SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

KENAN TRANSPORT COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
2

KENAN TRANSPORT COMPANY
CHAPEL HILL, NORTH CAROLINA
----------------------------------------------------

Notice of Annual Meeting of Shareholders
May 1, 2000

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

The Annual Meeting of the Shareholders of KENAN TRANSPORT COMPANY, a
North Carolina corporation, will be held at The Kenan Center, Bowles Drive
(adjacent to the Dean Smith Student Activities Center), Chapel Hill, North
Carolina, at 9:00 A.M. local time on Monday, May 1, 2000, for the following
purposes:

(1) To elect a Board of Directors for the ensuing year;

(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.

It is requested that you read carefully this Notice of Annual Meeting
and the accompanying Proxy Statement for information on the matters to be
considered and acted upon.

The Board of Directors of the Company has fixed the close of business on
March 28, 2000 as the record date for the determination of shareholders entitled
to notice of and to vote at the meeting.

Information relating to the Company's activities and operations during
the fiscal year ended December 31, 1999 is contained in the Company's Annual
Report, which is enclosed.

Your Proxy is enclosed. You are cordially invited to attend the meeting
in person, but if you do not expect to attend, please date and sign your Proxy
and return it promptly in the enclosed envelope.

WILLIAM L. BOONE
Secretary

March 30, 2000
Chapel Hill, North Carolina

KENAN TRANSPORT COMPANY
P.O. Box 2729
Chapel Hill, North Carolina 27515-2729

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

PROXY STATEMENT

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

GENERAL INFORMATION

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of KENAN TRANSPORT COMPANY (the "Company") for
the Annual Meeting of the Shareholders to be held on May 1, 2000 at 9:00 A.M.
local time at The Kenan Center, Bowles Drive (adjacent to the Dean Smith Student
Activities Center), Chapel Hill, North Carolina. This Proxy Statement and the
accompanying Proxy will be mailed on or about April 4, 2000.

Holders of record of shares of the Common Stock of the Company at the
close of business on March 28, 2000 will be entitled to vote at the Annual
Meeting of Shareholders.

Shareholders who execute and return proxies will retain the right to
revoke them at any time before they are voted. When executed and not so revoked,
proxies will be voted in accordance therewith.

The solicitation of proxies by the Board of Directors will be by mail.
The total expense of such solicitation will be borne by the Company and will
include reimbursement to brokerage firms and others for their expenses in
forwarding solicitation material regarding the meeting to beneficial owners.
Further solicitation of proxies may be made by telephone or oral communication
with some shareholders of the Company following the original solicitation. All
such further solicitation will be made by regular employees of the Company who
will not be additionally compensated therefor, or by the Company's transfer
agent, and the cost will be borne by the Company.

OUTSTANDING SECURITIES AND VOTING RIGHTS

Only shareholders of record at the close of business on March 28, 2000
will be entitled to notice of and to vote at the Annual Meeting of Shareholders.
On such date, the number of outstanding shares of Common Stock, no par value,
was 2,421,562. Each share of Common Stock is entitled to one vote.

The enclosed Proxy is designed to permit each shareholder of record at
the close of business on the record date of March 28, 2000 to vote for the
election of directors and on other matters coming before the meeting. Two
directors of the Company, Thomas S. Kenan, III and Lee P. Shaffer, have been
designated as proxies to vote shares in accordance with the instructions of the
Proxy.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Unless otherwise noted, the following table shows the ownership on March
1, 2000, of the Company's Common Stock by each person who owned of record, or
was known by the Company to own beneficially, more than five percent (5%) of
such stock:

Name and Address Shares Owned Beneficially Percent
- ---------------- ------------------------- -------

Frank H. Kenan 1988 Trust(1)
100 Europa Drive, Suite 525 789,360 32.6%
Chapel Hill, NC 27514

1965 Trust established by
Sarah Graham Kenan (2) 300,000 12.4%
345 Park Avenue
New York, NY 10154-1002

Royce & Associates, Inc.(3)
1414 Avenue of the Americas 209,830 8.7%
New York, NY 10019

Franklin Resources, Inc.(3)
777 Mariners Island Blvd. 143,600 5.9%
San Mateo, CA 94403

Lee P. Shaffer(4)
Post Office Box 2729 229,265 9.3%
Chapel Hill, NC 27515

- ---------------------
1 There are six trustees of the Frank H. Kenan 1988 Trust, each of whom
may be deemed to own beneficially the shares of common stock held
thereby. The trustees are Elizabeth P. Kenan, Thomas S. Kenan, III, Owen
G. Kenan, Elizabeth Kenan Howell, Annice Hawkins Kenan and Braxton
Schell.

