Message-ID: <28554079.1075854498149.JavaMail.evans@thyme> Date: Wed, 10 Jan 2001 11:29:00 -0800 (PST) From: david.delainey@enron.com To: jim.schwieger@enron.com Subject: Bammel Storage Cushion Gas Issue. Cc: john.lavorato@enron.com, brian.redmond@enron.com, wes.colwell@enron.com, thomas.martin@enron.com, edward.gottlob@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: john.lavorato@enron.com, brian.redmond@enron.com, wes.colwell@enron.com, thomas.martin@enron.com, edward.gottlob@enron.com X-From: David W Delainey X-To: Jim Schwieger X-cc: John J Lavorato, Brian Redmond, Wes Colwell, Thomas A Martin, Edward D Gottlob X-bcc: X-Folder: \David_Delainey_Jun2001\Notes Folders\All documents X-Origin: Delainey-D X-FileName: ddelain.nsf Jim, I can assure you that neither John or myself are trying to attract blame or "cover our backsides"; however, I do believe that there is/was a genuine breakdown in communication somewhere in the deal team, accounting and the desk. As well, it appears that this is not completely a black and white issue and can legitimately attract a number of points of view. As executives of this company, you, Brian, Tim and Tom absolutely were responsible to ensure that all aspects of this transaction are managed correctly. Nevertheless, I think it is amazing we have not had more problems with this divestment given the size, complexity, time and how intertwined it is into the overall framework of ENA. I appreciate your candor and the unselfish maturity to bring to the trading floor. I look forward to working with you as we continue to build our Texas and gas business. Regards Delainey ---------------------- Forwarded by David W Delainey/HOU/ECT on 01/10/2001 07:20 PM --------------------------- Jim Schwieger 01/10/2001 04:56 PM To: John J Lavorato/Corp/Enron@Enron, David W Delainey/HOU/ECT@ECT, Brian Redmond/HOU/ECT@ECT, Wes Colwell/HOU/ECT@ECT, Thomas A Martin/HOU/ECT@ECT, Edward D Gottlob/HOU/ECT@ECT cc: Subject: Bammel Storage Cushion Gas Issue. I'm very disappointed and angry with comments that have been made since the HPL Asset Disposition Team realized the impact of what has been communicated to them over the last six weeks regarding the level of Bammel cushion gas that would be available on March 31, 2001. The following is designed to set the record straight in the spirit of "Facts Are Friendly". First of all, it has been communicated multiple times over the last six - eight weeks to Patrick Wade and Brian Redmond and brought to the attention of Wes Colwell, Dave Delainey and John Lavorato in the meeting held before year end to discuss the unwind cost. All parties indicated that it was not a problem and that everyone was aware of the situation. Now Im hearing just the opposite and in fact insinuations that the Storage Book screwed up by: 1) originally booking injection and withdrawal assumptions down to 60 BCF. 2) reversing the April, 2007 5.5 BCF injection assumption on December 31, 2000. 1) The decision to record injection / withdrawal assumption down to 60 BCF was made in 1992 by Kevin Hannon and Steve Smaby. This was based on the fact that we had been down to 60 BCF physically in the several years proceeding 1992. Since 1992 we have been down top 60 BCF twice, the latest being March, 1996. Throughout this entire period the Accounting Dept was well aware of the Bammel assumptions and the physical capabilities of the facility. 2) The reversing of the Bammel assumptions has nothing to do with anything. When we communicated the unwind cost of $203 million it included the reversal of all assumptions including the April, 2007 injection. This was appropriate since we would be down to the 60 BCF physical minimum. In addition we were told to make sure there was no Working Gas left in the ground. If the reversal of the assumption was the problem then it could be reversed, but then the unwind cost would go up. It has also been suggested to me that I should have continued to follow up irregardless of the number of times I communicated the issue. If I was dealing with lower level employee's I would agree, but given the level involved I feel this suggestion is totally out of line. From my perspective the only way I had a chance of catching this issue was if I had reveiwed all documents including the one specificly addressing the cushion gas of 65.5 BCF. I beleive everyone on this memo was communicated to and was aware of the situation. Perhaps they were involved with other issues related to the sell? I am disappointed in the way everyone is scuring around to cover their backside.