Ami,

As discussed earlier, the issue is whether all of the Delivery Points 
appearing on Exhibit C to the 76 Agreement, as amended, are subject to the 
audit of General Service Customers, or whether the audit should narrow the 
focus to the Houston, East Texas and Gulf Coast Divisions.  Stated 
differently, the issue is whether quantities of gas required by General 
Service Customers in the Beaumont Division or the South Texas Division should 
be considered part of the Basket.

Transaction No. 1 - Revision No. 1 under the ENFOLIO Agreement states that 
the DCQ obligations apply  to "Customer's Houston, East Texas and Gulf Coast 
Divisions."  Therefore, although this Transaction identifies the Delivery 
Point(s) as those appearing on Exhibit C to the 76 Agreement, the intent was 
to exclude Beaumont and South Texas.  In an earlier conversation today, Dan 
Hyvl confirmed that the foregoing was the appropriate analysis of this 
Transaction.

Based on this call, it would appear that, although Exhibit C to the 76 
Agreement lists multiple Delivery Points, the intent was to limit the 
Delivery Point to the Customer group referenced in the heading of the 
applicable ENFOLIO Agreement.

Dan further stated that the boundary lines were redrawn at some time prior to 
December 29, 1998 (the date of the Restructuring Agreement).  We have not 
seen documentation evidencing these changes.  In addition, it was discovered 
that the "Texas Coast Division" (referenced on Exhibit C, as amended) is 
actually the "Gulf Coast Division."  Dan mentioned that it would be prudent 
for all parties to outline definitive boundaries of divisions for future 
clarification.  Finally, he stated he would meet with you personally to 
discuss these issues with you further.

I hope you find this information useful.  If you have any questions or 
comments, please do not hesitate to call me or Aaron Roffwarg at (713) 
221-1117.

Best regards,













Jay Sonnenberg
Bracewell & Patterson, L.L.P.
711 Louisiana St., Suite 2900
Houston, TX  77002-2781
(713) 221-1417 (Ph)
(713) 221-2158 (Fax)