affiliates may engage in activities that compete directly with us. The IRS could treat us as a corporation for tax purposes, which would substantially reduce cash available for distribution to unitholders. A successful IRS contest of the federal income tax positions we take may adversely impact the market for our common units, and the costs of any contest will be borne by us and, therefore, indirectly by our unitholders and our general partner. Unitholders may be required to pay taxes on income from us even if they do not receive any cash distributions from us. Tax gain or loss on the disposition of our common units could be different than expected. Tax-exempt entities and non-U.S. persons face unique tax issues from owning common units that may result in adverse tax consequences to them. We registered as a tax shelter under prior law. This may increase the risk of an IRS audit of us or a unitholder. We treat each purchaser of common units as having the same tax benefits without regard to the units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units. Unitholders may be subject to state, local and foreign taxes and return filing requirements as a result of investing in our common units. We have subsidiaries that are treated as corporations for federal income tax purposes and subject to corporate-level income taxes. The sale or exchange of 50% or more of our capital and profits interests during any twelve-month period will result in the termination of our partnership for federal income tax purposes.

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1178575--9/6/2006--K-SEA_TRANSPORTATION_PARTNERS_LP