2 There are four trustees of the 1965 Trust established by Sarah Graham
Kenan, each of whom may be deemed to own beneficially the shares of
common stock held thereby. The trustees are Thomas S. Kenan, III, Owen
G. Kenan, Elizabeth Kenan Howell and Morgan Guaranty Trust Company of
New York.

3 Ownership as of December 31, 1999 as reported to the Company on Schedule
13G.

4 Includes 56,360 shares for Mr. Shaffer that may be acquired within 60
days of March 1, 2000 pursuant to options granted under the Company's
1998 Long-Term Incentive Plan.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock, as of March 1, 2000, by its
directors, nominees for election as directors, named executive officers and by
all directors and executive officers as a group:

Officer, Director
Name of Beneficial Owner and/or Nominee Shares Owned Beneficially Percent
- ------------------------ ----------------- ------------------------- -------

Lee P. Shaffer Officer, Director 229,265 (3) 9.3%
Owen G. Kenan Officer, Director 32,820 (1),(2) 1.4%
Thomas S. Kenan, III Officer, Director 36,000 (1) 1.5%
William L. Boone Officer 66,789 (3) 2.7%
L. Avery Corning Officer 12,107 (3) *
William P. Prevost Officer 10,900 (3) *
James H. Reid Officer 10,900 (3) *
William C. Friday Director 1,100 *
William O. McCoy Director 0 *
Paul J. Rizzo Director 0 *
Braxton Schell Director 1,000 (4) *
Kenneth G. Younger Director 500 *

All Directors and Executive Officers as a Group 441,948 (1),(2)
(15 persons) 17.3%

* Less than 1%

- ------------------
1 The shares shown as beneficially owned by Owen G. Kenan, Thomas S. Kenan
III and all directors and executive officers as a group do not include
1,089,360 shares owned by trusts of which Owen G. Kenan and Thomas S.
Kenan, III are beneficiaries as well as trustees, and 18,900 shares held
by The Kenan Family Foundation, a nonprofit corporation of which each is
a director. When these amounts (1,089,360 and 18,900) are added to the
shares listed in the table above for each of the following individuals
and directors and executive officers as a group, the aggregate
beneficial ownership of stock and percentage of outstanding stock owned
by each person or group is as follows: Owen G. Kenan - 1,141,080 or
47.1%; Thomas S. Kenan, III - 1,144,260 or 47.3%; and all directors and
executive officers as a group - 1,550,208 or 60.7%.

2 Includes 1,380 shares owned by Owen G. Kenan's wife, 10,950 shares hold
by his wife as custodian for their children under the Uniform Gifts to
Minors Act and 11,490 shares held by a trust of which Owen G. Kenan
serves as trustee.

3 Includes 56,360 shares for Mr. Shaffer, 22,920 shares for Mr. Boone,
9,400 shares for Mr. Corning, 9,400 shares for Mr. Prevost, 9,400 shares
for Mr. Reid and 131,560 shares for all directors and executive officers
as a group which may be acquired within 60 days of March 1, 2000
pursuant to options granted under the Company's 1998 Long-Term Incentive
Plan.

4 Does not include 789,360 shares held by a trust of which Mr. Schell
serves as trustee.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under federal securities laws, the Company's directors, its executive
officers, and any persons holding more than 10 percent of the Company's stock
are required to report their ownership of the Company's stock, as well as any
changes in that ownership, to the Securities and Exchange Commission. Specific
due dates for these reports have been established, and the Company is required
to report in this Proxy Statement any failure during fiscal year 1999 to file
such reports in a timely fashion. Based solely on review of the copies of
reporting forms furnished to the Company, or written representations that no
forms are required, the Company believes that during 1999, all filing
requirements of its officers, directors and 10 percent shareholders for
reporting to the Securities and Exchange Commission their ownership and changes
in ownership of shares (as required pursuant to Section 16(a) of the Securities
and Exchange Act of 1934) were fulfilled.

