Gerald:  Thanks for the info.  Very interesting.  Sounds to me like
Wildhorse won't be acknowledging "unprofitability" any time soon.  That
would reduce the amount of gas committed to the contract, and even if it
doesn't actually want to transport that gas at the contract price, Wildhorse
will have even less desire to admit in advance of a sale that its committed
reserves have been declining drastically.  Your letter will, however, throw
an interesting new element into the Tom Brown/Kinder Morgan discussions.
Wouldn't it be fun to see how these "partners" go about handling formulation
of a response?

Craig

  -----Original Message-----
  From: Gerald Nemec [mailto:Gerald.Nemec@enron.com]
  Sent: Wednesday, August 02, 2000 1:20 PM
  To: ccarver@alfers-carver.com
  Subject: Re: Summary of Tom Brown Meeting



  Craig,  FYI.  Some internal discussions.


  ----- Forwarded by Gerald Nemec/HOU/ECT on 08/02/2000 02:19
PM -----
  |--------+------------------------>
  |        |          Gerald Nemec  |
  |        |                        |
  |        |          08/02/2000    |
  |        |          02:07 PM      |
  |        |                        |
  |--------+------------------------>

>---------------------------------------------------------------------------
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    |
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    |      To:     Dan J Bump/DEN/ECT@ENRON
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    |      cc:     Scott Josey/Corp/Enron@ENRON, Brian
Redmond/HOU/ECT@ECT, Joan |
    |      Quick/HOU/ECT@ECT, Barbara Gray, Teresa G
Bushman/HOU/ECT@ECT         |
    |      Subject:     Re: Summary of Tom Brown
Meeting(Document link: Gerald   |
    |      Nemec)
|

>---------------------------------------------------------------------------
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  Confidential Work Product - Attorney Client Privilege

  Dan,  Our letter was definitely structured to encourage a
quick solution.  As
  the situation stands now, Wildhorse's possible responses to
the letter are as
  follows:

  1.  Declare Unprofitability wrt to the gas covered by the
amendment.
       If they do so, then they have the obligation to provide
alternatives to
  Crescendo, one of which is release of the gas.  You are
right, there is no time
  frame in the contract under which they must resolve these
alternatives.  That is
  a risk I pointed out early.  However, in our letter to
Wildhorse, I proposed a
  time frame to resolve these issue of 2 weeks.  If Wildhorse
is not working with
  us in good faith within a commercially reasonable time then
we will have to make
  a choice:
            A.  Go for a Declaratory Judgment to have the gas
released from the
  contract.  This will take time.  Depending on court docket
loads, 6 months
  to 1 year.

            B.  Inform Wildhorse that we have been unable to
reach an agreement
  within a commercially reasonable time and they have not
negotiated in
  good faith and we consider the gas released (contract
breached by Wildhorse) and
  that we will build our own system.  Then Crescendo would
build its own
  system and risk a suit by Wildhorse.

  2.  Not declare Unprofitability
       If Wildhorse does not declare unprofitability, then
they have the
  obligation under the contract to take the gas in accordance
with its terms.  The
  only complication is that under the contract, Wildhorse's
obligation to take the
  gas is subject to the downstream carriers ability to receive
the aggregate gas
  stream.  Depending on Wildhorse's flow dynamics and our
plant placement,
  Wildhorse could use this as reason to refuse delivery of our
gas.  After your
  field meeting and our engineering assessment, hopefully we
will have a better
  understanding of that situation.  If Wildhorse does not
declare unprofitability,
  we would demand evidence and assurances that they will be
able to take the gas
  upon start up of the treating plant.

  If Wildhorse does not declare unprofitability, but continues
to discuss
  renegotiating of this deal, I would very directly ask them
"under what provision
  of the contract do they believe they have the right to
renegotiate any fees?".
  They don't have a right to renegotiate under the contract
without
  unprofitability.




  |--------+----------------------->
  |        |          Dan J        |
  |        |          Bump@ENRON   |
  |        |                       |
  |        |          08/01/2000   |
  |        |          05:23 PM     |
  |        |                       |
  |--------+----------------------->

>---------------------------------------------------------------------------
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    |
|
    |       To:     Gerald Nemec/HOU/ECT@ECT
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    |       cc:     Scott Josey/Corp/Enron@ENRON, Brian
Redmond/HOU/ECT@ECT, Joan|
    |       Quick/HOU/ECT@ECT
|
    |       Subject:     Summary of Tom Brown Meeting
|

>---------------------------------------------------------------------------
-|



  I wanted to provide a summary of my meeting with Tom Brown
today.  I met with
  the Business Development Director, Bob Mustard.

  1)  Tom Brown (as 45% owner of Wildhorse) is pushing Kinder
Morgan to come up
  with solutions to the production problems (quality,
pressure, et al) currently
  being experienced in the Piceance Basin.

  2)  Tom Brown is also encouraging KMI to develop plans to
take Crescendo (and
  other producers) low Btu gas; they see these as a new
business opportunity for
  Wildhorse.

  3)  Tom Brown is focusing their drilling efforts in other
regions of the
  Rockies, therefore TBI would be interested in discussing
Entrada development
  ventures with Crescendo.  Bob worked at Amoco with Ken Krisa
and is very
  familiar with the nitrogen treating technology.  (I passed
all this info on to
  Ken/Jim).

  4)  Here's the interesting part...Bob discussed
(confidentially) that for the
  past 6-8 monthsTom Brown has been trying to negotiate a
buy-out of Kinder
  Morgan's interest in Wildhorse (they have a right-to-match
provision in their
  LLC agreement).  The snag is on the last increment of
valuation which is now
  being negotiated by the very top mgmt (Kinder & Evans).  If
they are successful,
  (which he thinks TBI will be), then TBI will turn-around and
look to spin off
  the non-strategic systems (like the Piceance Basin assets)
to third party
  purchasers.

  This conversation with Tom Brown led me to a worst case
scenario with regard to
  our negotiations with Wildhorse..............Wildhorse has
been slow-playing
  negotiations since I first met with them in late May and #4
above may be the
  reason why.  Now that we've sent the letter recently to
Wildhorse requesting
  (essentially) to clarify their understanding / status of the
contracts so we can
  get to work, my feeling (based on the transaction between
KMI & TBI) is that
  Wildhorse may try to continue stalling until their
transaction with TBI is
  complete, (how much longer will this take?).  Of course, if
the transaction is
  completed, TBI has already made it clear they would like to
sell this system, so
  even if ENA is interested, will TBI negotiate a gathering
deal during this
  transition period or delay until the system is divested?

  The point is this......I'm anticipating a generic,
non-commital response to
  Crescendo's letter from Wildhorse.  Although I realize there
are no time
  deadlines in the contract, could you suggest anything we can
submit in writing
  to encourage a quick resolution to our contractual issues in
the event my above
  worst case scenario begins to play itself out?

  I'm off to Grand Junction to meet with Wildhorse.  I'll keep
you informed of any
  developments.

  Thanks.

  Dan