Subject: Southern Natural Gas (Sonat)
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked]
Date: Fri, 19 Apr 2002 11:25:31 -0700 (PDT)

We researched your question about how much money should we be paying SNG.  This is what we uncovered about the "facts" that were represented by Sonat.

#1)  The 92,949 Dth of gas that Sonat describes as the parked balance is really the net balance of 188,949 Dth of parked gas as of January 10th and an outstanding loan balance of 96,000 Dth.  The loan was made to ENA in November 2001 with the understanding that ENA had a put option (i.e. ENA could pick when, where, and how much gas would be delivered to the pipeline on any given day) to repay the gas to Sonat anytime with the next year.

#2)  January 9th was the last day that Sonat allowed us to withdraw our parked volumes.  ENA's balance of parked gas on December 2nd was 266,241 Dth.  On January 1st, ENA began withdrawing the gas to partially perform on a gas sales transaction to the pipeline.  A volume of 8,588 Dth/day was withdrawn for 9 days, January 1st through 9th.  When Sonat refused ENA's nomination to withdraw the parked volumes on January 10th, then ENA could then no longer partially make the sale to Sonat.

#3)  ENA has invoiced Sonat for the 9 days of the partial sale to Sonat, a total of 77,292 Dth.  To date Sonat has not paid ENA for the volumes of gas that was delivered.  Had ENA been allowed to continue to withdraw from the parked balance the remaining parked balance on January 10th, 188,949 Dth would have been zeroed out by the end of January 2002 and an additional sales of 188,949 Dth would have been made to Sonat.

#4)  The park transaction for ENA was done at a discounted rate that expired on January 31, 2002.  Once again ENA's plan was to withdraw the parked gas so that park balance would be at 0 Dth when the discount expired.

#5)  When ENA now tries to withdraw the parked gas, 188,949 Dth, or the net of the park and loan balance, 92,949 Dth, we need to have an agreement with Sonat on the rate that will be charged.  The rate they may insist upon may be a combined withdrawal charge per unit and an inventory charge.  Hopefully, they will be reasonable about these rates, since they were the ones that caused this problem in the first place.

If everything is thrown together, Sonat probably should be releasing our gas and paying us for the amounts due ENA.

Call me, so that we can go through each of these items,

Ruth Concannon
[email-masked]
713-853-1667