FERC Issues

Heather,

I talked further with Transwestern Counsel today concerning the issues and
have the following points;

1. FERC was made aware of the Compression Services arrangement with ECS in
the filings for the certification of the Kachina units. FERC simply didn't
ask any further questions in that proceeding. The Operation & Maintenance
Agreements in place for the Kachina units essentially accomplishes the same
tasks as the Operational Control Agreement in Gallup. TW feels the O&M
agreements would be adequate to address any concerns about TW's regulatory
responsibility over the compressor facilities. The Operational Control
agreement was put into place in the Gallup Transaction because it was thought
to be easier to give FERC exactly what is was looking for rather than provide
them with the Gallup O&M Agreement which might unecessarily complicate the
certification process at that time.

2. There is no basis in FERC Regs or the NGA for FERC to impose any type of
penalty or discontinue the Compression Service due to TW's operation of
Kachina without the Operational Control Agreement. No regs or law address
this situation. Again this is tempered by the fact that FERC was made aware
of the arrangement and didn't ask any questions and the O&M agreement is in
place to accomplish control for TW.

3. I also faxed you a copy of Section 19© of the NGA which indicates that
the petition for rehearing does not effect the status of the certificate.
Construction is moving ahead and the targeted start date is May 1.

I will forward the filing TW made wrt to the Operational Control Agreement as
soon as I recieve it. Let me know if you have any further questions (713)
853-3512.