Transition Issues

Troy / Jim:

The following are issues or concerns that I think need to be addressed. If
its OK I will pass these on as the pop into my head.
1) The 2001 Ad Valorem Tax should be allocated at closing based on the
period of time each entity owns the facilities. This is important since
the 2001 tax owed should be significantly higher (2 to 3 times the
2000 value) given the higher pricing.
2) Houston PipeLine has an Agricultural Exemption on the land out at Bammel
on the Ad Valorem Tax. I believe this Exemption has to be renewed
every two years. I would think that Enron would want to retain
responsibility for renewing this exemption. Both parties have a vested
interest since it will impact AEP's tax liability over the next 30
years but Enron wants the facility back with the exemption intact.
3) Houston PipeLine also has an agreement with the state of Texas regarding
Production Tax. HPL only pays Production Tax on 7.5% of the
withdrawal volumes. I do not think this will be impacted by the sale
but it might be worth a quick review by the lawyer's.
Ted Ryan can discuss the Ad Valorem Tax issues with you and the last person I
talked to about the Production Tax issue was Dan Hyvl.

Hope this is what you are looking for in this process.

Jim Schwieger