Oxy Deal

We hope to get the documents for this deal signed up within the next several
days. Once these documents are executed, our biggest challenge will be to
accomplish all of the "physical" things
(permitting/approvals/construction,etc.) that will be necessary for us to
perform on this deal. While we have every expectation that we will be able
to accomplish these things, our Bakersfield gas plant is in a very sensitive
environmental location, and we must acknowledge that there is always the
chance that we will not be able to get all required approvals, etc. from all
applicable authorities. We have built strong "outs" into our agreements with
Oxy to protect us against this possibility (we won't be liable to them if we
can't perform because we can't get the needed permits/approvals), but we all
need to recognize that there is at least some degree of economic loss (in the
form of sunk costs) that we will suffer if this deal does not go through.

I believe that Enron's financial group has okayed this deal (Joe, please
confirm), and that we have spent about $1.5 million on this project to date.
Also, it is my understanding that we will be spending about $250.000 on this
deal per week as we move forward. My understanding is that approximately
half of what we have already spent is on supplies/pipe/materials that would
be sellable/reusable if this deal does not ultimately make it for the reasons
stated above. I do not know the percentage of future expenses that would be
"salvageable."

In any case, this deal is a great opportunity for our West Coast segment, and
our mindset is that we WILL be successful in completing all
construction/permitting needed to perform with Oxy. We want to begin
performing with Oxy as soon as possible, and to do this, we are
building/spending/constructing while, at the same time, nailing down all
needed approvals. Thanks. SWD