Subject: Cushion Gas
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Wed, 17 Jan 2001 03:47:00 -0800 (PST)

Dave/John:

Attached is a recommended strategy for addressing the Cushion Gas issue with 
AEP.  Bottom line is:

1. Hedge our obligation now - understand that John has already done this.
2. Begin working with AEP to get their bid on purchasing the Cushion Gas from 
us (at a premium that will cover the cost of the additional 5.5 bcf)
3. Begin working with the banks regarding the cost/potential for Enron to 
re-monetize the Cushion Gas at a higher basis (again to cover the cost of the 
additional 5.5 bcf).  At a minimum, this gives us additional negotiating 
leverage with AEP.
4. Re-classify the 5.5 bcf from PP&E to a long term asset to delay 
recognition of the higher cost.
5. Once we get AEP's bid on purchasing the pad gas - introduce the fact that 
we mistakenly omitted from the balance sheet a 2007 liability to re-inject 
the 5.5 bcf of pad gas.  Offer for Enron to assume this 2007 liability.
6. If necessary we can also look at a higher threshold for the A/S line 
liability, as I think that the risk that additional repairs will be required 
is low.

Any comments/direction is appreciated,
Brian