ELECTION OF DIRECTORS

At the meeting, the shareholders will elect the Company's directors. The
Board of Directors has set the number of directors to be elected at the 2000
Annual Meeting at eight. All members of the present Board are nominees for
election to hold office until the next annual meeting of the shareholders and
until their successors have been duly elected. A plurality of the votes cast is
required to elect each director. Broker nonvotes and abstentions will not affect
the election results if a quorum is present.

If the enclosed Proxy is duly executed and received in time for the
meeting and if no contrary specifications are made as provided therein, it is
the intention of the persons named therein to vote the shares represented
thereby for the eight persons nominated for election as directors of the
Company. If any nominee should refuse or be unable to serve, the Proxy will be
voted for such persons as shall be designated by the Board of Directors to
replace any such nominee. The Board of Directors presently has no knowledge that
any of the nominees will refuse or be unable to serve.

INFORMATION ABOUT NOMINEES FOR DIRECTOR

The following information is furnished with respect to nominees:

Principal Occupation;
Name, Period Served Business Experience Past Five Years;
Other Directorships and Age
- ----------------------------- ---------------------------------------------------------------------------

Thomas S. Kenan, III(1) Chairman of the Board of Directors since July 1996; President, The
Director Since 1964 Westfield Company, Durham, NC; Trustee, The Duke Endowment,
Charlotte, NC; Trustee, The William R. Kenan Jr. Charitable Trust,
Chapel Hill, NC; Director, Flagler System, Palm Beach, FL. Age 62.

Owen G. Kenan(1) Vice Chairman of the Board of Directors since July 1996; President and
Director Since 1978 Chief Executive Officer, Kenan Enterprises, Inc., President and Chief
Executive Officer, Kenan Oil Company, Inc., Chapel Hill, NC (1987-
1997); Director, Central Carolina Bank & Trust Company; Director and
Vice Chairman, Flagler System, Palm Beach, FL. Age 56.

William C. Friday Retired; President, The William R. Kenan Jr. Fund, Chapel Hill, NC
Director Since 1978 (1983-1998). Age 79.

William O. McCoy Interim Chancellor of the University of North Carolina at Chapel Hill;
Director Since 1996 Partner, Franklin Street Partners, Chapel Hill, NC; Vice President-Finance,
The University of North Carolina, General Administration (1995-1998);
Vice Chairman, BellSouth Corporation-Telecommunications (1984-1994);
Director, Carolina Power & Light Company; Director, The Liberty
Corporation; Director, The Weeks Corporation; Director, Fidelity
Investments. Age 66.

Paul J. Rizzo Chairman, Franklin Street Partners, Chapel Hill, NC; Vice Chairman, IBM
Director Since 1996 Corporation (1993-1994); Director, Morgan Stanley; Director, Ryder
Systems; Director, McGraw-Hill Companies, Inc.; Director, Johnson &
Johnson. Age 72.

Braxton Schell Attorney-at-Law, Schell Bray Aycock Abel & Livingston P.L.L.C.,
Director Since 1986 Greensboro, NC; Director, Flagler System, Palm Beach, FL. Age 75.

Lee P. Shaffer(2) President of the Company since 1975; Chief Executive Officer of the
Director Since 1967 Company since July 1996; Chief Operating Officer of the Company (1975-
1996). Age 60.

Kenneth G. Younger Retired; Chairman and Chief Executive Officer, Carolina Freight
Director Since 1996 Corporation (1977-1990 and 1993-1994); Director, Trailer-Bridge, Inc.
Age 74.

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

1 Thomas S. Kenan, III and Owen G. Kenan are brothers.

2 Lee P. Shaffer is the father of Lee P. Shaffer, III, the Vice President
of Operations Services, an executive officer of the Company.

BOARD OF DIRECTORS AND BOARD COMMITTEES

The Board of Directors met seven times in 1999. Each director attended
at least seventy-five percent of the aggregate of those meetings and the
meetings of each committee of the Board on which he served except for Owen Kenan
who was absent from two Board meetings. In addition, the Board took action by
unanimous written consent in lieu of a meeting four times during 1999.

