Subject: Re: Asset Divestiture Approval
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked]
Date: Mon, 27 Nov 2000 06:22:00 -0800 (PST)

Rod,  to my knowledge the Commission has not specifically defined what is de 
minimus.   The working definition of an Operating Unit or System is taken 
from an Office of the Chief Accountant Interpretative Letter issued  May 26, 
1961.  "The principal tests are amount of investment, character of the 
property acquired, and continuity of operation.  The following have been 
deemed to be operating units or systems: a large compressor station, a 
processing plant, an important measuring station, a gathering system or 
important segment thereof,  a transmission line or important segment.  If the 
transaction involves such a small amount of property as to be de minimus, it 
need not be considered as an operating unit."  If a customer is attached to 
the facilities to be sold it is considered prima facie evidence that the 
property is an operating unit or system.

In a July 8, 1992, the NNG Rate department in an interoffice memorandum 
regarding the Definition of an Operating Units or System noted "The 
Commission has not specifically defined de minimus, however, based on past 
rulings we can assume that the investment must be something less than $9 
million, or a pipeline less than 7.586 miles."

The 1.091 miles of 6" pipe and Faribault TBS #1 and the Northfield 4" 
branchlines of 4.9 miles and TBS have a net book value of $57,712. 

My main concern, if we use the de minimus rationale, are we not setting a 
precedent in which future sales or acquisitions will have to be viewed?  Some 
of those future de minimus sales could involve gains! 

Again, it is not clear how the Commission will make its determination.  The 
downside, if the Commission rejects our argument, NNG will have a $ 58K loss 
on the sale of these assets. 

Rod Hayslett

11/27/2000 12:23 PM
To: Gary Zahn/ET&S/Enron@ENRON
cc: Bob Chandler/ET&S/Enron@ENRON, James Saunders/FGT/Enron@Enron 

Subject: Re: Asset Divestiture Approval  

I want to make sure of this.

   

	From:  Gary Zahn                           11/27/2000 10:56 AM

To: Bob Chandler/ET&S/Enron@ENRON
cc: Rod Hayslett/FGT/Enron@Enron, James Saunders/FGT/Enron@Enron 

Subject: Re: Asset Divestiture Approval  

I think an argument can be made that the amount is de minimus which leads to 
a non-operating unit designation.   

   

	From:  Bob Chandler                           11/21/2000 05:17 PM

To: Gary Zahn/ET&S/Enron@ENRON
cc: Rod Hayslett/FGT/Enron@Enron, James Saunders/FGT/Enron@Enron 

Subject: Asset Divestiture Approval

Gary:  Are you OK with the non-operating unit assumption based on deminimus 
NBV?
If you're OK with it and the lawyers are OK, then it must be OK for me.

Rod:  I don't have a clue why Steve Harris should have to sign off on this 
project.
---------------------- Forwarded by Bob Chandler/ET&S/Enron on 11/21/2000 
05:08 PM ---------------------------

Rod Hayslett

11/21/2000 05:06 PM
To: Bob Chandler/ET&S/Enron@ENRON, James Centilli/ET&S/Enron@ENRON, Dave 
Waymire/ET&S/Enron@ENRON, James Saunders/FGT/Enron@ENRON
cc:  

Subject: Asset Divestiture Approval

Can anyone think of a reason why this should not be done or why the 
assumptions made here are not all 100% correct?   Is there any risk on the 
accounting?   Where is the contract for sale?

---------------------- Forwarded by Rod Hayslett/FGT/Enron on 11/21/2000 
05:04 PM ---------------------------

Dave Waymire
11/20/2000 12:35 PM
To: Danny McCarty/ET&S/Enron@Enron, Dave Neubauer/ET&S/Enron@ENRON, Rod 
Hayslett/FGT/Enron@ENRON, Michel Nelson/ET&S/Enron@ENRON, Mike 
McGowan/ET&S/Enron@ENRON, Mary Kay Miller/ET&S/Enron@ENRON, Steven 
Harris/ET&S/Enron@ENRON, Julia White/ET&S/Enron@ENRON, Drew 
Fossum/ET&S/Enron@ENRON
cc: James Centilli/ET&S/Enron@ENRON, Bob Stevens/ET&S/Enron@Enron 

Subject: Asset Divestiture Approval

Attached is a  "Asset Divestiture Approval Form" for the sale of the 
Faribault Minnesota branchline location # 83801 consisting of 1.091 miles of 
6" pipe and the Faribault TBS#1 and the Northfield branchlines location No.'s 
85001 and 85002 consisting of approximately 4.9 miles of 4" pipe, and the 
Northfield TBS#1.  

Please indicate your approval or rejection of this proposal on the approval 
form and return to either James Centilli (EB4250) or David Waymire (OMA0755) 
by 5PM Monday, November 27th.  If you have questions or concerns, please 
contact James Centilli (853-5028) or myself (398-7062).

These branchlines are experiencing heavy encroachment.  The Faribault 
branchline is currently being odorized by NSP per a previous arrangement in 
order to comply with a commitment NNG made to the DOT to transport odorized 
gas because of the population density along the pipeline.  

There is no threat of a by pass by selling these branchlines.  There is an 
estimated annual O&M savings of $10k to $20k plus the avoided expense, 
exposure and operational headaches of not having to monitor high pressure 
branchline odorization.

The net book value of these facilities is $57,712.  The facilities will be 
sold for $1.  In addition, NSP has agreed to enter into a 1 year 
transportation agreement guaranteeing incremental revenues of $350,000.  

The net book value of the facilities, is assumed to be of such small value as 
to be de minimus as allowed by previous rulings of the Commission and  will 
be treated as a non-operating unit.  This will allow the undepreciated 
balance to be cleared to depreciation reserves.

The sale will require that the Northfield TBS be relocated upstream of the 
main line take off at an estimated cost of $225,000.  

David