Information Regarding The Board Of Managers

The business of Rio Vista is managed under the direction of the board of managers of Rio Vista GP LLC. The board conducts its business through meetings of the board and its committees. During 2006, the board held four meetings and the audit committee held four meetings.  No member of the board attended less than 75% of the meetings of the board and committees of which he was a member.

The board of managers is currently composed of three members, none of whom are members of the management of either Rio Vista GP LLC or Penn Octane.   The board has determined that all three of its managers, Messrs. Canney, Feiwell, and Manner, meet the independence requirements under the rules of the NASDAQ Stock Market.   As a result, although not required by NASDAQ rules applicable to limited partnerships, the majority of the board of managers is comprised of independent managers.

Communication With The Board Or Non-Management Managers

Unitholders and other interested parties may communicate with the board of managers or the Chairman of the Board by sending written communication in an envelope addressed to “Board of Managers” or “Chairman of the Board of Managers” in care of Company Secretary, Rio Vista Energy Partners L.P., 820 Gessner Road, Suite 1285, Houston, Texas 77024.

Audit Committee

The Company’s audit committee (Audit Committee) consists of Mr. Canney (Chairman), Mr. Feiwell, and Mr. Manner.  Mr. Canney and Mr. Manner are considered “audit committee financial experts” as defined in applicable rules of the Securities and Exchange Commission.  The board has determined that all three members of the audit committee meet the audit committee independence requirements under the rules of the NASDAQ Stock Market.  The board of managers has adopted a written charter for the audit committee.

The audit committee reviews and reports to the board on various auditing and accounting matters, including the quality, objectivity and performance of Rio Vista’s internal and external accountants and auditors, the adequacy of its financial controls and the reliability of financial information reported to the public. The audit committee met 4 times in 2006.

Compensation Committee

Rio Vista GP LLC has a compensation committee composed of managers whom the board has determined to be independent.

During the period from January 1, 2006 until October 6, 2006, Stewart J. Paperin, Emmett M. Murphy and Harvey L. Benenson served as the members of the compensation committee of Penn Octane.   For the period October 7, 2006 through December 31, 2006, Bruce I. Raben and Eugene A. Viele served as the members of the compensation committee of Penn Octane. 

Richard R. Canney, Murray J. Feiwell and Douglas G. Manner served as the members of the compensation committee of the General Partner during the year ended December 31, 2006. 

Conflicts Committee

Rio Vista’s partnership agreement provides for a conflicts committee composed of the managers whom the board has determined to be independent. The conflicts committee reviews and makes recommendations relating to potential conflicts of interest between Rio Vista and its subsidiaries, on one hand, and the General Partner and its affiliates (including Penn Octane), on the other hand. The members of the conflicts committee are Messrs. Feiwell, Canney, and Manner.

Report of the Audit Committee for Fiscal Year 2006

The primary function of the Audit Committee is oversight of Rio Vista's financial reporting process, public financial reports, internal accounting and financial controls, and the independent audit of the annual consolidated financial statements. The Audit Committee acts under a written charter. The Audit Committee reviews the adequacy of the charter at least annually. All of the committee’s members are independent and one of its members is an audit committee financial expert under Securities and Exchange Commission rules. The committee held four meetings in 2006 at which, as discussed in more detail below, the committee had extensive reports and discussions with members of management and Burton, McCumber & Cortez, L.L.P. (BMC), Rio Vista’s independent registered public accounting firm.  At each meeting, the committee met with management and BMC, both with and without management present.

In performing its oversight function, the committee reviewed and discussed the consolidated financial statements with management and BMC. Management and BMC informed the committee that Rio Vista's consolidated financial statements were fairly stated in accordance with generally accepted accounting principles. The committee discussed with BMC matters covered by the Statement on Auditing Standards No. 61 (Communication with Audit Committees), as modified or supplemented. In addition, the committee discussed management's evaluation of internal control over financial reporting.

The committee also discussed with BMC its independence from Rio Vista and management, including the matters in Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and the letter and disclosures from BMC to the committee pursuant to Standard No. 1. The committee considered the non-audit services provided by BMC to Rio Vista and concluded that the auditors' independence has been maintained.

Based on the reviews and discussions referred to above, in reliance on management and BMC, and subject to the limitations of its role described below, the committee recommended to the board, and the board has approved, the inclusion of the audited financial statements in Rio Vista's Annual Report on Form 10-K for the year ended December 31, 2006, for filing with the Securities and Exchange Commission.

The committee has also appointed BMC to audit Rio Vista's financial statements for 2007.

In carrying out its responsibilities, the committee looks to management and the independent auditors. Management is responsible for the preparation and fair presentation of Rio Vista's financial statements and for maintaining effective internal control. Management is also responsible for assessing and maintaining the effectiveness of internal control over the financial reporting process. The independent auditors are responsible for auditing Rio Vista's annual financial statements and expressing an opinion as to whether the statements are fairly stated in conformity with generally accepted accounting principles. The independent auditors perform their responsibilities in accordance with the standards of the Public Company Accounting Oversight Board.

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