The Board of Directors has an Audit Committee, a Compensation Committee
and an Executive Committee. The Board of Directors has no standing Nominating
Committee. A description of the duties and members of, and number of meetings
held by, each committee is provided below.

Audit Committee

The Audit Committee assists the Board of Directors in assuring that the
Company's financial reports are fairly presented and accurate and that the
Company has an adequate system of internal accounting controls. It also reviews
the report of the Company's independent public accountants. The Audit Committee
held two meetings during the fiscal year ended December 31, 1999. Its members
for that fiscal year were William C. Friday, William O. McCoy and Paul J. Rizzo.

Compensation Committee

The Compensation Committee recommends compensation for executive
officers of the Company and approves the grant of stock options and other awards
under the Company's 1998 Long-Term Incentive Plan. The Compensation Committee
held one meeting and acted once by unanimous written consent during the fiscal
year ended December 31, 1999. Its members for that fiscal year were William O.
McCoy, Paul J. Rizzo and Kenneth G. Younger.

Executive Committee

The members of the Executive Committee are Owen G. Kenan, Thomas S.
Kenan, III and Lee P. Shaffer. The Committee may exercise all the authority of
the Board of Directors in the management and affairs of the Company, except that
the Committee may not authorize distributions; approve or propose to
shareholders action that North Carolina law requires be approved by
shareholders; fill vacancies on the Board of Directors or on any committee;
amend the Articles of Incorporation; adopt, amend, or repeal bylaws; approve a
plan of merger not requiring shareholder approval; authorize or approve
reacquisition of shares of capital stock of the Company, except according to a
formula or method prescribed by the Board of Directors; or authorize or approve
the issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences, and limitations of a class or
series of shares. The Executive Committee did not meet in 1999.

COMPENSATION OF DIRECTORS

During 1999, Thomas S. Kenan, III was paid an annual retainer of $52,000
for his services as Chairman of the Board. Each outside director is paid an
annual retainer of $6,000 plus an additional $1,500 for each meeting of the
Board or meeting of a Board Committee that he attends.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company leases its corporate offices in University Square at 143
West Franklin Street in Chapel Hill, North Carolina from the Frank H. Kenan 1988
Trust under a five-year lease agreement that became effective January 1, 1995
and was renewed for an additional three years in November 1999 under the same
terms. In 1999 the Company paid $411,720 in base lease payments to the Frank H.
Kenan 1988 Trust, the present owner of University Square. Based upon studies
performed by the Company of rental rates for comparable facilities, the Company
is satisfied that the rent paid does not exceed market rates in the area.

Braxton Schell is a partner in Schell Bray Aycock Abel & Livingston
P.L.L.C., a law firm that provides legal services to the Company.

EXECUTIVE COMPENSATION AND RELATED MATTERS

The following table sets forth the annual compensation paid or accrued
by the Company to or for the account of the Chief Executive Officer and the next
four most highly compensated executive officers for fiscal 1999 ("Named
Executive Officers") of the Company for the years ended December 31, 1999, 1998
and 1997.

Summary Compensation Table

Long Term Compensation Awards
-------------------------------------
Annual Compensation Payouts
------------------------------ -------------------------------------
Restricted Stock Securities All Other
Name and Salary Bonus(1) Awards(2) Underlying Options Compensation(3)
Principal Position Year ($) ($) ($) (#) ($)
------------------ ---- ------ -------- ---------------- ------------------ ---------------

Lee P. Shaffer, 1999 316,206 - 0 - - 0 - - 0 - 124,862
President, Chief Executive 1998 302,300 99,660 288,925 140,900 118,543
Officer 1997 290,600 90,667 - 0 - - 0 - 108,967

William L. Boone, 1999 178,761 - 0 - - 0 - - 0 - 54,855
Vice President - Finance 1998 170,900 37,598 117,475 57,300 55,412
Secretary, Treasurer 1997 164,300 51,262 - 0 - - 0 - 55,063

William P. Prevost, 1999 125,520 - 0 - - 0 - - 0 - 18,509
Vice President, Marketing 1998 120,000 21,360 46,125 23,500 17,158
1997 10,000 - 0 - - 0 - - 0 - - 0 -

L. Avery Corning, 1999 131,796 - 0 - - 0 - - 0 - 20,821
Vice President - Operations 1998 126,000 22,428 46,125 23,500 18,976
1997 121,100 37,783 - 0 - - 0 - 17,761

James H. Reid, 1999 241,626 - 0 - - 0 - - 0 - 27,846
President & Chief Operating 1998 192,500 34,265 52,000 23,500 19,916
Officer of Petro-Chemical 1997 - 0 - - 0 - - 0 - - 0 - - 0 -
Transport, Inc.

