---------------------- Forwarded by Lorraine Lindberg/ET&S/Enron on 
08/24/2000 09:01 AM ---------------------------


Lorraine Lindberg
08/22/2000 10:25 AM
To: emeaders@redcedargathering.com
cc:  

Subject: Revised Transportation Proposal

Hi Ed - Here is a revised comprehensive summary of the firm transportation 
proposal between Red Cedar and Transwestern:

Term:  5 years, January 1, 2001through December 31, 2005

Year	Volume	Rate(+option fee)
1	125,000 MMBtu/d*	$0.02/MMbtu/d
2	150,000 MMBtu/d	$0.025/MMBtu/d
3	150,000 MMBtu/d	$0.03/MMBtu/d
4	150,000 MMBtu/d	$0.035/MMBtu/d
5	150,000 MMBtu/d	$0.04/MMBtu/d
		

Option:  Red Cedar shall have a one-time option to reduce its contract MDQ 
for contract years 4 - 5 to a volume between 100,000 MMBtu/d - 150,000 
MMBtu/d.  Red Cedar may trigger this option anytime before November 30, 
2003.  Option fee is an incremental one-tenth of one cent/MMBtu (additive to 
the above quoted rates) over the five year term.

Facility Modifications:  The current cost estimate to increase the meter 
capacity (from 200,000 MMBtu/d to 300,000 MMBtu/d) at the Arkansas Loop Plant 
into Transwestern is $378,000.  * Year 1 capacity of 125,000 MMBtu is 
dependent upon the completion of these facility modifications.  Red Cedar 
will fund these facility modifications (by a one-time payment of $378,000 
payable prior to Transwestern ordering material for the modifications).  In 
order to avoid the tax gross-up of approximately $130,000, the $378,000 will 
be amortized over the term of the contract and booked as "pre-paid" 
transportation fees.  (The net effect of this will be zero because the slight 
increase/MMBtu which will show up on the monthly transportation invoice will 
be negated by the corresponding credit for the pre-paid transportation.)

Please call me to discuss.  Thanks.

Lorraine