DRAFT 2/2227/02
	February 27, 2002

Via Facsimile (713) 646-3239

Enron North America Corp.
1400 Smith Street
Houston, TX 77002-7361
Attention: ____________________

Re: Gas Storage Agreement Section 311 and Intrastate - Firm

Dear Mr. ___________________________:

Centana Intrastate Pipeline Company (“CIPCO”) agreed as of September 1, 2001, to provide Enron North America Corp. (“Shipper”) Firm gas storage service at CIPCO’s  underground gas storage facility known as the Spindletop Storage Facility (the “Facility”).  Shipper began storing approximately 1 Bcf of working gas (the “Working Gas”) at the Facility on or about September 1, 2001 under the terms of a Gas Storage Agreement negotiated between the parties (the “Storage Agreement”).  Shipper only made the September 2001 lease payment under the Storage Agreement before filing for bankruptcy protection under the Bankruptcy Code on December 2, 2001.  To date, Shipper has failed to pay any additional lease payments under the Storage Agreement other than the September payment.

CIPCO and Shipper have been negotiating a resolution of the storage fees currently owed by Shipper under the Storage Agreement and this Letter Agreementletter agreement shall set forth the material terms of their agreement (this “Letter Agreement”).  Shipper desires to sell the Working Gas (the “Purchased Gas”) to CIPCO under the terms set forth in this Letter Agreement (the “Purchased Gas”).  CIPCO and Shipper hereby agree that the purchase price for the Purchased Gas set forth below shall include a deduction for all unpaid storage fees due to CIPCO under the Storage Agreement through February 2002 (both pre- and post-bankruptcy storage fees).   The parties understand that any agreement respecting pre-bankruptcy fees owed by Shipper would need to be approved by the bankruptcy court.  The parties agree to work in good faith to resolve Shipper’s pre-bankruptcy obligations to CIPCO under the Storage Agreement within 30 days of this Letter Agreement and to request bankruptcy court approval within such 30-day period.

CIPCO agrees to buy the Purchased Gas, and Shipper agrees to sell the Purchased Gas under the following terms and conditions:

Purchased Gas:	100% of Shipper’s Working Gas1,006,884 MMBtu at the Facility. 

PurchaseGas Price:		Gas Daily’s Daily Houston Ship Channel less three cents ($0.03) per MMBtu, and less the unpaid storage fees under the Storage Agreement (the “Storage Fees”) throughPrice shall be ascertained on the Purchase Date (defined below) in the amounts set forth in the CIPCO Withholding and CIPCO Retainage sections below.  On the Purchase Date, the spot Purchase Price shall be the Daily Index Price as published daily in Gas Daily’s “Daily Price Survey” in the midpoint column under the section titled “East-Houston-Katy, Houston Ship Channel” less $0.03 per MMBtu dry and less the or a mutually agreeable fixed price.

Purchase Price:	The product of the Purchased Gas multiplied by the Gas Price. 

CIPCO Withholding:	CIPCO shall deduct from the Purchase Price the Lease Obligationsstorage fees for the time period of December 2, 2001 through February 28, 2002 (post-bankruptcy), which total $308,000.  This payment shall be in full satisfaction of all obligations of the Shipper from and after December 2, 2001.

CIPCO RetainageEscrowed Funds:	CIPCO shall also deduct from the Purchase Price and retain Shipper’s Lease Obligationsshall place into an escrow account storage fees for the time period of October 1, 2001 through December 2, 2001 (pre-bankruptcy), which total $224,000.  CIPCO shall retain and keep thisThis amount segregatedshall remain in the escrow account until CIPCO’s rights to recoupment and set-off have been  determined by the bankruptcy court or the parties have reached a mutually acceptable written agreement regarding the dispostion of the escrowed funds and that agreement has receivedbeen approved by the bankruptcy court approval for this transaction.
                             
Contract Execution:	Shipper agrees to amend the Storage Agreement with the addition of the provisions contained in the attached page entitled “Proposed Revisions to Enron Gas Storage Agreement.”

Purchase Date:	As negotiated by Shipper and CIPCOFebruary 28, 2002

No Warranty:		THIS SALE AND CONVEYANCE BY SELLER TO BUYER OF THE WORKING GAS IS MADE WITHOUT ANY WARRANTY, INCLUDING, WITHOUT LIMITATION, ANY ABSENCE OF VICES OR DEFECTS (WHETHER APPARENT OR LATENT, KNOWN OR UNKNOWN, EASILY DISCOVERABLE OR HIDDEN), FITNESS FOR ANY ORDINARY USE, OR FITNESS FOR ANY INTENDED USE OR PARTICULAR PURPOSE; BUYER ACKNOWLEDGES AND AGREES THAT SELLER CONVEYS THE WORKING GAS “AS-IS”, “WHERE IS”, WITH ALL FAULTS.  

If this Letter Agreement correctly sets forth the terms of our agreement with respect to this matter, please promptly confirm in a reply to us by signing below and returning a copy of this Letter Agreement to the undersigned by facsimile transmission at (____) _______________.   The execution of this Letter Agreement will be followed by the execution of a formal Gas Sale and Purchase Agreement containing the material terms set forth in this Letter Agreement.  We look forward to hearing from you regarding this matter.  If you have any questions, please feel free to call the undersigned at (_____)__________ or_____________ at (_____) ____________. 

Very truly yours,

						_________________________
						[Title]

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