- ----------------------
1 Amounts shown for 1997 are based on the fair market value of stock
awarded that year under the Company's Stock Bonus Plan.

2 The value in this column is calculated by multiplying the closing price
of the Company's Common Stock on the date of grant of the restricted
stock by the number of shares awarded to each individual. The restricted
period for all grants of restricted stock is five years with 20% of the
stock granted becoming free of restrictions on the anniversary of the
date of grant each year, beginning in 1999. Each recipient of restricted
stock reported above will receive dividends and has the right to vote
the full number of shares granted. The number of shares owned and the
aggregate value of the restricted stock holdings of the Named Executive
Officers as of December 31, 1999 (based on a closing price of $32.175)
are as follows: Mr. Shaffer: 9100/ $292,792; Mr. Boone, 3,700/$119,048;
Messrs. Corning, Reid and Prevost, 1,500/$48,263 each.

8
11

3 Other compensation includes benefits paid or accrued by the Company
pursuant to the Company's Profit Sharing Retirement Plan (PSRP) and
Supplemental Executive Retirement Plan (SERP). Other compensation also
includes the value of split dollar life insurance premiums paid on
behalf of executive officers under a Senior Management Life Insurance
Plan (SMLIP). Plan benefits paid and/or accrued for the year ended
December 31, 1999 are presented below:

PSRP SERP SMLIP
Name: ($) ($) ($)
---- ----- ------ ------

Lee P. Shaffer 7,976 83,748 33,138

William L. Boone 7,976 30,531 16,348

William P. Prevost 6,257 6,057 6,195

L. Avery Corning 6,076 9,722 5,023

James H. Reid 7,976 19,870 --

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

Stock Options

None of the Named Executive Officers received any stock options under
the Company's 1998 Long-Term Incentive Plan during the fiscal year ended
December 31, 1999. The following table sets forth information with respect to
the five Named Executive Officers concerning the number and value of options to
purchase the Company's Common Stock outstanding at the end of 1999:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

Number of Securities Value of
Underlying Unexercised
Unexercised Options In-the-Money
Held at Options at
Number of Fiscal Year Fiscal Year
Shares End (#) End ($)(1)
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---- ----------- -------- ------------------- --------------

Lee P. Shaffer -0- -0- 28,180/112,720 11,976/47,906

William L. Boone -0- -0- 11,460/45,840 4,871/19,482

William P. Prevost -0- -0- 4,700/18,800 1,998/7,990

L. Avery Corning -0- -0- 4,700/18,800 1,998/7,990

James H. Reid -0- -0- 4,700/18,800 1,998/7,990

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

1 This is an estimate based on the aggregate dollar value of in-the-money,
unexercised options using the closing price of the Company's Common
Stock on December 31, 1999 of $32.175.

9
12

SEVERANCE, CHANGE IN CONTROL AND OTHER ARRANGEMENTS

The following Company plans provide for payments to be made to certain
Named Executive Officers upon the occurrence of specified events after a change
in control of the Company.

Senior Management Severance Plan

Each of the Named Executive Officers has entered into an agreement with
the Company that provides for payments to the covered individual under the
Company's Senior Management Severance Plan (the "Severance Plan"). The Severance
Plan provides for payments equal to two times the average base salary of the
covered individual for the immediately preceding three fiscal years if he is
terminated without cause or suffers a change in employment conditions within 24
months following a change in control of the Company. A change in control
includes (i) the acquisition by any person of beneficial ownership of securities
representing 50% or more of the combined voting power of the Company's
outstanding securities, (ii) the failure of the current Board members to
constitute a majority of the Board (except that any new Board member approved by
at least a majority of the current Board will be deemed to be a member of the
current Board), and (iii) the approval by the Board of the sale of all or
substantially all of the Company's assets or certain other mergers,
reorganizations or consolidations of the Company, which would result in the
occurrence of any event described in clauses (i) or (ii) above.

