In February, 539,594 Mmbtu were allocated to the our index purchase from HPLR 
Liquids at King Ranch.  This allocation resulted in a large physical 
unaccounted for loss.  Effectively, the gas was being purchased twice in our 
systems.  In addition, a sale to the Liquids group, which should have been 
zero, was brokered with a purchase from Swift (2500 Mmbtu/day), resluting in 
additional gas being allocated to the HPLR Liquids purchase contract.  I have 
attached a schedule detailing the volumes that were double booked in 
February.  This schedule also reports the daily volumes for March which will 
need to be adjusted.  I have calculated (based on estimates) that we should 
have only purchased about 88,000 from the Liquids group at King Ranch for 
February.  See the following:

Booked to HPLR Liquids: 539,574  18,606/day
Purch by HPLC @ WH:  379,108  13,073/day
Incorrect Liquids Sale:    72,500  2,500/day
     Adjusted purch from Liquids:   87,986  3,034/day


We usually input a purchase of 2,500 Mmbtu/day from HPLR Liquids at the 
tailgate.  We can increase this to 3,000/day for March.

The majority of gas in the 3-Rivers system is transported to the King Ranch 
plant through HGPL.  Some of this gas is purchased at the wellhead by HPLC, 
some of the gas is purchased at the wellhead by HPLR Liquids, and three 
producers have the option to either sell their gas to HPLC at the wellhead or 
to process their gas and sell the residue to HPLC at the tailgate of the 
plant.  It is very important to keep the meters and volumes allocated 
correctly among parties related to these transactions.  The attached schedule 
should assist in doing this.  I have reported the meters at which HPLC buys 
wellhead gas.  The movement of this gas through HGPL and King Ranch should be 
kept seperate from the gas purchased by the Liquids group.  A transport usage 
ticket can be used to show the transfer of HPLC's gas from King Ranch to HPL.

Let's plan on discussing this either Friday or Monday afternoon.  Let me know 
what works best for you.

D