As per your request, an environmental due diligence was completed of the 
assets and outstanding issues of Northwest Natural Gas Company (NWNG), a 
local distribution company  (LDC), with its corporate headquarters located in 
Portand, Oregon.  This  due diligence, which was conducted on August 7-9, 
2001,  was performed to determine the environmental liabilities and exposures 
which may be associated with  NWNG and identify and evaluate the 
environmental risks associated with each issue.  A relative risk number 
between 0 and 3 has been assigned to each discipline to evulate the potential 
risk impact.  A rating of "0" indicates that there is no risk associated with 
this regulation or issue and a rating of "3" indicates a major problem or an 
issue that has a potential long term risk or exposure.  An approximate cost  
value has also been assigned to each discipline.   It is to be understood and 
explicitly stated that in the calculation of each cost, conservative 
estimates were used to determine a dollar value to repair, remediate or 
formally close each issue. 

Presented below, by discipline, are the environmental activities which impact 
and affect NWNG.  The evualtion and written discussion of each disicpline is 
based upon the availability of records, documents and discussions with NWNG 
personnel.  Therefore, this summary report is limited to the availability of 
information presented.

General Pipeline Characteristics ;

This is a dry pipeline system.  No pipeline liquids are generated, only small 
volumes of compressor oils are collected.
All cast iron pipe has been removed from the system.  There is still approx. 
100 miles of steel pipe which will be repalced in the near future.  
The only location where horsepower and compression exists is at Mist Storage, 
and underground injection and storage reservoir (10.5 bcf storage capacity). 
this is a non Title V major source.
NWNG is planning additional property acquisitions to increase their 
underground storage capacity. 
NWNG is planning a 60 mile pipeline construction project to begin in fall of 
2002.  All environmental studies have been completed and sumbmitted to the 
agencies.
Landslide hazards appear to be the biggest pipeline safety concern.  NWNG has 
completed a study to locate and identify high potential landslide areas.    

Environmental Procedures Manual.   The NWNG environmental procedures manual  
appeared to be comprehensive and in a easily understood format.  The topics 
covered in the manual addressed all environmenatl issues that the company 
appeared to be involved with.  The manual addressed waste management, 
permitting,  disposal and environmetal stewardship.  There was also a written 
statement from management supporting and attesting to NWNG's commitment to 
enhancing and promoting a clean environment in all activities by NWNG. 
Risk: 0  Cost: $0

Notices of Violation (NOV)/Notices of Noncompliance (NON).   In a summary 
page provided by NWNG, a list of all state and federal agency actions against 
the company was available.  Although the company had received a few  notices 
(<10), they were of a very minor nature and involved mostly small 
recordkeeping and right of way issues.  There were no outstanding judgements, 
NOVs, NONs or pending agency actions or  issues to be resoved.  
Risk: 0  Cost: $0 

PCBs.  In interviews with NWNG, they attested to the fact that they have 
never used PCBs on their pipeline and that PCBs have never been detected.  
Although NWNG is an LDC and receives its gas from Northwest Pipeline Company, 
the status of PCBs on the Northwest pipeline system  was unknown.
Risk:  1  Cost: $0        

Mercury.   Mercury was used on the NWNG system, but only in monometers and 
not in natural gas metering equipment.  A decision was made by environmental 
management of NWNG in 1986-87 to remove mercury manometers.  An investigation 
has never been initiated to determine mercury releases from broken manometers 
or potential mercury releases from old historic mercury containing equipment 
which may have been used. 
Risk:  1  Cost:  $3,000-$40,000

Onsite Disposal.  Other than the issues surrounding the manufactured gas 
plants, in interviews with NWNG's environmental management, they were not 
aware of any onsite waste disposal of any hazardous, toxic or non hazardous 
waste.
Risk:   1  Cost:   undefined

Hazardous Waste.  There is only one location where hazardous waste is 
generated and this location is a service center where a small parts washer is 
used.  This site is classified as a conditionally exempt small quantity 
generator.  The remainder of the NWNG system is a non generator of hazardous 
waste.
Risk: 0  Cost:  0 

NORMS.  The environmental management of NWNG has stated that natrually 
occurring radioactive materials (NORMS) are not a problem in the pipeline 
system.  Tesing has not been completed to verify or confirm this, nor does 
NWNG have evidence to determine NORM status from Northwest  Pipeline Company.
Risk:  1  Cost:  $500

Underground Storage Tanks (UST).  There is only one regulated underground 
storage tank (UST) remaining on the NWNG system (Albany), and this tank is in 
complance with the UST regualtions for monitoring, testing and 
recordkeeping.  All other underground tanks have been removed.  At one of the 
tank removal sites, there exists  an active remediation in progress.  Closure 
of this site is expected in the near future.
Risk: 1  Cost: $500

LNG plants.  In interviews with NWNG environmental management, there are no 
histoirc or present outstanding environmental issues at the liquified natural 
gas (LNG)  plants.  The exception to this is a historic site of a 
manufactured gas plant (Linnton site) which underlies the LNG plant.  This 
issue will be addressed under the section of the Linnton Manufactured Gas 
Plant. 
Risk: 0  Cost:  $0

Manufactured Gas Plants.  NWNG owned and operated  a number of manufactured 
gas plants (MGPs).  Presented below are the MGP sites that NWNG owned or had 
operating interest in for which there are associated liabilites and risks.

