Gas Quality and Interchangeability Issues

1. Gas Quality and Interchangeability Issues From Gulf South Pipeline’s Perspective by Mike McMahon - Sr. Vice President and General Counsel

2. GULF SOUTH PIPELINE Legend Interstate Receipt Points Intrastate Receipt Points Interstate Delivery Points Intrastate Delivery Points Major Processing Plants Interstate/Intrastate Pipelines

3. GAS QUALITY ISSUES • In the last five years, Gulf South has received a limited number of quality based customer complaints • Complaints are typically related to specific operational upsets • Hydrocarbon dew point or liquid fallout has not been an issue • Average winter ambient temperature 55° F (New Orleans 5-year average) • Over the last five years, Gulf South has only been notified twice of quality concerns by other interstate pipelines (CO2, hydrocarbon dew point). Both of these notices were last fall and the gas being delivered by Gulf South was within its tariff specifications

4. COMPETITTIVE EFFECTS OF FERC’S GAS QUALITY POLICY • Access to wellhead supplies • Increased gas costs for on-system customers • On Gulf South, LDCs are currently buying gas at small individual receipt points that are not necessarily located behind a processing plant • A change in policy will make Gulf Coast intrastate pipelines more attractive especially to: • Small producers • Production that is not located behind a processing plant • Marginal wells • Will tend to favor the production area facilities of the incumbent interstate pipeline

5. GULF SOUTH PIPELINE’S PROPOSAL • A safe harbor should be created for interstate pipelines that deliver gas in the production area to other interstates provided that the gas being delivered meets the delivering pipeline’s tariff specifications. • This proposal will: • Facilitate the movement of gas between interstate pipelines • Continue to provide safe pipeline operations • Maintain a level competitive playing field between all pipelines • Continue to provide customers access to lower cost wellhead gas supplies