Pearson's June 9, 2000 letter questions why $.10 or $.11 were deducted from
the Transco and Koch indices in connection with the sale of Mobile Bay Block
870 gas.

We responded in detail on October 3.  In addition to those answers, we
should keep in mind that market value cannot necessarily be calculated with
mathematical precision.  Market value is often described in terms of a
range.  Indeed, the Inside FERC's Gas Market Reports publishes not only an
index price, but also a range of prices for each pipeline pricing point.

In looking at the applicable indices for those two pipelines for some of the
sample months, it is clear that, if $.10 or $.11 were deducted from the
index price, then the resulting price would still be in the range as
published by Inside FERC.

For example, in December 1996, the Transco Zone 3 index price was $3.82.
The published range was $3.38 to $3.95.  So adjusting the index by 10 cents
still keeps you well within the range.

Similarly, for the 1996 Koch So. La. index.  The index price was $3.82.  The
range was $3.55 to $3.94.  Again, an 11 cent adjustment is still well within
the range.

A quick review of other months shows that sometimes the range was narrower,
and the adjustments would take you outside the range.  Nonetheless, we
should keep this background information in mind in case Justice continues to
pursue this point.






Charles D. Tetrault
Vinson & Elkins L.L.P.
1455 Pennsylvania Ave. N. W.
Washington, D.C. 20004
ctetrault@velaw.com
202.639.6551 [voice]
202.639.6604 [fax]


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