 Eugene Water and Electrical Board. The City of Eugene has determined that  a 
parcel of property within the city has been contaminated by   numerous 
responsible parties of which NWNG owned and operated a MGP during the time 
period of 1958-1976.  The Eugene Water and Electrical Board  (EWEB), which is 
the regulatory agency in Eugene,  has determined that the total cost to clean 
the entire area will be approximately $1,300,000, of which  the EWEB has 
indicated that NWNGs responsibility will be $93,750.  NWNG has offered to pay 
compensation damages in the amount of $70,000-90,000 to  be relaesed from all 
liability and damages associated with the contamination impacts to the City 
of Eugene.   The environmental management of NWNG  has stated that the EWEB 
has verbally and in principal agreed with the NWNG  offer of approximately 
$94,000.
 Risk: 1-2 Cost:  $94,000

 Salem Site. According to NWNG management, this historic MGP site has been 
remediated and formally closed by the City of Salem, which is the   
regulatory agency with jurisdiction over this site.  NWNG has received 
endemnification and written closure from the City of Salem for this feature.  
 Risk: 1   Cost: $0

 Manufactured Gas Plant. This site, which ceased operation in the early 
1900's, was dismantled and  abandoned.  From the time the facility ceased  
operations, untill the present, a railroad has constructed a steel rail 
bridge over the site and the City of Portland and constructed a city park.  
The site is  immediately adjacent ot he Wilammette River, a major perennial 
watercourse in Oregon.  There have been no soil, groundwater or river/ river 
sediment   studies  completed  to determine potential environmental impacts.  
NWNG environmental personnel have stated that the site was insured by Lloyds 
of  London.  The insurance policies were not available at the time of this 
due diligence to determine policy applicability and coverage amounts for this 
site.
 Risks: 2-3 Costs: 0-$300,000,000

Portland Harbor Superfund Site.  The Environmetnal Protection Agency has 
determined that the Portland Harbor, on the Wilammette River,  has received 
contamination of a sufficient nature and magnitude to warrent and classify 
the 6.7 miles of the Harbor as a Superfund site.  This superfund site extends 
for a distance of 6.7 miles and includes the Linnton and Wacker sites, 
originally owned by NWNG.  The EPA has designated approximately 69 primary 
responsible parties  which are directly or indirectly involved in the 
contamination of this section of the Willamette River.  NWNG has been 
identified as a contributing member to the contamination.

 Linnton MGP/Wacker Site.   The Linnton MGP and Wacker Site, has 47 acres of 
water front exposure on the Wilammette River and is included in the  Portland 
Harbor Superfund Site.  The Linnton facility, which originally included the 
Wacker Site,  initiated operation in 1913 and ceased operation in 1956.   
During the operation of the  facility operation,  various organic coal tar 
wastes, comprised of light non aqueous phase liquids (LNAPLs) and dense non  
aqueous phase liquids (DNAPLs) were generated.  Characteristically these 
waste products include: polynuclear aromatic hydrocarbons (PAHs), BTEX  and 
cyanide.  During the early stages of facility operation, these wastes  were 
originally directly deposited into the Willammette River, and then later, in  
1941 unlined ponds were constructed at the facility.  Preliminary 
investigation reports of the volumes of regulated waste from the facility 
operations which  were released either directly or indirectly into the soil 
underlying the facility or into the Wilamette  River were in excess of 4.6 
million gallons or 23,000 cubic  yards.   It was also estimated from these 
reports that there is approximately 250,000 cubic yards of tar and tar mixed 
with soil underlying the historic tar  ponds.  

 Negotiations for cleanup and closure of this site may take up to 20 or more 
years.  NWNG has stated that it has insurance policies from Lloyds of 
London   which they feel will cover all costs assciated with NWNG's portion 
of this superfund responsibility.  The policies were not availble during the 
due diligence  to verify or confirm the amount of coverage.  Additionally, 
because the horizontal and vertical extent of the contamination in the 
subsurface soil,   groundwater and in the Willamette River sediments has not 
been determined, it seems unlikely that insurance coverage can adequatley be 
evaluated.   It  should also be mentioned that because the proportionate 
extent of NWNGs contamination responsibility is not known, adequate insurance 
coverage  appears to be somewhat premature. 
 Risk:  3  Cost:  $50,000,000-300,000,000