In exchange for payments under the Severance Plan, the covered
individual agrees to abide by certain restrictive covenants for a period of one
year following termination of his employment. Under these restrictive covenants,
the terminated employee agrees that he will not influence customers of the
Company to discontinue use of the Company's services, interfere with or disrupt
the relationships between the Company and any of its suppliers, distributors,
lessees or licensees, or solicit any employees of the Company to work for any
other person or firm.

1998 Long-Term Incentive Plan

Under the provisions of the Company's Incentive Plan, upon the
occurrence of a change in control of the Company, all stock options previously
issued become immediately exercisable for the underlying shares. The term change
in control as defined in the Incentive Plan includes substantially the same
events that constitute a change in control under the Severance Plan as described
above.

Senior Managers' Life Insurance Plan

The Senior Managers' Life Insurance Plan (the "Plan") contains a
provision that would require the Company to continue making premium payments for
any covered employee who is terminated within 24 months following a change in
control of the

10
13

Company. The definition of change in control in the Plan includes the sale or
transfer of all or substantially all of the Company's assets or a 50% change in
the ownership of the Company as a result of a merger, sale of shares or issuance
of new shares. The Company is obligated to provide continued coverage under the
Plan in the event of termination following a change in control until the later
of (i) the date the terminated participant turns 65 or (ii) the date on which
the terminated participant has been covered for 15 years. For each of the
current executive officers participating in the Plan, the fifteen year coverage
period will end in 2013.

COMPENSATION COMMITTEE REPORT

Compensation Committee Report

The Compensation Committee is comprised of three directors who are not
current or former employees of the Company. The Committee reviews the Company's
executive compensation philosophy and structure and considers performance
measures which should be used to determine cash bonuses and other forms of
incentive compensation for the executive officers on an annual basis. The
Committee has considered the advice of an outside consultant in determining
whether the amounts and types of compensation available to executive officers of
the Company are appropriate.

Compensation Philosophy

The Company maintains a compensation program that provides executive
officers with base salaries at competitive market levels and the opportunity to
earn incentive compensation when targeted performance goals are achieved. The
Committee believes that the overall compensation package, which the Company uses
to reward and motivate executive officers, enables the Company to attract and
retain the caliber of executives necessary to help it achieve targeted growth
and earnings objectives. The adoption of the 1998 Long-Term Incentive Plan (the
"Incentive Plan") in 1998 and the Executive Bonus Award Plan (the "Bonus Plan")
in 1999 increased the Company's ability to provide long- and short-term
incentive compensation. These additions to the Company's total compensation
package allow the Committee to link significant portions of executive
compensation to the Company's overall performance. Awards made under the
Incentive Plan are designed to encourage the retention of key executives and to
motivate superior performance over time while awards made under the Bonus Plan
provide a means of rewarding achievement of specified short-term performance
objectives established by the Committee at the beginning of each year.

Components of the Compensation Program

The five components of the Company's compensation program are: (i) base
salary, (ii) long-term incentive compensation in the form of stock options,
restricted stock and

11
14

similar awards; (iii) short-term incentive compensation in the form of cash
bonuses payable when specified performance objectives are achieved, (iv)
retirement benefits in the form of Company contributions on behalf of
participants in the profit sharing retirement plan and supplementary executive
retirement plan and (v) payment of premiums for senior managers' life insurance
policies.

Long-Term Incentive Compensation

The Incentive Plan was approved by shareholders at the Annual Meeting in
1998. It provides a number of different awards that can be used to reward those
persons who have contributed significantly to the success of the Company and to
provide incentive for them to remain with the Company. The Incentive Plan is
designed to allow the Committee maximum flexibility in structuring awards
through a combination of incentive stock options and nonqualified stock options,
restricted stock, stock appreciation rights, performance shares and
performance-based compensation awards ("Awards"). The Incentive Plan is also
intended to allow compensation paid to the Company's five most highly
compensated officers to qualify as performance-based compensation as defined in
Section 162(m) of the Internal Revenue Code.

