Natural Gas Processing

Natural Gas Processing Assets

At the core of our natural gas processing business are 26 processing plants located in Texas, Louisiana, Mississippi, New Mexico, Colorado and Wyoming. Our natural gas processing facilities can be characterized as two distinct types: (i) straddle plants situated on mainline natural gas pipelines owned either by us or by third parties or (ii) field plants that process natural gas from gathering pipelines. We operate the Toca, Chaco, North Terrebonne, Calumet, Neptune, Carlsbad, Meeker and Pioneer plants and all of the Texas facilities. On a weighted-average basis, utilization rates for these assets were 63%, 56% and 53% during the years ended December 31, 2007, 2006 and 2005, respectively. These rates reflect the periods in which we owned an interest in such facilities.

In general, natural gas produced at the wellhead contains varying amounts of NGLs. This "rich" natural gas in its raw form is usually not acceptable for transportation in the nation's major natural gas pipeline systems or for commercial use as a fuel. Natural gas processing plants remove the NGLs from the natural gas stream, enabling the natural gas to meet transmission pipeline and commercial quality specifications. In addition, on an energy equivalent basis, NGLs generally have a greater economic value as a raw material for petrochemical and motor gasoline production than their value as components of the natural gas stream. After extraction, we typically transport the mixed NGLs to a centralized facility for fractionation (or separation) into purity NGL products such as ethane, propane, normal butane, isobutane and natural gasoline. The purity NGL products can then be used in our NGL marketing activities to meet contractual requirements or sold on spot and forward markets.

In March 2006, we acquired the Pioneer natural gas processing plant located in Opal, Wyoming from TEPPCO, along with certain natural gas processing rights related to production from the Jonah and Pinedale fields located in the Greater Green River Basin in Wyoming and subsequently increased the processing capacity from 0.3 Bcf/d to 0.6 Bcf/d. This expansion was completed in July 2006 and enables us to process natural gas production from the Jonah and Pinedale fields that will be transported to our Wyoming facilities as a result of the processing contract rights we acquired from TEPPCO.

In addition, to handle future production growth in the region and substantially increase NGL recoveries, we began construction of a cryogenic natural gas processing plant in July 2006 adjacent to the silica gel plant we acquired from TEPPCO. The Pioneer cryogenic facility commenced operations in February 2008. This new facility has a processing capacity of 750 MMcf/d and can handle expected production growth from the Jonah and Pinedale fields located in the Greater Green River Basin in Wyoming.

In January 2006, we announced the execution of a minimum 15-year natural gas processing agreement with an affiliate of EnCana. Under that agreement, we have the right to process up to 1.3 Bcf/d of EnCana's natural gas production from the Piceance Basin area of western Colorado. To accommodate this production, we completed construction of the Meeker natural gas processing facility in Rio Blanco County, Colorado. In October 2007, we commenced natural gas processing operations at our Meeker I facility, which recently completed its first phase of construction. Located in Colorado's Piceance Basin, our Meeker I facility has a processing capacity of 750 MMcf/d of natural gas and is capable of extracting up to 35 MBPD of mixed NGLs. The Meeker II facility, which is under construction and expected to be completed in the third quarter of 2008, will double its processing capacity to 1.5 Bcf/d of natural gas and 70 MBPD of mixed NGLs.

The two phases are supported by long-term commitments from producers, including EnCana and ExxonMobil. By the end of 2008, natural gas volumes processed at the facility are expected to exceed 800 MMcf/d, which we believe could yield to us approximately 40 MBPD of equity NGLs in full extraction mode. The Piceance Basin represents one of the most prolific and fastest growing energy producing areas in the nation, and the completion of our Meeker facility provides the region with valuable midstream infrastructure needed to accommodate those growing volumes.

Gas Processing Facility	Company Ownership Interest in Facility ⁽¹⁾	Gross Gas Processing Capacity (Bcf/day)	Offshore Pipelines Served	Connections to Onshore Pipelines
Gulf Coast Plants
Yscloskey, LA	18.3%	1.85	Garden Banks, Viosca Knoll, Tennessee	Tennessee
Calumet, LA	32.0%	1.60	Manta Ray, ANR, Trunkline, Garden Banks	ANR, Trunkline
North Terrebonne, LA	48.8%	1.30	Manta Ray, Transco, Garden Banks	Transco
Venice, LA	13.1%	0.75	Mississippi Canyon, Texas Eastern, Venice Gathering System	Texas Eastern, Columbia Gulf, Gulf South
Toca, LA	63.9%	1.10	SONAT, Viosca Knoll, Mississippi Canyon	SONAT
Pascagoula, MS	40.0%	1.50	Destin, Viosca Knoll, Okeanos	Transco, Tennessee, Florida Gas, SONAT, Gulf South
Sea Robin, LA	15.5%	0.95	Garden Banks, Sea Robin Pipeline	Henry Hub, Columbia Gulf, SONAT, LRC, Sabine, Gulf South, Texas Gas
Blue Water, LA	7.4%	0.53	Blue Water, Garden Banks	Tennessee, Columbia Gulf
Neptune, LA	66.0%	0.65	Manta Ray, Nautilus	Acadian Gas, Cypress Gas, Texas Gas, Tennessee, Gulf South, LIG
Burns Point, LA	50.0%	0.16	Gulf South, Quivera	Gulf South

Gas Processing Facility	Company Ownership Interest in Facility ⁽¹⁾	Gross Gas Processing Capacity (Bcf/day)	Producing Regions	Connections to Onshore Pipelines
Western U.S. Treating Plants
Chaco, NM (Processing)	100%	0.65	San Juan Basin	EPNG
Indian Basin, NM	42.4%	0.24	Permian Basin	NGPL\DFS\GTFS
South Carlsbad Dewpoint, NM	100%	0.15	Permian Basin	Transwestern/EPNG
Pioneer, WY ⁽²⁾	100%	1.35	Green River Basin	Wyoming
Meeker, CO ⁽³⁾	100%	0.75	Piceance Basin	Colorado. REX, TransColorado, CIG, WIC & Questar

Gas Processing Facility	Company Ownership Interest in Facility ⁽¹⁾	Gross Gas Processing Capacity (Bcf/day)	Connections To Onshore Pipelines
Texas Plants
Armstrong	100%	0.25	Texas Intrastate Pipeline System
Delmita	100%	0.15	"
Gilmore	100%	0.26	"
Matagorda	100%	0.25	"
San Martin	100%	0.20	"
Shilling	100%	0.07	"
Shoup	100%	0.29	"
Sonora	100%	0.12	"
Thompsonville	100%	0.30	"
Indian Springs	75%	0.12	Indian Springs and Big Thicket Gathering
Total Gross Processing Capacity		15.54
Total Net Processing Capacity		8.38 ⁽⁴⁾

⁽¹⁾ Our ownership in these facilities ranges from 7.4% to 100%.
⁽²⁾ We acquired the Pioneer facility from TEPPCO in March 2006 and subsequently increased the processing capacity from 0.3Bcf/d to 0.6 Bcf/d. In addition, we constructed a new cryogenic processing facility having 0.75 Bcf/d of processing capacity, which became operational in February 2008.
⁽³⁾ In October 2007, we commenced natural gas processing operations at our Meeker facility. Phase II of the Meeker facility, which is under construction and expected to be completed in the third quarter of 2008, will double the natural gas processing capacity to 1.5 Bcf/d at this facility.
⁽⁴⁾ The approximate net natural gas processing capacity does not necessarily correspond to our ownership interest in each facility. It is based on a variety of factors including volumes processed at facility and ownership interest in the facility.

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