ENA is proceeding with a number of volumetric production payment 
transactions.  Generally, the producer will want to establish the pricing 
through a swap mechanism prior to the actual closing of the VPP and prior to 
the syndication of the VPP.   For example, Preston Exploration entered into a 
swap last Friday with ENA to establish the VPP pricing on a transaction to be 
closed this week.  At the VPP closing the Preston position in the swap will 
be transferred to ECT Merchant Investments Corp. (a wholly owned sub of ENA 
and VPP buyer); therefore, the swap counterparties will then be ECTMI and 
ENA.  As the VPP is syndicated (planned prior to year end), the original 
Preston swap position will be further assigned/restated to the syndicate VPP 
buyer (generally a Texas LP 99.9999% owed by an unrelated Trust).  Upon the 
last transfer, the swap will not be between two Enron subs.

Based upon viewing other VPP structures, it is my understanding that these 
swaps do not need the RMT  tax treatment since the swap is carried as an 
affiliate swap only as an interim step.  Please advise.  I will be preparing 
the swaps on the basis of the foregoing absent your direction otherwise.

As noted in my voice mail, I also need to visit with you about RMT in 
general.  Thanks. Mary.


Cordially,
Mary Cook
Enron North America Corp.
1400 Smith, 38th Floor, Legal
Houston, Texas   77002-7361
(713) 345-7732 (phone)
(713) 646-3490 (fax)
mary.cook@enron.com