Stock Options - In 1998, the Committee granted nonqualified stock
options to executive officers as indicated in the Summary Compensation
Table. The options vest in increments of 20% on February 3 of each year
over a period of five years beginning in 1999. In the event of a change
of control of the Company, as defined in the Incentive Plan, all
outstanding options become immediately exercisable. Stock options expire
one year after termination of employment if an employee ceases to be
employed by reason of death, disability or normal retirement or three
months after termination for any other reason. The Committee did not
award any stock options in 1999.

Restricted Stock Award - In 1998, the Committee granted certain
executives of the Company shares of restricted stock as indicated in the
Summary Compensation Table. The restrictions lapse in increments of 20%
each year on the anniversary date of the grant and all of the stock
awarded to each officer in 1998 will be fully vested and free of
restrictions by the year 2003. Certificates evidencing the restricted
stock have been issued but are being held in escrow by the Company to be
delivered to the holders as the restrictions lapse. Holders of
restricted stock receive all dividends and other incidents of ownership
from the date of grant. The Committee did not award any shares of
restricted stock in 1999.

Short-Term Incentive Compensation

The Bonus Plan provides a competitive short-term compensation component
to the Company's overall compensation package. Under the terms of the Bonus
Plan, the Committee has the authority to establish performance measures (from
among those specified

12
15

in the Bonus Plan) to be used in determining annual bonus awards. Unless the
Committee adopts another performance measure, the Company's annual Net Income
After Taxes is used. The Committee must establish a target amount of Net Income
After Taxes (the "Target Amount") within 90 days of the beginning of each year.
Once the Target Amount is determined, a threshold amount is set at 81% of the
Target Amount and a maximum amount is set at 135% of the Target Amount. The
Committee then creates a bonus award schedule indicating a range of bonus
payments to be paid to eligible participants depending on the level of Net
Income After Taxes that the Company achieves. In addition to achieving at least
the threshold level of Net Income After Taxes, the Company was required to
achieve at least a ten percent return on equity before any bonuses could be
paid. The Committee did not award any bonuses for 1999 because the Company did
not achieve the threshold amount of Net Income After Taxes, which was
established by the Committee in December 1998.

In December 1999, the Committee, with the advice of an outside
consultant who provided relevant market data, adopted a Target Amount of Net
Income After Taxes for 2000 and established applicable threshold and maximum
amounts as contemplated by the Plan. The Committee also recommended that the
Board of Directors adopt an amendment to the Bonus Plan to replace the
requirement that the Company achieve at least a ten percent return on equity
before any bonuses could be awarded with the requirement that the Company
achieve at least a six percent return on investment before any bonuses can be
awarded. Based on information provided by the outside consultant, the Committee
decided that return on investment is a more appropriate benchmark than return on
equity. The Board of Directors amended the Bonus Plan effective January 1, 2000
to reflect this change.

Salary

In establishing salary levels for executives, the Committee annually
monitors salaries at other businesses through a broad-based industry survey of
similar-sized companies. Salary levels are set to compare with averages as
reported for such companies based on revenue.

Mr. Shaffer has served as Chief Executive Officer of the Company since
1996. In evaluating his performance in 1999, the Committee considered the
Company's financial results and progress toward its strategic objectives. The
Committee also considered Mr. Shaffer's increased managerial responsibilities
during 1999 arising from the need to integrate the recently acquired operations
of Transport South, Inc. and Petro Chemical Transport, Inc. into the Company.

Mr. Shaffer received a 4.3 percent increase in base salary for the year
2000. He did not receive any Awards under the Incentive Plan or the Bonus Plan.
Mr. Shaffer also received the benefit of certain payments made on his behalf to
the Company's Profit Sharing Retirement Plan, Supplemental Executive Retirement
Plan, and Senior Management Life Insurance Plan in an aggregate amount of
$124,862, which amount represented

13
16

approximately 39% of Mr. Shaffer's salary, as well as other benefits available
to the Company's executives.

Salary levels for the other Named Executive Officers for 1999, 1998 and
1997 are reported in the Summary Compensation Table.

