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   &lt;!-- Begin Block Tagged Note 7 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock--&gt;
   &lt;div style="font-family: 'Times New Roman',Times,serif"&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 12pt"&gt;&lt;b&gt;Note 7. Contingent Liabilities&lt;/b&gt;
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&lt;b&gt;&lt;i&gt;Environmental Matters&lt;/i&gt;&lt;/b&gt;
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;Our interstate gas pipelines are involved in remediation activities related to certain
   facilities and locations for polychlorinated biphenyl, mercury contamination, and other hazardous
   substances. These activities have involved the U.S. Environmental Protection Agency
   (EPA), various state environmental authorities and identification as a potentially responsible
   party at various Superfund waste sites. At March&amp;#160;31, 2011, we have accrued liabilities of $12
   million for these costs. We expect that these costs will be recoverable through rates.
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;In September&amp;#160;2007, the EPA requested, and Transco later provided, information regarding
   natural gas compressor stations in the states of Mississippi and Alabama as part of the EPA&amp;#8217;s
   investigation of our compliance with the Clean Air Act. On March&amp;#160;28, 2008, the EPA issued notices
   of violation alleging violations of Clean Air Act requirements at these compressor stations.
   Transco met with the EPA in May&amp;#160;2008 and submitted its response denying the allegations in June
   2008. The EPA has requested additional information pertaining to these compressor stations, most
   recently in February&amp;#160;2011. In August&amp;#160;2010, the EPA requested, and Transco later provided, similar
   information for a compressor station in Maryland.
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;In March&amp;#160;2008, the EPA proposed a penalty of $370,000 for alleged violations relating to leak
   detection and repair program delays at our Ignacio gas plant in Colorado and for alleged permit
   violations at a compressor station. Tentative settlement has been reached in first-quarter 2011.
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;We also accrue environmental remediation costs for natural gas underground storage facilities,
   primarily related to soil and groundwater contamination. At March&amp;#160;31, 2011, we have accrued
   liabilities totaling $7&amp;#160;million for these costs.
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;The EPA and various state regulatory agencies routinely promulgate and propose new rules, and
   issue updated guidance to existing rules. These new rules and rulemakings include, but are not
   limited to, rules for reciprocating internal combustion engine maximum achievable control
   technology, new air quality standards for ground level ozone, and one hour nitrogen dioxide
   emission limits. We are unable to estimate the costs of asset additions or modifications necessary
   to comply with these new regulations due to uncertainty created by the various legal challenges to
   these regulations and the need for further specific regulatory guidance.
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 12pt"&gt;&lt;b&gt;&lt;i&gt;Rate Matters&lt;/i&gt;&lt;/b&gt;
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;On
   August&amp;#160;31, 2006, Transco submitted to the Federal Energy
   Regulatory Commission (FERC) a general rate filing (Docket No.&amp;#160;RP06-569)
   principally designed to recover increased costs. The rates became effective March&amp;#160;1, 2007, subject
   to refund and the outcome of a hearing. All issues in this proceeding except one have been resolved
   by settlement.
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;The one issue reserved for litigation or further settlement relates to Transco&amp;#8217;s proposal to
   change the design of the rates for service under one of its storage rate schedules, which was
   implemented subject to refund on March&amp;#160;1, 2007. A hearing on that issue was held before a FERC
   Administrative Law Judge (ALJ)&amp;#160;in July&amp;#160;2008. In November&amp;#160;2008, the ALJ issued an initial decision
   in which he determined that Transco&amp;#8217;s proposed incremental rate design is unjust and unreasonable.
   On January&amp;#160;21, 2010, the FERC reversed the ALJ&amp;#8217;s initial decision, and approved our proposed
   incremental rate design. Certain parties have sought rehearing of the FERC&amp;#8217;s order. If the FERC
   were to reverse their opinion on rehearing, we believe any refunds would not be material to our
   results of operations.
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 12pt"&gt;&lt;b&gt;&lt;i&gt;Safety Matters&lt;/i&gt;&lt;/b&gt;
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;Transco and Northwest Pipeline have developed an Integrity Management Plan that we believe
   meets the United States Department of Transportation Pipeline and Hazardous Materials Safety
   Administration final rule that was issued pursuant to the requirements of the Pipeline Safety
   Improvement Act of 2002. The rule requires gas pipeline operators to develop an integrity
   management program for transmission pipelines that could affect high consequence areas in the event
   of pipeline failure. The Integrity Management Program includes a baseline assessment plan along
   with periodic reassessments to be completed within required timeframes. In meeting the integrity
   regulations, they have identified high consequence areas and developed baseline assessment plans.
   They are on schedule to complete
   the required assessments within required timeframes. Currently, we estimate the cost to
   complete the required initial assessments over the period of 2011 through 2012 and associated
   remediation will be primarily capital in nature and range between $80&amp;#160;million and $110&amp;#160;million for
   Transco and between $50&amp;#160;million and $60&amp;#160;million for Northwest Pipeline. Ongoing periodic
   reassessments and initial assessments of any new high consequence areas will be completed within
   the timeframes required by the rule. Management considers the costs associated with compliance
   with the rule to be prudent costs incurred in the ordinary course of business, and, therefore,
   recoverable through our rates.
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 12pt"&gt;&lt;b&gt;&lt;i&gt;Other&lt;/i&gt;&lt;/b&gt;
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;In addition to the foregoing, various other proceedings are pending against us which are
   incidental to our operations.
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 12pt"&gt;&lt;b&gt;&lt;i&gt;Summary&lt;/i&gt;&lt;/b&gt;
   &lt;/div&gt;
   &lt;div align="left" style="font-size: 10pt; margin-top: 6pt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160;&amp;#160;Litigation, arbitration, regulatory matters and environmental matters are subject to inherent
   uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material
   adverse impact on the results of operations in the period in which the ruling occurs. Management,
   including internal counsel, currently believes that the ultimate resolution of the foregoing
   matters, taken as a whole and after consideration of amounts accrued, insurance coverage, recovery
   from customers or other indemnification arrangements, will not have a material adverse effect upon
   our future liquidity or financial position.
   &lt;/div&gt;
   &lt;/div&gt;
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