KENNETH G. YOUNGER PAUL J. RIZZO WILLIAM O. MCCOY

PERFORMANCE GRAPH

The following graph shows a five-year comparison of cumulative total
shareholder returns for the Company, the NASDAQ Market (US) Index and an index
of peer companies, assuming $100.00 investment on January 1, 1995, and the
reinvestment of all dividends.

COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG KENAN TRANSPORT COMPANY,
NASDAQ MARKET INDEX AND PEER GROUP

1994 1995 1996 1997 1998 1999
Kenan Transport 100.00 120.06 111.41 217.37 191.63 194.94
Peer Group 100.00 84.78 80.08 115.71 111.33 107.57
Nasdaq Market Index 100.00 129.71 161.18 197.16 278.08 490.46

14
17

INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP served as the independent public accountants for the
Company in 1999, and they will be considered for appointment for 2000 at the
Board of Directors' meeting following the meeting of shareholders. A
representative of the firm will be in attendance at the shareholders' meeting,
will have the opportunity to make a statement if he desires to do so and will be
available to respond to shareholder questions.

OTHER MATTERS

The Board of Directors knows of no other matters that may properly be,
or which are likely to be, brought before the meeting; however, if any other
matters are properly brought before the meeting, the persons who are named in
the enclosed Proxy or their substitutes will vote in accordance with their best
judgment on such matters.

SHAREHOLDER PROPOSALS

Shareholder proposals to be presented at the next annual meeting of the
Company's shareholders must be received by the Company at its principal offices,
Fifth Floor, University Square West, 143 West Franklin Street, Chapel Hill,
North Carolina 27516-3910, on or before December 6, 2000, in order to be
included in the Company's next Proxy Statement for such annual meeting.

Notice of a matter to be presented by a shareholder for consideration at
the next annual meeting of the Company's shareholders, other than pursuant to
the foregoing paragraph, will be considered untimely if not received by the
Company prior to February 20, 2001. Failure to give timely notice of such matter
will result in discretionary authority being conferred on management proxies to
vote with respect to the matter without any requirement for the Proxy Statement
to disclose how management intends to exercise its discretion.

By Order of the Board of Directors

WILLIAM L. BOONE
Secretary

March 30, 2000
Chapel Hill, North Carolina

15
18

- FOLD AND DETACH HERE -

KENAN TRANSPORT COMPANY

This Proxy Solicited on Behalf of the Board of Directors

The undersigned hereby appoints THOMAS S. KENAN, III and LEE P. SHAFFER, and
each or either of them as proxies, with full power of substitution and
revocation, to represent the undersigned and to vote, as designated below and
upon any and all other matters which may be properly brought before such
meeting, all shares of Common Stock of KENAN TRANSPORT COMPANY, which the
undersigned is entitled to vote at the Annual Meeting of the Shareholders of the
Company to be held on May 1, 2000 at The Kenan Center, Bowles Drive, Chapel
Hill, North Carolina at 9:00 A.M., local time or any adjournment thereof.

UNLESS OTHERWISE SPECIFIED BELOW, THIS PROXY WHEN PROPERLY EXECUTED, WILL BE
VOTED FOR THE NOMINEES FOR DIRECTOR.

(1) ELECTION OF DIRECTORS

[ ] FOR all nominees listed below; [ ] WITHHOLD AUTHORITY to vote for all
except vote withheld for the nominees nominees listed below
whose names are written in the space below

William C. Friday William O. McCoy Lee P. Shaffer
Owen G. Kenan Paul J. Rizzo Kenneth G. Younger
Thomas S. Kenan, III Braxton Schell

INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:

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

(Continued on Reverse Side)
19

- FOLD AND DETACH HERE -

(Continued from Reverse Side)

In their discretion, the proxies are authorized to vote upon such other matters
as may properly come before the meeting. If no direction is made, this proxy
will be voted FOR all nominees for Director.

Signed:
---------------------------

Please sign the Proxy exactly as
name appears hereon. If the holder
is a corporation or partnership,
please sign its name and add your
own name and title. When signing
as attorney, executor,
administrator, trustee or
guardian, please also give your
full title. If shares are held
jointly EACH holder must sign.

Dated:
----------------------------

IMPORTANT: PLEASE MARK, SIGN AND
RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.